<PAGE>
As filed with the Securities and Exchange Commission on June 26, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
BIOSHIELD TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Georgia 2842 58-2181628
------- ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
BioShield Technologies, Inc.
4405 International Boulevard
Suite B-109
Norcross, Georgia 30093
(770) 925-3432
(Address and telephone number of principal
executive offices and principal place of business)
--------------------------------------------------
Timothy C. Moses
BioShield Technologies, Inc.
4405 International Boulevard, Suite B-109
Norcross, Georgia 30093
(770) 925-3432
(Name, address and telephone number of agent for service)
Copies of all communications to:
Raymond L. Moss, Esq.
Sims Moss Kline & Davis LLP Bruce A. Cheatham, Esq.
400 Northpark Town Center, Suite 310 Winstead, Sechrest & Minick P.C.
1000 Abernathy Road, N.E. 5400 Renaissance Tower
Atlanta, Georgia 30328 Dallas, Texas 75270
(770) 481-7200 (214) 745-5400
(770) 481-7210 FAX (214) 745-5390 FAX
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
<PAGE>
================================================================================
(Registration Statement cover page cont'd)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
(1) (1) (1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units 862,500 $13.00 $11,212,500 $3,308
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, no
par value (2) 1,725,000 (2) (2) (2)
- -----------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants (2) 862,500 (2) (2) (2)
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, no
par value (3) 862,500 $15.60 $13,455,000 $3,969
- -----------------------------------------------------------------------------------------------------------------------
Underwriters' Warrants (4) 75,000 $0.01 $75 $1
- -----------------------------------------------------------------------------------------------------------------------
Units Underlying the
Underwriter's Warrants 75,000 $15.60 $1,170,000 $345
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, no
par value (5) 150,000 (5) (5) (5)
- -----------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants 75,000 (5) (5) (5)
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, no
par value (6) 75,000 $15.60 $1,170,000 $345
- -----------------------------------------------------------------------------------------------------------------------
Total $27,007,575 $7,967
</TABLE>
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Included in the Units. No additional registration fee is required.
(3) Issuable upon the exercise of Redeemable Common Stock Purchase Warrants.
Pursuant to Rule 416 there are also registered an indeterminable number
of shares of Common Stock, which may be issued pursuant to the
antidilution provisions applicable to the Redeemable Common Stock
Purchase Warrants, the Underwriters' Warrants and the Redeemable Common
Stock Purchase Warrants issuable under the Underwriters Warrants.
(4) Underwriters' Warrants to purchase up to 75,000 Units, consisting of an
aggregate of 150,000 shares of Common Stock and 75,000 Warrants.
(5) Included in the Units underlying the Underwriters' Warrants. No
additional registration fee is required.
(6) Issuable upon exercise of Redeemable Common Stock Purchase Warrants
underlying the Underwriters' Units.
<PAGE>
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
================================================================================
SUBJECT TO COMPLETION, DATED JUNE 26, 1998
PROSPECTUS
BIOSHIELD TECHNOLOGIES, INC.
750,000 UNITS
CONSISTING OF 1,500,000 SHARES OF COMMON STOCK AND
750,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
-------------
BioShield Technologies, Inc. (the "Company") is hereby offering 750,000
Units, each unit (the "Unit") consisting of two shares (the "Shares") of Common
Stock, no par value (the "Common Stock"), and one Redeemable Common Stock
Purchase Warrant (the "Warrants"). The Units, the Shares and the Warrants
offered hereby are referred to collectively as the "Securities." The Shares and
Warrants included in the Units may not be separately traded until six months
after the date of this Prospectus, unless earlier separated upon ten days' prior
written notice from Tejas Securities Group to the Company. Each Warrant entitles
the holder thereof to purchase one share of Common Stock at an exercise price of
$7.80 per share, commencing at any time after the Common Stock and Warrants
become separately tradable and until five years from the date of this
Prospectus. Commencing on 12 months from the date of this Prospectus, the
Warrants are subject to redemption by the Company at $0.05 per Warrant at any
time on thirty days prior written notice, provided that the closing price
quotation for the Common Stock has equalled or exceeded $13.00 for ten
consecutive trading days. The Warrant exercise price is subject to adjustment
under certain circumstances. See "Description of Securities."
Prior to this offering, there has been no public market for the Securities,
and there can be no assurance that an active market will develop. It is
currently anticipated that the initial public offering price of the Units will
be $13.00 per Unit. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. The Company intends
to apply to list the Units, Common Stock and Warrants on the NASDAQ Small Cap
Market ("NASDAQ") under the symbols "BSTI.U", "BSTI" and "BSTI.W", respectively.
There can be no assurance that the application for listing on the NASDAQ small
cap market will be approved.
-------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 6 HEREOF CONCERNING THE COMPANY AND THIS OFFERING.
PROSPECTIVE INVESTORS SHOULD ALSO CONSIDER THE FACT THAT THEIR INVESTMENT WILL
RESULT IN IMMEDIATE SUBSTANTIAL DILUTION. SEE "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions/(1)/ Company/(2)/
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Per Unit................... $ $ $
- --------------------------------------------------------------------------------
Total (2)(3)............... $ $ $
================================================================================
</TABLE>
(1) In addition, the Company has agreed to pay Tejas Securities Group Inc.,
Redstone Securities, Inc., and Seaboard Securities, Inc. (collectively,
the "Representatives"), a 2.00% nonaccountable expense allowance and to
sell to the Underwriter warrants exerciseable for four years commencing one
year from the date of this Prospectus to purchase 75,000 Warrants at 120%
of the public offering price (the Underwriters' Warrants). The Company has
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducing estimated expenses of $500,000 payable by the Company,
including the Representative's 2.00% nonaccountable expense allowance and
other expenses of the offering estimated at $400,000 payable by the
Company. No expenses shall be paid by the Selling Shareholders. See
"Underwriting."
(3) The Company has granted to the Underwriters an option, exercisable within
45 days from the date of this Prospectus, to purchase up to 112,500 Units,
consisting of 250,000 shares of Common Stock owned by Timothy C. Moses and
Jacques Elfersy, the founders and Senior Management of the Company (the
"Selling Shareholders") and 112,500 Warrants at 120% on the same terms set
forth above, solely for the purpose of covering over-allotments, if any. If
the Underwriters' over-allotment option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions, Proceeds to
the Company, and Proceeds to Selling Shareholders will be $ , $ and
$ , respectively. See "Underwriting."
The Securities are being offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters on a "firm commitment basis" and
subject to approval of certain legal matters by counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify the offering without notice and to reject any order, in whole or in part.
It is expected that delivery of Common Stock and Warrant certificates will be
made against payment therefor at the offices of the Underwriter in Dallas, Texas
on or about , 1998.
-------------
TEJAS SECURITIES GROUP, INC.
REDSTONE SECURITIES, INC.
SEABOARD SECURITIES, INC.
-------------
The date of this Prospectus is , 1998.
<PAGE>
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form SB-2 (including any amendments thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Securities, reference is made to the Registration Statement and the exhibits and
schedules thereto. Statements made in this Prospectus regarding the contents of
any contract or document filed as an exhibit to the Registration Statement are
not necessarily complete and, in each instance, reference is hereby made to the
copy of such contract or document so filed. Each such statement is qualified in
its entirety by such reference. The Registration Statement and the exhibits and
the schedules thereto filed with the Commission may be inspected, without
charge, at the Commission's public reference facilities located at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at the public
reference facilities in the Commission's regional offices located at:
Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago,
Illinois 60661; and Suite 1300, Seven World Trade Center, New York, New York
10048. Copies of such materials also may be obtained at prescribed rates by
writing to the Commission, Public Reference Section, 450 Fifth Street, NW,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission at http://www.sec.gov.
As a result of this Offering, the Company will become subject to the
reporting requirements of the Exchange Act, and in accordance therewith will
file periodic reports, proxy statements and other information with the
Commission. The Company will furnish its shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants following the end of each fiscal year, proxy statements and
quarterly reports containing unaudited consolidated financial information for
the first three quarters of each fiscal year following the end of such fiscal
quarter.
The Company has applied for listing of the Securities on Nasdaq SmallCap
Market. There can be no assurance that the Company's securities will be accepted
for listing. Reports, proxy statements and other information concerning the
Company will be available for inspection at the principal office of the Nasdaq
Stock Market, Inc. at 1735 K Street, Washington, DC 20006-1500.
__________________________
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVERALLOTMENT, ENTERING STABILIZATION BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS, AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE SECURITIES ON NASDAQ IN
CONNECTION WITH THE COMMON STOCK AND WARRANTS ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING." SEE "PLAN OF DISTRIBUTION."
UNTIL ______________, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (included notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information herein is presented on the basis that the over-allotment option and
underwriters' warrants are not exercised. The securities offered hereby involve
a high degree of risk. Investors should carefully consider the information set
forth under "Risk Factors."
THE COMPANY
BioShield Technologies, Inc. (the "Company") is a development stage company
engaged in the development, marketing, and sale of surface modifying
antimicrobials and biostatic products, primarily through third party licensing
arrangements. The Company's primary focus is to exploit its proprietary
technology to become the leader in topical antimicrobials and biocides for
consumer, industrial and institutional markets, environmental services, and
medical device markets. BioShield products are an easily applied reactive
coating technology that modifies surfaces of all types , by creating an
invisible covalent bond between surfaces and a variety of chemical agents.
The Company focuses on providing value added and unique antimicrobial
solutions to a variety of industries and product categories. Examples of
products in the market or under development that utilize the BioShield
technology include surface-borne and air-borne products which remove or
eliminate certain allergens from the air which may cause respiratory discomfort
or asthma, nine (9) consumer products exhibiting residual antimicrobial
efficacy, a powder form of add-mixture for the control of specialty
microorganisms. The Company is developing a bio-barrier treatment for acute
wound care and a product that seeks to control food borne contaminants.
The Company's technology is currently available in four (4) different
delivery and enhanced performance systems, and current research on three (3)
other delivery systems are underway. All of the newly developed antimicrobials
are based on the ability of the Company to modify its molecular structure to
suit the required needs of a particular product category or performance
characteristics, such as slow release of antibiotics or drugs. The Company's
core products are essentially non-toxic for their intended uses. The Company
believes that no other known antimicrobial products combine the abilities to
covalently bond on a long-term basis, are generally as safe, effective, variable
and environmentally friendly or have the capability and potential regulatory
clearances for so many applications.
The Company is commercializing its antimicrobial technology through
licensing arrangements, marketing distributors which incorporate or repackage
under private labeling agreements, joint development arrangements and in direct
sales to retailers. The Company's strategy is to build and develop new and
existing retail distribution channels for its products using its technologies as
a means to partially fund the commercialization of higher margin industrial and
medical applications.
The Company has also filed certain applications for patents with the United
States Patent and Trademark Office with respect to its proprietary technology.
Specifically, the Company has discovered and claimed a variety of new
compositions and methods of making and using its proprietary antimicrobial
products. The mode of action of the core microbial technology is to disrupt the
microbial cell membrane. By contrast, other antimicrobials rely on absorption
of the antimicrobial by the organisms, which in turn disrupts the metabolic
systems. These characteristics of the Company's products combine to make the
products ideal for use in a wide range of medical, household, commercial, and
industrial applications.
The largest near-term opportunity exists in the mass market retail outlets
including supermarkets, mass volume retailers, drug stores, and home improvement
superstores. In June 1997, the Company entered into distribution agreements for
certain of its retail products through national supermarket chains such as
Kroger, Winn Dixie, A&P, Cub Foods, Drug Emporium, and Supervalue. Sales
through these customers began in January 1998 and continue through the date
hereof. The Company has previously sold to and also has a distribution
agreement with QVC, Inc. to sell its retail products via "Direct Response T.V."
QVC, Inc. began featuring the Company's products on television in April 1998 and
sales earned the Company awards as "Best of Show in Georgia" in 1997. The
Company has also entered into agreements for commercial and industrial
applications of the Company's technology. An agreement with Healthsafe
Environmental, Inc. together with the agreement with QVC, Inc., has accounted
for the bulk of the Company's revenues to date. The Company has executed
certain exclusive rights to Concrete Microtech, Inc. ("CMT") to use technologies
of the Company within the concrete pipe industry as an additive for sewer pipe.
The Company was incorporated in June 1995 in the State of Georgia. The
executive offices of the Company are located at 4405 International Boulevard,
Suite 109, Norcross, Georgia 30093, and its telephone number is (770) 925-3432
and its Internet address is BioShield [email protected].
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered hereby............ 750,000 Units, each Unit consisting of two shares of
Common Stock and one Warrant, each Warrant entitling
the holder to purchase one share of Common Stock at
a price of $7.80 until (August ____), 2003. See
"Description of Securities".
Description of the Warrants.......... The Warrants are not immediately exercisable and
are not transferable separately from the Shares
until (August ____), 1999. The Warrants are
redeemable by the Company at $0.05 per Warrant
under certain conditions. See "Description of
Securities."
Common Stock to be outstanding
after the Offering (1)(2)(3)(4)...... 5,895,040 Shares
Warrants to be outstanding
after the Offering (1)(2)(3)(4)...... 750,000
Use of Proceeds...................... The Company intends to use the net proceeds of this
Offering to payoff existing noteholder indebtedness,
EPA testing, FDA updates, research and development,
marketing, and working capital and general corporate
purposes. See "Use of Proceeds."
Risk Factors......................... The securities offered hereby are speculative and
involve a high degree of risk and immediate substantial
dilution and should not be purchased by investors who
cannot afford the loss of their entire investment. See
"Risk Factors" and "Dilution.
Proposed Nasdaq Symbols
Units................................ "BSTI.U"
Common Stock......................... "BSTI"
Warrants............................. "BSTI.W"
</TABLE>
________
(1) Does not include an aggregate of 400,000 shares of Common Stock reserved for
issuance upon the exercise of stock options to be outstanding under the
Company's 1997 Stock Incentive Plan and the Company's 1996 Directors Stock
Option Plan (collectively, the "Plans"), 82,500 of which options are
currently exercisable. See "Management -- Employment Agreements," "Stock
Option Plans," "Principal and Selling Shareholders," "Certain Transactions"
and "Underwriting."
(2) Does not include an aggregate of up to 1,125,000 shares issuable upon
exercise of (i) the Warrants, (ii) the over-allotment option and (iii) the
Underwriters' Warrants.
(3) Does not include up to 112,500 Warrants issuable upon exercise of the over-
allotment option or the 75,000 Warrants underlying the Underwriters'
Warrants, or shares issuable upon the exercise of these Warrants.
(4) Does not include an aggregate of 648,252 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants at a weighted average price
of $0.50 per share, 450,000 warrants at an exercise price equal to $6.50 per
share (the "IPO Price"), 40,000 warrants at an exercise price equal to $7.80
per share, and 15,000 shares issued to employees pursuant to the Company's
1997 Stock Incentive Plan at a price of $1.00 per share. See "Management
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected financial data has been derived from the
audited balance sheet of the Company as of June 30, 1997, audited income
statements for the fiscal years ended June 30, 1997 and 1996 and unaudited
financial statements for the eleven months ended May 31, 1998 and 1997. This
selected financial data should be read in conjunction with the financial
statements of the Company and the related notes thereto included elsewhere in
this Prospectus. See "Financial Statements."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED ELEVEN MONTHS ENDED
---------------------- ------------------------
JUNE 30, MAY 31,
-------- -------
1996 1997 1997 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA:
Net Sales $ 0 $ 775,315 $ 578,561 $ 434,790
Cost of Sales 0 315,822 266,843 155,008
--------- --------- --------- -----------
Gross Profit 0 459,493 311,718 279,782
Operating Expenses 386,217 987,533 925,724 1,470,669
--------- --------- --------- -----------
Operating (loss) (386,217) (527,860) (614,006) (1,190,887)
Net (loss) (356,316) (514,459) (610,801) (1,187,484)
Loss per share $ 0.09 $ 0.12 $ 0.16 $ 0.27
</TABLE>
<TABLE>
<CAPTION>
Year Ended ELEVEN MONTHS ENDED MAY 31,
---------- --------------------------
June 30,1997 1998 1998
------------ ----------- -----------
AS ADJUSTED (1)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) $ 114,665 $ (949,858) $7,325,142
Current assets 590,477 299,156 7,325,142
Current liabilities 475,812 1,249,014 319,014
Total assets 692,938 466,156 8,741,156
Total liabilities 475,812 1,249,014 319,014
Shareholder's equity (deficit) 217,126 (782,858) 7,492,142
Shares outstanding 4,364,421 4,395,040 5,895,040
</TABLE>
____________
(1) Adjusted to reflect the sale of the Units offered by this prospectus at an
offering price of $ 13.00 per Unit and application of the net proceeds of
$8,275,000.
5
<PAGE>
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of risk.
Prospective investors should consider the following factors in addition to other
information set forth in the prospectus before purchasing the securities offered
hereby.
DEVELOPMENT STAGE COMPANY; UNCERTAINTY OF PRODUCT DEVELOPMENT; LIMITED
OPERATING HISTORY.
The Company was organized in June 1995 and until 1998 was a
development stage company. The Company's long-term viability, profitability and
growth will depend upon successful commercialization of products resulting from
its research and product development activities. The Company may not be able to
sell significant quantities of any product, outside of retail distribution
channels, until such time, if ever, as it receives regulatory approval to
commercially market the products in the industrial and medical markets. Many of
the Company's products will require laboratory and clinical testing and
investment prior to obtaining such approvals for any product with the EPA and
the FDA and prior to full commercialization. The Company does not expect to
receive any registrations from the EPA for any product for at least 9-12 months
and with respect to the FDA for at least three years. No FDA applications or
registrations have been filed to date. Moreover, with respect to the FDA,
adverse or inconclusive results in clinical trials could significantly delay or
ultimately preclude any such approvals and, even if obtained, there can be no
assurance that any product approval will lead to the successful
commercialization of such product. Further, as a development stage company, the
Company has a limited relevant operating history upon which an evaluation of its
prospects can be made. Such prospects must be considered in light of the risks,
expenses and difficulties frequently encountered in establishing a new business
in the evolving, heavily regulated healthcare, drug, and medical device
industry, which is characterized by an increasing number of market entrants,
intense competition and a high failure rate. In addition, significant
challenges are often encountered in shifting from development to
commercialization of new products. See "Business."
HISTORY OF SIGNIFICANT LOSSES; ANTICIPATED FUTURE LOSSES; LIMITED PRODUCT
REVENUES.
To date, although the Company has recorded contract revenues, the
Company has generated only limited revenues from product sales and consulting of
$1,253,407 since 1995. Moreover, the Company has incurred significant losses,
including losses of $356,316 and $514,459 for the years ended June 30, 1996, and
1997, respectively, and $1,187,484 for the eleven months ended May 31, 1998.
For the years ended June 30,1996, and 1997, and the eleven month period ended
May 31, 1998, the Company recorded product sale revenues of $0, $775,315, and
$434,790. Inasmuch as the Company will continue to have a high level of
research and development and general and administrative expenses and will not
have matching contract revenues as such expenditures are incurred, the Company
anticipates that, commencing in the first calendar quarter of 1998, losses will
increase significantly and losses will continue until such time, if ever, as the
Company is able to generate sufficient revenues to support its operations. The
Company believes that its ability to generate sufficient revenues, aside from
the retail market, may depend on the success of the Company obtaining regulatory
registrations for the commercial sale of products, including approval of any
manufacturing facilities established or maintained by the Company or its
suppliers that produce such products. There can be no assurance that any of
such events will occur, that the Company will attain revenues from
commercialization of its products or that the Company will ever achieve
profitable operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and Financial Statements.
BUSINESS CONCENTRATION
The Company is dependent upon a small base of customers for the
majority of its net sales. Sales to one customer totaled approximately $59,000
or 14% of total sales for the period ended May 31, 1998. Sales to two customers
totaled $555,000 the fiscal year ended June 30, 1997, or 71.6% of net sales.
The Company expects that it will be less dependent upon few customers as its
customer base grows in the future. However, there can be no assurance that it
will increase its customer base, or that it will not continue to be dependent
upon a small base of customers. The loss of a significant customer or any
reduction in orders by any significant customers may have a material adverse
effect on the Company's business, financial condition and results of operations.
6
<PAGE>
SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON PROCEEDS OF THIS OFFERING; NEED
FOR ADDITIONAL CAPITAL.
The Company's capital requirements have been and will continue to be
significant. To fund its capital requirements to date, the Company has been
dependent primarily on (i) sales revenues generated primarily from the sale of
products through QVC and HealthSafe (ii) the net cash proceeds of private
placements of the Company's Common Stock, aggregating approximately $1,562,500.
The Company is dependent upon the proceeds of this Offering to fund its research
and development, marketing, as well as other working capital requirements. The
Company anticipates, based on its currently proposed plans and assumptions
relating to its operations (including assumptions regarding the progress of its
research and development), that the net proceeds of this Offering, together with
the Company's existing capital resources, will be sufficient to satisfy the
Company's estimated cash requirements for at least 12 months following the
consummation of this Offering. The Company expects to incur substantial costs
over approximately the next three years to complete its primary development of
products for the medical and industrial markets. Such amounts are expected to
be substantially in excess of the net proceeds of this Offering and the existing
capital of the Company. Therefore, unless the Company generates significant
revenues during such period, the Company will need additional financing to fully
fund such development. The Company has no current arrangements with respect to,
or sources of, additional financing and it is not anticipated that any of the
officers, directors or shareholders of the Company will provide any portion of
the Company's future financing requirements. There can be no assurance that,
when needed, additional financing will be available to the Company on
commercially reasonable terms, or at all. In the event that the Company's plans
change, its assumptions change or prove inaccurate, or if the net proceeds of
this Offering, together with other capital resources, otherwise prove to be
insufficient to fund operations, the Company could be required to seek
additional financing sooner than currently anticipated. Any inability to obtain
additional financing when needed would have a material adverse effect on the
Company, including possibly requiring the Company to significantly curtail or
possibly cease its operations. In addition, any additional equity financing may
involve substantial dilution to the Company's then existing shareholders. See
"Use of Proceeds," "Dilution," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and "Certain
Transactions."
LIMITED SALES AND MARKETING EXPERIENCE; RELIANCE ON DISTRIBUTORS AND CORPORATE
PARTNERS.
At present, the Company has limited sales and marketing capability.
The Company intends to sell its products both in the United States and
internationally through distributors and corporate partners. There can be no
assurance that the Company will be able to recruit and train adequate sales and
marketing personnel to successfully commercialize their products. The inability
to retain suitable distributors and corporate partners could also have a
material adverse effect on the Company's business financial condition and
results of operations.
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE.
To be successfully commercialized, the Company's products must be
manufactured in large quantities in compliance with regulatory requirements and
at an acceptable cost. The Company does not intend to build manufacturing
facilities for such purpose. Rather, it currently intends to subcontract with
independent third parties to obtain all of its requirements except for the
manufacture of the Company's active concentrates which are manufactured by the
Company at its Lithonia, Georgia, manufacturing plant. The Company presently
contracts its additional manufacturing and packaging through Griffin Packaging,
Inc. located in Conyers, Georgia. Such manufacturing arrangement may be
terminated by the Company at any time. The availability of such alternate
sources of supply, on terms satisfactory to the Company, is not assured. The
Company's failure to obtain adequate supplies of its raw materials at a
competitive cost or in a timely manner could have a material adverse effect on
the Company. See "Business."
GOVERNMENT REGULATION; FDA.
The development, manufacture, testing and marketing of all of the
Company's products are subject to extensive regulation by numerous authorities
in the United States and other countries. In the United States, before new
antimicrobial products for humans are permitted to be marketed commercially,
they must undergo extensive preclinical and clinical testing to satisfy the FDA
that they are safe and efficacious in each clinical indication (the specific
condition intended to be treated) for which approval is sought. Additionally,
approval by analogous regulatory authorities in other countries must be obtained
prior to commencing marketing of healthcare, drug products and medical devices
in those countries. The approval process varies from country to country and
approval of a drug for sale in one country does not ensure approval in other
countries. Delays in obtaining regulatory approvals may adversely affect the
development, testing or marketing of the Company's products and the ability of
the Company to generate revenues from the sale or licensing of such products.
There can be no assurance
7
<PAGE>
that regulatory approvals will be obtained by the Company in the United States
or any other country to sell its products for such purposes.
Manufacturers of therapeutic products sold in the United States are
required to satisfy the FDA that their manufacturing facilities and processes
adhere to the agency's Good Manufacturing Practices ("GMP") regulations and to
engage in extensive record keeping and reporting. Even if regulatory approval
for a product is granted, the facilities in which the product is manufactured
will be subject to periodic review and inspections by the FDA or the analogous
regulatory authorities of other countries for compliance with GMP or similar
foreign regulatory standards. Compliance with such regulations requires
substantial time and attention, and is costly. In addition, each domestic
manufacturing establishment must be registered with and approved by the FDA.
For biologics, except certain well-characterized ones, this requires the filing
of an establishment license application for the facilities at which the product
will be produced. Failure to comply with the applicable regulatory requirements
by either the Company or its strategic partners could, among other things,
result in criminal prosecution and fines, product recalls, product seizures and
operating restrictions. The Company has not yet sought FDA approval for the
commercial sale of any of its products or for the manufacturing processes or
facilities of any of its strategic partners. Moreover, even if approval is
granted, such approval may impose limitations on the indicated uses for which a
product may be marketed.
Inasmuch as the Company may manufacture products in the United States
and seek to market or license other domestic manufacturers to market products
throughout the world, the Company may become subject to United States laws and
regulations applicable to exporting drugs, including biologics. The Federal
Food, Drug, and Cosmetic Act stipulates that, prior to FDA approval for
commercial sale, a drug manufactured in the United States may be exported to any
country in the world, without prior FDA authorization, only if it has received
marketing authorization in at least one of the 25 countries listed in Section
802 of that act. Other requirements include that (i) the product is
manufactured in substantial compliance with the FDA's GMP regulations, (ii) the
FDA is notified of the exportation, and (iii) the FDA has not determined that
the probability of reimportation presents an imminent hazard to the public
health and safety of the United States. Drugs for investigational use in any of
the 25 countries may be exported without notification to the FDA. Drugs for
investigational use in other countries may not be exported without FDA
authorization. Thus, the ability of the Company or its licensees to export
products manufactured in the United States prior to receiving commercial
approval in the United States will be subject to certain restrictions.
Therefore, there can be no assurance that the Company or its licensees would be
able to export for investigational use or commercial sale in any countries ,
products manufactured in the United States which have not received FDA approval.
GOVERNMENT REGULATION; EPA.
The Company is also subject to the regulations of the United States
Environmental Protection Agency as well as other federal, state and local laws
and regulations governing pesticides and antimicrobial products . Compliance
with these laws and regulations is time-consuming, expensive and failure to
receive timely approval or approval at all could have a material adverse effect
on the Company. In May of 1997, the Company made applications to the EPA for
registration of BioShield AM500 and AM500I and intends to submit an application
to the EPA for registration of BioShield AM36.OI and AM3651P to enable it to
make certain claims regarding the antimicrobial properties of certain of its
products. No assurance can be given that the EPA will approve any or all of
such claims. The adoption by federal, state or local governments of significant
new laws or regulations or a change in the interpretation of existing laws or
regulations relating to environmental or other regulatory matters could increase
the cost of producing the products manufactured by the Company or its strategic
partners or otherwise adversely affect the demand for the Company's products.
Adverse governmental regulation which might arise from future legislative or
administrative action cannot be predicted. See "Business-Government
Regulation."
RISKS RELATED TO OBTAINING, MAINTAINING AND DEFENDING PATENTS AND PROPRIETARY
TECHNOLOGY.
The Company's success will depend in part on its ability to obtain or
license U.S. and foreign patents, protect trade secrets for its technology, and
operate without infringing on the proprietary rights of others. There can be no
assurance, however, that either the Company's or its licensors' existing patent
applications will mature into issued patents or, if issued, that such patents
will be adequate to protect the Company's products or processes. In addition,
there can be no assurance that the Company will be able to obtain any necessary
or desired additional licenses to patents or technologies of others or that the
Company will be able to develop its own additional patentable technologies.
The Company believes that the patent position generally involves
complex legal and factual questions. There can be no assurance that any future
patent applications or any patents ultimately issued to the Company will provide
it with competitive advantages or that the Company's use of its technology will
not be infringing upon the patents or proprietary rights of others, or that the
patents or proprietary rights of others will not have an adverse
8
<PAGE>
effect on the ability of the Company to do business. Furthermore, there can be
no assurance that others will not independently develop similar technology or
that others will not design technology to circumvent the Company's existing or
future patents or proprietary rights. In the event that the Company's technology
were deemed to be infringing upon the rights of others, the Company could be
subject to damages or enjoined from using such technology or the Company could
be required to obtain licenses to utilize such technology. No assurance can be
given that any such licenses would be made available on terms acceptable to the
Company, or at all. If the Company were unable to obtain such licenses, it could
encounter significant delays in introducing products to the market while it
attempts to design around the patents or rights infringed upon, or the Company's
development, manufacture and sale of products requiring such licenses could be
foreclosed. In addition, the Company could experience a loss of revenues and may
incur substantial costs in defending itself and indemnifying its strategic
partners in patent infringement or other actions based on proprietary rights
violations brought against it or its strategic partners. The Company could also
incur substantial costs in the event it finds it necessary to assert claims
against third parties to prevent the infringement of its patents and proprietary
rights by others.
The Company relies on proprietary know-how and confidential
information and employs various methods, such as entering into confidentiality
and noncompete agreements with its current employees and with third parties to
whom it has divulged proprietary information, to protect the processes,
concepts, ideas and documentation associated with its technologies. Such
methods may afford incomplete protection and there can be no assurance that the
Company will be able to protect adequately its trade secrets or that other
companies will not acquire information which the Company considers to be
proprietary. The Company will be materially adversely affected if it cannot
maintain its proprietary technologies. See "Business--Patents and Proprietary
Rights."
COMPETITION.
The markets for the Company's products are competitive. Competition
from companies that produce antimicrobials for commercial use is intense and
expected to increase. There can be no assurance that other companies with the
expertise or resources that would encourage them to attempt to develop or market
competing products will not develop new products directly competitive with the
Company's products. The Company is aware of several other companies which
manufacture products that compete directly with its products. Certain of these
companies have well-established reputations for success in the development, sale
and service of conventional antimicrobials and have substantially greater
financial, technical, personnel and other resources than the Company. The
Company competes on the basis of technological suitability, quality, performance
characteristics and price of its products, its ability to meet customer
specifications, and the quality of technical assistance and service furnished to
these customers. There can be no assurance that the Company will be able to
compete successfully, that competitors will not develop technologies or products
that render the Company's products obsolete or less marketable or that the
Company will be able to successfully enhance its existing products or develop or
acquire new products. See "Business-Competition."
TECHNOLOGICAL CHANGE.
The antimicrobial industry is subject to rapid and significant
technological change, and the ability of the Company to compete is dependent in
large part on its continual ability to enhance and improve its products and
technologies. In order to do so, the Company must effectively utilize and
expand its research and development capabilities, and, once developed,
expeditiously convert new technology into products and processes which can be
commercialized. The Company's competitors may succeed in developing
technologies, products and processes that render the Company's processes and
products obsolete. Certain entities, such as Emory University, have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights relating to products or processes competitive with or
otherwise related to those of the Company. The scope and viability of these
patents, the extent to which the Company may be required to obtain licenses
under these patents or under other proprietary rights and the cost and
availability of licenses are unknown, but these factors may limit the Company's
ability to market its products. See "Business-- Competition."
PRODUCT LIABILITY EXPOSURE; UNCERTAINTY OF AVAILABILITY OF INSURANCE.
The Company's business exposes it to potential product liability risks
which are inherent in the testing, manufacturing, marketing and sale of
therapeutic products. While the Company will take precautions it deems
appropriate, there can be no assurance that it will be able to avoid significant
product liability exposure. The Company intends to obtain general liability
insurance, which will include aggregate product coverage of 200%. There can be
no assurance that it will be able to obtain coverage on acceptable terms or that
any insurance policy will provide adequate protection against potential claims.
A successful claim brought against the Company in excess of any insurance
coverage could have a material adverse effect upon the Company.
9
<PAGE>
UNCERTAINTY OF MARKET ACCEPTANCE.
To date, the Company has generated limited revenues from sales of its
products. The Company has not yet commenced significant marketing activities
relating to product commercialization and has limited marketing experience and
limited financial, personnel, and other resources to independently undertake
extensive marketing activities. As is typically the case, demand and market
acceptance for newly introduced, innovative products is subject to a high level
of uncertainty. Achieving market acceptance for the Company's products will
require substantial marketing efforts and expenditure of significant funds to
inform customers of the distinctive characteristics and benefits of using the
Company's products. There can be no assurance that the Company's efforts will
result in successful product commercialization or initial or continued market
acceptance for its products.
DEPENDENCE ON KEY PERSONNEL.
The success of the Company will be largely dependent on the abilities
and continued personal efforts of Timothy C. Moses, one of the Company's
founders, Co-Chairman of the Board, President and Chief Executive Officer;
Jacques Elfersy, founder, Co-Chariman of the Board, Senior Vice President,
Secretary, Treasurer, and Director; Dr. Joachim Berkner, Director of Research
and Development, Organic Chemistry, of the Company. Messrs. Moses and Elfersy
are employed by the Company under an employment agreement expiring January 1,
2003. The loss of the services of any of Mr. Moses, Mr. Elfersy, or Dr. Berkner
would have a material adverse effect on the Company. The Company intends to
obtain and become a beneficiary of key man life insurance policies, each in the
amount of $1,000,000, on each of Mr. Moses and Mr. Elfersy. It does not
currently own policies covering any other officer or employee. The Company is
seeking the services of an additional experienced senior executive. There can
be no assurance that the Company will be able to attract such a person. See
"Management."
BROAD DISCRETION BY MANAGEMENT IN APPLICATION OF PROCEEDS.
Although the Company currently intends to use approximately $955,000
(11.5%) to repay certain promissory notes issued in February and March 1998 and
accrued and unpaid salaries to Timothy C. Moses and Jacques Elfersy for the
years 1995-1997; $1,000,000 (12.1%) of the net proceeds of this Offering to fund
EPA testing; approximately $500,000 (6.0%) of the net proceeds to fund FDA
update of master file; $2,000,000 (24.2%) of the net proceeds of this Offering
to fund marketing; and approximately $1,620,000 (19.6%)of the net proceeds to
fund research and development, it will have broad discretion in the use of such
funds as circumstances warrant. In addition, approximately $2,200,000 (26.6%)
of the estimated net proceeds from this Offering has been allocated to working
capital and general corporate purposes. Accordingly, the Company's management
will have broad discretion as to the application of such proceeds. See "Use of
Proceeds."
CONTINUING CONTROL BY EXISTING SHAREHOLDERS.
Upon the consummation of this Offering, assuming the exercise in full
of the over-allotment option granted by Messrs. Moses and Elfersy to the
Underwriters, Mr. Moses, Co-Chairman, President and Chief Executive Officer of
the Company, and Mr. Elfersy, Co-Chairman of the Board, Senior Vice President,
Treasurer, Secretary and Director, will beneficially own approximately 21.6%,
and 23.5%, respectively, of the shares of Common Stock outstanding. In the
event that Mr. Moses and Mr. Elfersy were to act in concert, they may be in a
position generally to control the affairs of the Company. These two
shareholders may be able to control the outcome of shareholder votes, including
votes concerning the election of directors, the adoption of amendments to the
Company's Restated Certificate of Incorporation or Bylaws and the approval of
certain mergers and other significant corporate transactions, including a sale
of substantially all of the Company's assets. Such control by existing
shareholders could also have the effect of delaying, deferring or preventing a
change in control of the Company. Moreover, purchasers of the shares offered
hereby will be minority shareholders and, although entitled to vote on matters
submitted to a vote of shareholders, they will not control the outcome of such a
vote. See "Principal and Selling Shareholders" and "Description of Common
Stock."
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide for the Company to indemnify each
director and officer of the Company against liabilities imposed upon him
(including reasonable amounts paid in settlement) and expenses incurred by him
in connection with any claim made against him or any action, suit or proceeding
to which he may be a party by reason of his being or having been a director or
officer of the Company and prove that the Company will, in general, indemnify
such persons to the maximum extent permitted by the Company's Bylaws and the
laws of the State of Georgia against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement incurred in connection with any
actual or threatened action or proceeding to which such director or officer is
made or
10
<PAGE>
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the Company. The foregoing provisions may reduce the
likelihood of derivative litigation against directors and may discourage or
deter shareholders or management from suing directors for breaches of their duty
of care, even though such an action, if successful, might otherwise benefit the
Company and its shareholders. See "Management --Indemnification of Directors and
Officers."
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE;
POSSIBLE VOLATILITY OF MARKET PRICE OF COMMON STOCK.
Prior to this Offering, there has been no public trading market for
the Common Stock. Consequently, the initial public offering price has been
determined by negotiation between the Company and the Underwriter and is not
necessarily related to the Company's asset value, net worth or other criteria of
value. Among the factors considered in determining the offering price were the
Company's financial condition and prospects, management, market prices of
similar securities of comparable publicly-traded companies, certain financial
and operating information of companies engaged in activities similar to those of
the Company and the general condition of the securities market. There can be no
assurance that a regular trading market will develop after this Offering or
that, if developed, it will be sustained. The market prices for securities of
biotechnology companies have been volatile. Announcements of technological
innovations or new products by the Company or its competitors, developments
concerning proprietary rights (including patents and litigation matters),
publicity regarding actual or potential clinical testing relating to products
under development by the Company or others, regulatory developments in both the
United States and foreign countries, public concern as to the safety of
biotechnology products and economic and other external factors, as well as
period-to-period fluctuations in financial results, may have a significant
impact on the market price of the Common Stock. Additionally, in recent years,
the stock market has experienced a high level of price and volume volatility and
market prices for the stock of many companies, particularly the common stock of
small and emerging growth companies that trade in the over-the-counter market,
have experienced wide price fluctuations not necessarily related to the
operating performance of such companies. See "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION.
This offering involves an immediate and substantial dilution of $5.23
(80%) between the pro forma net tangible book value per share of Common Stock
after the Offering and the proposed initial public offering price of $6.50 per
share. See "Dilution."
BENEFITS OF OFFERING TO EXISTING SHAREHOLDERS.
Upon the consummation of this Offering, the existing shareholders of
the Company will receive substantial benefits, including the creation of a
public trading market for their securities and the corresponding facilitation of
sales by such shareholders of their shares of Common Stock in the secondary
market, as well as an immediate increase in net tangible book value of [$1.45
per share] to such shareholders based upon the pro forma net tangible book value
per share after this Offering and the initial public offering price per share of
the Common Stock offered hereby. The existing shareholders of the Company have
acquired their respective equity interests at costs substantially below the
offering price. Accordingly, to the extent that the Company incurs losses, the
investors purchasing shares in this Offering will bear a disproportionate risk
of such losses. If, at the time the existing shareholders are able to sell
their shares of Common Stock in the public market, the market price per unit
remains at the proposed $13.00 initial public offering price (of which there can
be no assurance) or $6.50 per share of common stock giving no value to the
warrant such shareholders would realize an aggregate gain of [$6.29] on the sale
of all of their existing shares. See "Use of Proceeds," "Dilution" and "Shares
Eligible for Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company's current shareholders
will own 4,395,040 shares of Common Stock, which will represent 74.5% of the
then issued and outstanding shares of Common Stock (70.7% if the over-allotment
option is exercised in full). 4,395,040 of such restricted securities have been
held for more than one year and will be eligible for resale under Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), subject to volume
limitations, beginning 90 days after the date of this Prospectus, unless such
shareholders agree to a 12 month lock-up (excluding those shares of Common Stock
offered pursuant to the Offering). Sales of significant amounts of Common Stock
by current shareholders in the public market after this Offering could adversely
affect the market price of the Common Stock. See "Shares Eligible for Future
Sale," "Principal and Selling Shareholders," "Management Discussion and Analysis
of Financial Condition and Operating Results," "Liquidity and Capital
Resources."
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<PAGE>
EFFECT OF OUTSTANDING WARRANTS AND UNDERWRITERS' WARRANTS.
Until the date five (5) years following the date of this Prospectus,
the holders of the Warrants and Underwriters' Warrants are given an opportunity
to profit from a rise in the market price of the Common Stock, with a resulting
dilution in the interests of the other shareholders. The shares of Common Stock
underlying the Underwriters' Warrants have certain registration rights.
Further, the terms on which the Company might obtain additional financing during
that period may be adversely affected by the existence of the Warrants and
Underwriters' Warrants. The holders of the Warrants and Underwriters' Warrants
may exercise the Warrants and Underwriters' Warrants at a time when the Company
might be able to obtain additional capital through a new offering of securities
on terms more favorable than those provided herein. The Company has agreed
that, under certain circumstances, it will register under federal and state
securities laws the Underwriters' Warrants and/or the securities issuable
thereunder. Exercise of these registration rights could involve substantial
expense to the Company at a time when it could not afford such expenditures and
may adversely affect the terms upon which the Company may obtain financing. See
"Description of Securities" and "Underwriting."
SUBSTANTIAL SHARES OF COMMON STOCK RESERVED.
The Company has reserved 400,000 shares of Common Stock for issuance
to key employees, officers, directors and consultants pursuant to the Company's
Stock Incentive Plan (the Incentive Plan") and 1,000,000 shares of Common Stock
for issuance to directors pursuant to the 1996 Directors' Stock Option Plan (the
"Directors Plan"). To date, 90,000 options have been granted under the Stock
Option Plan, none of which are immediately exercisable and 67,500 options have
been granted under the Director Plan, all of which are immediately exercisable.
The existence of these options and any other options or warrants may prove to be
a hindrance to future equity financing by the Company. Further, the holders of
such options may exercise them at a time when the Company would otherwise be
able to obtain additional equity capital on terms more favorable to the Company.
See "Management Stock Option Plan."
AUTHORIZATION OF PREFERRED STOCK.
The Company's Articles of Incorporation authorize the issuance of
"blank check" preferred stock with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without shareholder approval, to issue
additional preferred stock with dividend, liquidation, conversion, voting, or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying, or preventing a change in control of the Company. Although the
Company has no present intention to issue any shares of its authorized preferred
stock, there can be no assurance that the Company will not do so in the future.
ANTI-TAKEOVER PROVISIONS.
The Articles of Incorporation and Bylaws of the Company contain
numerous anti-takeover provisions intended to encourage any potential acquiror
of the Company to deal directly with the Company's Board of Directors. Among
the features of the Company's Articles of Incorporation and Bylaws that could
have anti-takeover effects are: a classified Board of Directors with Board
members serving staggered three-year terms; prohibition of majority shareholder
actions by written consent; restricting the power to call special meetings of
shareholders to the Chairman of the Board of Directors, President, Board of
Directors or the holders of two-thirds of the outstanding shares of the Company
capital stock entitled to vote generally in the election of directors ("Voting
Stock") not held by an "Interested Shareholder" (generally, a shareholder that,
together with its affiliates, associates and any persons acting in concert with
them, acquires beneficial ownership of fifteen percent or more of the
outstanding shares of the Voting Stock after July 15, 1997); requiring advance
notice of shareholder nominees to stand for election to the Board of Directors
or of shareholder introduced business to be considered at a shareholders
meeting; adoption of the requirements of Part 3 of Article 11 of the Georgia
Business Corporation Code (the "Corporation Code") regarding business
combinations; express authorization of the Board of Directors to consider the
effects of a proposed acquisition on the Company employees, customers and
suppliers and the communities where the Company operates; requiring cause and a
greater than majority vote of shareholders to approve removal of directors and
amendments to the Company's Articles of Incorporation or Bylaws and providing
for a greater than majority vote of shareholders in certain circumstances
relating to an acquisition of the Company unless the amendment or acquisition
have been approved by the Board of Directors. These anti-takeover provisions
could also allow the Board of Directors to impede or prevent an acquisition of
the Company even if shareholders support the acquisition, and could also serve
to entrench incumbent management.
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<PAGE>
NO DIVIDENDS.
To date, the Company has not paid any cash dividends on its Common
Stock and it does not expect to declare or pay dividends on the Common Stock in
the foreseeable future. In addition, future agreements or credit facilities may
restrict dividend payments. See "Dividend Policy" and "Description of Common
Stock."
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS.
While the Company's Common Stock and Warrants are expected to meet the
current Nasdaq SmallCap Market initial listing requirements, there can be no
assurance that such securities will meet the continued listing requirements.
Under current criteria for continued inclusion on the Nasdaq SmallCap Market,
(i) the Company will have to maintain at least $2,000,000 in net tangible assets
or $35,000,000 market capitalization or achieve net income of $500,000 for two
of the last three years, (ii) the minimum bid price of the Common Stock will
have to be $1.00 per share, (iii) there must be at least 500,000 shares in the
public float valued at $1,000,000 or more, (iv) the Common Stock must have at
least two active market makers, and (v) the Common Stock must be held by at
least 300 holders.
If the Company is unable to satisfy the Nasdaq SmallCap Market's
maintenance requirements, its securities may be delisted form the Nasdaq
SmallCap Market. In such event, trading, if any, in the Common Stock and
Warrants would thereafter be conducted in the over-the-counter market in the so-
called "pink sheets" or the NASD's "Electronic Bulletin Board." Consequently,
the liquidity of the company's securities could be impaired, not only in the
number of securities which could be bought and sold, but also through delays in
the timing of transactions, reduction in security analysts' and the news media's
coverage of the Company, and lower prices for the Company's securities than
might otherwise be attained.
In addition, if the Common Stock were to become delisted from trading
on Nasdaq and the trading price of the Common Stock were to fall below $5.00 per
share, trading in the Common Stock would also be subject to the requirements of
certain rules promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as "penny stock"
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
defined as an investor with a net worth in excess of $1,000,000 or annual income
exceeding $200,000, $300,000 together with a spouse). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The broker-dealer also must disclose the commissions
payable to the broker-dealer, current bid and offer quotations for the penny
stock and, if the broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market.
Such information must be provided to the customer orally or in writing prior to
effecting the transaction and in writing before or with the customer
confirmation. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon broker-
dealers by such requirements may discourage them from effecting transactions in
the Common Stock, which could severely limit the liquidity of the Common Stock
and the ability of purchasers in this Offering to sell the Common Stock in the
secondary market.
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USE OF PROCEEDS
The net proceeds of this Offering to the Company, with an assumed initial
public offering price of $13.00 per Unit, will be $8,275,000 ($11,212,500 if the
over-allotment Option is exercised in full) after deducting $500,000 of expenses
relating to the Offering. The Company intends to use the net proceeds as
follows:
<TABLE>
<CAPTION>
AMOUNT %
---------- ------
<S> <C> <C>
Debt and Liabilities Retirement (1) 955,000 11.5%
EPA testing 1,000,000 12.1%
FDA Update for Master File 500,000 6.0%
Marketing (2) 2,000,000 24.2%
Research and Development (3) 1,620,000 19.6%
Working Capital and general corporate purposes (4) 2,200,000 26.6%
---------- -----
Total $8,275,000 100.0%
</TABLE>
___________
(1) Represents repayment of $450,000 in principal amount of three year non-
negotiable promissory notes issued in February and March of 1998, together
with accrued and unpaid interest at a rate of 10% per annum for the first
year; payment in arrears of deferred salary of $300,000 to Timothy C. Moses
and Jacques Elfersy of the Company for the years 1995-1997; $125,000 for a
promissory note to Mr. Stephen Dale, due November 13, 1998, together with
accrued and unpaid interest at a rate of 10% per annum; and three
promissory notes, in the aggregate principal amount of $80,000, payable to
Mrs. Judy Turner, the mother-in-law of Timothy C. Moses, President of the
Company, together with accrued and unpaid interest at a rate of 8% per
annum.
(2) Represents a portion of cost associated with initial introductory media and
advertising by market segment, estimated at an average of $750,000 per
market segment with five total markets for the U.S. The initial focus shall
be on two product lines into five market segments (food, non-food, mass
merchandisers, do-it-yourselfers, and specialty).
(3) Represents a portion of the costs associated with research and development,
including the cost of conducting studies to determine the safety and
efficacy of synthetic skins and wound care products and further testing of
36.OI and 3651P. The Company estimates that the amounts required to
complete the primary development projects will be substantially in excess
of the portion of the proceeds allocated to research and development. See
"Business--Research and Development."
(4) A portion of the proceeds allocated to working capital is expected to be
utilized to pay the salaries of the Company's two principal executive
officers, Timothy C. Moses and Jacques Elfersy, which salaries are
anticipated to aggregate approximately $250,000 for the 12 months following
the consummation of this Offering. See "Management" and "Certain
Transactions."
Pending application of the net proceeds of this Offering, the Company may
invest the net proceeds from this Offering in interest-bearing savings accounts,
United States Government obligations, certificates of deposit or short-term
interest-bearing securities.
DIVIDEND POLICY
The Company does not anticipate paying dividends on the Common Stock at any time
in the foreseeable future. The Company's Board of Directors plans to retain
earnings for the development and expansion of the Company's business. The Board
of Directors also plans to regularly review the Company's dividend policy. The
Company's ability to pay dividends will be dependent, in large measure, on its
ability to receive dividends and management fees from its life insurance
subsidiaries. The ability of these corporations to pay dividends and management
fees, in turn, is limited pursuant to applicable insurance laws. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of the Company and will depend on a number of factors,
including future earnings, capital requirements, financial condition and such
other factors as the Board of Directors may deem relevant.
14
<PAGE>
DILUTION
As of June 30, 1997, the net tangible book value of the Company was
$217,126 or $0.05 per share of Common Stock. The net tangible book value of the
Company is the aggregate amount of its tangible assets less its total
liabilities. The net tangible book value per share represents the total
tangible assets of the Company, less total liabilities of the Company, divided
by the number of shares of Common Stock outstanding. After giving effect to the
sale of 750,000 Units (shares of Common Stock and Warrants) at an assumed
offering price of $13.00 per Unit or $6.50 per share of Common Stock (no value
assigned to the Warrants) and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value per share would increase from
$0.05 to $1.47. This represents an immediate increase in net tangible book
value of $1.42 per share to current shareholders and an immediate dilution of
$5.03 per share to new investors or, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Public offering price per share $ 6.50
Deficit in Net tangible
book value per Share before this Offering $(0.18)
Increase per share attributable
to new investors 1.45
------
Adjusted net tangible book value
per share after this Offering $ 1.27
------
Dilution per share to new investors $ 5.23
======
</TABLE>
The following table sets forth as of May 31, 1998, (i) the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price per share paid by the current shareholders, and
(ii) the number of shares of Common Stock included in the Units to be purchased
from the Company and total consideration to be paid by new investors (before
deducting underwriting discounts and other estimated expenses) at an assumed
offering price of $13.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVG. PRICE
------------------------- ------------------------ -------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current shareholders 4,395,040(2) 75.0% $ 1,375,401 9.0% $0.21
New investors 1,500,000(2) 25.0% 9,750,000(2) 91.0% 6.50(3)
--------- ----- ----------- ------
Total 5,895,040(1) 100.0% $11,125,401(2) 100.0%
========= ===== =========== =====
</TABLE>
________
(1) Does not include an aggregate of 1,810,000 shares of Common Stock issuable
upon the exercise of: (i) the Warrants, (ii) the Underwriters' Warrants,
(iii) the over-allotment option, (iv) employee stock options, and (v)
450,000 warrants issued to investors in a private placement at an exercise
price of $6.50 per share, and (vi) 40,000 warrants at an exercise price of
$7.80 per share. To the extent that these options and warrants are
exercised, there will, in certain cases, be further share dilution to new
investors.
(2) Upon exercise of the over-allotment option, the number of shares held by new
investors would increase to 1,725,000 or 27.7% of the total number
of shares to be outstanding after the Offering and the total consideration
paid by new investors will increase to $11,212,500. See "Principal and
Selling Shareholders."
(3) This amount assumes the attribution of the Unit purchase price solely to the
Common Stock included in each Unit. See "Use of Proceeds."
15
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma short-term debt and
capitalization of the Company as of June 30, 1997, and as adjusted to give
effect to sale of 750,000 Units offered hereby and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
May 31, 1998
---------------------------
(UNAUDITED) AS ADJUSTED
<S> <C> <C>
Short-term debt:
Current portion of notes payable. $ 630,000 $ 0
Total short-term debt $ 630,000 $ 0
Shareholder's equity:
Common Stock, no par value,
50,000,000 shares authorized,
4,395,040 shares issued and outstanding,
5,895,040 as adjusted (1) (2) (3) (4) $ 1,153,001 $ 1,253,001
Additional paid in capital 122,400 8,397,400
Deficit accumulated
during the Development stage (2,058,259) (2,158,259)
----------- -----------
Total shareholder's equity (deficit) (782,858) 7,492,142
----------- -----------
Total capitalization (deficit) $ (152,858) $ 7,492,142
=========== ===========
</TABLE>
___________
(1) Does not include an aggregate of 400,000 shares of Common Stock reserved for
issuance upon the exercise of stock options to be outstanding under the
Company's 1997 stock Incentive Plan and the Company's 1996 Directors Stock
Option Plan (collectively, the "Plans"), 82,500 of which options are
currently exercisable. See "Management Employment Agreements," Stock
Option Plans," "Principal and Selling Shareholders," "Certain Transactions"
and "Underwriting."
(2) Does not include an aggregate of up to 1,125,000 shares issuable upon
exercise of (i) the Warrants, (ii) the over-allotment option and (iii) the
Underwriters' Units.
(3) Does not include of up to 112,500 Warrants issuable upon exercise of the
over-allotment option or the 75,000 Warrants underlying the Underwriters'
Warrants.
(4) Does not include an aggregate of 648,252 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants at a weighted average price
of $0.50 per share, 15,000 shares issued to employees pursuant to the
Company's 1997 Stock Incentive Plan at a price of $1.00 per share, 450,000
warrants at an exercise price equal to the IPO price, and 40,000 warrants at
an exercise price of $7.80 per share. See "Management Discussion and
Analysis of Financial Condition and Results of Operations - - Liquidity and
Capital Resources."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL.
Since June 1995, the Company, a development stage company, has been engaged
almost exclusively in research and development, regulatory approvals, patent
filings and activities focused on developing its antimicrobial products.
RESULTS OF OPERATIONS.
COMPARISON OF ELEVEN-MONTH PERIODS ENDING MAY 31, 1998 COMPARED TO MAY 31, 1997
AND JUNE 30, 1996 COMPARED TO JUNE 30, 1997.
The Company's net sales were $434,790 compared to $578,561 during the
period ending May 31, 1998, and May 31, 1997, respectively, and $775,315 for
the year ended June 1997. There were no sales made in 1996. The Company began
minimal sales activity in March 1997, generating a significant portion of all
revenues for its period ending May 31 1997, with a significant one month
increase of June 1997, primarily due to an initial order from one customer. The
growth in sales was attributable to the beginning commercialization of the
Company's technology.
Gross Profit for the period ending May 31 1998, was $279,782 compared to
$311,718 for the same period ending in 1997 and, for fiscal year ended June 30,
1997, was $459,493 or 59% of net sales. There was no gross profit in fiscal
year ended June 1996 due to the absence of sales. Total operating expenses
increased to $1,470,669 for the period ended May 31, 1998, compared to $925,724
for the period ended May 31, 1997, primarily due to a significant increase in
regulatory applications, testing, and patent filings, representing $987,353 in
1997 compared to $328,217 in 1996. Marketing and selling expenses increased
3,705% for the period ending June 1997 from ($213,387 in 1997 and $5,608 in
1996) reflecting growth in the Company's market studies and preparation for
product launch. In addition, marketing and selling expenses during the period
ended May 31, 1998, of $368,774 compared to $204,326 during the period ended
May 31, 1997, increased due to the launch in Georgia of two retail consumer
products. General and administrative expenses increased from May 31, 1998, of
$1,037,588 compared to $660,680 for May 31 1997, as a direct result of the
Company filing additional patent applications, costs associated with the IPO,
and Regulatory applications. In addition, general and administrative expenses
during the fiscal year ended June 30, increased to $700,184 in 1997 from
$195,515 in 1996 to support growth of research and development and a build up of
support personnel.
Operating loss was $1,190,887 Compared to $614,0046 for the period ending
May 31, 1998, and May 31, 1997, respectively and $527,860 for the fiscal years
ended June 30, 1997 and June 30 year ended June 1996 versus $386,217 in 1996.
The larger operating loss for each of the more recent periods was due to the
increase in operating expenses as the Company built up its infrastructure to
support future growth, patent application and regulatory testing and
applications. Other income was $13,401 and $29,901 in 1996 and $3,403 for the
period ended May 31, 1998 compared to $3,205 for the period respectively ended
May 31, 1997. This income in 1997 was derived from consulting services by the
senior officers of the Company and the 1998 income was derived from interest.
Interest income for 1998 was the result of short term interest from the sale of
a private placement of the Company. See "Liquidity and Capital Resources."
The Company incurred a net loss of $1,187,484 for the period of May 31,
1998 compared to $610,801 for the period ended May 31, 1997 and a $514,459 for
the fiscal year ended June 30 1997 compared to $356,316 for the period ended
June 30, 1996. The increase in net loss was due to the increase in operating
expenses as explained above. The Company expects such losses to continue for
the foreseeable future and until such time as the Company is able to attain
sales levels sufficient to support operations.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
The Company has funded its activities to date through loans from principal
stockholders, debt and private placement offerings. Working capital at June 30,
1997, was $114,665 versus a working capital deficit of ($183,663) for the fiscal
year ended June 30 1997 compared to June 30, 1996. The increase in working
capital was due to cash infusions during the year from private placements.
Cash used in operating activities was ($430,554) for the fiscal year ended
June 30, 1997 compared to ($90,434) for the year ended June 30, 1996, $1,119,357
for the period ended May 31, 1998 compared to ($580,043) for the period ended
May 31,1997. The increase in cash used in operations was primarily due to the
increase in net loss and changes in current assets and current liabilities.
In February 1998, the Company raised $450,000 from the sale of 90 Units in
a private offering. Each Unit consists of (i) a $5,000 Non-Negotiable Interest
Bearing Promissory Note due and payable on the earlier of the closing of an
"IPO" or three years from the date of issuance (the "Maturity Date"), and (ii) a
warrant to purchase up to 5,000 shares of Common Stock at the IPO offering price
which will be $6.50 per share.
During the first two calendar quarters of 1998, Mrs. Judy Turner, the
mother-in-law of Timothy C. Moses (President and CEO of the Company), loaned the
Company a total of $80,000 payable at the earlier of one year or an IPO at an
accrued interest rate of 8% per annum.
In November 1996, the Company sold an aggregate of 16,667 common shares and
two warrants attached at a strike price of $1.50 (50% convertible in two years
and the remaining 50% in three years) for net cash proceeds of $250,000. In
April 1997, the Company sold an aggregate of 300,000 common shares and two
warrants at a strike price of $2.00 (50% convertible in two years and the
remaining 50% in three years). In December 1997, the Company initiated a 2.45
for 3.00 reverse stock split and a reverse split of 1.00 for 2.00 on the
warrants.
Prior to November 1996, the Company sold an aggregate of 28,000 common
shares in a private placement for net cash proceeds of $140,000. The
Subscription Agreement was anti-dilutive, and therefore, upon the consummation
of the November 1996 sale of stock by the Company, an additional 65,333 shares
were issued to four original shareholders.
The Company expects that its cash needs will continue to increase
substantially in future periods for expansion of its markets, marketing
expenses, research and development as well as an increase in regulatory testing
requirements by the EPA and FDA. Accordingly, the Company will need to raise
substantial additional funds to continue development and commercialization of
its products. The Company's future cash requirements will depend on many
factors, including the successful completion of the proposed public offering
contained herein. At its planned rate of spending, the Company estimates that
the net proceeds of the proposed offering combined with projected revenues will
only be sufficient for approximately 12 months of activity. However, there can
be no assurances that the underlying assumed levels of revenue and expense will
be accurate or adequate.
18
<PAGE>
BUSINESS
GENERAL.
BioShield Technologies, Inc., a Georgia corporation formed in 1995, is a
development stage company engaged in the development, marketing, and sale of
surface modifying antimicrobials and biostatic products, primarily through third
party licensing arrangements. The Company's primary focus is to exploit its
proprietary technology to become the leader in topical antimicrobials and
biocides for consumer, industrial and institutional markets, environmental
services, and medical device markets. BioShield products are an easily applied
reactive coating technology that modifies surfaces of all types , by creating an
invisible covalent bond between surfaces and a variety of chemical agents.
Through the cross linking technology, these antimicrobial properties and other
chemical agents can impart many performance-enhancing characteristics, such
as residual antimicrobial activity, removal of (surface-borne and air-borne)
allergens which may cause respiratory discomfort or asthma, infection
resistance, anti-inflamation, lubricity and drug delivery onto many surfaces
without changing the dimensions or physical properties of the modified surfaces.
The Company believes that its antimicrobial technologies have revolutionary
properties that make its products significantly more durable, effective,
versatile, and safer than currently available conventional antimicrobials for
treatment of hard and soft surfaces, surface modified medical devices, allergy
and respiratory conditions and preservatives. The Company believes that certain
manufacturers who utilize the Company's technologies are able to significantly
improve the performance of their products and, in many cases, differentiate
their products in a highly competitive marketplace.
The Company focuses on providing value added and unique antimicrobial
solutions to a variety of industries and product categories. Examples of
products in the market or under development that utilize the BioShield
technology include surface-borne and air-borne products which remove or
eliminate certain allergens from the air which may cause respiratory discomfort
or asthma, nine (9) consumer products exhibiting residual antimicrobial
efficacy, a powder form of add-mixture for the control of specialty
microorganisms, antimicrobial bio-barrier treatment for acute wound care, and
control of food borne contaminates. The Company believes further opportunities
exist to commercialize its covalent bonding technology for other market
applications, such as acute and chronic wound sites, artificial synthetic skins,
cardiology and urinary catheters, timed released anti-inflammatory and the
promotion of host cell attachment and transplant/medical device anti-rejection.
However, no assurances can be given that the Company will be successful in
commercializing any such applications or obtaining the required regulatory
approvals.
The Company's objective is to exploit its proprietary technology patents,
technical and marketing property, and future regulatory approval from the United
States Environmental Protection Agency ("EPA") and United States Food and Drug
Administration ("FDA") to become the leader in topical antimicrobial and biocide
products for the consumer, industrial and institutional markets,
environmental services, and medical device markets. The Company believes that
its antimicrobial technologies have revolutionary properties that make its
products significantly more durable, effective, and safer than currently
available conventional antimicrobials, non-antibiotics, preservatives, or
biocides.
MARKET NEEDS FOR MODIFIED ANTIMICROBIALS.
The need to develop and provide protection against bacteria, fungi, algae,
yeast, and viruses has long been recognized. However, the use of long-lasting
bacteriostatic finishes have gained attention during the past decade. This is
magnified by the fact that the mortality rate from viruses and bacteria has,
according to The Centers for Disease Control and Prevention increased 58%
between 1980 and 1992 and is now the third major cause of mortality, ranking
behind only heart disease and cancer. Most recently, according to the New
England Journal of Medicine, certain forms of bacteria are being associated with
or are contributing factors to certain diseases including some forms of cancer.
Additionally, approximately 800,000 to 1.2 million commercial buildings might be
suffering from some form of "sick building syndrome," according to the
Occupational Safety and Health Association (OSHA). More than 70 million workers
might suffer from health problems caused by faulty buildings. The Company
believes that there has been a significant increase in demand for environmental
services.
19
<PAGE>
ADVANTAGES.
The Company believes its technology is significantly different, and has
many advantages and advances over conventional antimicrobials, non-antibiotic
treatments, or biocides which, themselves, offer no residual activity, long term
solution or ability for performance enhancement and are prone to adaptation and
declining efficacy due to microbial mutations. The Company's products contain no
heavy metals, mercury or formaldehyde. BioShield products are versatile
antimicrobials, easily applied, reactive coating technology that modifies
surfaces of all types , by creating an invisible covalent bond between surfaces
and a variety of chemical agents. The Company believes that its antimicrobial
technology has revolutionary properties that make them significantly more
durable, effective, versatile and safer than currently available technologies.
Unlike other antimicrobial materials, the Company's key active ingredient has,
to date, not been shown to cause genetic mutation or to be teratogenic (causing
physical defects in developing embryos). The Company has filed (but has not yet
obtained) certain applications for patents with the United States Patent and
Trademark Office with respect to its proprietary technology. Specifically, the
Company has discovered and claimed a variety of new compositions and methods of
making and using its proprietary antimicrobial products and the manipulation and
moiety of performance enhancing properties. The Company intends to continue to
pursue patent protection in the United States and other commercially important
foreign countries for its core technologies, improvements thereon, and for
certain specific products that it develops.
The Company's technology provide almost any surface with continuous
antimicrobial protection, killing a variety of viruses and bacteria as they come
in contact with the treated surface. Reapplication of the Company's
antimicrobial technology is generally not needed for up to six months to a year
in some instances. Certain manufactured devices or products, with BioShield's
antimicrobial covalent technology, provide protection to a wide array of
disposable products as the treated surface continues in many cases to kill
microorganisms for the life of the product.
The Company's technology can potentially be used to provide manufacturers
with the following surface properties.
NON MUTATION. The Companies antimicrobial products take effect on
contact with the organism. It remains surface attached and is not absorbed or
"ingested" by the microorganism. As a result, to date no mutation-adaptation of
microorganisms involving the Company's active ingredient have been reported, as
is frequently the case with antibiotic compounds.
RESIDUAL ACTIVITY. Antimicrobial cleaning and treatment of surfaces is
of great importance and benefit to most environments. Disinfection and
sanitation are required application steps in, for example food processing
and hospital environments. Part of every day cleaning is to remove
visible soil and invisible organisms from surfaces. Beginning shortly
after the disinfection and sanitation step new bacteria and other
microorganism can reinfect most surfaces. The Company's antimicrobial
coating converts surfaces to provide residual activity. The residual
activity allows the continuous destruction of microorganisms on the
treated surface. It continuously kills bacteria and other microorganisms
that come in contact with the surface long after the cleaning steps are
completed. The residual activity can last for six months or longer
depending on the environment.
NON LEACHING. Antimicrobial treatments often migrate or leach from the
application site into the surrounding environment. This migration slowly
depletes the surface of active ingredient and possibly contaminates
adjacent sites. The Company's unique technology is based on chemistry
that binds the Company's active ingredient to the surface and has been
shown to prevents the active ingredient from leaching quickly into the
environment. This ability to localize the activity prevents the
undesired spread into adjacent materials and provides for a prolonged
presence and antimicrobial activity at the application site.
CONTAMINATION RESISTANCE. Antimicrobial treatment of surfaces is
advantageous when the risk of infection is of concern. Uncontrolled
growth of microorganisms in the environment can be the source of
microorganisms that cause infections, diseases, allergies, spoilage of
products, and aesthetic devaluation. Lethal antibiotic-resistant
organisms have become endemic in U.S. hospitals. The Company's technology
has been shown in many cases to reduce the extent of bacterial growth on
treated versus untreated surfaces. This reduction of surface organisms
provides a cleaner environment and reduced risk from surface
contamination.
VERSATILITY. The Company's surface conversion technology is an
integrated technology. It combines the chemistry and action of several
individual molecules into one application system. The Company's
integrated technology can be modified, providing a versatility to design
new coatings with a variety of properties based on the original
technology.
20
<PAGE>
The Company's long term viability, profitability, and growth will depend
upon successful commercialization of the products resulting from its research
and product development activities. The Company will attempt to gain market
share by forming alliances with strong marketing partners. The Company's goal
is to obtain new and broader approvals for its claims and products through the
EPA and through the FDA. Examples of products in the market or under
development that uses the BioShield technology include surface-borne and air-
borne products which remove or eliminate certain allergens which may cause
respiratory discomfort or asthma, nine (9) consumer products exhibiting residual
antimicrobial efficacy, powder form of add-mixture for the control of specialty
microorganisms, antimicrobial bio-barrier treatment for acute wound care,
artificial synthetic skins cardiology and urinary catheters and control of food
borne contaminates. However, no assurances can be given that the Company will
be successful in commercializing any such applications or obtaining the required
regulatory approvals.
The Company's products provide most surfaces with continuous antimicrobial
protection, killing viruses, and bacteria as they come in contact with the
treated surface depending upon the environment. Reapplication of the Company's
retail antimicrobial products is generally not needed for up to six months to a
year in some instances. Certain OEM products provide protection to a wide
array of disposable products as the treated surface continues to kill
microorganisms for the life of the product.
OVERVIEW OF TECHNOLOGY.
The Company's products provide antimicrobial solutions based on reactive
silane quaternary ammonium salts. These salts, either independently or as part
of an integrated system, are comprised of up to two different silanes and a
suitable solvent, commonly an alcohol solvent and/or water. These integrated
systems are designed to bind to many surfaces forming an invisible antimicrobial
coating. This solution is antimicrobially active and provides protection
against microorganisms. Binding or strong interaction with the surface of a
substrate allows the antimicrobial to remain active on the surface, often for
many subsequent years, possibly the lifetime of the treated article. The
original system has found many applications over the years and extensive data
have been collected regarding the safety, application, and durability of the
product. A limitation of the product in its original form is the dependence on
methanol as a solvent. Methanol is a highly toxic, flammable substance and when
misused may cause blindness or death. In addition, dissolution in water is slow
and aqueous solutions of high concentrations have a limited shelf life. These
limitations prevented a broad scale distribution and application of the original
integrated system. The Company's inventions overcame these limitations in
creating essentially non-toxic, water stable, aqueous solutions. This
innovation allows for many unique end use applications while the base technology
continues to have utility in a wide variety of other markets.
The Company has filed four patents pertaining to the stabilization of the
silane intergrated system in different systems including water. Based on the
water stabilized integrated antimicrobial silane system, the Company has
developed numerous end use products and more products are under development.
FORWARD THINKING.
The integrated system provides the flexibility to modify individual parts
of the system. For example, removing one component and replacing it with
another more heat stable renders the entire system more heat stable. This is an
important feature for incorporation of the system into thermoplastic materials.
This same flexibility is complemented by the large amount of formulation
experience. Modifications and mixtures that enhance hydrophobic character,
hydrophilic character, antisoiling, antistatic, dye fastness, handle, and other
favorable end-use substrate properties are available both under certain patents
and under proprietary knowledge.
In addition to providing improved antimicrobial properties, research into
new materials based on silane integrated systems is expected to provide new
products such as anti-rejection agents for use in human organ transplants. An
example is the problem of rejection of transplant organs or artificial implants
by the receiving body's immune system. Rejection is often based on the
recognition of the implant as a foreign body. This recognition is affected by
the surface of the implant. Silane treatment of implants may change the surface
and recognition of the implant. A possible modification of the silane is the
incorporation of body proteins to mask the implant or attachment of molecules
known to reduce the likelihood of rejection. However, no assurances can be
given that the Company will be successful in commercializing any such
applications or obtaining the required regulatory approvals.
21
<PAGE>
Although there has been an enormous interest in silane chemistry,
historically, product development has not been focused on end-use products
containing reactive silane, possibly because of the difficulty associated with
providing safe means of application, for example from aqueous solutions. By
providing water stable solutions of reactive silanes, a whole field of chemistry
research with many useful molecules synthesized and characterized is readily
available to the Company for commercialization. However, no assurances can be
given that the Company will obtain the required regulatory approvals or will be
successful in bringing any of these products to market.
In summary, the Company has developed new technologies for the
stabilization of reactive silanes or silane integrated systems in user friendly
solvents, primarily water. This new technology allows the utilization of a well
known antimicrobial system into medical and consumer products providing durable
treatments possibly otherwise unavailable.
MARKETING AND SALES
There are numerous product, process, and service uses for the Company's
unique antimicrobial technologies. Viewed collectively, they form the basis of
a mini-industry built around a single key active ingredient chemistry that, like
penicillin, might change the way microbes are controlled in the future.
The largest number of opportunities require additional development
activities. In some, much of the technical work has been completed and
generally only regulatory work is required. In others, significant technical
development is still required.
The Company intends to initially concentrate its efforts towards the
marketing and sales of products for the retail consumer and industrial markets.
The Company believes that product market is comprised of four primary
segments as described below: Retail-Household Care products, Industrial-
Institutional products, Healthcare products, and Environmental Services.
Technical development has been completed on several products, and many are
ready for commercialization in areas where regulatory requirements permit.
Initially, however, products are being commercialized by the Company in the
retail consumer market and institutional and industrial (I & I) marketplaces as
described below.
PRODUCTS MARKET SEGMENT.
- -----------------------
RETAIL-HOUSEHOLD CARE MARKET. Microbial fears have promoted lively sales
of antibacterial products. Because of the increase of microbial infections and
disease, companies like Colgate-Palmolive have increased sales by 20% by
incorporating a simple antibacterial agent within their hand soaps, which helps
to control germs on hands. Companies like 3M have absorbed 50% of the sponge
market by incorporating an antibacterial agent that kills germs in the sponge,
but not on the surface with which it comes in contact. Reckitt & Coleman, Inc.
claims that its Lysol Antibacterial Kitchen Cleaner mopped up $25 million in
retail sales, or 5% of the total Lysol line in 1995 - its first full year on the
market.
The Company believes that its largest near-term opportunities for revenue
generation exist in the mass market retail outlets including supermarkets, mass
volume retailers, drug stores and perhaps DIY (do- it-yourselfers) outlets.
Household cleaners represent a retail market value in the annual range of $1.5
billion dollars in supermarkets only.
----
To capitalize on this opportunity the Company is developing a network of
manufacturer's representative firms to market its first antimicrobial retail
products. These are primarily traditional food "brokers" plus general
merchandise reps. General merchandise reps are frequently more effective with
drug and mass volume retailers, such as Walgreens, CVS, Eckerd, K-Mart, etc.
In nine southeastern states the Company has engaged offices of a regional
food trade brokerage firm, Budd Mayer Company, with offices in Atlanta, GA;
Nashville, TN; Charlotte, NC; Tampa, FL; Memphis, TN; Raleigh, NC; Miami, FL;
Fayetteville, AR; Greenville, SC; Orlando, FL; Jackson, MS; Birmingham, AL;
Jacksonville, FL; Little Rock, AR; and Montgomery, AL.
As of June 1 , 1998, the Company has acceptance in several major
supermarket accounts buying locally in the Georgia market. The Company's first
two retail products are BioShield Mold & Mildew (stain) and Odor Protectant and
BioShield Carpet and Upholstery Cleaner. Kroger (150 stores), Winn Dixie (101),
A & P (51), Cub Foods (13) and wholesaler Super-Valu have committed to stock
these products in their 550+ retail outlets.
Company products for the Florida, North/South Carolina and Georgia markets
are scheduled for shipping/advertising in the third and fourth calendar
quarters of 1998.
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The Company believes that the challenge of greatest magnitude for the
Company is to develop consumer awareness, induce first time purchase of such
products and build brand awareness.
The Company will be required to expend approximately 11.5% of revenues from
these retail outlets toward media placement and advertising of which radio will
account for approximately 75-80% of the total planned budget. Creative
approaches are being "tested" and will be kicked-off in four week flights in
Georgia in September and Florida during October. Additionally, the Company has
set aside 10% of sales to these retail outlets (which accrues on a quarterly
basis and which is redeemable on a quarterly basis )for in-store premium
promotion programs. All radio spots will be tagged with names of retailers with
the Company's items on their shelves.
The Company has commenced the process of selecting marketing support in the
advertising and public relations arenas. The Company plans to spend
approximately $2,000,000 for advertising and public relations through 1999. The
Company's spending levels in advertising and account development funds will
enable the Company to find talented agencies to build creative and results-
oriented activities.
The Company has launched additional products (BioShield KleenAire Healthy
Home Systems to reduce airborne allergens and BioShield Antimicrobial stain
guard (for fabrics) in Spring of 1998 on the QVC cable channel and anticipates
commencing distribution into new and existing supermarket chains effective the
fourth quarter of 1998. The Company anticipates introducing a total of seven
retail lines by the end of 1999.
INDUSTRIAL AND INSTITUTIONAL MARKETS (I & I).
The Company intends to follow a path taken by many other proprietary
chemical manufacturers and has targeted leading industrial and institutional
products companies that currently formulate and market to this industry.
The following products have been developed for sale to the industrial and
institutional markets but have not received regulatory approval.(See Government
Regulation):
BIOSHIELD AM500
- molecular bonding additive for formulating institutional industrial
disinfectants
- molecular bonding additive for formulating sanitizers and
microbiocides
- for use in laundry additives
- additive for carpet treatment products
- for use in upholstery and drapery treatment products
- for use in building cleaning and treatment products
- additive for household cleaning products
- for use in food processing plants
BIOSHIELD AM36.OI
- molecular bonding additive for formulating institutional and
industrial disinfectants
- molecular bonding additive for formulating sanitizers and
microbiocides
- for use in laundry additives
- for use additive for carpet treatment products
- for use in upholstery and drapery treatment products
- in building cleaning and treatment products
- additive for household cleaning products
- for use in food processing plants
- higher strength than BioShield AM500
BIOSHIELD AM3651P
- molecular bonding additive for formulating institutional and
industrial disinfectants
- can be used similar to BioShield AM36.OI
- produces coating with migrating properties
- for use as preservative in personal care product
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TECHNOLOGY LICENSING ACTIVITIES.
The Company is seeking to finalize private label agreements with certain
manufacturers in the janitorial and sanitary supply industry. The manufacturing
and technology use licensing program incorporates a licensing agreement for an
initial term of two (2) years. This agreement allows licensees to purchase
BioShield industrial concentrates for private label use in either BioShield
supplied formulations or formulae that are developed independently by the
licensee. BioShield structures the agreement so that a royalty is collected on
each unit (quart, gallon, etc.) of product that is shipped by the licensee which
contains BioShield. In structuring the licensing agreements exclusivity in
certain market channels or product categories has not been given as a general
practice, however, agreements are being structured to allow a "market lead time
advantage" in certain segments so long as volume purchases of the industrial
concentrates by the licensee are met on a predetermined basis.
Initial discussions are underway with several large direct industrial
prospect accounts. However, none have been consummated to date. Sales to these
direct accounts, as well as those through reselling distributors are expected to
be slow until approval of pending EPA registrations.
THE ENVIRONMENTAL SERVICES MARKET.
The environmental services market describes the treatment of materials in-
place. The Company will seek to exploit opportunities in the aftercare market
through two distribution channels. The first of these channels is the sale of
BioShield products through specialty distributors and is targeted at the small
operator that will treat residences and small commercial buildings. The second
distribution channel is being developed with bulk sales, full technical training
and support, and will target the large restoration companies and other high
volume users who see the value in the technical support and the more technical
market positioning sell.
Microbial contamination causes a variety of problems, ranging from odors,
staining, rotting and defacement of goods to allergies, illnesses, and other
health related problems. This may allow for the development of business
opportunities directed at solving specific problems. These include Company
products to prevent musty odors and staining caused by mold, providing a
hypoallergenic environment for people with allergies, asthmatics, and persons
with respiratory ailments, and the prevention of algal and fungal deterioration
and staining of roofing shingles. The Company believes that other potential
applications may include treatment of swimming pools and building exteriors to
provide additional market potential. These applications will require EPA
approval for antimicrobial claims. However, no assurances can be given that the
Company will be successful in commercializing any of these products or will
receive EPA or other required regulatory approvals.
Approximately 800,000 to 1.2 million commercial buildings might be suffering
from some form of "sick building syndrome," according to the Occupational Safety
and Health Association (OSHA). More than 70 million workers might suffer from
health problems caused by faulty buildings. The Company currently has treated
over two hundred schools, hospitals, and sick buildings with great success. The
Company has currently seen a significant increase in demand for environmental
services.
The Indoor Environmental Quality (IEQ) market includes all enclosed space
that is occupied by people, animals, plants, and valuable or perishable items.
Microbial problems within these structures are the prime focus of the Company in
this segment of the antimicrobials marketplace. Within the large array of
indoor pollutants and mitigating factor, microorganisms are the only pollutants
that may produce a gas (VOC metabolic wastes), a particulate (spores and somatic
parts), or a toxin, which may result in human irritation, allergy sensitization,
or disease.
BUSINESS AGREEMENTS.
AGREEMENTS WITH QVC, HEALTHSAFE AND OTHERS.
The Company currently has several agreements in place for distribution rights
to its different antimicrobial technologies on an exclusive basis. The Company
has entered into various sales distribution agreements for its products. The
most significant of which are through QVC and HealthSafe Environmental Products,
Inc. Since the Company's inception sales through QVC have accounted for
$225,000 in revenues and through HealthSafe of $330,000 in revenues for a total
of 71.6% of revenues.
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Currently the Company has given HealthSafe Environmental, Inc. the
worldwide right to exclusively distribute the BioShield 36.OI concentrate
product for use in the commercial/residential building restoration industry.
Such application includes applications before or after building disasters
(floods, fire, water damage) for the prevention and control of microbial
contamination. In addition, HealthSafe has the exclusive worldwide right to
distribute concentrates to the allergy and respiratory discomfort medical
market. Such applications to large interior surface areas will be marketed
pending EPA approval to assist in the prevention and control of health related
illnesses caused from exposure to microbial germs. This contract requires
HealthSafe to purchase $1.3 million, $2.6 million, and $3.9 million for the
first three years, with additional years of not less than 120% of previous years
purchases. To date, HealthSafe is in default of the terms of the licensing
agreement and has not, among other things, achieved the required minimum
purchase amounts.
Pursuant to an agreement dated November 1997, the Company has entered into
a marketing and distribution agreement to build brand equity with QVC (the QVC
"Agreement") to promote its products on an exclusive basis via direct response
television. The Agreement is renewable on an approval basis. However, the
Agreement will be automatically renewed in the event that net purchases by QVC
equal $1,500,000 during the first year and 110% of such amount each year
thereafter. QVC has also agreed to work with the Company to help it introduce
six (6) new consumer products on QVC's television shopping program during the
term of the Agreement. The Company has also granted QVC certain option rights
to purchase shares of the Company's Common Stock upon exceeding $2,000,000 in
sales goals.
In addition to the two contracts above, the Company has entered into
certain agreements with Concrete Microtech, Inc., (CMT) and Sanitary Coding
Systems. LLC, American industrial chemical corporation and a chemical
corporation. CMT has the right to use the technology within the concrete pipe
industry as an additive for sewer pipe. To date, CMT has successfully specified
AM500 in three municipalities waste water treatment contracts and one additional
municipality has already installed approximately 5,000 linear feet of sewer pipe
using BioShield. To date, CMT is in default of the terms of the licensing
agreement and has not, among other things, achieved the required minimum
purchase amounts.
MANUFACTURING
The Company is unique in that the only manufacturing contemplated is the
production of its antimicrobial concentrates. No special equipment is required
other than typical chemical manufacturing vessels and are in abundant supply.
The Company is currently producing its concentrates at its Lithonia, Georgia,
location and does not, in the foreseeable future, plan any additional
manufacturing operations. The Company intends to use chemical compounders
located around the U.S. and as centrally located to the Company's four U.S.
market segments. The Company may elect to open distribution centers in these
five markets or contract distribute.
COMPETITION.
The antimicrobial industry is an expanding and changing industry
characterized by intense competition. The key active ingredients used by the
industry have not changed significantly in the last twenty five or more years.
Another characteristic of the modern antimicrobial industry is the increasing
involvement of foreign companies in the field. These companies have found the
USA regulatory climate very complex and costly (money and time) and their
products appear to be of the traditional leaching types where they utilize
reservoirs in fibers or coatings to try to extend the useful life of their
products. Others have entered the market with slight modifications of old
technologies that on some substrates extend the life of their products but
clearly fail to deal with all of the other problems that are inherent in the
active ingredients list.
The Company believes that its ability to compete will be dependent in large
part upon its ability to continually enhance and improve its products and
technologies and to build a tradename presence that obviates the nature of the
technologies. In order to do so, the Company must effectively utilize and
expand its research and development capabilities and, once developed,
expeditiously convert new technology into products and processes which can be
commercialized. This must be complemented with the marketplace expansions
encompassed in this document.
The Company's ability to compete is based primarily on scientific and
technological superiority, technical support, availability of patent protection,
access to adequate capital, the ability to develop, acquire, and market products
and processes successfully, the ability to obtain further governmental
approvals and the ability to serve the
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particular needs of commercial customers with service, products, and tradenames.
Corporations and institutions with greater resources than the Company may,
therefore, have a significant competitive advantage. The Company's potential
competitors include consumer products companies, product based pharmaceutical
companies, and biotechnology companies. Almost all of these potential
competitors have substantially greater capital resources, research and
development capabilities, manufacturing and marketing resources, and experience
than the Company. The Company's competitors may succeed in developing products
or processes that are more effective or less costly than any that may be
developed by the Company, or that gain regulatory approval prior to the
Company's products. The Company also expects that the number of its competitors
and potential competitors will increase as more antimicrobial products receive
commercial marketing approvals from the EPA, FDA or analogous foreign regulatory
agencies. Any of these competitors may be more successful than the Company in
manufacturing, marketing and distributing its products. There can be no
assurance that the Company will be able to compete successfully.
PATENTS AND PROPRIETARY RIGHTS.
The Company seeks patent protection for its technology and products. It
typically files United States patent applications and related foreign patent
applications as soon as such technology and products are developed. The Company
files foreign patent applications on some of its technology and products in
countries where, in the Company's opinion, business considerations warrant such
filings. The foreign countries in which the Company files patent applications
usually include Japan, Canada, Australia, and countries of the European Economic
Community.
The Company has applied for four United States patents on its core
technology of novel composition and one joint patent with Emory University
("Emory") with respect to methods for producing water-stable organosilanes and
methods of using these compositions.
In addition, the Company intends to file additional patent applications in
1998 and in future years for improvements in its core technologies and for
specific products that it develops. There can be no assurance, however, that
the Company's patent applications will mature into issued patents, or, if
issued, that such patents will be adequate to protect the Company's products or
processes. In addition, there can be no assurance that the Company will be able
to obtain any necessary or desired additional licenses to patents or
technologies of others or that the Company will be able to develop its own
additional patentable technologies.
PATENT CLAIMS MADE BY OTHERS.
The Company entered into a Research Agreement with Emory University on
December 22, 1995. As a result of work performed pursuant to this Research
Agreement, Emory University has filed at least two patent applications, one
composition patent independently and the other an end-use patent jointly with
the Company (the"Joint Application"). Emory's independent composition patent
application (the "Emory Application") discloses and claims technologies
developed in conjunction with the Company that are different from, but similar
to, only one of the three technologies developed solely by the Company and on
which the Company is actively pursuing its own patents. If patents ultimately
issue out of the Emory Application, Emory may in the future seek to assert to
the Company that the manufacture, sale, and use of certain antimicrobial
products may infringe certain claims of their Emory Application patent and/or
foreign counterparts thereof.
The Company believes that its current products would not infringe any
claims that might issue from the Emory Application. However, any determination
in the future that one or more Company products infringe in the Emory
Application patent could have a material adverse effect on the business and
operations of the Company.
In addition, there can be no assurance that the Company is aware of all
patents or patent applications that may materially affect the Company's ability
to make, use, or sell any products. United States patent applications are
confidential while pending in the United States Patent and Trademark Office
("PTO"), and patent applications filed in foreign countries are often first
published six months or more after filing. Any conflicts resulting from third-
party patent applications and patents could significantly reduce the coverage of
the patents or patent applications licensed to the Company and limit the ability
of the Company to obtain meaningful patent protection. If patents are issued to
other companies that contain competitive or conflicting claims, the Company may
be required to obtain licensees to these patents or to develop or obtain
alternative technology. There can be no assurance that the Company will be able
to obtain any such license on acceptable terms or at all. If such licenses are
not obtained, the Company could be delayed in or prevent from the development or
commercialization of its product candidates, which would have a material adverse
effect on the Company. See "Business-Patents and Proprietary Rights and Certain
Transactions."
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The Company believes that its patent position involves complex legal and
factual questions. There can be no assurance that any future patent
applications or any patents issued to the Company will provide it with
competitive advantages or that the Company's use of its technology will not be
challenged as infringing upon the patents or proprietary rights of others, or
that the patents or proprietary rights of others will not have an adverse effect
on the ability of the Company to do business. Furthermore, there can be no
assurance that others will not independently develop similar technology or that
others will not design technology to circumvent the Company's existing or future
patents or proprietary rights. In the event that the Company's technology were
deemed to be infringing upon the rights of others, the Company could be subject
to damages or enjoined from using such technology or the Company could be
required to obtain licenses to utilize such technology. No assurance can be
given that any such licenses would be made available on terms acceptable to the
Company, or at all. If the Company were to be unable to obtain such licenses,
it could encounter significant delays in introducing products to the market
while it attempts to design around the patents or rights infringed upon, or the
Company's development, manufacture and sale of products requiring such licenses
could be foreclosed. In addition, the Company could experience a loss of
revenues and may incur substantial costs in defending itself and indemnifying
its strategic partners in patent infringement or other actions based on
proprietary rights violations brought against it or its strategic partners. The
Company could also incur substantial costs in the event it finds it necessary to
assert claims against third parties to prevent the infringement of its patents
and proprietary rights by others.
In March of 1997, the Company filed trademark applications for Duralast and
BioShield with the United States Patent and Trademark Office. The Company is
presently aware of a prior trademark filing for the name "BioShield," which the
Company believes has not been used in interstate commerce and has been
abandoned. The Company has instituted a cancellation proceeding with the U.S.
Patent and Trademark Office with respect to such prior trademark filing. No
assurances can be given that the Company will be successful in such cancellation
proceeding or in securing a trademark for the name BioShield.
The Company relies on proprietary know-how and confidential information and
employs various methods, such as entering into confidentiality and non-
competition agreements with its current employees and with third parties to whom
it has divulged proprietary information, to protect the processes, concepts,
ideas and documentation associated with its technologies. Such methods may
afford incomplete protection and there can be no assurance that the Company will
be able to protect adequately its trade secrets or that other companies will not
acquire information which the Company considers to be proprietary. The Company
will be materially adversely affected if it cannot maintain its proprietary
technologies.
GOVERNMENT REGULATION.
ENVIRONMENTAL PROTECTION AGENCY. The Company's research and development,
manufacturing, distribution, and sales activities are subject to comprehensive
regulation by numerous governmental authorities in the United States and other
countries. The Company's current products and products in short term
development, where pest control claims are made, are regulated by the EPA. The
key applicable regulations governing , pesticide products are the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) and Federal Food, Drug, and
Cosmetic Act (FFDCA) as amended by the Food Quality Protection Act (FQPA) of
August 3, 1996, and other federal statutes and regulations, and certain state,
local and tribal regulations. These statues and regulations govern the
development, testing, formulation, manufacture, labeling, storage, record
keeping, quality control, advertising, promotion, sale, distribution and
approval of pesticide products. Failure to comply with applicable requirements
can result in fines, recall or seizure of products, total or partial suspension
of production, refusal by the government to approve marketing of the product,
and criminal prosecution.
In order to obtain EPA approval of a new product, the Company and its
strategic partners, if any, must submit proof of safety, efficacy, purity, and
stability, and the Company must demonstrate validation of its manufacturing
process. The testing and application process is expensive and time consuming,
often taking years to complete. There is no assurance that the EPA will act
favorably or quickly in reviewing applications. With respect to patented
products, processes, or technologies, delays imposed or caused by the
governmental approval process may materially reduce the period during which the
Company will have the exclusive right to exploit them. Delays could also affect
the commercial advantages derived from the proprietary processes. There is no
assurance that the regulatory agencies will find present or future submissions
of the Company to be adequate.
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The Company's planned pesticide products include certain antimicrobial
products for non-agricultural uses. EPA's Office of Pesticide Programs recently
has been extensively reorganized. Among other things, OPP has recently
established a new Antimicrobial Division (AD) to manage the registration and
reregistration of antimicrobial products with non-agricultural uses. This
interdisciplinary approach will allow most registration and reregistration
activities to be consolidated within a single division and may yield
efficiencies and shorten review times. However, the reorganization can be
expected to cause substantial delays at first as new policies and procedures are
implemented by persons who in many cases will be somewhat unfamiliar with the
responsibilities of their new positions.
FOOD AND DRUG ADMINISTRATION. The Company's research and development
activities are subject to comprehensive regulation by numerous governmental
authorities in the United States and other countries. If the Company is able to
produce and market products, such production and marketing will place the
Company under continued regulation. Among the applicable regulations in the
United States, pharmaceutical ,over-the-counter drugs, products are subject to
the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, other
federal statutes and regulations, and certain state and local regulations.
These statutes and regulations govern the development, testing, formulation,
manufacture, labeling, storage, record keeping, quality control, advertising,
promotion, sale, distribution and approval of drug products. Failure to comply
with applicable requirements can result in fines, recall or seizure of products,
total or partial suspension of production, refusal by the government to approve
marketing of the product and criminal prosecution. As the proprietary silane
chemistry is not considered an over-the-counter drug, all products for human
application will be considered new drugs.
A new drug or medical device may not be legally marketed for commercial use
in the United States without FDA approval. In addition, upon approval, a drug
may only be marketed for the indications, in the formulations and at the dosage
levels approved by the FDA. The FDA also has the authority to withdraw approval
of drugs or devices in accordance with applicable statutes and regulations.
Analogous foreign regulators impose similar approval requirements relating to
commercial marketing of a drug or medical device in their respective countries
and may impose similar restrictions and limitations after approval.
In order to obtain FDA approval of a new drug product, the Company and its
strategic partners, if any, must submit proof of safety, efficacy, purity, and
stability , and validation of its manufacturing process. The testing and
application process is expensive and time consuming, often taking years to
complete. There is no assurance that the FDA will act favorably or quickly in
reviewing applications. With respect to patented products, processes or
technologies, delays imposed or caused by the governmental approval process may
materially reduce the period during which the Company will have the exclusive
right to exploit them. Delays could also affect the commercial advantages
derived from proprietary processes. There is no assurance that the regulatory
agencies will find present or future submissions of the Company to be adequate.
To obtain approval of medical devices, a premarket notification (510(k))
or premarket approval (PMA) application must be submitted to FDA that proves the
device is as safe and effective or substantially equivalent to a legally
marketed device. There is no assurance that the FDA will act favorably or
quickly in reviewing applications. With respect to patented products, processes
or technologies, delays imposed or caused by the governmental approval process
may materially reduce the period during which the company will have the
exclusive right to exploit them. Delays could also affect the commercial
advantage derived from proprietary processes. There is no assurance that the
regulatory agencies will find present or future submissions of the Company to be
adequate.
The Company is currently considering numerous applications for the
proprietary technology which may require multiple IND and NDA submissions prior
to commercial sale. The development of the appropriate pre-clinical safety,
efficacy, and chemistry testing may require a minimum of one (1) year to produce
and will not be funded from the proceeds of this Offering. Portions of this
data may be appropriate for support of numerous IND applications for each
proposed use-pattern (for example, anti-acne/wrinkle facial preparation, wound
care products, body sanitizer, and synthetic skin.) The IND application may
become effective 30 days following receipt by the FDA. Although there is no
assurance that the FDA will grant the IND.
Human clinical trials are typically conducted in three sequential phases
with some amount of overlap allowed. Preclinical tests must be conducted by
laboratories that comply with FDA Good Clinical Practices regulations governing
the testing of drugs in humans and animals,. Phase 1 trials normally consist of
testing the product in a small number of patient volunteers for establishing
safety (adverse effects), dosage tolerance,
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metabolism, distribution, excretion and clinical pharmacology. In Phase 2, the
continued safety and initial efficacy of the product are evaluated in a somewhat
larger patient population, and appropriate dosage amounts and treatment
intervals are determined. Phase 3 trials typically involve more definitive
testing of the appropriate dose for safety and clinical efficacy in an expanded
patient population at multiple clinical testing centers. A clinical plan, or
"protocol," accompanied by the approval of the research center's Institutional
[Review Board , must be submitted to the FDA prior to commencement of each
clinical trial. The Clinical Research and Development phases on the average last
5 years.
The Institutional Review Board ("IRB") evaluates the protocol and monitors
the conduct of the study to protect the rights and safety of the human subjects.
An IRB may require changes in a protocol, and there can be no assurance that an
IRB will permit any given study to be initiated or completed. In addition, the
FDA may order the temporary or permanent discontinuation of clinical trials at
any time. In light of this process, the Company must necessarily rely on other
persons and institutions to conduct studies. The Company cannot guarantee that
such persons and institutions will conduct studies properly. There also can
be no assurance that Phase 1, Phase 2 and Phase 3 testing of the Company's
products will be completed successfully within any specified time period, if at
all.
All the results of the preclinical and clinical studies on a pharmaceutical
or device products are submitted to the FDA in the form of an NDA or PMA, for
approval to commence commercial distribution. Submission of an NDA or PMA does
not assure FDA approval for marketing. The application review process takes
more than two years on average to complete. However, the process may take
substantially longer if the FDA has questions or concerns about a product or
studies regarding the product. In general, the FDA requires at least two
adequate and well-controlled clinical studies demonstrating efficacy with
sufficient levels of statistical assurance. However, additional support may be
required. The FDA also may request additional information relating to safety or
efficacy, such as long- term toxicity studies. In responding to NDA or an PMA,
the FDA may grant marketing approval, require additional testing and/or
information or deny the application. Accordingly, there can be no assurance
about any specific time frame for approval, if any, of products by the FDA. The
FDA also may require post-marketing testing and surveillance to monitor the
safety record of a product and its continued compliance with regulatory
requirements.
The facilities of each pharmaceutical and device manufacturer must be
registered with and approved by the FDA as compliant with the agency's good
manufacturing practice regulations ("GMP"). In order to comply with GMP,
manufacturers must continue to expend time, money and effort in production,
record keeping and quality control. In addition, manufacturers must be
registered with the United States Environmental Protection Agency and similar
state and local regulatory authorities if they generate toxic or dangerous waste
streams. Other regulatory agencies, such as the Occupational Safety and Health
Administration, also monitor manufacturing facilities for compliance with
workplace safety regulations. Each of these organizations conducts periodic
establishment inspections to confirm continued compliance with its regulations.
Failure to comply with any of these regulations could mean fines, interruption
of production and even criminal prosecution.
For foreign markets, the company is subject to regulatory requirements,
review procedures and product approvals which, generally, may be as extensive,
if not more extensive, as those in the United States. Although the technical
descriptions of the clinical trials are different, the trials themselves are
often substantially the same as those in the United States. Approval of a
product by regulatory authorities of foreign countries must be obtained prior to
commencing commercial product marketing in those countries, regardless of
whether FDA approval has been obtained. The time and cost required to obtain
market approvals in foreign countries may be greater than required for FDA
approval and may be subject to delay. There can be no assurance that regulatory
authorities of foreign countries will grant approval.
There are a number of anticipated applications which require listing with
the Cosmetics, Toiletries, and Fragrances Association (CTFA) inventory. This is
largely a procedural process but one that will have to be done before the
Company can fully capitalize on the use of its active ingredient or its
formulations in the personal care industry.
FILINGS MADE TO DATE INCLUDE CURRENT APPLICATIONS AND FUTURE FILINGS.
In May 1997, the Company made application to the EPA for registration of
BioShield AM500 and AM500I to enable it to make certain claims regarding the
antimicrobial properties of products.
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The Company has included with the EPA registration application the claims
for AM500, which the Company believes are sufficiently documented to allow
approval by the EPA without further testing. However, no assurances can be
given in this regard. Because of the unique properties of BioShield AM500,
additional applications for this product appear feasible and the following list
of claims is not intended as a list of all possible applications and benefits of
BioShield AM500. The primary uses listed in the application are as an active
ingredient for formulating disinfectants, sanitizers, and microbiocides for use
in laundry additives, carpet treatment products, upholstery and drapery
treatment products, and building cleaning and treatment products, to give a
surface-durable antimicrobial treatment effective and active against a wide
variety of bacteria, fungi, algae and yeast.
The Company has requested EPA approval for AM500 and AM500I to be used to
impart durable, broad-spectrum, antimicrobial protection to substrates for the
following applications:
air filters/materials; aquarium filter material; bed sheets, blankets and
bedspreads; buffer pads (abrasive and polishing); carpets and draperies;
fiberfill; fiberglass ductboard; fire hose fabric; humidifier belts; mattress
pads and ticking; men's underwear and outerwear; non-woven disposable
diapers; non-woven polyester; outerwear apparel; disposable polyurethane foam
cushions for Lapidus Airfloat Systems; polyurethane and polyethylene foam,
when covered; polyurethane foam for packaging and cushioning in non-food
contact applications; roofing materials; sand bags, tents, tarpaulins, sails,
and ropes; athletic and causal shoes; shoe insoles; shower curtains; socks;
providing residual self-sanitizing activity against athlete's foot fungus
throw rugs; toilet tank and seat covers; umbrellas; upholstery vacuum cleaner
bags and filters; women's hosiery; and women's intimate apparel.
FUTURE FILINGS.
The Company intends to submit applications to the EPA for registration of
BioShield AM36.OI and AM3651P, to enable it to make certain claims regarding the
antimicrobial properties of products. The Company's new industrial strength
products AM36.OI and AM3651P are two new, and the Company believes, unique
products. Whereas both are new formulations of the silane integrated system,
neither product is water based. However, AM36.OI and AM3651P provide stable
aqueous solutions.
The primary use claims, intended to be included in the application for
AM36.OI and AM3651P, are as an active ingredient for formulating disinfectants,
sanitizers and microbiocides for use in laundry additives, carpet treatment
products, upholstery and drapery treatment products, and building cleaning and
treatment products, to give a surface-durable antimicrobial treatment effective
and active against a wide variety of bacteria, fungi, algae and yeast. The
following features are planned as descriptions of the products in the
application:
Whereas AM36.OI is a concentrate designed for ease of application and
durability, the strength of AM3651P lies in its intended use as a preservative.
AM3651P is a blend of active ingredients chosen for their performance. The
interplay of the ingredients of the active blend provides high efficiency in
small concentrations. The company believes that because of this interplay of
the ingredients and the resulting independence from toxic compounds such as
chlorine, formaldehyde or formaldehyde donors, AM3651P is ideally suited as a
preservative.
Materials treated with formulations containing the antimicrobial agent
AM36.OI or AM3651P are preserved by the bacteriostatic, fungistatic and
algistatic action imparted by the active ingredient. AM36.OI and AM3651P
inhibits the growth of microorganisms that are responsible for causing odor,
discoloration and deterioration. It also provides residual inhibition of
microorganisms to aid in the control of these deleterious effects. AM36.OI and
AM3651P form a coating on a wide variety of substrates and antimicrobial action
is exhibited on contact.
The Company intends to seek approval that AM36.OI and AM36.51P can be used
to impart durable, broad-spectrum, antimicrobial protection to substrates for
the following applications:
air filters/materials; aquarium filter material; bed sheets, blankets, and
bedspreads; buffer pads (abrasive and polishing); carpets and draperies;
fiberfill; fiberglass ductboard; fire hose fabric; humidifier belts; mattress
pads and ticking; men's underwear and outerwear; non-woven disposable
diapers; non-woven polyester; outerwear apparel; disposable polyurethane foam
cushions for Lapidus
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Airfloat Systems; polyurethane foam polyethylene foam, polyurethane foam used
as a growth medium for non-food crops and plants; roofing materials; sand
bags, tents, tarpaulins, sails, and ropes; athletic and casual shoes; shoe
insoles; shower curtains; socks; providing residual self-sanitizing activity
against athlete's foot fungus; toilet tank and seat covers; umbrellas;
upholstery vacuum cleaner bags and filters; vinyl paper-wallpaper for non-
food contact surfaces; women's hosiery; and women's intimate apparel.
In addition, it is planned to seek approval for use of AM3651P as a
preservative in FDA regulated products, including cosmetic articles, such as
skin creams; hair treatment products, for example shampoos; non-regulated
products, including detergents and detergent formulations; other preservative
applications, such as interior and exterior paints, latex, machine oils, and
lubricants; cutting fluids; water for cooling systems and swimming pools which
may require EPA registration. However, no assurances can be given that the
Company will be successful in commercializing these products or will receive the
required regulatory approvals.
RESEARCH AND DEVELOPMENT.
Research and development activities are performed principally by Dr.
Joachim Berkner, Director of Research and Development, Organic Chemistry, of the
Company.
The Company's core technologies are in aqueous reactive silanes and
antimicrobial products. Combinations of both technologies are producing
compounds with new properties and are setting new standards. The Company's new
product releases in the near future will be based on these core technologies.
Research on silane based and non silane based antimicrobials will expand
application of antimicrobial Company products from pesticides to medications and
treatments to preventive care. Research on silane based durable products will
provide the applicator with the opportunity to give any surface any desired new
property.
Future development efforts are anticipated to focus on development of
antimicrobial products for medical applications, specifically, human and animal
skin treatments, new formaldehyde free product preservatives, agricultural and
food antimicrobials, and new active ingredients and formulations useful in the
markets currently providing antimicrobial products, ranging from antimicrobial
absorbents to cleaning solutions and disinfectants and other household and
products. Products in this category include materials treated by the
manufacturer, for example socks, shower curtains and carpets. Product
development in this category is anticipated on a market-need basis in
collaboration with the manufacturers. In addition, a number of new applications
based on the uniqueness of the Company products are anticipated. There can be
no assurance that the Company will be successful in developing these or other
products.
During the fiscal years ended June 30, 1996, and 1997, the Company incurred
expenses of $73,000 and $65,000, respectively, resulting from Company-sponsored
research and development activities. Research and development is expected to
remain a significant component of the Company's business. In the short term,
the Company expects to concentrate on the primary development projects and
intends to use approximately $1,620,000 of the estimated net proceeds of this
Offering and other funds to the extent they are, or may become, available for
such projects. However, the Company may abandon or de-emphasize its research
and development activities with respect to the Primary development projects and
expand research and development of other products as circumstances warrant. The
Company has contracted out substantially all of its clinical research and
intends to continue to do so while utilizing its staff for monitoring such
research.
1. ANTIMICROBIAL BIOBARRIERS: BURN CARE/SYNTHETIC SKIN.
Commonly, the greater the skin damage, the greater the risk of infection.
The skin damage and the risk of infection are especially serious in burn
victims. To this day, proper treatment of burn patients remains a challenge to
the healthcare professional. In addition to direct wound application, the
Company believes that the Company's technology may, under certain conditions, be
appropriate for application to skin grafts, either manufactured or from cadavers
and most importantly, animal collagen matrixes. Collagen matrix based products
are frequently applied graft materials. In addition to their importance as skin
grafts, their chemical composition is such that a very favorable bonding with
the Company antimicrobial products and the graft may be possible. The Company
believes that the unique properties of the Company's core technology may, under
certain circumstances, allow certain products based upon its technology to form
a bound protective layer that allows the grafted skin to breath and transport
liquids, but reduce/prohibit the entry of microorganisms.
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The initial intention of the antimicrobial protective layer is to provide
protection. Integration of additional features, such as the slow release of
growth stimulants to accelerate the healing process is contemplated for future
exploration. Development of compounds beneficial to the healing process is
planned parallel to the skin graft development. Each integrated part has to be
evaluated separately for efficacy, and the focus of the skin graft application
lies in the antimicrobial protection. However, the flexibility of the Company
technologies is expected to provide several new additions to the skin graft
technology.
Integration of the Company's products and research may lead to new skin
treatment products that the Company believes may provide continuous effective
skin condition treatment. Adverse skin conditions caused by microbes appear
susceptible to treatment by the Company's products. However, no assurances can
be given that the Company will be successful in commercializing these products
or will receive the required regulatory approvals.
2. TRANSPLANT/MEDICAL DEVICE TREATMENTS.
Common problems in the transplant of organs or artificial implants is
rejection by the receiving body's immune system. The rejection is often based
on the recognition of the implant as a foreign body. This recognition is
affected by the surface of the implant. Silane treatment of implants changes
the surface of the implant, the treatment can be modified to be permanent or
temporary. (For example, permanent on man-made implants and temporary on organ
transplant transplants). One approach may be to chemically bond currently
available anti-rejection medication to the silane. Design, synthesis, and
characterization of this application is planned at the Company facilities and
initial tests are to be performed at collaborating laboratories to prove
efficacy and viability of this approach. This application will require FDA
approval prior to clinical testing and commercial introduction. However, no
assurances can be given that the Company will be successful in commercializing
these products or will receive the required regulatory approvals.
3. QUATERNARY AMMONIUM SALTS OF PHOSPHATE ESTERS AS PESTICIDAL POLYMER
ADDITIVES.
Phosphate esters have long been known to be effective pesticides. Over the
years, these compounds developed into especially useful additives for polymers
by reacting the free acid of the phosphate ester with tertiary amines. The
antimicrobial activity of the amine is secondary in this approach. The primary
function of the amine is to "solubilize" the phosphate ester amine salt in the
polymer, allowing the active ingredient to migrate in the polymer. The amines
selected for this approach are known surfactants and often used as polymer
additives. Once exposed on the surface of the polymer, the amine "surfactant"
again aids in the migration of the phosphate, providing antimicrobial activity.
A potential new invention may be the use of a quaternary ammonium as the
cation in the phosphate ester salt. The quaternary ammonium salt would be
distinguished from the amine salts used in the previous inventions by having
four alkyl chains attached to the nitrogen atom. According to a preliminary
literature review, this is a novel idea and similar products have only been
disclosed for antimicrobial active quaternary ammonium phosphate ester salts for
cleaning applications. This new compound may perform similarly or better than
to the previously disclosed compounds. However, no assurances can be given that
the Company will be successful in commercializing these products or will receive
the required regulatory approvals.
PROPERTY.
The Company's executive and administrative offices are located at 4405
International Blvd., Suite B109, Norcross, Georgia in a 6,900 square foot
facility leased by the Company. The building contains offices, meeting rooms,
and an organic chemistry lab with biological storage area. In addition the
Company currently leases a 5,000 square foot manufacturing facility in Lithonia,
Georgia for the production of the Company's active antimicrobial agent. The
Company believes that the facility is adequate for its present and anticipated
uses.
EMPLOYEES.
The Company currently has seven employees, two of whom are executive
officers, one of whom is involved in research and development, three of whom are
in marketing and sales, and one of whom is clerical staff. The Company believes
that its relations with its employees are good. None are covered by a
collective bargaining agreement with the Company.
LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information regarding the directors
and executive officers of the Company:
NAME AGE POSITION
- ---- --- --------
Timothy C. Moses 41 Co-Chairman of the Board, President,
Chief Executive Officer and Director
Jacques Elfersy 47 Co-Chairman of the Board, Senior Vice
President, Secretary, Treasurer and Director
To be identified xx Chief Financial Officer
Douglas Moore 62 Vice President, National Sales
Dr. Joachim Berkner 29 Director of Research and Development,
Organic Chemistry
Carl T. Garner 50 Director
Michel Azran 52 Director
Mr. Timothy C. Moses, a Director and Founder, is the Company's Co-Chairman,
Chief Executive Officer, President, and Director of Marketing and Sales. For
over a decade, Mr. Moses has been an independent businessman and entrepreneur
with Mr. Elfersy, the Senior Vice President of the Company. His career has
spanned from sales and marketing to Director of Securities and Investment. He
has developed knowledge in the chemical and chemical siloxane industry and
business since leaving his former employer, Dow Corning Corporation in 1986,
where he acted as liaison between management and technical sales in the role of
new product planning and launches. As President of his former company, DCI,
Inc., a silicone and siloxane based technology company, Mr. Moses was
instrumental in seeking and raising of investment capital as well as Director of
Marketing and Sales to clients on a direct basis. Mr. Moses co-developed a new
antimicrobial silicone based coating system for textile applications and
coordinated sales from the (EEC) European Economic Community countries to the
United States. Mr. Moses is also a co-inventor of three inventions for which
patent applications have been filed by the Company on its core antimicrobial
technologies. Mr. Moses is a graduate of a division of Georgia Institute of
Technology where he received his B.S. degree in 1980.
Mr. Jacques Elfersy, a Director and Founder/Co-Founder, is the Company's
Co-Chairman, Senior Vice President, acting Chief Financial Officer, Secretary,
and Treasurer. Mr. Elfersy has been instrumental in the discovery, development,
and patent filing of the Company's core antimicrobial technology. In addition
to his duties, Mr. Elfersy continues to oversee the Company's research and
development activities and objectives. Mr. Elfersy is a graduate of the McGill
University where he earned his Bachelor's Degree in Civil Engineering in 1979.
For a decade, Mr. Elfersy has been an independent businessman and entrepreneur.
His career reflects extensive knowledge of silicone-based technology and silane-
based antimicrobial (as a result of his past employment and business
relationship with Dow Corning) program management and supervision of large scale
projects and installations, contract negotiations and implementation, and
customer support services and communications. As Executive Vice President of
his former Company, DCI, Inc., a silicone-based technology and silane-based
antimicrobial, Mr. Elfersy was instrumental in the implementation of research
and development on projects requiring antimicrobial-based coating processes and
production application. In addition, he acted as senior management of
engineering and production and was responsible for meeting critical time frames
and budgets as well as manpower constraint requirements.
Mr. Douglas Moore has been the Vice President, National Sales, of the
Company since March 1997. Mr. Moore has 40 years of sales and marketing
experience. Mr. Moore received his B.B.A. Finance from Emory University in
Atlanta, Georgia, in 1957. He then began his career at Proctor & Gamble with
assignments for a total of eight years in Nashville, Atlanta, Birmingham, and
Columbus, Georgia, as a Unit Manager and District Head Salesman for Territory
Sales. Mr. Moore then spent several years with a Kroger Company division and
ten years with Warner Lambert Company with assignments as Director of Broker
Operations and Sales Operations, Manager of Marketing Development, Sales
Training and Sales Operations, and Chicago District Manager. He then became a
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National Sales Manager for the W.E. Bassett Company, Derby, Connecticut, from
1978 to 1981, and the Director, Sales Merchandising, for Tambrands, Inc. from
1981 to 1985 when he developed the Maxithins product launch. Mr. Moore then
served as Vice President, Marketing and Sales Service for Faberge, Inc., Mahwah,
New Jersey, from 1985 to 1988 and Vice President, Administration and Sales -
Suncare/Skincare, for Eclipse Labs, Inc. of Boca Raton, Florida, in 1988 and
1989 before beginning an extended period as a marketing and sales consultant to
numerous clients prior to joining the Company in March 1997.
Dr. Joachim Berkner has been Director of Research and Development, Organic
Chemistry, of the Company since January, 1996. Dr. Berkner has served as
consultant to Alpha Gamma Research; a company involved in cancer research since
1992 and as a consultant to Chemical Products Technology, a company involved in
dye synthesis and process development since 1995. He has published several
articles on Organic Chemistry and polymers and has co-authored several sections
of the Encyclopedia of Reagents for Organic Synthesis. Dr. Berkner received his
Ph.D. in Chemistry and BioChemistry from the Georgia Institute of Technology in
the fall of 1996 and received his valdiplom in Chemistry from Philipps
Univeritat Marburg in Marburg, Germany, in 1990.
Carl T. Garner has been a Director of the Company since 1996. Since 1995,
Mr. Garner has been a partner in Garner and Nevins (a division of Nevins
Marketing Group, Inc.), a promotional and advertising agency based in Atlanta,
Georgia. Mr. Garner received a B.S. in Business/Accounting from Jacksonville
State University in 1969, a masters degree in Management from Georgia College in
1977, and a masters degree in Business Administration from Jacksonville State
University in 1978. Mr. Garner also acts as an Advisory Director to the
Company.
Mr. Michel M. Azran has been a Director of the Company since December 1997.
Since August 1994, he has been a partner at J.C. Bradford & Co., a securities
and brokerage firm. From 1982 through 1994, Mr. Azran was employed by The
Robinson-Humphrey Company, Inc. and last served in the capacity of Senior Vice
President - Investments. He holds an Accounting and Finance degree from
University of Lyons (1967) and Paris (1975) and was in public accounting in
France until October 1977
The Company's directors are divided into three classes which serve
staggered three-year terms or until their successors have been duly elected and
qualified. Currently, Michel M. Azran is serving in Class I with a term ending
at the Company's 1998 annual meeting of shareholders, Carl T. Garner is serving
in Class II with a term expiring at the Company's 1999 annual meeting of
shareholders, and Jacques Elfersy and Timothy C. Moses are serving in Class III
directors with a term expiring at the 2000 annual meeting of shareholders.
Following the IPO, the Company currently intends to pay directors who are not
employees of the Company a fee of (i) $1,000 per regularly scheduled Board
meeting attended (or $250 for participation in a regularly scheduled Board
meeting by conference telephone) and (ii) $12,000 annually. The Company
reimburses all directors for their expenses in connection with their attendance
at such meetings.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.
The Company currently intends to apply for $1,000,000 insurance policies on
the lives of each of Mr. Moses and Mr. Elfersy upon completion of the initial
public offering.
EXECUTIVE COMPENSATION.
The following table sets forth for the two years ended June 30, 1997
compensation paid by the Company to its Co-Chairman of the Board, President and
Chief Executive Officer, and Co-Chairman of the Board, Senior Vice President,
Acting Chief Financial Officer, Secretary, and Treasurer, and Director. None of
the Company's other executive officers had annual compensation in excess of
$100,000 for services rendered during either of the two years ended June 30,
1997 or 1996
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------- ----- ------------
<S> <C> <C> <C> <C>
Timothy C. Moses, 1997 120,000 - -
Co- Chairman of the
Board, President, 1996 120,000 - -
Chief Executive Officer
and Director.
Jacques Elfersy, 1997 120,000 - -
Co-Chairman of the Board,
Executive 1996 120,000 - -
Vice President, ActingChief
Financial Officer Director
of Regulatory Affairs, Secretary,
Treasurer, and Director.
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements, each dated January 1,
1998, with Mr. Moses and Mr. Elfersy. The agreements have an initial term
commencing January 1, 1998, and expiring December 31, 2003. However, the
remaining term of each agreement will be extended automatically for one year on
each July 1 beginning July 1, 2001 so that each agreement expires three years
from such date unless either party notifies the other party in writing of an
intent not to renew at least ninety (90) days prior to the applicable July 1st.
Under the agreements, each of Mr. Moses and Mr. Elfersy is required to devote
their full business time to the affairs of the Company.
Each agreement provides for a base salary at the rate of $125,000. The
base salaries are then subject to increase, but not decrease, as of January 1,
in the case of Messrs. Moses and Elfersy, of each year during the term of the
agreements as determined by the Company's Board of Directors. Each agreement
also provides for an annual performance bonus based upon a matrix of dollar
sales levels and dollar before-tax profitability. Cells within the matrix
represent specific combinations of sales and profits, with performance falling
within a particular cell resulting in a bonus to the Mr. Moses or Mr. Elfersy
expressed as a percent of his base salary. This matrix, which allows for
bonuses running from 0% to 150% of base salary, is constructed to reward the
executive for reaching specific combinations of sales and profit levels with
higher sales and profit resulting in a larger bonus. The maximum amount paid
to either Mr. Moses or Mr. Elfersy pursuant to the matrix cannot exceed $50,000
per year.
In addition, in the event of termination, each agreement provides a
severance package in the event the executive is terminated other than for cause
(as defined) or the executive terminates his agreement for good reason (as
defined) an amount equal to the sum of (A) the greater of two (2) years of the
base salary applicable to the executive on the date of termination or the base
salary (assuming no increases) payable for remaining term of his agreement
assuming no termination, plus (B) two (2) times the average of the annual
bonuses paid or payable to the executive during the term of his agreement,
payable in six (6) equal, consecutive monthly installments commencing no later
than thirty (30) days after the date of termination. In addition, all
outstanding options, stock grants, share of restricted stock or any other
equity, incentive compensation shall be and become fully vested and
nonforfeitable and the executive and the executive's family will be entitled to
receive welfare plan benefits (other than continued group long-term disability
coverage) generally available to executives with comparable responsibilities or
positions for a period of two (2) years from the date of termination at the same
cost to the executive as is charged to such executives from time to time for
comparable coverage.
ADVISORY BOARD. The Company's Advisory Board (the "Advisory Board") was
organized to review and evaluate the Company's research and development programs
and to advise the Company generally in addressing various scientific and
business issues. The Company generally selects for membership persons who have
experience in finance, marketing and science. Members of the Advisory Board
("Advisors") may meet as a group or individually with management of the Company.
They are not employed by the Company and may have commitments to, or consulting
or advisory agreements with, other entities that may limit their availability to
the Company. These entities may also be competitors of the Company. The Company
is not aware of any conflict of interest between
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work performed by Advisors on behalf of the Company and work performed by them
on behalf of other parties. The Company requires each Advisor to execute a
confidentiality agreement upon the commencement of his or her relationship with
the Company. The agreements generally provide that all confidential information
made known to the individual during the term of the relationship is the
exclusive property of the Company and shall be kept confidential and not
disclosed to third parties. The current members of the Advisory Board are as
follows:
Mr. Martin Savarick, age 58, is currently President of The Printstar Group,
Inc., a marketing and management consulting firm. He has been the Chairman of
the Board, President, and Chief Executive Officer of two publicly traded
companies - Beacon Photo Service, Inc. and Imprint Products, Inc. Both
companies dealt with retail customers throughout the United States exclusively
on a mail-order basis. The companies employed various innovative marketing
techniques to advertise and sell its products. Mr. Savarick also served as
President of a fund raising organization and of a direct mail marketing
consulting firm.
Dr. Cecil R. Smith, age 44, is currently Chief Executive Officer and
Director in BioShield Research Corporation, a company based in Powell, Ohio,
which conducts biohazard control evaluations for indoor environmental quality of
such buildings and develops contamination control protocols for the
biotechnology/pharmaceutical industry and provides site safety analysis. Since
1987, Dr. Smith has also been Assistant Vice President of Environmental Health
and Safety of the Ohio State University. In that capacity, Dr. Smith is
responsible for the administration of an environmental, occupational health and
radiation safety program which includes biological/chemical safety, safety
engineering, industrial hygiene, infectious/hazardous waste management, safety
training and environmental compliance. Since 1991, Mr. Smith has also served as
Assistant Professor to the Ohio State University, School of Public Health. Dr.
Smith received his Ph.D. in Public Health and Masters Degree in Public Health
from the University of North Carolina. In 1983 and 1980, respectively, Dr.
Smith received his B.S. in Microbiology from North Dakota State University in
1977 and his B.A. in Biology and Natural Science from Gustavus Adolphus College
in 1975.
Edward H. Brown, age 39, is a partner in Schreeder, Wheeler & Flint, based
in Atlanta, Georgia. Mr. Brown is a corporate lawyer and has served as
corporate counsel to the Company since 1995. Mr. Brown received his J.D. from
the Washington and Lee School of Law in Lexington, Virginia in 1984 and his B.A.
from Washington and Lee University in 1980.
Advisors receive reimbursement of travel expenses connected with Company
business and stock options under the Director Plan. Consultation services
include assisting the Company in the development of a marketing plan as well as
research plan to elucidate the biological effects, safety and efficacy of the
Company's products and assisting the Company in analyzing data from research
trials and other studies concerning the Company's products. The Company
anticipates that each Advisor will devote approximately six days per year to the
affairs of the Company in his capacity as an Advisor, consisting of three one-
day meetings of the Advisory Board to be held each year and preparation for such
meetings.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide for the Company to indemnify each director and
officer of the Company against liabilities imposed upon him (including
reasonable amounts paid in settlement) and expenses incurred by him in
connection with any claim made against him or any action, suit or proceeding to
which he may be a party by reason of his being or having been a director or
officer of the Company. The Company has also entered into Indemnification
Agreements with each officer and director pursuant to which the Company will, in
general, indemnify such persons to the maximum extent permitted by the Company's
Bylaws and the laws of the State of Georgia against any expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection with any actual or threatened action or proceeding to which such
director or officer is made or threatened to be made a party by reason of the
fact that such person is or was a director or officer of the Company. The
foregoing provisions may reduce the likelihood of derivative litigation against
directors and may discourage or deter shareholders or management from suing
directors for breaches of their duty of care, even though such an action, if
successful, might otherwise benefit the Company and its shareholders.
Insofar as indemnification of liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for
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<PAGE>
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of his counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
STOCK OPTION PLANS.
In December 1997, the Board of Directors adopted and the shareholders of
the Company approved the 1997 Stock Incentive Plan (the "Incentive Plan"). The
Board of Directors and shareholders approved the 1996 Directors Stock Option
Plan (the "Director Plan") in 1996.
TERMS OF INCENTIVE PLAN.
The Incentive Plan provides the Company with increased flexibility to grant
equity-based compensation to key employees, officers and consultants of the
Company. The purpose of the Incentive Plan is to: (i) provide incentives to
stimulate individual efforts toward the Company's long-term growth and
profitability; (ii) encourage stock ownership by officers, key employees and
consultants by enabling them to acquire a proprietary interest in the Company in
the form of shares of Common Stock or to receive compensation based on
appreciation in the value of the Common Stock; and (iii) provide a means of
obtaining, rewarding and retaining key personnel. The Company has reserved
400,000 shares of Common Stock for issuance pursuant to awards that may be made
under the Incentive Plan. Awards of 15,000 shares of Common Stock were granted
under the Incentive Plan to key employees in March of 1998.
The nature, terms and conditions of awards under the Incentive Plan will be
determined by the Stock Option Committee of the Board of Directors (the
"Committee"). The members of the Committee are selected by the Board of
Directors. The current members of the Committee are Messrs. Garner and Azran.
The Incentive Plan permits the Committee to make awards of Common Stock,
incentive or non-qualified stock options (collectively, "Stock Incentives") with
the following terms and conditions:
TERMS AND CONDITIONS OF ALL STOCK INCENTIVES. The number of shares of Common
Stock as to which a Stock Incentive may be granted will be determined by the
Committee in its sole discretion. To the extent required under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder relating to compensation to be treated as qualified
performance-based compensation, the maximum number of shares of Common Stock
with respect to which options or SARs may be granted during any one-year period
to any employee may not exceed 25,000. Each Stock Incentive will either be
evidenced by a Stock Incentive Agreement or Stock Incentive Program, in each
case containing such terms, conditions and restrictions as the Committee may
deem appropriate. Stock Incentives are not transferable or assignable except by
will or by the laws of descent and distribution and are exercisable only by the
recipient during his or her lifetime or by the recipient's legal representative
in the event of the recipient's death or disability.
STOCK AWARDS. The number of shares of Common Stock subject to a Stock
Award and restrictions or conditions on such shares, if any, will be determined
by the Committee. The Committee may require a cash payment from the recipient
in an amount no greater than the aggregate fair market value of the shares of
Common Stock awarded, as determined at the date of grant.
OPTIONS. Options may be either incentive stock options as described in
Section 422 of the Code or non-qualified stock options. The exercise price of
each option will be determined by the Committee and set forth in a Stock
Incentive Agreement but may not be less than the fair market value of the Common
Stock on the date the option is granted. No incentive stock options will be
granted to beneficial owners of over 10% of the outstanding Common Stock ("10%
Owners"). The exercise price may not be less than 110% of the fair market value
of the Common Stock on the date the option is granted. The exercise price may
not be changed after the option is granted, and options may not be surrendered
in consideration of, or exchanged for, a grant of a new option with a lower
exercise price. Incentive stock options will expire 10 years after the date of
grant. Non-qualified stock options will expire on the date set forth in the
respective Stock Incentive Agreement. Payment for shares of Common Stock
purchased upon exercise of an option may be made in any form or manner
authorized by the Committee in the Stock Incentive Agreement or by amendment
thereto. In the event of a recipient's termination of employment, the option or
unexercised portion thereof will expire no later than three months after the
date of termination, except that in the case of the recipient's death or
disability, such period will be extended to one year. The Committee may set
forth longer time limits in the Stock Incentive Agreement, although in such
cases incentive stock option treatment will not be available under the Code.
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TERMINATION AND AMENDMENT OF THE INCENTIVE PLAN.
The Board of Directors may amend or terminate the Incentive Plan without
stockholder approval at any time; provided, however, that the Board may
condition any amendment on the approval of the stockholders if such approval is
necessary or advisable with respect to tax, securities or other applicable laws.
No such termination or amendment without the consent of the holder of a Stock
Incentive may adversely affect the rights of a holder under the terms of that
Stock Incentive.
CHANGES IN CAPITALIZATION.
The Incentive Plan provides for an adjustment of the number of shares of
Common Stock reserved and subject to awards issued pursuant to the Incentive
Plan and of the exercise price of options granted under the Incentive Plan in
the event of any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or combination of shares or the payment of a
stock dividend in shares of Common Stock or any other increase or decrease in
the number of shares of Common Stock outstanding effected without receipt of
consideration by the Company. In the event of a merger, consolidation or other
reorganization of the Company or a tender offer for its shares of Common Stock,
the Committee may take such action as it deems necessary or appropriate to
reflect the effect of the applicable transaction, including but not limited to:
(i) the substitution, adjustment or acceleration of awards; (ii) the removal of
restrictions on awards; or (iii) the termination of outstanding awards in
exchange for the cash value of the vested portion of the award.
FEDERAL INCOME TAX CONSEQUENCES.
The following discussion outlines generally the federal income tax
consequences of the receipt of options under the Incentive Plan. Individual
circumstances may vary these results. The federal income tax laws and
regulations are frequently amended, and each participant should rely on his or
her own tax counsel for advice regarding federal income tax treatment under the
Incentive Plan. If the recipient is subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), special rules may apply
to determine the federal income tax consequences of certain option exercises.
Participants in the Incentive Plan should consult their own tax advisors as to
the specific tax consequences applicable to them and to the tax consequences
applicable to other types of Stock Incentives that may be awarded under the
Incentive Plan.
INCENTIVE STOCK OPTIONS. The recipient of an incentive stock option is not
subject to any federal income tax upon the grant of such an option pursuant to
the Incentive Plan, nor does the grant of an incentive stock option result in an
income tax deduction for the Company. Further, a recipient will not recognize
income for federal income tax purposes and the Company normally will not be
entitled to any federal income tax deduction as a result of the exercise of an
incentive stock option and the related transfer of shares of Common Stock to the
recipient. However, the excess of the fair market value of the shares
transferred upon the exercise of the incentive stock option over the exercise
price for such shares generally will constitute an item of alternative minimum
tax adjustment to the recipient for the year in which the option is exercised.
Thus, certain recipients may increase their federal income tax liability as a
result of the exercise of an incentive stock option under the alternative
minimum tax rules under the Code. If the shares of Common Stock transferred
pursuant to the exercise of an incentive stock option are disposed of within two
years from the date the option is granted or within one year from the date the
option is exercised, the recipient generally will recognize ordinary income
equal to the lesser of (1) the gain recognized (i.e., the excess of the amount
realized on the disposition over the exercise price) or (2) the excess of the
fair market value of the shares transferred upon exercise over the exercise
price for such shares. The balance, if any, of the recipient's gain over the
amount treated as ordinary income on disposition generally will be treated as
long- or short-term capital gain depending upon whether the holding period
applicable to long-term capital assets is satisfied. The Company normally would
be entitled to a federal income tax deduction equal to any ordinary income
recognized by the recipient, provided the Company satisfies applicable federal
income tax withholding requirements. If the shares of Common Stock transferred
upon the exercise of an incentive stock option are disposed of after the holding
periods have been satisfied, such disposition will result in a long-term capital
gain or loss treatment with respect to the difference between the amount
realized on the disposition and the exercise price. The Company will not be
entitled to a federal income tax deduction as a result of a disposition of such
shares after these holding periods have been satisfied.
38
<PAGE>
NON-QUALIFIED OPTIONS. A recipient will not recognize income upon the
grant of a non-qualified option or at any time prior to the exercise of the
option or a portion thereof. At the time the recipient exercises a non-
qualified option or portion thereof, he or she will recognize compensation
taxable as ordinary income in an amount equal to the excess of the fair market
value of the Common Stock on the date the option is exercised over the price
paid for the Common Stock, and the Company will then be entitled to a
corresponding deduction. Depending upon the period for which shares of Common
Stock are held after exercise, the sale or other taxable disposition of shares
acquired through the exercise of a non-qualified option generally will result in
a short- or long-term capital gain or loss equal to the difference between the
amount realized on such disposition and the fair market value of such shares
when the non-qualified option was exercised. Special rules apply to a
participant who exercises a non-qualified option by paying the exercise price in
whole or in part by a transfer of shares of Common Stock to the Company.
DIRECTOR PLAN.
The purpose of the Director Plan is to provide an incentive to outside
directors and members of the Company's Advisory Board ("Advisors") for
continuous association with the Company and to reinforce the relationship
between participants' rewards and shareholder gains.
CONSULTANTS.
The Company has entered into a consulting agreement in November 1997 with
R.T. Consulting, Inc. ("R.T."), to provide the Company with various consulting
services, including rendering strategic and financial advice, developing
marketing plans and materials, financial plans and budgets, and initiating
strategic business initiatives. Pursuant to its agreement with the Company,
R.T. will receive $3,000 per calendar month for a period of four (4) calendar
years commencing on the effective date of a registration statement filed with
the SEC with respect to any IPO.
In May 1998, the Company entered into an agreement with Revere Financial
Group, Inc. ("Revere") to provide Edgarization, pre-press services, and
assistance with the roadshow presentation in connection with this Offering in
exchange for a fee equal to $50,000. Revere is a company affiliated with Tejas
Securities Group, Inc., one of the underwriters.
39
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information as of the date of this Prospectus
and as adjusted to reflect the sale of 750,000 units offered hereby, based upon
information obtained from the persons named below, relating to the beneficial
ownership of shares of Common Stock by (i) each person known to the Company to
own five percent or more of the outstanding Common Stock, (ii) each director of
the Company and (iii) all officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING (3)
------------------- ----------------------
SHARES
NAME AND ADDRESS SHARES PERCENT OFFERED BY SHARES PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS SHAREHOLDERS (1) OWNED OF CLASS
- ------------------- ------ -------- ---------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Timothy C. Moses
405 North Errol
Court, N.W.
Atlanta, Georgia
30327 1,399,594 31.8% 125,000 1,274,594 21.6%
Jacques Elfersy
1771 East
Clifton Road
Atlanta, Georgia
30307 1,511,649 34.3% 125,000 1,386,149 23.5%
Carl T. Garner (2)
4473 Chattahoochee
Plantation
Marietta, Georgia
30067 20,000 * 0 * *
All officers and
directors
as a group
(4 persons) (2) 2,931,243 66.1% 250,000 2,681,243 45.1%
</TABLE>
* Less than 1%
_______
(1) A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus upon
the exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options held by such person (but
not those held by any other person) and that are exercisable within 60 days
from the date of this Prospectus have been exercised.
(2) Includes 20,000 shares of Common Stock subject to currently exercisable
options.
(3) Assumes full exercise of over-allotment option for a total of 250,000 shares
of Common Stock granted by Selling Shareholders to the Underwriters. See
"Underwriting."
40
<PAGE>
CERTAIN TRANSACTIONS
In June 1998, Timothy C. Moses and Jacques Elfersy contributed
approximately $600,000 of capital to the Company. Such contribution was funded
by the sale of 200,000 shares of Common Stock of the Company owned by such
persons since 1995 at a purchase price of $3.00 per share.
In January, March, and June 1998, Judith B. Turner, the mother-in-law of
Timothy C. Moses, lent the Company $30,000, $25,000, and $25,000, respectively.
The Company has agreed to repay such sums to Mrs. Turner pursuant to three
promissory notes, dated January 16, 1998, February 27, 1998, and June 5, 1998
(the "Notes"). Each of the Notes mature on the earlier of the first anniversary
of issuance or the effective date of the IPO and bear interest at the rate of 8%
per annum.
Upon consummation of this Offering, Messrs. Moss and Elfersy will receive
$300,000 in the aggregate from the Company representing repayment of accrued and
unpaid salary due and payable by the Company to such persons for their
employment for the period June 1995 through December 31, 1997.
Although the Company believes that the foregoing transactions were on terms
no less favorable to the Company than would have been available from
unaffiliated third parties in arm's length transactions, there can be no
assurance that this is the case. All future transactions and loans between the
Company and its officers, directors and 5% shareholders will be on terms no less
favorable to the Company than could be obtained from independent, third parties.
There can be no assurance, however, that future transactions or arrangements
between the Company and its affiliates will be advantageous, that conflicts of
interest will not arise with respect thereto or that if conflicts do arise, that
they will be resolved in favor of the Company.
41
<PAGE>
DESCRIPTION OF SECURITIES
UNITS.
Each Unit consists of two shares of Common Stock and one Warrant. The
Shares and the Warrants included in the Units may not be separately traded until
(February ____), 1999, unless earlier separated upon ten day's written notice
from the Representatives to the Company.
COMMON STOCK.
The Company is authorized to issue 50,000,000 shares of Common Stock,
without par value, and 10,000,000 of blank check preferred stock. As of August
____ , 1998 there were 4,395,040 shares of Common Stock issued. There were 43
holders of record of Common Stock, as of August ____, 1998.
The holders of outstanding shares of all classes of Common Stock are
entitled to share ratably in any dividends paid on the Common Stock when, as and
if declared by the Board of Directors out of funds legally available. Each
holder of Common Stock is entitled to one vote for each share held of record.
The Common Stock is not entitled to cumulative voting or preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in the
net assets legally available for distribution. All outstanding shares of Common
Stock are fully paid and non-assessable.
WARRANTS.
The Warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement (the "Warrant Agreement") between
the Company and the American Stock Transfer & Trust Company as warrant agent
(the "Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
Each Warrant entitles the holder thereof to purchase at any time one share
of Common Stock at an exercise price of $7.80 per share at any time after the
Common Stock and Warrants become separately tradable until August ____, 2002.
The right to exercise the Warrants will terminate at the close of business on
August ____, 2002. The Warrants contain provisions that protect the Warrant
holders against dilution by adjustment of the exercise price in certain events,
including but not limited to stock dividends, stock splits, reclassification or
mergers. A Warrant holder will not possess any rights as a shareholder of the
Company. Shares of Common Stock, when issued upon the exercise of the Warrants
in accordance with the terms thereof, will be fully paid and non-assessable.
Commencing six months after the date of this Prospectus, the Company may
redeem some or all of the Warrants at a call price of $0.05 per Warrant, upon
thirty (30) day's prior written notice if the closing sale price of the Common
Stock on the Nasdaq SmallCap Market has equaled or exceeded $13.00 for ten (10)
consecutive days.
The Warrants may be exercised only if a current prospectus relating to the
underlying Common Stock is then in effect and only if the shares are qualified
for sale or exempt from registration under the securities laws of the state or
states in which the purchaser resides. So long as the Warrants are outstanding,
the Company has undertaken to file all post-effective amendments to the
Registration Statement required to be filed under the Securities Act, and to
take appropriate action under federal law and the securities laws of those
states where the Warrants were initially offered to permit the issuance and
resale of the Common Stock issuable upon exercise of the Warrants. However,
there can be no assurance that the Company will be in a position to effect such
action, and the failure to do so may cause the exercise of the Warrants and the
resale or other disposition of the Common Stock issued upon such exercise to
become unlawful. The Company may amend the terms of the Warrants, but only by
extending the termination date or lowering the exercise price thereof. The
Company has no present intention of amending such terms. However, there can be
no assurances that the Company will not alter its position in the future with
respect to this matter.
TRANSFER AGENT AND REGISTRAR.
The Transfer Agent and Registrar for the Units, the Common Stock and the
Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
42
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 5,895,046 shares of
Common Stock outstanding. Of these shares, the 1,500,000 shares sold in this
Offering (1,725,000 if the over-allotment option is exercised in full) will be
freely tradable in the public market without restriction under the Securities
Act, except shares purchased by an "affiliate" (as defined in the Securities
Act) of the Company. The remaining 4,395,046 shares (the "Restricted Shares")
(4,170,046 if the over-allotment option is exercised in full) will be
"restricted shares" within the meaning of the Securities Act and may be publicly
sold only if registered under the Securities Act or sold in accordance with an
applicable exemption from registration, such as those provided by Rule 144 under
the Securities Act.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell Restricted Shares if at least
one year has passed since the later of the date such shares were acquired from
the Company or any affiliate of the Company. Rule 144 provides, however that
within any three-month period such person may only sell up to the greater of 1%
of the then outstanding shares of the Company's Common Stock (approximately
59,000 shares following the completion of this Offering) or the average weekly
trading volume in the Company's Common Stock during the four calendar weeks
immediately preceding the date on which the notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 also are subject to certain other
requirements relating to manner of sale, notice of sale and availability of
current public information. Any person who has not been an affiliate of the
Company for a period of 90 days preceding a sale of Restricted Shares is
entitled to sell such shares under Rule 144 without regard to such limitations
if at least two years have passed since the later of the date such shares were
acquired from the Company or any affiliate of the Company. Shares held by
persons who are deemed to be affiliated with the Company are subject to such
volume limitations regardless of how long they have been owned or how they were
acquired.
Without consideration of contractual restrictions described below, an
aggregate of 4,395,046 shares of Common Stock, representing 74.5% of the
outstanding shares of the Common Stock, or 4,270,046 shares representing 70.7%
if the over-allotment option is exercised in full will be eligible for sale in
the public market pursuant to Rule 144 after the completion of this Offering.
The Company is unable to estimate the number of shares that may be sold from
time to time under Rule 144, since such number will depend upon the market price
and trading volume for the Common Stock, the personal circumstances of the
sellers and other factors.
After this Offering, executive officers, directors and senior
management will own 2,932,243 shares of the Common Stock (2,707,243 if the
Underwriter's over-allotment option is exercised). The Company's shareholders
and directors have entered into an agreement with the Representatives providing
that they will not sell or otherwise dispose of any shares of Common Stock held
by them for a period of one year after the date of this Prospectus without the
prior written consent of the Representatives, except for shares sold upon
exercise of the over-allotment option.
The Company can make no prediction as to the effect, if any, that
offer or sale of these shares would have on the market price of the Common
Stock. Nevertheless, sales of significant amounts of Restricted Shares in the
public markets could adversely affect the fair market price of Common Stock, as
well as impair the ability of the Company to raise capital through the issuance
of additional equity securities.
43
<PAGE>
UNDERWRITING
Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, the Company has agreed to sell to the Underwriters named
below, and each of the Underwriters, for whom Tejas Securities Group, Inc.,
Redstone Securities, Inc., and Seaboard Securities, Inc., (the
"Representatives") are acting as Representatives, has severally agreed to
purchase the number of Units set forth opposite its name in the following table.
UNDERWRITERS NUMBER OF UNITS
------------ ---------------
Tejas Securities Group, Inc.
Redstone Securities, Inc
Seaboard Securities, Inc
Total.................................. 750,000
=======
The Representatives have advised the Company that the Underwriters propose
to offer the Units to the public at the initial public offering price per unit
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession of not more than $ per Unit, of which $ may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company and the Selling Shareholders have granted to the Underwriters
an option, exercisable during the 45-day period after the date of this
Prospectus, to purchase up to 112,500 additional Units to cover over-
allotments, if any, at the same price per share as the Company will receive for
the 750,000 Units that the Underwriters have agreed to purchase. If the over-
allotment option is exercised in full, the Selling Shareholders will sell
250,000 shares of Common Stock to the Underwriter. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage of such additional
Units that the number of Units to be purchased by it shown in the above table
represents as a percentage of the 750,000 Units offered hereby. If purchased,
such additional Units will be sold by the Underwriters on the same terms as
those on which the 750,000 Units are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, and the Company against certain civil liabilities, including
liabilities under the Securities Act.
The holders of approximately 3,970,040 shares of the Common Stock after the
Offering have agreed with the Representatives that, until one year after the
date of this Prospectus, subject to certain limited exceptions, they will not
sell, contract to sell, or otherwise dispose of any shares of Common Stock, any
options to purchase shares of Common Stock, or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of the Representatives. Substantially all of
such shares will be eligible for immediate public sale following expiration of
the lock-up periods, subject to the provisions of Rule 144. In addition, the
Company has agreed that until 365 days after the date of this Prospectus, the
Company will not, without the prior written consent of the Representatives,
subject to certain limited exceptions, issue, sell, contract to sell, or
otherwise dispose of, any shares of Common Stock, any options to purchase any
shares of Common Stock or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the Company's sales of shares
in this Offering, the issuance of Common Stock upon the exercise of outstanding
options or warrants or the issuance of options under its employee stock option
plan or pursuant to merger and acquisition. See "Shares Eligible for Future
Sale."
The Underwriters have the right to offer the Securities offered hereby only
through licensed securities dealers in the United States who are members of the
National Association of Securities Dealers, Inc. and may allow such dealers such
portion of its ten (10%) percent commission as the Underwriters may determine.
The Underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
The Company has agreed to pay the Representatives a non-accountable expense
allowance of 2.00% of the gross amount of the Units sold ($195,000 on the sale
of the Units offered) at the closing of the Offering. The Underwriters'
expenses in excess thereof will be paid by the Representatives. To the extent
that the expenses of the underwriting are less than that amount, such excess
shall be deemed to be additional compensation to the Underwriters. In the event
this Offering is terminated before its successful completion, the Company may be
obligated to pay the Representatives a maximum of $25,000 on an accountable
basis for expenses incurred by the Underwriters in connection with this
Offering.
44
<PAGE>
The Company has agreed that for a period of five years from the closing of
the sale of the Units offered hereby, it will nominate for election as a
director a person designated by the Representatives, and during such time as the
Representatives have not exercised such right, the Representatives shall have
the right to designate an observer, who shall be entitled to attend all meetings
of the Board and receive all correspondence and communications sent by the
Company to the members of the Board. The representatives have not yet identified
to the Company the person who is to be nominated for election as a director or
designated as an observer.
The Underwriting Agreement provides for indemnification among the Company
and the Underwriters against certain civil liabilities, including liabilities
under the Securities Act. In addition, the Underwriters' Warrants provide for
indemnification among the Company and the holders of the Underwriters' Warrants
and underlying shares against certain civil liabilities, including liabilities
under the Securities Act, and the Exchange Act.
UNDERWRITERS' WARRANTS.
Upon the closing of this Offering, the Company has agreed to sell to the
Underwriters, for nominal consideration, the Underwriters' Warrants to purchase
up to 75,000 Units consisting of 150,000 shares of Common Stock and 75,000
warrants. The Underwriters' Warrants are exercisable at 120% of the public
offering price for a four-year period commencing one year from the effective
date of this Offering. The Underwriters' Warrants may not be sold, transferred,
assigned or hypothecated for a period of one year from the date of this Offering
except to the officers of the Underwriters and their successors and dealers
participating in the Offering and/or their partners or officers. The
Underwriters' Warrants will contain antidilution provisions providing for
appropriate adjustment of the number of shares subject to the Warrants under
certain circumstances. The holders of the Underwriters' Warrants have no
voting, dividend or other rights as shareholders of the Company with respect to
shares underlying the Underwriters' Warrants until the Underwriters' Warrants
have been exercised.
The Company has agreed, subject to certain exceptions, during the four year
period commencing one year from the date of this Offering, to give advance
notice to the holders of the Underwriters' Warrants or underlying securities of
its intention to file a registration statement, other than in connection with
employee stock options, mergers, or acquisitions, and in such case the holders
of the Underwriters' Warrants and underlying securities shall have the right to
require the Company to include their securities in such registration statement
at the Company's expense.
For the term of the Underwriters' Warrants, the holders thereof will be
given the opportunity to profit from a rise in the market value of the Company's
shares, with a resulting dilution in the interest of other shareholders. The
holders of the Underwriters' Warrants can be expected to exercise the
Underwriters' Warrants at a time when the Company would, in all likelihood, be
able to obtain needed capital by an offering of its unissued shares on terms
more favorable to the Company than those provided by the Underwriters' Warrants.
Such facts may adversely affect the terms on which the Company can obtain
additional financing. Any profit realized by the Underwriters on the sale of
the Underwriters' Warrants or shares issuable upon exercise of the Underwriters'
Warrants may be deemed additional underwriting compensation.
If the Representatives, at their election, at any time one year after the
date of this Prospectus, solicits the exercise of the Warrants, the Company will
be obligated, subject to certain conditions, to pay the Representatives a
solicitation fee equal to 5% of the aggregate proceeds received by the Company
as a result of the solicitation. No warrant solicitation fees will be paid
within one year after the date of this Prospectus. No solicitation fee will be
paid if the market price of the Common Stock is lower than the exercise price of
the Warrants at such time, no solicitation fee will be paid if the Warrants
being exercised are held in a discretionary account at the time of exercise,
except where prior specific approval for exercise is received from the customer
exercising the Warrants, and no solicitation fee will be paid unless the
customer exercising the Warrants states in writing that the exercise was
solicited and designates in writing the Representative or other broker-dealer to
receive compensation in connection with the exercise. The Representatives may
re-allow a portion of the fee to soliciting broker-dealers.
DETERMINATION OF OFFERING PRICE.
The initial public offering price was determined by negotiations between
the Company and the Representatives. The factors considered in determining the
public offering price include the Company's revenue growth since its
organization, the industry in which it operates, the Company's business
potential and earning prospects and the general condition of the securities
markets at the time of the Offering. The offering price does not bear any
relationship to the Company's assets, book value, net worth or other recognized
objective criteria of value.
Prior to this Offering, there has been no public market for the Securities,
and there can be no assurance than an active market will develop.
45
<PAGE>
NASDAQ SMALLCAP MARKET.
The Units, Common Stock, and Warrants have been applied for listing on the
Nasdaq SmallCap Market under the trading symbols "BSTI.U," "BSTI," and "BSTI.W,"
respectively. The Offering is contingent upon the Company obtaining 400
shareholders.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by Sims Moss Kline & Davis LLP, Atlanta, Georgia.
Raymond L. Moss, a partner with Sims Moss Kline & Davis LLP, owns or has the
right to acquire 22,708 shares of Common Stock. Certain legal matters in
connection with the sale of the Securities offered hereby will be passed upon
for the Underwriters by Winstead Sechrest & Minick P.C., Dallas, Texas.
EXPERTS
The financial statements for each of the two fiscal years in the period
ended June 30, 1997, included in this Prospectus have been so included in
reliance on the report of Grant Thornton LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
46
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants F-1
Balance Sheet as of January 30, 1997 and 1996, and Period ended
May 31, 1998 (unaudited). F-2
Statements of Operations for the year ended June 30, 1997, for the
Period from June 1, 1995 (Inception) to June 30, 1997, Period ended
May 31, 1998 (unaudited). F-3
Statements of Stockholders Equity (Deficit) as of June 30, 1997 and 1996,
Period ended May 31, 1998 (unaudited). F-4
Statements of Cash Flows for the Year Ended June 30, 1997, for the
Period from June 1, 1995 (Inception) to June 30, 1997, and Period ended
May 31, 1998 (unaudited). F-5
Notes to Financial Statements F-6
</TABLE>
47
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors
BioShield Technologies, Inc.
We have audited the accompanying balance sheets of BioShield Technologies, Inc.,
as of June 30, 1997 and 1996, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioShield Technologies, Inc. as
of June 30, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Atlanta, Georgia
July 28, 1997
The foregoing auditor's report is in the form which will be signed upon
effectiveness of the offering contemplated and described in Note A to the
financial statements.
/s/ Grant Thornton LLP
Atlanta, Georgia
July 28, 1997
F-1
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
May 31, 1998 -----------------------
(unaudited) 1997 1996
--------------- ----------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 20,584 $ 398,921 $ 25,066
Accounts receivable 111,024 29,294 -
Inventories 165,048 142,194 38,034
Prepaid expenses and other current assets 2,500 20,068 11,791
----------- --------- --------
Total current assets 299,156 590,477 74,891
PROPERTY AND EQUIPMENT, NET 106,090 42,657 -
DEPOSITS AND OTHER LONG-TERM
ASSETS 60,910 59,804 2,847
----------- --------- ---------
$ 466,156 $ 692,938 $ 77,738
=========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 450,000 $ - $ -
Notes payable other 180,000 - -
Accounts payable 295,955 168,880 44,951
Accrued payroll 323,059 306,932 213,603
----------- --------- ---------
Total current liabilities 1,249,014 475,812 258,554
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - no par value; 10,000,000
shares authorized, 4,395,040, 4,364,421 and
3,969,698 issued and outstanding at May 31,
1998, June 30,1997 and 1996, respectively 1,153,001 965,501 115,500
Additional paid-in capital 122,400 122,400 60,000
Deficit accumulated during the development
stage (2,058,259) (870,775) (356,316)
----------- --------- ---------
(782,858) 217,126 (180,816)
----------- --------- ---------
$ 466,156 $ 692,938 $ 77,738
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Eleven months ended June 1, 1995 (inception)
------------------------- Year ended to June 30,
May 31, May 31, June 30, -----------------------
1998 1997 1997 1996 1997
----------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ 434,790 $ 578,561 $ 775,315 $ - $ 775,315
Cost of sales 155,008 266,843 315,822 - 315,822
----------- --------- --------- --------- ----------
Gross profit 279,782 311,718 459,493 - 459,493
Operating expenses
Marketing and selling 368,774 204,326 213,387 5,608 218,995
General and administrative 1,037,588 660,680 700,184 195,515 895,699
Research and development 64,307 60,718 73,782 185,094 258,876
----------- --------- --------- --------- ----------
1,470,669 925,724 987,353 386,217 1,373,570
----------- --------- --------- --------- ----------
Loss from operations (1,190,887) (614,006) (527,860) (386,217) (914,077)
Other income
Consulting income, net of consulting
expenses of $19,474 and $62,227
for the periods ended June 30,
1997 and 1996, respectively - - 10,007 29,901 39,908
Interest income 3,403 3,205 3,394 - 3,394
----------- --------- --------- --------- ----------
3,403 3,205 13,401 29,901 43,302
----------- --------- --------- --------- ----------
Net loss before income taxes (1,187,484) (610,801) (514,459) (356,316) (870,775)
Income tax (expense) benefit - - - - -
----------- --------- --------- --------- ----------
Net loss $(1,187,484) $(610,801) $(514,459) $(356,316) $ (870,775)
=========== ========= ========= ========= ==========
Net loss per common share
Basic $ (0.27) $ (0.16) $ (0.12) $ (0.09) $ (0.21)
=========== ========= ========= ========= ==========
Weighted average number
of shares 4,395,040 3,917,177 4,150,270 3,917,177 4,150,720
=========== ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Periods ended May 31, 1998 (unaudited) and June 30, 1997 and 1996
<TABLE>
<CAPTION>
Deficit
Common stock accumulated
no par value Additional during the
------------------------ paid-in development
Shares Amount capital stage Total
------------ --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1995 - $ - $ - $ - $ -
Proceeds from original issuance
of shares 3,907,086 500 - - 500
Proceeds from issuance of shares
under a private placement offering 62,612 115,000 - - 115,000
Issuance of stock warrants for
services rendered - - 60,000 - 60,000
Net loss - June 1, 1995 (inception)
through June 30, 1996 - - - (356,316) (356,316)
------------ -------- ---------- ----------- ---------
Balance at June 30, 1996 3,969,698 115,500 60,000 (356,316) (180,816)
Proceeds from issuance of shares
under a private placement offering 149,723 275,001 - - 275,001
Proceeds from issuance of shares
under a private placement offering 245,000 600,000 - - 600,000
Stock issuance costs related to
private placement offerings - (25,000) - - (25,000)
Issuance of stock warrants for
services rendered - - 62,400 - 62,400
Net loss for the year ended
June 30, 1997 - - - (514,459) (514,459)
------------ -------- ---------- ----------- ---------
Balance at June 30, 1997 4,364,421 965,501 122,400 (870,775) 217,126
Proceeds from issuance of shares
under private placement offering
(unaudited) 30,619 187,500 - - 187,500
Net loss for the period ended
May 31, 198 (unaudited) - - - (1,187,484) (1,187,484)
---------- ---------- -------- ----------- -----------
Balance at May 31, 1998 (unaudited) $4,395,040 $1,153,001 $122,400 $(2,058,259) $ (782,858)
========== ========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Periods ended May 31, 1998 and 1997 (unaudited) and
June 30, 1997 and 1996
<TABLE>
<CAPTION>
Eleven months ended June 1, 1995 (inception)
------------------------- Year ended to June 30,
May 31, May 31, June 30, -------------------------
1998 1997 1997 1996 1997
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,187,484) $(610,801) $(514,459) $(356,316) $(870,775)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization
expense 13,047 15,158 16,536 1,504 18,040
Issuance of stock and stock
options for services rendered - 62,400 62,400 60,000 122,400
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable (81,730) (19,666) (29,294) - (29,294)
Inventory (22,854) (97,716) (104,160) (38,034) (142,194)
Prepaid expenses
and other current
assets 17,568 (21,448) (21,448) (12,862) (34,310)
Stock issuance costs - (42,000) (42,000) - (42,000)
Deposits and other
assets (1,106) (15,387) (15,387) (3,280) (18,667)
Increase (decrease) in:
Accounts payable 127,075 56,088 123,929 44,951 168,880
Accrued payroll 16,127 93,329 93,329 213,603 306,932
----------- --------- --------- --------- ---------
Net cash used in operating
activities (1,119,357) (580,043) (430,554) (90,434) (520,988)
----------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures (76,480) (45,592) (45,592) - (45,592)
----------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from debt 630,000 - - - -
Private offering of stock, net 187,500 850,001 850,001 115,500 965,501
--------- -------- -------- -------- --------
Net cash provided by
financing activities 817,500 850,001 850,001 115,500 965,501
--------- -------- -------- -------- --------
Net increase (decrease) in
cash (378,337) 224,366 373,855 25,066 398,921
Cash at beginning of period 398,921 25,066 25,066 - -
--------- -------- -------- -------- --------
Cash at end of period $ 20,584 $249,432 $398,921 $ 25,066 $398,921
========= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE A - NATURE OF OPERATIONS
BioShield Technologies, Inc. (the "Company"), was incorporated on June 1, 1995.
The Company was formed to develop, manufacture and distribute certain
antimicrobial agents and products. Patents for these new agents and products
are currently pending. The Company is in the process of developing
distribution channels for these products throughout the United States and
internationally.
The Company is in the development stage and its efforts though May 31, 1998,
have been principally devoted to organizational activities, raising capital,
regulatory approvals, research and development and further investigation into
new markets.
During the next fiscal year, the Company is planning an initial public
offering.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
2. Revenue Recognition
-------------------
The Company recognizes revenue and provides for the estimated cost of returns
and allowances in the period the products are shipped and title transfers to
the customer.
3. Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventories consist primarily of
raw materials, work in progress and finished goods.
4. Property, Equipment and Depreciation
------------------------------------
Property and equipment are recorded at historical cost. Depreciation is
provided for in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives on a straight-line basis.
Depreciation expense related to property and equipment charged to operations
was approximately $13,000, $3,000 and $0 for the periods ended 1998, 1997 and
1996, respectively. Estimated service lives are as follows:
Office Equipment 3 years
Machinery, leasehold improvements,
furniture and equipment 5-10 years
F-6
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
6. Income Taxes
------------
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance is provided for
deferred tax assets when it is more likely than not that the asset will not be
realized.
7. Research and Development Costs
------------------------------
The costs of research and development and consumable supplies and materials to
be used for the development of the Company's intended products are expensed
when incurred. Research and development expense was $64,307, $73,782 and
$185,094 for the periods ending May 31, 1998, June 30, 1997 and 1996,
respectively. Research and development expense for the period ended June 30,
1996, included $120,000 of certain officers' compensation that related to
conceptual formulation, testing and design of product alternatives.
8. Advertising Costs
-----------------
The Company expenses the cost of advertising the first time advertising takes
place. Costs of developing advertising materials are expensed at the time the
advertising materials are produced and distributed to customers. Advertising
expense was $66,624 and $69,932 for the periods ended May 31, 1998 and June 30,
1997, respectively.
9. Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments include cash and cash equivalents. The
carrying value of cash and cash equivalents approximates fair value due to the
relatively short period to maturity of the instruments.
F-7
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
10. General and Administrative Costs
--------------------------------
General and administrative costs include, amongst other things, the cost of
testing and consulting related to filings with the Environmental Protection
Agency (EPA) and patent filings as well as professional fees associated with
private placement offerings and the Company's proposed initial public offering.
11. Reverse Stock Split
-------------------
Effective December 11, 1997, the Company's board of directors approved a
reverse split, which had the following effect on all outstanding securities:
Common stock - 2.45 for 3.00
Options - 1 for 2
Warrants - 1 for 2
The exercise price on all options and warrants was reduced to $0.50 in
connection with the reverse split.
All share and per share amounts and option and warrant amounts have been
restated retroactively to reflect these reverse splits.
12. Loss Per Common Share
---------------------
Basic loss per common share has been calculated using the weighted average
number of shares of common stock outstanding during each period as adjusted for
the reverse split as discussed in Note A-13. Diluted loss per common share is
not disclosed because the effect of the exchange or exercise of common stock
equivalents would be antidilutive.
F-8
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE C - INVENTORIES
Inventories consist of the following :
<TABLE>
<CAPTION>
(Unaudited)
May 31, June 30, June 30,
1998 1997 1996
------------- ------------- ----------
<S> <C> <C> <C>
Raw Materials $ 44,657 $100,146 $ 27,155
Work in Progress 82,821 30,828 10,879
Finished Goods 37,570 11,220 -
-------- -------- --------
$165,048 $142,194 $ 38,034
======== ======== ========
</TABLE>
NOTE D - PROPERTY AND EQUIPMENT
Property and Equipment consists of the following:
<TABLE>
<CAPTION>
(Unaudited)
May 31, June 30, June 30,
1998 1997 1996
------------- ------------- -----------
<S> <C> <C> <C>
Leasehold improvements $ 58,092 $ - $ -
Office furniture and equipment 28,433 23,890 -
Machinery and equipment 35,547 21,701 -
-------- ------- --------
Total property and equipment 122,072 45,592 -
Less accumulated depreciation (15,982) (2,935) -
-------- ------- --------
$106,090 $42,657 $ -
======== ======= ========
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENCIES
Operating Leases
----------------
The Company leases certain office and operating facilities and certain
equipment under operating lease agreements which expire on various dates
through 2000 and require the Company to pay all maintenance costs. Rent
expense under these leases was $59,003 and $16,133 for the periods ended May
31, 1998 and June 30, 1997, respectively.
F-9
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE E - COMMITMENTS AND CONTINGENCIES - Continued
Commitments under noncancelable operating leases are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year:
<S> <C>
1998 $ 48,437
1999 49,903
2000 42,269
2001 and Thereafter -
--------
Total $140,069
========
</TABLE>
NOTE F - STOCKHOLDERS' EQUITY
Warrants
--------
At June 30, 1997, warrants for the purchase of 901,504 shares had been issued
in connection with various private placement offerings. In connection with the
reverse split discussed in Note A-13, the restated number of warrants
outstanding at June 30, 1997 was 450,752, with an exercise price of $.50. The
expiration date was also restated to reflect a five year term offering in
April, 2003. In connection with a private placement during the period ended
May 31, 1998, warrants for the purchase of 490,000 shares were issued with an
exercise price ranging from $6.50 to $7.15 expiring April, 2003.
Warrants Issued for Services in Lieu of Cash
--------------------------------------------
During the periods ended June 30, 1997 and 1996, warrants to purchase 100,000
and 60,000 shares, respectively were issued to consultants at an exercise price
of $.50. The Company recorded $62,400 and $60,000 of expense during the
periods ended June 30, 1997 and 1996, respectively, as a result of issuing
these warrants.
Options
- -------
During 1996, the Company implemented a directors' stock option plan covering all
members of the Company's board of directors. The provisions of this plan
included a grant of options to acquire 17,500 and 20,000 shares of common stock
at an exercise price of $1.00 per share for the periods ended June 30, 1997 and
1996, respectively. The exercise price was reduced to $1.00 per share as a
result of a reverse two for one options split. In accordance with the 1997 stock
option and directors' plan, options for the purchase of 92,500 shares were
granted during the period ended May 31, 1998.
F-10
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE F - STOCKHOLDERS' EQUITY - Continued
Options - Continued
-------------------
The Company uses the intrinsic value method in accounting for its stock option
plan. In applying this method, no compensation cost has been recognized in the
accompanying financial statements. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the grant dates
for awards under this plan, the Company's net loss and loss per share would
have resulted in the pro forma amounts indicated below:
<TABLE>
<CAPTION>
June 30, 1997 June 30,1996
------------------ ---------------
<S> <C> <C>
Net loss As reported $(514,459) $(356,316)
Pro forma (527,847) (371,616)
Net loss per
common share As reported $(0.09) $(0.07)
Pro forma (0.10) (0.07)
</TABLE>
For purposes of the pro forma amounts above, the fair value of each option
grant was estimated by reference to other equity instruments issued during the
period to non-employees.
In addition, warrants to purchase 75,000 shares of common stock have been
reserved for the Company's underwriters in connection with the Company's
proposed initial public offering. The vesting of these warrants is contingent
upon a certain level of net proceeds obtained from the offering.
F-11
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE F STOCKHOLDERS' EQUITY Continued
Options - Continued
--------------------
Stock option and warrant transactions are summarized as follows:
<TABLE>
<CAPTION>
Period ended Year ended Year ended
May 31, 1998 June 30, 1997 June 30, 1996
----------------------- ------------------ -----------------
Weighted Weighted Weighted
Average average average
Exercise exercise exercise
Shares price Shares price Shares price
------ --------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
period 648,252 $ 0.50 80,000 $ 0.50 - $ -
Issued in connection with private
placement offerings 450,000 6.50 450,752 0.50 - -
Issued in connection with
Private placement offering 40,000 7.80 - - - -
Issued to non-employees for
services rendered - 100,000 0.50 60,000 0.50
Issued to directors 47,500 1.00 17,500 0.50 20,000 0.50
Issued to employees 15,000 1.00
Issued to advisory board 20,000 1.00 - - - -
Exercised - - - - - -
Canceled - - - - - -
------------- -------- ------- ------- ------ -----
Outstanding, end of period 1,220,752 $ 2.98 648,252 $ 0.50 80,000 $ 0.50
========= ========= ======= ======= ====== =======
</TABLE>
The weighted average remaining contractual life of options and warrants
outstanding is approximately 5.0 years as of May 31, 1998.
NOTE G INCOME TAXES
The Company's temporary differences result in a deferred income tax asset which
is reduced to zero by a related valuation allowance, summarized as follows:
<TABLE>
<CAPTION>
May 31, June 30, June 30,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Deferred income tax assets:
Operating loss carryforwards $ 582,000 $ 163,918 $ 30,767
Payroll accruals 117,000 116,634 81,169
Options for services 46,000 46,512 22,800
--------- --------- ---------
Gross deferred tax assets 745,000 327,064 134,736
Deferred tax asset valuation allowance (745,000) (327,064) (134,736)
--------- --------- ---------
Net deferred income tax asset $ - $ - $ -
========= ========= =========
</TABLE>
F-12
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE G - INCOME TAXES - Continued
The income tax provisions for the periods ended May 31, 1998, June 30, 1997 and
1996, differ from the amounts determined by applying the applicable U.S.
statutory federal income tax rate to pretax results of operations. These
differences are a result of applying valuation allowances against the deferred
tax assets.
Reconciliations of statutory Federal tax rates to the effective tax rate for
the periods ended May 31, 1998, June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
May 31, June 30, June 30,
1998 1997 1996
------------ ------------- ----------
<S> <C> <C> <C>
Income tax benefit at applicable Federal rate of 34% $437,745 $ 174,916 $ 121,147
State tax benefit, net of Federal income tax effect 51,500 20,578 14,253
Other (3,200) (3,166) (664)
-------- --------- ---------
486,045 192,328 134,736
Increase in deferred income tax asset valuation allowance 486,045 (192,328) (134,736)
-------- --------- ---------
Net income tax benefit $ - $ - $ -
======== ========= =========
</TABLE>
At June 30, 1997, the Company had operating loss carry forwards for U.S. income
tax purposes of approximately $400,000 available to reduce future taxable
income. These loss carry forwards will expire in fiscal years 2011 and 2012.
NOTE H - SIGNIFICANT CUSTOMERS
During 1997, the Company entered into sales agreements with two customers that
include provisions for certain exclusive marketing rights and preferential
payment terms. These agreements range from one to three years and provide for
minimum purchase commitments on behalf of these customers. Sales to these
customers totaled approximately $555,000 or 72% of total sales during the year
ended June 30, 1997. Sales to one customer totaled approximately $59,000 or
14% of total sales for the period ended May 31, 1998. No other customer
represented more than 10% of sales during this period.
F-13
<PAGE>
BioShield Technologies, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
May 31, 1998 (unaudited) and June 30, 1997 and 1996
NOTE I - NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards (SFAS) 131, Disclosure About
Segments of An Enterprise and Related Information, which is effective for
fiscal years beginning after December 15, 1997 requires companies to report
information about an entity's different types of business activities and the
different economic environments in which it operates, referred to as operating
segments.
NOTE J - CONTINUED OPERATIONS
The Company's continued existence as a going concern is ultimately dependent
upon the success of future operations and its ability to obtain additional
financing. As shown in the financial statements, the Company incurred losses
of $1,187,484, $514,459 and $356,316 for the periods ended May 31, 1998, June
30, 1997 and 1996, respectively. Management believes that its ability to
generate sufficient revenues may depend on the success of a proposed initial
public offering. The Company is dependent on the proceeds of this offering in
order to continue operations.
NOTE K - NOTES PAYABLE
Notes payable consist of ninety $5,000 notes payable to individuals totaling
$450,000 at May 31, 1998. The notes are due the earlier of the completion of a
successful initial public offering or March, 2001. The notes bear interest at
10% per annual during the first twelve months, 13% per annum during the second
twelve months, and 15% per annum during the third twelve months. In connection
with these notes, warrants for the purchase of 450,000 shares at an exercise
price of $6.50 were issued. The value attributable to these warrants is not
significant to the accompanying financial statements and accordingly, the value
has not been included therein.
Other notes payable consist of a $55,000 note payable to a relative of a
principle stockholder bearing interest at 8% and maturing the earlier of a
successful initial public offering or May, 1999, and a $125,000 note payable to
an individual bearing interest at prime plus 2% and maturing the earlier of a
successful initial public offering or six months.
F-14
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.............................................. 2
Prospectus Summary.................................................. 3
Risk Factors........................................................ 6
Use of Proceeds..................................................... 14
Dividend Policy..................................................... 14
Dilution............................................................ 15
Capitalization...................................................... 16
Management's Discussion and
Analysis of Financial Condition
and Results of Operation........................................... 17
Business............................................................ 19
Management.......................................................... 33
Principal Shareholders.............................................. 40
Certain Transactions................................................ 41
Description of Securities........................................... 42
Shares Eligible For Future Sale..................................... 43
Underwriting........................................................ 44
Legal Matters....................................................... 46
Experts............................................................. 46
Index to Financial Statements....................................... 47
</TABLE>
-----------------
UNTIL ________, 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
===============================================================================
===============================================================================
750,000 UNITS
EACH UNIT CONSISTING OF
TWO SHARES OF COMMON STOCK
AND
ONE REDEEMABLE COMMON
STOCK PURCHASE WARRANT
BIOSHIELD
TECHNOLOGIES, INC.
OFFERING PRICE
$13.00
PER UNIT
PROSPECTUS
, 1998
TEJAS SECURITIES GROUP, INC.
REDSTONE SECURITIES, INC.
SEABOARD SECURITIES, INC.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14-2-202(b)(4) of the Georgia Business Corporation Code provides
that a corporation's articles of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its shareholders for monetary damages for breach of duty of care or other
duty as a director. This Section also provides, however, that such a provision
shall not eliminate or limit the liability of a director (i) for any
appropriation, in violation of his duties, of any business opportunity of the
corporation, (ii) for acts or omissions involving intentional misconduct or a
knowing violation of law, (iii) for certain other types of liability set forth
in the Code, and (iv) for transactions from which the director derived an
improper personal benefit. Article VI of the Registrant's Articles of
Incorporation contains a provision eliminating or limiting the personal
liability of a director of the Registrant to the fullest extent authorized by
the Georgia Business Corporation Code.
In addition, Sections 14-2-851 and 14-2-857 of the Georgia Business
Corporation Code, provides for indemnification of directors and officers of the
Registrant for liability and expenses reasonably incurred by them in connection
with any civil, criminal, administrative or investigative action, suit or
proceeding in which they may become involved by reason of being a director or
officer of the Registrant. Indemnification is permitted if the director or
officer acted in a manner which he believed in good faith to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct to be unlawful; provided that the Registrant may not indemnify any
director or officer (i) in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation or
(ii) in connection with any other proceeding in which he was adjudged liable on
the basis that personal profit was improperly received by him, except as
determined by a court of competent jurisdiction. Article 9 of the Registrant's
Bylaws contains a provision providing for the indemnification of officers and
directors and advancement of expenses to the fullest extent authorized by the
Georgia Business Corporation Code.
The Registrant may seek to purchase and maintain directors and officers
liability insurance which insures against liabilities that directors and
officers of the Registrant may incur in such capacities.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all expenses in
connection with the issuance and distribution of the securities being registered
other than underwriting discounts and commissions and the Underwriter's non-
accountable expense allowance:
Securities and Exchange Commission filing $ 7,967
NASDAQ fee 7,738*
National Association of Securities
Dealers, Inc. filing fee 3,201
Printing and engraving expenses 85,000*
Legal Fees and expenses 180,000*
Registrar and transfer agent fees 5,000*
Accounting fees and expenses 95,000*
Non Accountable expense allowance 195,000*
Blue sky fees and expenses 4,000*
Miscellaneous 5,000*
--------
Total $587,906*
*Estimated.
II-2
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During February and April of 1996, the Company sold a total of 18,000 (pre-
split) shares of Common Stock to three investors at a price of $1.50 per share
(an aggregate sale price of $26,500). Beginning on July 23, 1996, the Company
sold units consisting of one share of Common Stock and two warrants to purchase
one share of Common Stock (the "Private Units") at prices of $1.50 and $2.00 per
Private Unit, with the same price of $1.50 or $2.00 per share applying to the
respective Private Unit warrants. The Company sold 6,000 Private Units for
$9,000 on July 23, 1996, to a single investor, 229,168 Private Units for
$375,001 to six married couples in November 1996, 50,000 Private Units for
$100,000 to a husband and wife and another investor on December 4, 1996, and a
total of 131,833 Private Units to four existing and three new investors for an
aggregate of $229,000 during January 1997. On February 17, 1997, an existing
shareholder purchased an additional 25,000 Private Units for $50,000. In
February and March 1997, five new investors purchased an aggregate of 75,000
Private Units for an aggregate of $150,000, and during June and July 1997, three
new investors purchased 37,500 Private Units at a price of $5.00 per unit. All
of the shares and Private Units were issued pursuant to the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of that
Act.
On December 11, 1997, the Company effected a 2.45-for-3 reverse stock split
of its Common Stock and each outstanding Private Unit warrant was adjusted to
provide for an exercise price of $.50 per share of Common Stock. The shares
issued in the reverse split did not require registration under the Securities
Act in that the reverse split and warrant adjustment was not a "sale," "offer
for sale" or "offer" as such terms are defined in the Securities Act.
On February 27, March 16, and March 24, 1998, the Company sold 90 units to
12 investors for an aggregate of $450,000 or $5,000 per unit, with each unit
consisting of (i) a $5,000 non-negotiable promissory note payable on the earlier
of an initial public offering or three years from the date of issuance, and (ii)
a warrant to purchase up to 5,000 shares of Common Stock at the initial public
offering price beginning six months after the offering and ending five years
after issuance. First Atlanta Securities, LLC acted as the Company's placement
agent with respect to the placement of the units and received $40,000 in cash
and a warrant to purchase 40,000 shares of Common Stock at a price per share
equal to 110% of the initial public offering price. The units and related
placement agent's warrants were issued pursuant to the exemption from the
registration requirements of the Securities Act afforded by Section 4(2) of the
Act.
II-3
<PAGE>
ITEM 27. EXHIBITS
Number Description
Exhibit 1.1 Form of Underwriting Agreement (2)
Exhibit 1.2 Form of Underwriter's Warrant (2)
Exhibit 3.1 Amended and Restated Articles of Incorporation of the
Company, dated February 13, 1998 (1)
Exhibit 3.2 Bylaws of the Company (1)
Exhibit 4.1 Specimen Stock Certificate (2)
Exhibit 4.2 Forms of Investor Warrants (1)
Exhibit 4.3 First Atlanta Warrant (1)
Exhibit 5.1 Opinion of Sims Moss Kline & Davis (1) GET FROM EDGAR
VERSION
Exhibit 10.1 Employment Agreement between the Company and Timothy C.
Moses, dated January 1, 1998 (1)
Exhibit 10.2 Employment Agreement between the Company and Jacques
Elfersy, dated January 1, 1998 (1)
Exhibit 10.3 Employment Agreement between the Company and Joachim
Berkner, dated January 1, 1998 (2)
Exhibit 10.4 Employment Agreement between the Company and William O.
Hitt, dated March 11, 1998 (1)
Exhibit 10.5 Material Lease between the Company and Weeks Realty for
Property in Norcross, Georgia, dated April 24, 1997 (1)
Exhibit 10.6 Material Lease between the Company and Selig Enterprises
for Property in Atlanta, Georgia, dated September 4, 1997
(1)
Exhibit 10.7 Marketing and Distribution Agreement between the Company
and QVC, Inc., dated November 5, 1997 (2)
Exhibit 10.8 Sales Agreement between the Company and HealthSafe
Environmental Products, Inc., dated February 6, 1997 (2)
Exhibit 10.9 Sales and Distribution Agreement between the Company and
Concrete MicroTech, Inc., dated February 7, 1997 (2)
Exhibit 10.10 Sales Agreement between the Company and Sanitary Coating
Systems, Inc., dated November 13, 1997 (2)
Exhibit 10.11 Consulting Agreement between the Company and R.T.
Consulting, dated December 5, 1997 (1)
Exhibit 10.12 Form of Investor Note (1)
Exhibit 10.13 Settlement Agreement between the Company and Stephen M.
Dale, dated May 12, 1998 (1)
Exhibit 10.14 Agreement to provide Edgarization Services between the
Company and Revere Financial Group, Inc., dated May 28,
1998 (1)
II-4
<PAGE>
Exhibit 10.15 Three Promissory Notes between the Company and in favor of
Judy Turner, dated January 16, 1998, May 27, 1998, and
June 5, 1998 (1)
Exhibit 10.16 1996 Director's Stock Option Plan and 1996 Director's
Stock Option Agreement Pursuant to 1996 Director's Stock
(1)
Exhibit 10.17 1997 Stock Incentive Plan (1)
Exhibit 10.18 Patent Assignment Agreements by and among Jacques Elfersy,
Joachim Berkner, Timothy C. Moses, and the Company, dated
February 5, 1998 (2)
Exhibit 10.19 Revolving Credit Facility between the Company and Mountain
National Bank (2)
Exhibit 21.1 Form of Consent by Grant Thornton, LLP (1)
(1) Filed herewith
(2) To be filed by amendment
(3) Confidential treatment has been requested with respect to portions of this
document. Omitted portions have been filed separately with the Securities
and Exchange Commission.
II-5
<PAGE>
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes that:
(1) It will file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(a) Include any prospectus required under Section 10(a)(3) of the
Securities Act;
(b) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(c) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the provisions described under Item 24 above, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted against
the Company by such director, officer or controlling person in connection with
the securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that (i) for purposes of determining
liability under the Securities Act, the information omitted from the form of
Prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of Prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part
of this Registration Statement as of the time it was declared effective; and
(ii) for purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The Company will provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this amendment to the
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Atlanta, State of Georgia, on June 22, 1998.
BIOSHIELD TECHNOLOGIES, INC.
By: /s/ Timothy C. Moses
-----------------------------------------
Timothy C. Moses, President
II-6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints TIMOTHY C. MOSES and JACQUES ELFERSY and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or their substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Timothy C. Moses President; Chief Executive June 22, 1998
- --------------------------------------------- Officer; Director
Timothy C. Moses
/s/ Jacques Elfersy Chairman of the Board; June 22, 1998
- --------------------------------------------- Vice President of Operations
Jacques Elfersy and Director of Regulatory Affairs;
Chief Financial Officer
/s/ Carl T. Garner Director June 22, 1998
- ---------------------------------------------
Carl T. Garner
/s/ Michel Azran Director June 22, 1998
- ---------------------------------------------
Michel Azran
</TABLE>
II-7
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BIOSHIELD TECHNOLOGIES, INC.
I.
The name of the Corporation is BioShield Technologies, Inc.
II.
(a) The Corporation shall have authority to be exercised by the Board of
Directors to issue not more than 50,000,000 shares of common voting stock
("Common Stock") and 10,000,000 shares of preferred stock ("Preferred Stock").
(b) Subject to any preferences of any Preferred Stock then outstanding, the
shares of Common Stock shall have unlimited voting rights and shall be entitled
to receive the net assets of the Corporation upon dissolution.
(c) Subject to the provisions of these Articles of Incorporation and to the
provisions of the Georgia Business Corporation Code (the "Corporation Code"),
the Board of Directors may determine (i) the number, designation, preferences,
limitations and relative rights of any class of shares of Preferred Stock and
(ii) the number, preferences, limitations and relative rights of one or more
series of Preferred Stock within a class, prior to the issuance of any shares of
such class or series. Any of the voting powers, preferences, rights,
qualifications, limitations or restrictions of a class or series of Preferred
Stock, or the holders thereof, may be made dependent upon facts ascertainable
outside these Articles of Incorporation.
III.
(a) In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the Corporation, the
Board of Directors, committees of the Board of Directors, and individual
directors, in addition to considering the effects of any action on the
Corporation or its shareholders, may consider the interests of the employees,
customers, suppliers and creditors of the Corporation and its subsidiaries, the
communities in which offices or other establishments of the Corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent; provided, however, that this paragraph shall be deemed solely to
grant discretionary authority to the directors and shall not be deemed to
provide to any constituency any right to be considered.
(b) The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
the Board of Directors and shareholders:
(i) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors;
(ii) The Board of Directors shall consist of not less than three nor more
than twenty-one directors. The exact number of directors shall be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The first member of Class I shall be Michel M.
Azran, the first member of Class II shall be Carl T. Garner, and the first
member of Class III shall be Timothy C. Moses and Jacques Elfersy. The first
directors serving as members of Class I shall hold office until the annual
meeting of shareholders to be held in 1998, the first director serving as
members of Class II shall hold office
<PAGE>
until the annual meeting of shareholders to be held in 1999, and the first
directors serving as members of Class III shall hold office until the annual
meeting of shareholders to be held in 2000. At each annual meeting of
shareholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. Directors shall serve
until the expiration of their terms and until their successors have been elected
and qualify, subject to the director's prior death, resignation,
disqualification or removal from office. If the number of directors is changed
in accordance with the terms of these Articles of Incorporation, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. Any vacancy on the Board of
Directors that results from a newly created directorship, and any other vacancy
occurring on the Board of Directors, shall be filled by the affirmative vote of
a majority of the Board of Directors then in office, although less than a
quorum, or by a sole remaining director. A director of any class elected by the
Board of Directors to fill a vacancy shall hold office until the next annual
meeting of shareholders. A director of any class elected by the shareholders to
fill a vacancy shall hold office for a term that shall coincide with the
remaining term of that class. In no case will a decrease in the number of
directors shorten the term of any incumbent director. The election of directors
need not be by written ballot unless the Corporation's Bylaws so require.
(c) The shareholders shall not have the right to remove any one or all of
the directors except for cause and by the affirmative vote of the holders of at
least 66 and 2/3% of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors ("Voting
Stock") that are not beneficially owned (as defined in (h)(x) below) by any
Interested Shareholder (as defined in (h)(iii) below). Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of
preferred stock that may be authorized in the future and issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of that class or series ("Preferred Stock Designation") as
determined by the shareholders or by the Board of Directors, and such directors
so elected shall serve annual terms and shall not be divided into classes except
as expressly provided by the Preferred Stock Designation for that class or
series.
(d) In addition to the powers and authority herein or by statute expressly
conferred upon them, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the Corporation Code,
these Articles of Incorporation and any Bylaws adopted by the shareholders;
provided, however, that no Bylaws hereafter adopted by the shareholders shall
invalidate any prior act of the directors which would have been valid if such
Bylaws had not been adopted.
(e) No action shall be taken by shareholders of the Corporation except at
an annual or special meeting of shareholders of the Corporation or by unanimous
written consent and the right of shareholders to act by less than unanimous
written consent in lieu of a meeting is specifically denied. Unless otherwise
prescribed by law, special meetings of shareholders, for any purpose or
purposes, may be called only by (i) the Chairman of the Board of Directors of
the Corporation, (ii) the President of the Corporation, (iii) the Secretary of
the Corporation at the request in writing of a majority of the Board of
Directors, or (iv) the Secretary of the Corporation at the request in writing of
the holders of at least 66 and 2/3% of the outstanding shares of Voting Stock
that are not beneficially owned by any Interested Shareholder.
(f) The Board of Directors shall have concurrent power with the
shareholders as set forth in these Articles of Incorporation to make, alter,
amend, change, add to or repeal the Bylaws of the Corporation. The Board of
Directors may amend the Bylaws of the Corporation upon the affirmative vote of
the number of directors required, under the terms of the Bylaws, to take action
of the Board of Directors; provided, however, that any amendment, addition or
repeal of any provision of the Bylaws regarding indemnification of the
directors, officers, employees or agents of the Corporation shall require the
affirmative vote of a majority of the Disinterested Directors. Shareholders may
not amend the Bylaws of the Corporation except upon the affirmative vote of the
holders of at least 66 and 2/3% of the outstanding shares of Voting Stock that
are not beneficially owned by any Interested Shareholder, except that the
affirmative vote of the holders of only a majority of the outstanding Voting
Stock shall be required to approve any amendment to the Bylaws approved by the
Board of Directors if at least two-thirds (2/3) of the directors then in office
are Disinterested Directors.
(g) For purposes of this Article III:
2
<PAGE>
(i) The term "person" shall mean any individual, firm, group,
corporation, partnership, association, trust or other entity (as such terms were
used on July 15, 1997 for purposes of Regulation 13D-G under the 1934 Act).
(ii) The term "Interested Shareholder" shall mean:
3
<PAGE>
(A) any person (other than the Corporation, any Subsidiary or any
employee benefit plan of the Corporation or any Subsidiary) who or which,
together with its "Affiliates" and "Associates" (as such terms were defined on
July 15, 1997 in Rule 12b-2 promulgated under the 1934 Act) and any persons
acting in concert with them, is the beneficial owner of fifteen percent (15%) or
more of the outstanding shares of the Voting Stock;
(B) any Affiliate, Associate, representative or person acting in
concert with any person described in the foregoing subparagraph (iii)(A) of this
Section (h);
(C) any Affiliate of the Corporation that, at any time within the two-
year period immediately prior to the date in question, was the beneficial owner,
directly or indirectly, of fifteen percent (15%) or more of the Voting Stock;
and
(D) any person who is an assignee of, or has otherwise succeeded to,
any shares of Voting Stock that were at any time within the two-year period
immediately prior to the date in question, beneficially owned by any Interested
Shareholder, if such assignment or succession occurred in the course of a
transaction or series of transactions not involving a "public offering," within
the meaning of the Securities Act of 1933, as amended. Without limitation, any
person that has the right to acquire any shares of Voting Stock pursuant to any
agreement, or upon exercise of conversion rights, warrants, or options, or
otherwise, shall be deemed a beneficial owner of such shares for purposes of
determining whether such person or group, individually or together with its
Affiliates and Associates, is an Interested Shareholder, but the number of
shares deemed to be outstanding pursuant to this Paragraph (iii) of Section (h)
shall not include any other shares of Voting Stock that may be issuable pursuant
to any agreement, arrangement, or understanding, or upon exercise of conversion
rights, warrants, or options, or otherwise; provided, however, that the term
"Interested Shareholder" shall not include any person who has beneficially
owned, together with its Affiliates and Associates and any persons acting in
concert with them, at least fifteen percent (15%) or more of the outstanding
shares of the Voting Stock at all times since July 15, 1997.
(iii) The term "Subsidiary" shall mean any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition of
an Interested Shareholder set forth in Paragraph (c) of this Section 6.2, the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Corporation.
(iv) The term "Disinterested Director" shall mean any person who:
(A) is not affiliated, associated or otherwise a representative of or
acting in concert with an Interested Shareholder and who was a member of the
Corporation's Board of Directors prior to the time the Interested Shareholder
became an Interested Shareholder; or
4
<PAGE>
(B) any successor to a Disinterested Director who is not affiliated
with an Interested Shareholder and who was (1) elected as a director or (11)
recommended (and continued to be recommended at all times before such person's
initial election as a director) for election as a director by the shareholders
by a majority of the Board of Directors, if at least two-thirds (2/3) of the
directors were Disinterested Directors at the time of such election or
recommendation.
(v) The term "beneficial owner" shall have the meaning set forth as of
July 15, 1997 in Rule 13d-3 promulgated under the 1934 Act and a person shall
"beneficially own" securities of which it is the beneficial owner;
(h) In the event any paragraph (or portions thereof) of this Article III
shall be found to be invalid, prohibited, or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Article III shall be deemed
to remain in full force and effect and shall be construed as if such invalid,
prohibited, or unenforceable provisions had been stricken herefrom or otherwise
rendered inapplicable, it being the intent of the Corporation and its
shareholders that each remaining provision (or portion thereof) of this Article
III remain to the fullest extent permitted by law, applicable and enforceable as
to all shareholders, including Interested Shareholders, notwithstanding any such
finding.
(i) A majority of the Board of Directors, if at least two-thirds (2/3) are
Disinterested Directors, shall have the power and duty to determine, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Article III, including, without limitation,
(i) whether a person is an Interested Shareholder; (ii) the number of shares of
Voting Stock beneficially owned by any person, and (iii) whether a person is
affiliated, associated, a representative of or otherwise acting in concert with,
another person.
(j) Nothing contained in this Article III shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
IV.
(a) A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation; (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) of the types set forth in Section 14-2-832
of the Corporation Code; or (iv) for any transaction from which the director has
derived an improper personal benefit. The provisions of this Article shall not
apply with respect to acts or omissions occurring prior to the effective date of
this Article.
<PAGE>
(b) Any repeal or modification of the provisions of this Article by the
shareholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation with respect to any act or omission occurring prior to the effective
date of such repeal or modification.
(c) If the Corporation Code hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Corporation Code.
(d) In the event that any of the provisions of this Article (including any
provisions within a single sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, the remaining
provisions are severable and shall remain enforceable to the fullest extent
permitted by law.
V.
The Corporation reserves the right to amend, alter or repeal any provision
contained in these Articles of Incorporation. Amendments, alterations or
repeals of any provision of these Articles of Incorporation other than Article
III or this Article V shall be effected only by the affirmative vote of the
holders of a majority of the shares entitled to vote thereon and of a majority
of the shares of each class entitled to vote as a class thereon, as prescribed
in the Corporation Code. Notwithstanding any other provisions of these Articles
of Incorporation or the Corporation's Bylaws or any provision of law that
otherwise might permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of stock
required by law, by these Articles of Incorporation or by any Preferred Stock
Designation, the provisions set forth in Article III or this Article V may not
be amended, altered or repealed in any respect, and no provision may be added to
these Articles of Incorporation limiting the effect of Article III or this
Article V, unless such action is approved by the affirmative vote of the holders
of at least 66 and 2/3% of the outstanding Voting Stock, excluding from the
number of shares deemed to be outstanding and from such vote on such amendment,
alteration or repeal all shares owned beneficially by any Interested
Shareholder; provided, however, that such special voting requirements shall not
apply to, and such special votes shall not be required for, any amendment,
alteration or repeal recommended by the Board of Directors if two-thirds (2/3)
of the directors then in office are Disinterested Directors.
IN WITNESS WHEREOF, the undersigned execute these Amended and Restated
Articles of Incorporation.
President
Attest:
Secretary
[SEAL]
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
BIOSHIELD TECHNOLOGIES, INC.
Adopted as of _____, 1997
<PAGE>
BYLAWS
OF
BIOSHIELD TECHNOLOGIES, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE - OFFICES AND AGENT
Section 1.1 Registered Office and Agent 1
Section 1.2 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS 1
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 1
Section 2.4 Notice of Meetings 1
Section 2.5 Voting Group 2
Section 2.6 Quorum 2
Section 2.7 Vote Required for Action 2
Section 2.8 Voting of Shares 2
Section 2.9 Proper Business at Annual Meetings 2
Section 2.10 Proxies 3
Section 2.11 Presiding Officer 3
Section 2.12 Adjournments 3
Section 2.13 Action of Shareholders Without a Meeting 3
ARTICLE THREE - THE BOARD OF DIRECTORS 4
Section 3.1 General Powers 4
Section 3.2 Number, Election, Classification
and Term of Office 4
Section 3.3 Nomination Procedures 4
Section 3.4 Removal 5
Section 3.5 Vacancies 5
Section 3.6 Compensation 5
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS 6
Section 4.1 Regular Meetings 6
Section 4.2 Special Meetings 6
Section 4.3 Place of Meetings 6
Section 4.4 Notice of Meetings 6
Section 4.5 Quorum 6
Section 4.6 Vote Required for Action 6
Section 4.7 Participation by Conference Telephone 7
Section 4.8 Action by Directors Without a Meeting 7
Section 4.9 Adjournments 7
Section 4.10 Committees of the Board of Directors 7
ARTICLE FIVE - MANNER OF NOTICE AND WAIVER AS TO SHAREHOLDERS
AND DIRECTORS 7
Section 5.1 Procedure 7
Section 5.2 Waiver 8
ARTICLE SIX - OFFICERS 9
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Section 6.1 Number 9
Section 6.2 Election and Term 9
Section 6.3 Compensation 9
Section 6.4 Chairman of the Board 9
Section 6.5 President 9
Section 6.6 Vice Presidents 9
Section 6.7 Secretary 9
Section 6.8 Treasurer 10
ARTICLE SEVEN - DISTRIBUTIONS AND SHARE DIVIDENDS 10
Section 7.1 Authorization or Declaration 10
Section 7.2 Record Date with Regard to Distributions
and Share Dividends 10
ARTICLE EIGHT - SHARES 10
Section 8.1 Authorization and Issuance of Shares 10
Section 8.2 Share Certificates 10
Section 8.3 Rights of Corporation with Respect
to Registered Owners 11
Section 8.4 Transfers of Shares 11
Section 8.5 Duty of Corporation to Register Transfer 11
Section 8.6 Lost, Stolen or Destroyed Certificates 11
Section 8.7 Fixing of Record Date with regard to
Shareholder Action 11
ARTICLE NINE - INDEMNIFICATION 12
Section 9.1 Certain Definitions 12
Section 9.2 Basic Indemnification Arrangement 13
Section 9.3 Advances for Expenses 14
Section 9.4 Authorization of and Determination of
Entitlement to Indemnification 14
Section 9.5 Court-Ordered Indemnification and
Advances for Expenses 15
Section 9.6 Indemnification of Employees and Agents 16
Section 9.7 Shareholder Approved Indemnification 16
Section 9.8 Liability Insurance 17
Section 9.9 Witness Fees 17
Section 9.10 Report to Shareholders 17
Section 9.11 Security for Indemnification Obligations 17
Section 9.12 No Duplication of Payments 17
Section 9.13 Subrogation 17
Section 9.14 Contract Rights 18
Section 9.15 Non-exclusivity, Etc. 18
Section 9.16 Severability 18
ARTICLE TEN - MISCELLANEOUS 18
Section 10.1 Inspection of Books and Records 18
Section 10.2 Fiscal Year 18
Section 10.3 Corporate Seal 18
Section 10.4 Annual Financial Statements 18
Section 10.5 Conflict with Articles of Incorporation 19
ARTICLE ELEVEN - AMENDMENTS 19
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Section 11.1 Power to Amend Bylaws 19
ARTICLE TWELVE - STATUTORY BUSINESS COMBINATION PROVISION 19
Section 12.1 Business Combinations 19
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ARTICLE ONE
OFFICES AND AGENT
SECTION 1.1. REGISTERED OFFICE AND AGENT. The Corporation shall
maintain a registered office in the State of Georgia and shall have a registered
agent whose business office is identical to the registered office.
SECTION 1.2. OTHER OFFICES. In addition to its registered office, the
Corporation may have offices at any other place or places, within or without the
State of Georgia, as the Board of Directors may from time to time select or as
the business of the Corporation may require or make desirable.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
SECTION 2.1. PLACE OF MEETINGS. Meetings of shareholders may be held
at any place within or without the State of Georgia as set forth in the notice
thereof or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver, or if no place is so specified, at the principal office of
the Corporation.
SECTION 2.2. ANNUAL MEETINGS. The annual meeting of shareholders
shall be held on a date and at a time to be determined by the Board of
Directors, such date to be no later than April 30 of each year for the purpose
of electing directors and transacting any and all business that may properly
come before the meeting. If the annual meeting of shareholders is not held
within the period specified in this Section 2.2, any business, including the
election of directors, that might properly have been acted upon at that meeting
may be acted upon at a special meeting in lieu of the annual meeting held
pursuant to these bylaws or held pursuant to a court order.
SECTION 2.3. SPECIAL MEETINGS. As provided in the articles of
incorporation, unless otherwise prescribed by law, special meetings of
shareholders, for any purpose or purposes, may be called only by (i) the
Chairman of the Board of Directors of the Corporation, (ii) the President of the
Corporation, (iii) the Secretary of the Corporation at the request in writing of
a majority of the Board of Directors, or (iv) the Secretary of the Corporation
at the request in writing of the holders of at least 66 and 2/3% of the
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors ("Voting Stock") that are not
beneficially owned (as defined in the articles of incorporation) by any
Interested Shareholder (as defined in the articles of incorporation).
SECTION 2.4. NOTICE OF MEETINGS. Unless waived as contemplated in
Section 5.2, a notice of each meeting of shareholders stating the date, time and
place of the meeting shall be given not less than ten (10) days nor more than
sixty (60) days before the date thereof, by or at the direction of the
President, the Secretary, or the officer or persons calling the meeting, to each
shareholder entitled to vote at that meeting. In the case of an annual meeting,
the notice need not state the purpose or purposes of the meeting unless the
articles of incorporation or the Georgia Business Corporation Code (the
"Corporation Code") requires the purpose or purposes to be stated in the notice
of the meeting. In the case of a special meeting, including a special meeting
in lieu of an annual meeting, the notice of meeting shall state the purpose or
purposes for which the meeting is called.
SECTION 2.5. VOTING GROUP. Voting group means all shares of one or
more classes or series that are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders. All shares entitled to
vote generally on the matter are for that purpose a single voting group.
SECTION 2.6. QUORUM. With respect to shares entitled to vote as a
separate voting group on a matter at a meeting of shareholders, the presence, in
person or by proxy, of a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter unless the articles of incorporation or the Corporation Code
provides otherwise. Once a share is represented for any purpose at a meeting,
other than solely to object to holding the meeting or to transacting business at
the meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of the meeting unless a new record date is or
must be set for the adjourned meeting pursuant to Section 8.7 of these bylaws.
SECTION 2.7. VOTE REQUIRED FOR ACTION. If a quorum exists, action on
a matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation, provisions of these
bylaws validly
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adopted by the shareholders, or the Corporation Code requires a greater number
of affirmative votes. If the articles of incorporation or the Corporation Code
provide for voting by two or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately. Action may be taken by one voting group on a matter even though no
action is taken by another voting group entitled to vote on the matter. With
regard to the election of directors, unless otherwise provided in the articles
of incorporation, if a quorum exists, action on the election of directors is
taken by a plurality of the votes cast by the shares entitled to vote in the
election.
SECTION 2.8. VOTING OF SHARES. Unless the articles of incorporation
or the Corporation Code provides otherwise, each outstanding share having voting
rights shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. Voting on all matters shall be by voice vote or by
show of hands unless any qualified voter, prior to the voting on any matter,
demands vote by ballot, in which case each ballot shall state the name of the
shareholder voting and the number of shares voted by him, and if the ballot be
cast by proxy, it shall also state the name of the proxy.
SECTION 2.9. PROPER BUSINESS AT ANNUAL MEETINGS. At any annual
meeting of the shareholders, only such business shall be conducted as shall have
been properly brought before such meeting. To be properly brought before an
annual meeting, business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, or
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than 45 days prior to the month and day of that year
corresponding to the month and day of the previous year on which the annual
meeting of shareholders was held (or at least 45 days prior to the date of the
annual meeting for that year if the date of such meeting has been publicly
announced by the Corporation at least 60 days in advance of such meeting date).
A shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the shareholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the shareholder and
(iv) any material interest of the shareholder in such business. The chairman of
an annual meeting shall, if the facts warrant, determine and declare to the
meeting that such business was not properly brought before the meeting in
accordance with these provisions, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION 2.10. PROXIES. A shareholder entitled to vote pursuant to
Section 2.8 may vote in person or by proxy pursuant to an appointment of proxy
executed in writing by the shareholder or by his attorney in fact. An
appointment of proxy shall be valid for only one meeting to be specified
therein, and any adjournments of such meeting, but shall not be valid for more
than eleven months unless expressly provided therein. Appointments of proxy
shall be dated and filed with the records of the meeting to which they relate.
If the validity of any appointment of proxy is questioned, it must be submitted
to the secretary of the meeting of shareholders for examination or to a proxy
officer or committee appointed by the person presiding at the meeting. The
secretary of the meeting or, if appointed, the proxy officer or committee, shall
determine the validity or invalidity of any appointment of proxy submitted and
reference by the secretary in the minutes of the meeting to the regularity of an
appointment of proxy shall be received as prima facie evidence of the facts
stated for the purpose of establishing the presence of a quorum at the meeting
and for all other purposes.
SECTION 2.11. PRESIDING OFFICER. The Chairman shall serve as the
chairman of every meeting of shareholders unless another person is elected by
shareholders to serve as chairman at the meeting. The chairman shall appoint
any persons he deems required to assist with the meeting.
SECTION 2.12. ADJOURNMENTS. Whether or not a quorum is present to
organize a meeting, any meeting of shareholders (including an adjourned meeting)
may be adjourned by the holders of a majority of the voting shares represented
at the meeting to reconvene at a specific time and place, but no later than 120
days after the date fixed for the original meeting unless the requirements of
the Corporation Code concerning the selection of a new record date have been
met. At any reconvened meeting within that time period, any business may be
transacted that could have been transacted at the meeting that was adjourned.
If notice of the adjourned meeting was properly
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given, it shall not be necessary to give any notice of the reconvened meeting or
of the business to be transacted, if the date, time and place of the reconvened
meeting are announced at the meeting that was adjourned and before adjournment;
provided, however, that if a new record date is or must be fixed, notice of the
reconvened meeting must be given to persons who are shareholders as of the new
record date.
SECTION 2.13. ACTION OF SHAREHOLDERS WITHOUT A MEETING. As provided
in the articles of incorporation, no action shall be taken by shareholders of
the Corporation except at an annual or special meeting of shareholders of the
Corporation and the right of shareholders to act by written consent in lieu of a
meeting is specifically denied.
ARTICLE THREE
THE BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed by or under the direction of, the Board of Directors. In
addition to the powers and authority expressly conferred upon it by these
bylaws, the Board of Directors may exercise all powers of the Corporation and do
all lawful acts and things that are not prohibited by law, by any legal
agreement among shareholders, by the articles of incorporation or by these
bylaws directed or required to be exercised or done by the shareholders.
SECTION 3.2. NUMBER, ELECTION, CLASSIFICATION AND TERM OF OFFICE. As
provided in the articles of incorporation, the Board of Directors shall consist
of not less than three nor more than twenty-one directors. The exact number of
directors shall be determined from time to time by resolution adopted by the
affirmative vote of a majority of the Board of Directors. The directors shall
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The initial
directors designated in the articles of incorporation as members of Class I
shall hold office until the annual meeting of shareholders to be held in 1998,
the initial directors designated in the articles of incorporation as members of
Class II shall hold office until the annual meeting of shareholders to be held
in 1999, and the initial directors designated in the articles of incorporation
as members of Class III shall hold office until the annual meeting of
shareholders to be held in 2000. At each annual meeting of shareholders,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. Directors shall serve until the
expiration of their terms and until their successors have been elected and
qualify, subject to the director's prior death, resignation, disqualification or
removal from office.
SECTION 3.3. NOMINATION PROCEDURES. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the Board of Directors, by any nominating committee or person appointed by the
Board of Directors or by any shareholder of the Corporation entitled to vote for
the election of Directors at the meeting. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than 45 days prior to
the month and day of that year corresponding to the month and day of the
previous year on which the annual meeting of shareholders was held (or at least
45 days prior to the date of the annual meeting for that year if the date of
such meeting has been publicly announced by the Corporation at least 60 days in
advance of such meeting date). Such shareholder's notice shall set forth (a) as
to each person whom the shareholder proposes to nominate for election or re-
election as director, (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class and number of shares of the Corporation which are beneficially owned
by the person and (iv) any other information relating to the person that is
required to be disclosed in solicitations of proxies for election of Directors
pursuant to Section 14(a) under the Securities Exchange Act of 1934, as amended
(the "Act"), and any other applicable laws or rules or regulations of any
governmental authority or of any national securities exchange or similar body
overseeing any trading market on which shares of the corporation are traded, and
(b) as to the shareholder giving the notice (i) the name and record address of
shareholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by the shareholder. No person shall be eligible for election
as a Director of the Corporation unless nominated in accordance with the
procedures set forth herein. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
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accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
SECTION 3.4. REMOVAL. As provided in the articles of incorporation,
the shareholders shall not have the right to remove any one or all of the
directors except for cause and by the affirmative vote of the holders of at
least 66 and 2/3% of the outstanding shares of the Voting Stock that are not
beneficially owned (as defined in the articles of incorporation) by any
Interested Shareholder (as defined in the articles of incorporation).
SECTION 3.5. VACANCIES. As provided in the articles of incorporation,
if the number of directors is changed in accordance with the terms of the
articles of incorporation, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as nearly
equal as possible. Any vacancy on the Board of Directors that results from a
newly created directorship, and any other vacancy occurring on the Board of
Directors, shall be filled by the affirmative vote of a majority of the Board of
Directors then in office, although less than a quorum, or by a sole remaining
director. A director of any class elected by the Board of Directors to fill a
vacancy shall hold office until the next annual meeting of shareholders. A
director of any class elected by the shareholders to fill a vacancy shall hold
office for a term that shall coincide with the remaining term of that class. In
no case will a decrease in the number of directors shorten the term of any
incumbent director. The election of directors need not be by written ballot
unless the Corporation's Bylaws so require.
SECTION 3.6. COMPENSATION. Unless the articles of incorporation
provide otherwise, the Board of Directors may determine from time to time the
compensation, if any, directors may receive for their services as directors. A
director may also serve the Corporation in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in any other capacity.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4.1. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held immediately after the annual meeting of shareholders or
a special meeting in lieu of the annual meeting. In addition, the Board of
Directors may schedule other meetings to occur at regular intervals throughout
the year.
SECTION 4.2. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board or the
President or by any two directors in office at that time.
SECTION 4.3. PLACE OF MEETINGS. Directors may hold their meetings at
any place within or without the State of Georgia as the Board of Directors may
from time to time establish for regular meetings or as set forth in the notice
of special meetings or, in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
SECTION 4.4. NOTICE OF MEETINGS. No notice shall be required for any
regularly scheduled meeting of the directors. Unless waived as contemplated in
Section 5.2, each director shall be given at least one day's notice (as set
forth in Section 5.1) of each special meeting stating the date, time, and place
of the meeting.
SECTION 4.5. QUORUM. Unless a greater number is required by the
articles of incorporation, these bylaws, or the Corporation Code, a quorum of
the Board of Directors consists of a majority of the total number of directors
that has been prescribed by resolution of shareholders or of the Board of
Directors pursuant to Section 3.2.
SECTION 4.6. VOTE REQUIRED FOR ACTION.
(a) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the Board of Directors unless
the Corporation Code, the articles of incorporation, or these bylaws require the
vote of a greater number of directors.
(b) A director who is present at a meeting of the Board of Directors or
a committee of the Board of Directors when corporate action is taken is deemed
to have assented to the action taken unless:
(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
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(2) His dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(3) He delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
SECTION 4.7. PARTICIPATION BY CONFERENCE TELEPHONE. Any or all
directors may participate in a meeting of the Board of Directors or of a
committee of the Board of Directors through the use of any means of
communication by which all directors participating may simultaneously hear each
other during the meeting.
SECTION 4.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless the
articles of incorporation or these bylaws provide otherwise, any action required
or permitted to be taken at any meeting of the Board of Directors or any action
that may be taken at a meeting of a committee of the Board of Directors may be
taken without a meeting if the action is taken by all the members of the Board
of Directors (or of the committee as the case may be). The action must be
evidenced by one or more written consents describing the action taken, signed by
each director (or each director serving on the committee, as the case may be),
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records.
SECTION 4.9. ADJOURNMENTS. Whether or not a quorum is present to
organize a meeting, any meeting of directors (including an adjourned meeting)
may be adjourned by a majority of the directors present, to reconvene at a
specific time and place. At any reconvened meeting any business may be
transacted that could have been transacted at the meeting that was adjourned.
If notice of the adjourned meeting was properly given, it shall not be necessary
to give any notice of the reconvened meeting or of the business to be
transacted, if the date, time and place of the reconvened meeting are announced
at the meeting that was adjourned.
SECTION 4.10. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors by resolution may designate from among its members an executive
committee and one or more other committees, each consisting of one or more
directors all of whom serve at the pleasure of the Board of Directors. Except
as limited by the Corporation Code, each committee shall have the authority set
forth in the resolution establishing the committee. The provisions of this
Article Four as to the Board of Directors and its deliberations shall be
applicable to any committee of the Board of Directors.
ARTICLE FIVE
MANNER OF NOTICE AND WAIVER AS TO SHAREHOLDERS AND DIRECTORS
SECTION 5.1. PROCEDURE. Whenever these bylaws require notice to be
given to any shareholder or director, the notice shall be given in accordance
with this Section 5.1. Notice under these bylaws shall be in writing unless
oral notice is reasonable under the circumstances. Any notice to directors may
be written or oral. Notice may be communicated in person; by telephone,
telegraph, teletype, telecopy, or other form of wire or wireless communication;
or by mail or private carrier. If these forms of personal notice are
impracticable, notice may be communicated by a newspaper of general circulation
in the area where published, or by radio, television, or other form of public
broadcast communication. Written notice to the shareholders, if in a
comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown in
the Corporation's current record of shareholders. Except as provided above,
written notice, if in a comprehensible form, is effective at the earliest of the
following:
(a) When received or when delivered, properly addressed, to the
addressee's last known principal place of business or residence;
(b) Five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly addressed; or
(c) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
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Oral notice is effective when communicated if communicated in a comprehensible
manner. In calculating time periods for notice, when a period of time measured
in days, weeks, months, years, or other measurement of time is prescribed for
the exercise of any privilege or the discharge of any duty, the first day shall
not be counted but the last day shall be counted.
SECTION 5.2. WAIVER.
(a) A shareholder may waive any notice before or after the date and
time stated in the notice. Except as provided below in (b), the waiver must be
in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records.
(b) A shareholder's attendance at a meeting (i) waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
(c) Unless required by the Corporation Code, neither the business
transacted nor the purpose of the meeting need be specified in the waiver.
(d) A director may waive any notice before or after the date and time
stated in the notice. Except as provided below in (e), the waiver must be in
writing, signed by the director entitled to the notice, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE SIX
OFFICERS
SECTION 6.1. NUMBER. The officers of the Corporation shall consist of
a Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer and any other officers as may be appointed by the Board of
Directors or appointed by a duly appointed officer pursuant to this Article Six.
The Board of Directors shall from time to time create and establish the duties
of the other officers. Any two or more offices may be held by the same person.
SECTION 6.2. ELECTION AND TERM. All officers shall be appointed by
the Board of Directors or by a duly appointed officer pursuant to this Article
Six and shall serve at the pleasure of the Board of Directors or the appointing
officers as the case may be. All officers, however appointed, may be removed
with or without cause by the Board of Directors and any officer appointed by
another officer may also be removed by the appointing officer with or without
cause.
SECTION 6.3. COMPENSATION. The compensation of all officers of the
Corporation appointed by the Board of Directors shall be fixed by the Board of
Directors.
SECTION 6.4. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall call to order meetings of the shareholders, the Board of
Directors and the Executive Committee and shall act as chairman of such
meetings. The Chairman of the Board shall perform such other duties as the
directors may direct from time to time.
SECTION 6.5. PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall have general supervision of the business of
the Corporation. He shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall perform such other
duties as may from time to time be delegated to him by the Board of Directors.
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SECTION 6.6. VICE PRESIDENTS. In the absence or disability of the
President, or at the direction of the President, the Vice President, if any,
shall perform the duties and exercise the powers of the President. If the
Corporation has more than one Vice President the one designated by the Board of
Directors shall act in lieu of the President. Vice Presidents shall perform
whatever duties and have whatever powers the Board of Directors may from time to
time assign.
SECTION 6.7. SECRETARY. The Secretary shall be responsible for
preparing minutes of the acts and proceedings of all meetings of shareholders
and, unless a secretary has been designated for such purpose, of the Board of
Directors and any committees thereof. He shall have authority to give all
notices required by law or these bylaws. He shall be responsible for the
custody of the corporate books, records, contracts and other documents. The
Secretary may affix the corporate seal to any lawfully executed documents and
shall sign any instruments as may require his signature. The Secretary shall
authenticate records of the Corporation. The Secretary shall perform whatever
additional duties and have whatever additional powers the Board of Directors may
from time to time assign him. In the absence or disability of the Secretary or
at the direction of the President, any assistant secretary may perform the
duties and exercise the powers of the Secretary.
SECTION 6.8. TREASURER. The Treasurer shall be responsible for the
custody of all funds and securities belonging to the Corporation and for the
receipt, deposit or disbursement of funds and securities under the direction of
the Board of Directors. The Treasurer shall cause to be maintained full and
true accounts of all receipts and disbursements and shall make reports of the
same to the Board of Directors and the President upon request. The Treasurer
shall perform all duties as may be assigned to him from time to time by the
Board of Directors.
ARTICLE SEVEN
DISTRIBUTIONS AND SHARE DIVIDENDS
SECTION 7.1. AUTHORIZATION OR DECLARATION. Unless the articles of
incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Corporation Code.
SECTION 7.2. RECORD DATE WITH REGARD TO DISTRIBUTIONS AND SHARE
DIVIDENDS. For the purpose of determining shareholders entitled to a
distribution (other than one involving a purchase, redemption, or other
reacquisition of the Corporation's shares) or a share dividend the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of the Corporation Code.
ARTICLE EIGHT
SHARES
SECTION 8.1. AUTHORIZATION AND ISSUANCE OF SHARES. In accordance with
the Corporation Code, the Board of Directors may authorize shares of any class
or series provided for in the articles of incorporation to be issued for any
consideration valid under the provisions of the Corporation Code. To the extent
provided in the articles of incorporation, the Board of Directors shall
determine the preferences, limitations, and relative rights of the shares.
SECTION 8.2. SHARE CERTIFICATES. The interest of each shareholder in
the Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation which shall be in such form as the Board of Directors
from time to time may adopt. Share certificates shall be numbered
consecutively, shall be in registered form, shall indicate the date of issuance,
the name of the Corporation and that it is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
the designation of the series, if any, represented by the certificate. Each
certificate shall be signed by any one of the Chairman of the Board, the
President, a Vice President, the Secretary, or the Treasurer. The corporate
seal need not be affixed.
SECTION 8.3. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS.
Prior to due presentation for transfer of registration of its shares, the
Corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any share dividend or
distribution with respect to the shares, and for all other purposes; and the
Corporation shall not be bound to recognize any equitable or other claim
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to or interest in the shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
SECTION 8.4. TRANSFERS OF SHARES. Transfers of shares shall be made
upon the transfer books of the Corporation, kept at the office of the transfer
agent designated to transfer the shares, only upon direction of the person named
in the certificate, or by an attorney lawfully constituted in writing; and
before a new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen,
or destroyed, the requirements of Section 8.6 of these bylaws shall have been
met.
SECTION 8.5. DUTY OF CORPORATION TO REGISTER TRANSFER.
Notwithstanding any of the provisions of Section 8.4 of these bylaws, the
Corporation is under a duty to register the transfer of its shares only if:
(a) the certificate is endorsed by the appropriate person or persons;
and
(b) reasonable assurance is given that the endorsement or affidavit is
genuine and effective; and
(c) the Corporation either has no duty to inquire into adverse claims
or has discharged that duty; and
(d) the requirements of any applicable law relating to the collection
of taxes have been met; and
(e) the transfer in fact is rightful or is to a bona fide purchaser.
SECTION 8.6. LOST, STOLEN OR DESTROYED CERTIFICATES. Any person
claiming a share certificate to be lost, stolen or destroyed shall make an
affidavit or affirmation of the fact in the manner required by the Board of
Directors and, if the Board of Directors requires, shall give the Corporation a
bond of indemnity in form and amount, and with one or more sureties satisfactory
to the Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
SECTION 8.7. FIXING OF RECORD DATE WITH REGARD TO SHAREHOLDER ACTION.
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote, or to take any
other action, the Board of Directors may fix a future date as the record date,
which date shall be not more than seventy (70) days prior to the date on which
the particular action, requiring a determination of shareholders, is to be
taken. A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed by the Board of Directors, the record date
shall be determined in accordance with the provisions of the Corporation Code.
ARTICLE NINE
INDEMNIFICATION
SECTION 9.1. CERTAIN DEFINITIONS. As used in this Article, the term:
(a) "Corporation" includes any domestic or foreign predecessor entity
of this Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise. Directors of
the Corporation who are serving as directors, officers, employees or agents of
any subsidiary of the Corporation shall be considered to be serving at the
Corporation's request and shall be considered a "director" for the purposes of
this Article. A director is considered to be serving an employee benefit plan
at the Corporation's request if his duties to the Corporation also impose duties
on, or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
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(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
Corporation or an individual who, while an officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise. Officers of
the Corporation who are serving as directors, officers, employees or agents of
any subsidiary of the Corporation shall be considered to be serving at the
Corporation's request and shall be considered an "officer" for the purposes of
this Article. An officer is considered to be serving an employee benefit plan
at the Corporation's request if his duties to the Corporation also impose duties
on, or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Officer" includes, unless the context requires
otherwise, the estate or personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
(h) "Reviewing Party" shall mean the person or persons making the
entitlement determination pursuant to Section 9.4 of this Article, and shall not
include a court making any determination under this Article or otherwise.
SECTION 9.2. BASIC INDEMNIFICATION ARRANGEMENT.
(a) To the extent that a director or officer has been successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party, or in defense of any claim, issue, or matter therein, because he is or
was a director or officer, the Corporation shall indemnify the director or
officer against reasonable expenses incurred in connection therewith. Except as
provided in subsections 9.2(d) and 9.2(e) below, the Corporation shall in
addition indemnify an individual who is made a party to a proceeding because he
is or was a director or officer against liability incurred by him in the
proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the Corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 9.2(a).
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, be determinative that the proposed indemnified person did not meet the
standard of conduct set forth in subsection 9.2(a).
(d) The Corporation shall not indemnify a person under this Article in
connection with (i) a proceeding by or in the right of the Corporation in which
such person was adjudged liable to the Corporation, or (ii) any proceeding in
which such person was adjudged liable on the basis that he improperly received a
personal benefit; unless in either case, and then only to the extent that, a
court of competent jurisdiction acting pursuant to Section 9.5 of this Article
or Section 14-2-854 of the Georgia Business Corporation Code, determines that,
in view of the circumstances of the case, such person is fairly and reasonably
entitled to indemnification.
(e) Indemnification permitted under this Article in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
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SECTION 9.3. ADVANCES FOR EXPENSES.
(a) The Corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer as a party to a proceeding in advance of final
disposition of the proceeding if:
(i) Such person furnishes the Corporation a written affirmation of
his good faith belief that he has met the standard of conduct set forth
in subsection 9.2(a) above; and
(ii) Such person furnishes the Corporation a written undertaking
(meeting the qualifications set forth below in subsection 9.3(b)),
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification under
this Article or otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) above must be an
unlimited general obligation of the proposed indemnified person but need not be
secured and shall be accepted without reference to financial ability to make
repayment.
SECTION 9.4. AUTHORIZATION OF AND DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(a) The Corporation acknowledges that indemnification of a director or
officer under Section 9.2 has been pre-authorized by the Corporation in the
manner described in subsection 9.4(b) below. Nevertheless, the Corporation
shall not indemnify a director or officer under Section 9.2 unless a separate
determination has been made in the specific case that indemnification of such
person is permissible in the circumstances because he has met the standard of
conduct set forth in subsection 9.2(a); provided, however, that regardless of
the result or absence of any such determination, and unless limited by the
articles of incorporation of the Corporation, to the extent that a director or
officer has been successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party, or in defense of any claim, issue or matter
therein, because he is or was a director or officer, the Corporation shall
indemnify such person against reasonable expenses incurred by him in connection
therewith.
(b) The determination referred to in subsection 9.4(a) above shall be
made, at the election of the board of directors:
(i) by the board of directors of the Corporation by majority vote of
a quorum consisting of directors not at the time parties to the
proceeding;
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the board of directors
(in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;
(iii) by special legal counsel:
(1) selected by the board of directors or its committee in the
manner prescribed in subdivision (i) or (ii); or
(2) if a quorum of the board of directors cannot be obtained
under subdivision (i) and a committee cannot be designated under
subdivision (ii), selected by a majority vote of the full board of
directors (in which selection directors who are parties may
participate); or
(iv) by the shareholders; provided that shares owned by or voted
under the control of directors or officers who are at the time parties
to the proceeding may not be voted on the determination.
(c) As acknowledged above, the Corporation has pre-authorized the
indemnification of directors and officers hereunder, subject to a case-by-case
determination that the proposed indemnified person met the applicable standard
of conduct under subsection 9.2(a). Consequently, no further decision need or
shall be made on a case-by-case basis as to the authorization of the
Corporation's indemnification of directors and officers hereunder.
Nevertheless, evaluation as to reasonableness of expenses of a director or
officer in the specific case shall be made in the same manner as the
determination that indemnification is permissible, as described in subsection
9.4(b) above,
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except that if the determination is made by special legal counsel, evaluation as
to reasonableness of expenses shall be made by those entitled under subsection
9.4(b)(iii) to select counsel.
(d) The Reviewing Party acting pursuant to subsections 9.4(b) or 9.4(c)
above shall act expeditiously and reasonably upon an application for
indemnification or advancement of expenses, and shall cooperate in the
procedural steps required to obtain court-ordered indemnification or advancement
of expenses under Section 9.5 below.
SECTION 9.5. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES.
Unless this Corporation's articles of incorporation provide otherwise, a
director or officer who is a party to a proceeding may apply for indemnification
or advances for expenses to the court conducting the proceeding or to another
court of competent jurisdiction. For purposes of this Article, the Corporation
hereby consents to personal jurisdiction and venue in any court in which is
pending a proceeding to which a director or officer is a party. Regardless of
any determination by the Reviewing Party that the proposed indemnified person is
not entitled to indemnification or advancement of expenses or as to the
reasonableness of expenses, and regardless of any failure by the Reviewing Party
to make a determination as to such entitlement or the reasonableness of
expenses, such court's review shall be a de novo review, and its determination
shall be binding, on the questions of whether:
(a) The applicant is entitled to mandatory indemnification under the
final clause of subsection 9.4(a) above (in which case the Corporation shall pay
the indemnified person's reasonable expenses incurred to obtain court-ordered
indemnification);
(b) The applicant is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the standard of
conduct set forth in subsection 9.2(a) above or was adjudged liable as described
in subsection 9.2(d) above (but if he was adjudged so liable, any court-ordered
indemnification shall be limited to reasonable expenses incurred by the
indemnified person, including reasonable expenses incurred to obtain court-
ordered indemnification, unless the articles of incorporation of this
Corporation or a bylaw, contract or resolution approved or ratified by the
shareholders pursuant to Section 9.7 provides otherwise); or
(c) In the case of advances for expenses, the applicant is entitled
pursuant to the articles of incorporation, bylaws or applicable resolution or
agreement to payment for or reimbursement of his reasonable expenses incurred as
a party to a proceeding in advance of final disposition of the proceeding (in
which case the Corporation shall pay the applicant's reasonable expenses
incurred to obtain court-ordered advancement of expenses).
In any claim brought by the proposed indemnified person seeking court-
ordered indemnification or advancement of expenses, the failure of the Reviewing
Party to act in accordance with Section 9.4(d) may properly be considered by the
court in assessing the expenses of the proposed indemnified person.
SECTION 9.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Unless this
Corporation's articles of incorporation provide otherwise, the Corporation may
indemnify and advance expenses under this Article to an employee or agent of the
Corporation or any subsidiary of the Corporation who is not a director or
officer to the same extent as to a director or officer, or to any lesser extent
(or greater extent if permitted by law), determined by the board of directors.
SECTION 9.7. SHAREHOLDER APPROVED INDEMNIFICATION.
(a) If authorized by the articles of incorporation or a bylaw, contract
or resolution approved or ratified by the shareholders of the Corporation by a
majority of the votes entitled to be cast, the Corporation may indemnify or
obligate itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the Corporation, without regard to the
limitations in other sections of this Article. The Corporation shall not
indemnify a person under this Section 9.7 for any liability incurred in a
proceeding in which the person is adjudged liable to the Corporation or is
subjected to injunctive relief in favor of the Corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
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(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Code; or
(iv) for any transaction from which he received an improper personal
benefit.
(b) Where approved or authorized in the manner described in subsection
9.7(a) above, the Corporation may advance or reimburse expenses incurred in
advance of final disposition of the proceeding only if:
(i) the proposed indemnified person furnishes the Corporation a
written affirmation of his good faith belief that his conduct does not
constitute behavior of the kind described in subsection 9.7(a)(i) -
(iv) above; and
(ii) the proposed indemnified person furnishes the Corporation a
written undertaking, executed personally, or on his behalf, to repay
any advances if it is ultimately determined that he is not entitled to
indemnification.
SECTION 9.8. LIABILITY INSURANCE. The Corporation may purchase and
maintain insurance on behalf of a director or officer or an individual who is or
was an employee or agent of the Corporation or who, while an employee or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee, or
agent, whether or not the Corporation would have power to indemnify him against
the same liability under Section 9.2, Section 9.3 or Section 9.4 above.
SECTION 9.9. WITNESS FEES. Nothing in this Article shall limit the
Corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
SECTION 9.10. REPORT TO SHAREHOLDERS. If the Corporation indemnifies
or advances expenses to a director in connection with a proceeding by or in the
right of the Corporation, the Corporation shall report the indemnification or
advance, in writing, to the shareholders with or before the notice of the next
shareholders' meeting.
SECTION 9.11. SECURITY FOR INDEMNIFICATION OBLIGATIONS. The
Corporation may at any time and in any manner, at the discretion of the board of
directors, secure the Corporation's obligations to indemnify or advance expenses
to a person pursuant to this Article.
SECTION 9.12. NO DUPLICATION OF PAYMENTS. The Corporation shall not
be liable under this Article to make any payment to a person hereunder to the
extent such person has otherwise actually received payment (under any insurance
policy, agreement or otherwise) of the amounts otherwise payable hereunder.
SECTION 9.13. SUBROGATION. In the event of payment under this
Article, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the indemnified person, who shall execute all
papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable the
Corporation effectively to bring suit to enforce such rights.
SECTION 9.14. CONTRACT RIGHTS. The right to indemnification and
advancement of expenses conferred hereunder to directors and officers shall be a
contract right and shall not be affected adversely to any director or officer by
any amendment of these bylaws with respect to any action or inaction occurring
prior to such amendment; provided, however, that this provision shall not confer
upon any indemnified person or potential indemnified person (in his capacity as
such) the right to consent or object to any subsequent amendment of these
bylaws.
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SECTION 9.15. NON-EXCLUSIVITY, ETC. The rights of a director or
officer hereunder shall be in addition to any other rights with respect to
indemnification, advancement of expenses or otherwise that he may have under
contract or the Georgia Business Corporation Code or otherwise.
SECTION 9.16. SEVERABILITY. To the extent that the provisions of this
Article are held to be inconsistent with the provisions of Part 5 of Article 8
of the Georgia Business Corporation Code, such provisions of such Code shall
govern. In the event that any of the provisions of this Article (including any
provision within a single section, subsection, division or sentence) is held by
a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain enforceable
to the fullest extent permitted bylaw.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.1. INSPECTION OF BOOKS AND RECORDS. The Board of Directors
shall have power to determine which accounts, books and records of the
Corporation shall be opened to the inspection of shareholders, except those as
may by law specifically be made open to inspection, and shall have power to fix
reasonable rules and regulations not in conflict with the applicable law for the
inspection of accounts, books and records which by law or by determination of
the Board of Directors shall be open to inspection. Without the prior approval
of the Board of Directors in their discretion, the right of inspection set forth
in Section 14-2-1602(c) of the Corporation Code shall not be available to any
shareholder owning two (2%) percent or less of the shares outstanding.
SECTION 10.2. FISCAL YEAR. The Board of Directors is authorized to
fix the fiscal year of the Corporation and to change the same from time to time
as it deems appropriate.
SECTION 10.3. CORPORATE SEAL. If the Board of Directors determines
that there should be a corporate seal for the Corporation, it shall be in the
form as the Board of Directors may from time to time determine.
SECTION 10.4. ANNUAL FINANCIAL STATEMENTS. In accordance with the
Corporation Code, the Corporation shall prepare and provide to shareholders such
financial statements as may be required by the Corporation Code.
SECTION 10.5. CONFLICT WITH ARTICLES OF INCORPORATION. In the event
that any provision of these bylaws conflicts with any provision of the articles
of incorporation, the articles of incorporation shall govern.
ARTICLE ELEVEN
AMENDMENTS
SECTION 11.1. POWER TO AMEND BYLAWS. The Board of Directors shall
have concurrent power with the shareholders as set forth in the articles of
incorporation to make, alter, amend, change, add to or repeal the bylaws of the
Corporation. The Board of Directors may amend the bylaws of the Corporation
upon the affirmative vote of the number of directors required, under the terms
of the bylaws, to take action of the Board of Directors; provided, however, that
any amendment, addition or repeal of any provision of the bylaws regarding
indemnification of the directors, officers, employees or agents of the
Corporation shall require the affirmative vote of a majority of the
Disinterested Directors (as defined in the articles of incorporation).
Shareholders may not amend the bylaws of the Corporation except upon the
affirmative vote of the holders of at least 66 and 2/3% of the outstanding
shares of Voting Stock that are not beneficially owned (as defined in the
articles of incorporation) by any Interested Shareholder (as defined in the
articles of incorporation), except that the affirmative vote of the holders of
only a majority of the outstanding shares entitled to vote generally in the
election of directors shall be required to approve any amendment to the bylaws
approved by the Board of Directors if two-thirds (2/3) of the directors then in
office are Disinterested Directors (as defined in the articles of
incorporation).
ARTICLE TWELVE
STATUTORY BUSINESS COMBINATION PROVISION
SECTION 12.1. BUSINESS COMBINATIONS. All of the requirements of Part
3 of Article 11 of the Corporation Code shall apply to the Corporation.
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EXHIBIT 4.2
FORMS OF IVESTOR WARRANTS
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM
REGISTRATION REQUIREMENTS UNDER SAID LAWS, INCLUDING IN PARTICULAR, SECTION 10-
5-9(13) OF THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
BIOSHIELD TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF UP TO ______ SHARES OF
COMMON STOCK, NO PAR VALUE PER SHARE
No. UW-____ _______ Shares
THIS CERTIFIES that, for value received, ___________________________ with
an address at ___________________ (including any transferee, the "Holder"), is
entitled to subscribe for and purchase from BioShield Technologies, Inc., a
Georgia corporation (the "Company"), upon the terms and conditions set forth
herein, at any time or from time to time (a) after six (6) months from the
closing ("Closing") of an initial public offering (the "IPO") of the Company=s
Common Stock, no par value (the "Common Stock"), pursuant to a registration
statement on Form SB-2 or another equivalent form declared effective by the U.S.
Securities and Exchange Commission, and (b) before 5:00 P.M., New York time, on
__________________, 2003 (the "Exercise Period"), up to ____________ (_________)
shares of the Common Stock at an initial exercise price per share equal to the
price per share offered to the public pursuant to the IPO (the "IPO Price") (and
as such price may be adjusted pursuant to the terms hereof, collectively, the
"Exercise Price"). This Warrant is one of the warrants issued pursuant to an
offering (the "Offering") by the Company up to 200 units (the "Units"), each
Unit consisting of (i) an Interest Bearing Non-Negotiable Promissory Note
("Bridge Notes") in the principal amount of $5,000 and (ii) a warrant to
purchase up to 5,000 shares of Common Stock at the Exercise Price (collectively,
the "Warrants"). As used herein, the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of this Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period as to all or a
lesser number (but not less than 5,000 Warrant Shares or the remaining Warrant
Shares; if less than 5,000, in any exercise of whole Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office at BioShield Technologies, Inc., 4405 International
Blvd., Suite B109, Norcross, Georgia 30083, Attention: Timothy C. Moses,
President, or at such other place as is designated in writing by the Company,
together with a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Warrant Shares for which this Warrant is being exercised.
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2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authority shall be produced. Upon
any registration of transfer, the Company shall deliver a new Warrant or
Warrants to the person entitled thereto. This Warrant may be exchanged, at the
option of the Holder thereof, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company may require prior to registering any transfer of a
Warrant an opinion of counsel reasonably satisfactory to the Company that such
transfer complies with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he has been advised by the Company
that neither this Warrant nor the Warrant Shares have been registered under the
Act, that this Warrant is being or has been issued and the Warrant Shares may be
issued on the basis of the statutory exemption provided by Section 4(2) of the
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering, and that the Company's reliance
thereon is based in part upon the representations made by the original Holder in
the original Holder's Subscription Agreement executed and delivered in
accordance with the terms of the Offering (the "Subscription Agreement"). The
Holder acknowledges that he has been informed by the Company of, or is otherwise
familiar with, the nature of the limitations imposed by the Act and the rules
and regulations thereunder on the transfer of securities. In particular, the
Holder agrees that no sale, assignment or transfer of this Warrant or the
Warrant Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Warrant Shares is registered under the Act, it being understood
that neither this Warrant nor such Warrant Shares are currently registered for
sale and that the Company has no obligation or intention to so register this
Warrant or such Warrant Shares except as specifically provided for in the
Subscription Agreement, or (ii) this Warrant or such Warrant Shares are sold,
assigned or transferred in accordance with all the requirements and limitations
of Rule 144 under the Act, it being understood that Rule 144 is not available at
the time of the original issuance of this Warrant for the sale of this Warrant
or such Warrant Shares and that there can be no assurance that Rule 144 sales
will be available at any subsequent time, or (iii) such sale, assignment, or
transfer is otherwise exempt from registration under the Act in the opinion of
counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
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5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price, and the number of Warrant Shares issuable upon exercise of
this Warrant, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised immediately prior to such time, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the then applicable Exercise Price per share on such
record date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so to be offered (or the aggregate initial conversion or exchange price of the
convertible or exchangeable securities so to be offered) would purchase at such
Exercise Price and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; provided, however, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Warrants exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into or exchangeable
for shares of Common Stock) actually issued. In case any subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness, cash (other than any cash
dividend which, together with any cash dividends paid within the 12 months prior
to the record date for such distribution, does not exceed 5% of the then
applicable Exercise Price at the record date for such distribution) or assets
(other than distributions and dividends payable in shares of Common Stock), or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Exercise Price is provided pursuant to Section 5(b) hereof), then, in each case,
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction, the numerator of which
shall be the then applicable Exercise Price per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one share,
and the denominator of which shall be such Exercise Price per share of Common
Stock. Such adjustment shall become effective at the close of business on such
record date.
(d) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.01; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried
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forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(e) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the Holder a due bill or other
appropriate instrument evidencing the Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (A) the
product obtained by multiplying the number of shares purchasable upon exercise
of this Warrant prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price by (B) the Exercise
Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this Section
5, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable on the exercise of this
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Exercise Price
of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety
(collectively an "Extraordinary Event"), such successor, leasing, or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof (collectively
"Extraordinary Event Consideration") receivable upon such consolidation, merger,
sale, lease, or conveyance by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease, or conveyance, and (ii) make effective
provision in its certificate of incorporation or otherwise, if necessary, to
effect such agreement. Such agreement shall provide for adjustments which shall
be as nearly equivalent as practicable to the adjustments in Section 5. In the
event that prior to the IPO an Extraordinary Event or sale, conveyance, or other
transfer by the Company is made to persons or entities of in excess of 50% of
the voting capital stock of the Company, then the Exercise Price of this Warrant
for purposes of this Section 6(a) shall be the lesser of (i) $4.00 per share, or
(ii) 50% of the Extraordinary Event Consideration to be paid. For purposes of
calculating Extraordinary Event Consideration, the valuation placed on such
consideration by the Company=s Board of Directors determined in good faith shall
be conclusive.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value,
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or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property; or
(d) effect any liquidation, dissolution, or winding-up of the
Company; or
(e) take any other action which would cause an adjustment to the
Exercise Price; then, and in any one or more of such cases, the Company shall
give written notice thereof, by registered mail, postage prepaid, to the Holder
at the Holder's address as it shall appear in the Warrant Register, mailed at
least 15 days prior to (i) the date as of which the holders of record of shares
of Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants, or other securities are to be determined, (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. The registered Holders of the Warrant Shares shall have the rights to
include their Warrant Shares under a registration statement (other than on Form
S-4, Form S-8, or any similar or successor form) filed by the Company with the
U.S. Securities and Exchange Commission and otherwise as and to the extent
provided in Paragraph 5 of the Subscription Agreement.
10. Unless registered pursuant to the provisions of Section 9 hereof, the
Warrant Shares issued upon exercise of this Warrant shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS, INCLUDING IN PARTICULAR, SECTION 10-5-9(13) OF THE GEORGIA SECURITIES ACT
OF 1973, AS AMENDED AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Notwithstanding anything contained herein to the contrary, in the
event of a Pay Off Conversion by the Company (as defined in the Bridge Notes) of
all of the unpaid principal and accrued interest due under the Bridge Notes,
this Warrant and all Unit Warrants shall automatically terminate and shall be
null and void and of no value.
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
14. As a condition precedent to receiving and registering the shares
underlying the Warrants, a Holder will be required to execute a lock-up
agreement to the extent required by the underwriters of the IPO, the terms of
which shall require, among other things, the Holder to refrain from offering for
sale, selling, soliciting an offer to buy, contracting to sell, granting any
option for the sale of or otherwise transferring or disposing of, directly or
indirectly, any shares of Common Stock underlying the Warrant or to be received
pursuant to the Bridge Notes for a period not to exceed twelve (12) months after
the closing of the IPO.
15. The Company may by notice to the Holders of all the Warrants make any
changes or corrections in the Warrants (i) that it shall deem in good faith
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error contained in the Warrants; or (ii) that
it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Holders of Warrants representing not less than 50%
of the Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of this
Warrant, or increasing the Exercise Price therefor, or the acceleration of the
termination of the Exercise Period, shall be made without the consent in writing
of the Holders of Warrants representing not less than two-thirds of the Warrants
then outstanding (other than such changes as are specifically prescribed by this
Warrant as originally executed or are made in compliance with applicable law).
16. This Warrant has been negotiated and consummated in the State of
Georgia and shall be construed in accordance with the laws of the State of
Georgia applicable to contracts made and performed within such State, without
regard to principles governing conflicts of law.
Dated: ________________, 199__________
BIOSHIELD TECHNOLOGIES, INC.
[Seal]
By: __________________________
_______________________________ Name: Timothy C. Moses
Secretary Title: President
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BIOSHIELD TECHNOLOGIES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
To: BioShield Technologies, Inc.
4405 International Blvd., Ste. B109
Norcross, Georgia 30083
Attention: Secretary
FOR VALUE RECEIVED, _____________________ hereby represents and warrants
that all Bridge Notes issued in connection with this Offering have been paid in
full and hereby sells, assigns, and transfers unto _________________ that
certain Warrant (Number UW-______________) to purchase __________ shares of
Common Stock, no par value per share, of BioShield Technologies, Inc. (the
"Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated: _________________
Signature:______________________
NOTICE:
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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BIOSHIELD TECHNOLOGIES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: BioShield Technologies, Inc.
4405 International Blvd., Ste. B109
Norcross, Georgia 30083
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $__________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
________________________________________
________________________________________
________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_______________, ________ Name:______________________________________
(Please Print)
Address:___________________________________
___________________________________________
___________________________________________
___________________________________________
(Signature)
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EXHIBIT 4.3
FORM OF UNIT WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM
REGISTRATION REQUIREMENTS UNDER SAID LAWS, INCLUDING IN PARTICULAR, SECTION 10-
5-9(13) OF THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
BIOSHIELD TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF UP TO 40,000 SHARES OF
COMMON STOCK, NO PAR VALUE PER SHARE
NO. UW-1 40,000 SHARES
THIS CERTIFIES that, for value received, First Atlanta Securities, LLC with
an address at Suite 515, 5500 Interstate North Parkway, Atlanta, Georgia 30328
(including any transferee, the "Holder"), is entitled to subscribe for and
purchase from BioShield Technologies, Inc., a Georgia corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time (a) after six (6) months from the closing ("Closing") of an initial
public offering (the "IPO") of the Company's Common Stock, no par value (the
"Common Stock"), pursuant to a registration statement on Form SB-2 or another
equivalent form (the "Registration Statement") declared effective by the U.S.
Securities and Exchange Commission (the "Effective Date"), and (b) before 5:00
P.M., New York time, on March 16, 2003 (the "Exercise Period"), up to forty
thousand (40,000) shares of the Common Stock at an initial exercise price per
share equal to one hundred and ten percent (110%) of the price per share offered
to the public pursuant to the IPO (the "IPO Price") (and as such price may be
adjusted pursuant to the terms hereof, collectively, the "Exercise Price").
This Warrant is issued pursuant to that certain Placement Agency Agreement,
dated as of February 11, 1998, between the Holder and the Company relating to an
offering (the "Offering") by the Company up to 200 units (the "Units"), each
Unit consisting of (i) an Interest Bearing Non-Negotiable Promissory Note
("Bridge Notes") in the principal amount of $5,000 and (ii) a warrant to
purchase up to 5,000 shares of Common Stock. As used herein, the term "this
Warrant" shall mean and include this Warrant and any Warrant or Warrants
hereafter issued as a consequence of the exercise or transfer of this Warrant in
whole or in part.
The number of shares of Common Stock issuable upon exercise of this Warrant
(the "Warrant Shares") and the Exercise Price may be adjusted from time to time
as hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period as to all or a
lesser number (but not less than 5,000 Warrant Shares or the remaining Warrant
Shares; if less than 5,000, in any exercise of whole Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed) to
the Company at its office at BioShield Technologies, Inc., 4405 International
Blvd., Suite B109, Norcross, Georgia 30083, Attention: Timothy C. Moses,
President, or at such other place as is designated in writing by the Company,
together with a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Warrant Shares for which this Warrant is being exercised.
2. Upon each exercise of the Holder's rights to purchase Warrant Shares,
the Holder shall be deemed to be the holder of record of the Warrant Shares
issuable upon such exercise, notwithstanding that the
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<PAGE>
transfer books of the Company shall then be closed or certificates representing
such Warrant Shares shall not then have been actually delivered to the Holder.
As soon as practicable after each such exercise of this Warrant, the Company
shall issue and deliver to the Holder a certificate or certificates for the
Warrant Shares issuable upon such exercise, registered in the name of the Holder
or its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
3. (a) Any Warrants issued upon the transfer or exercise in part of this
Warrant shall be numbered and shall be registered in a Warrant Register as they
are issued. The Company shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authority shall be produced. Upon
any registration of transfer, the Company shall deliver a new Warrant or
Warrants to the person entitled thereto. This Warrant may be exchanged, at the
option of the Holder thereof, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company may require prior to registering any transfer of a
Warrant an opinion of counsel reasonably satisfactory to the Company that such
transfer complies with the provisions of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations thereunder.
(b) The Holder acknowledges that he has been advised by the Company that
neither this Warrant nor the Warrant Shares have been registered under the Act,
that this Warrant is being or has been issued and the Warrant Shares may be
issued on the basis of the statutory exemption provided by Section 4(2) of the
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering, and that the Company's reliance
thereon is based in part upon the representations made by the original Holder in
the original Holder's Subscription Agreement executed and delivered in
accordance with the terms of the Offering (the "Subscription Agreement"). The
Holder acknowledges that he has been informed by the Company of, or is otherwise
familiar with, the nature of the limitations imposed by the Act and the rules
and regulations thereunder on the transfer of securities. In particular, the
Holder agrees that no sale, assignment or transfer of this Warrant or the
Warrant Shares issuable upon exercise hereof shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of this
Warrant or such Warrant Shares is registered under the Act, it being understood
that neither this Warrant nor such Warrant Shares are currently registered for
sale and that the Company has no obligation or intention to so register this
Warrant or such Warrant Shares except as specifically provided for in the
Subscription Agreement, or (ii) this Warrant or such Warrant Shares are sold,
assigned or transferred in accordance with all the requirements and limitations
of Rule 144 under the Act, it being understood that Rule 144 is not available at
the time of the original issuance of this Warrant for the sale of this Warrant
or such Warrant Shares and that there can be no assurance that Rule 144 sales
will be available at any subsequent time, or (iii) such sale, assignment, or
transfer is otherwise exempt from registration under the Act in the opinion of
counsel reasonably acceptable to the Company.
4. The Company shall at all times reserve and keep available out its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of the rights to purchase all Warrant Shares granted pursuant to
the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon exercise of this Warrant, upon receipt by the Company of the full
Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
5. (a) In case the Company shall at any time after the date the Warrants
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the
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outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then, in each case, the Exercise Price, and the number of Warrant
Shares issuable upon exercise of this Warrant, in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so that the
Holder after such time shall be entitled to receive the aggregate number and
kind of shares which, if such Warrant had been exercised immediately prior to
such time, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall issue or fix a record date for the issuance
to all holders of Common Stock of rights, options, or warrants to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share (or having a conversion or exchange price per
share, if a security convertible into or exchangeable for Common Stock) less
than the then applicable Exercise Price per share on such record date, then, in
each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial conversion or exchange price of the convertible or
exchangeable securities so to be offered) would purchase at such Exercise Price
and the denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock to be offered for subscription or purchase (or into which the convertible
or exchangeable securities so to be offered are initially convertible or
exchangeable). Such adjustment shall become effective at the close of business
on such record date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible into or exchangeable for shares of Common
Stock) are not delivered, the Exercise Price shall be readjusted after the
expiration of such rights, options, or warrants (but only with respect to
Warrants exercised after such expiration), to the Exercise Price which would
then be in effect had the adjustments made upon the issuance of such rights,
options, or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) actually issued. In case any subscription price may be
paid in a consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive.
(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness, cash (other than any cash dividend
which, together with any cash dividends paid within the 12 months prior to the
record date for such distribution, does not exceed 5% of the then applicable
Exercise Price at the record date for such distribution) or assets (other than
distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding those
with respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to Section 5(b) hereof), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
then applicable Exercise Price per share of Common Stock on such record date,
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one share,
and the denominator of which shall be such Exercise Price per share of Common
Stock. Such adjustment shall become effective at the close of business on such
record date.
(d) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.01; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest one-
thousandth of a share, as the case may be.
(e) In any case in which this Section 5 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer, until the occurrence of
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such event, issuing to the Holder, if the Holder exercised this Warrant after
such record date, the shares of Common Stock, if any, issuable upon such
exercise over and above the shares of Common Stock, if any, issuable upon such
exercise on the basis of the Exercise Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(f) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b) or 5(c) hereof, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (A) the
product obtained by multiplying the number of shares purchasable upon exercise
of this Warrant prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price by (B) the Exercise
Price in effect after such adjustment of the Exercise Price.
(g) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall promptly cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder, at its address as it shall appear in the
Warrant Register, which notice shall be accompanied by an officer's certificate
setting forth the number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
(h) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable on the exercise of this
Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Exercise Price
of such share of Common Stock on the date of exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety
(collectively an "Extraordinary Event"), such successor, leasing, or purchasing
corporation, as the case may be, shall (i) execute with the Holder an agreement
providing that the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
consolidation, merger, sale, lease, or conveyance by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such consolidation, merger, sale, lease, or conveyance, and
(ii) make effective provision in its certificate of incorporation or otherwise,
if necessary, to effect such agreement. Such agreement shall provide for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination
thereof receivable upon such reclassification, change, consolidation, or merger
by a holder of the number of shares of Common Stock for which this Warrant might
have been exercised immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
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7. In case at any time the Company shall propose to:
(a) pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) issue any rights, warrants, or other securities to all holders of
Common Stock entitling them to purchase any additional shares of Common Stock or
any other rights, warrants, or other securities; or
(c) effect any reclassification or change of outstanding shares of
Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property; or
(d) effect any liquidation, dissolution, or winding-up of the
Company; or
(e) take any other action which would cause an adjustment to the
Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
8. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) At any time beginning on the first anniversary of the Effective
Date and ending on the third anniversary of the Effective Date, the Holder (or
the then Holders of a majority of the Warrants or the underlying shares of
Common Stock subject to the Warrants (the "Underlying Securities") shall have
the one-time right to require the Company to prepare and file a post-effective
amendment to the Registration Statement or a new Registration Statement, if then
required under the Securities Act of 1933 as amended (the "Act"), covering all
or any portion of the Warrants and/or the Underlying Securities. The Company
shall bear all expenses incurred in the preparation and filing of such post-
effective amendment or new Registration Statement.
(b) In addition, if at any time during the Exercise Period the Company
prepares and files
one or more Registration Statements under the Act, (other than on Form S-4 or S-
8, or their equivalents) with respect to a public offering of equity securities
of the Company, or of any such securities of the Company held by its
shareholders, the Company will use its best efforts to include in such
Registration Statement such number of Warrants and/or Underlying Securities held
by the Holder and its designees or transferees as they may reasonably request.
(c) The Company will bear all fees and expenses incurred by the
Company in connection with the preparation and filing of such Registration
Statement. In the event of such a proposed registration, the Company will
furnish the then Holders of outstanding Warrants and Underlying Securities with
not less than thirty (30) days written notice prior to the proposed date of
filing of such Registration Statement. Such notice shall continue to be given
during the Exercise Period by the Company to such Holders until such time as all
of the
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Warrants and Underlying Securities have been registered. The Holders of the
Warrants and Underlying Securities, as the case may be, shall exercise the
"piggy-back" rights contemplated hereby by giving written notice within twenty
(20) days of the receipt of the Company's notice of its intention to file a
Registration Statement.
10. Unless registered pursuant to the provisions of Section 9 hereof, the
Warrant Shares issued upon exercise of this Warrant shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS, INCLUDING IN PARTICULAR, SECTION 10-5-9(13) OF THE GEORGIA SECURITIES ACT
OF 1973, AS AMENDED AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS."
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Warrant (and upon surrender of any
Warrant if mutilated), the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Warrant.
13. The Holder agrees until the first anniversary of the Effective Date,
the Holder will not transfer the Warrants or the Underlying Securities, except
to officers, partners, or employees of First Atlanta Securities, LLC, unless the
underwriter of the IPO agrees to a lesser period restricting transfer. As a
condition precedent to receiving and registering the shares underlying the
Warrants, a Holder will also be required to execute a lock-up agreement to the
extent required by the underwriters of the IPO, the National Association of
Securities Dealers or any state regulatory authority in connection with the IPO,
the terms of which shall require, among other things, the Holder to refrain from
offering for sale, selling, soliciting an offer to buy, contracting to sell,
granting any option for the sale of or otherwise transferring or disposing of,
directly or indirectly, any shares of Common Stock underlying the Warrant for a
period not to exceed twelve (12) months after the Closing of the IPO.
14. The Company may by notice to the Holders of all the Warrants make any
changes or corrections in the Warrants (i) that it shall deem in good faith
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error contained in the Warrants; or (ii) that
it may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Warrants; provided, however, that the Warrants shall
not otherwise be modified, supplemented or altered in any respect except with
the consent in writing of the Holders of Warrants representing not less than 50%
of the Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of this
Warrant, or increasing the Exercise Price therefor, or the acceleration of the
termination of the Exercise Period, shall be made without the consent in writing
of the Holders of Warrants representing not less than two-thirds of the Warrants
then outstanding (other than such changes as are specifically prescribed by this
Warrant as originally executed or are made in compliance with applicable law).
15. This Warrant has been negotiated and consummated in the State of
Georgia and shall be construed in accordance with the laws of the State of
Georgia applicable to contracts made and performed within such State, without
regard to principles governing conflicts of law.
Dated: As of March 16, 1998
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BIOSHIELD TECHNOLOGIES, INC.
By:
-------------------------
Name: Jacques Elfersy
Title: Senior Vice President
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BIOSHIELD TECHNOLOGIES, INC.
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
To: BioShield Technologies, Inc.
4405 International Blvd., Ste. B109
Norcross, Georgia 30083
Attention: Secretary
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto _________________ that certain Warrant (Number UW-______________)
to purchase __________ shares of Common Stock, no par value per share, of
BioShield Technologies, Inc. (the "Company"), together with all right, title,
and interest therein, and does hereby irrevocably constitute and appoint
___________________________ attorney to transfer such Warrant on the books of
the Company, with full power of substitution.
Dated: _________________
Signature:___________________________
NOTICE:
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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BIOSHIELD TECHNOLOGIES, INC.
EXERCISE FORM
(To be completed and signed only upon exercise of the Warrants)
To: BioShield Technologies, Inc.
4405 International Blvd., Ste. B109
Norcross, Georgia 30083
Attention: Secretary
The undersigned hereby exercises his or its rights to purchase _______
Warrant Shares covered by the within Warrant and tenders payment herewith in the
amount of $__________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
______________________________________
______________________________________
______________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_______________, ________ Name:______________________________________
(Please Print)
Address:___________________________________
___________________________________
___________________________________
___________________________________
(Signature)
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EXHIBIT 5.1
June 25, 1998
BioShield Technologies, Inc.
Suite B-109
4405 International Boulevard
Norcross, Georgia 30083
Gentlemen:
At your request, we have examined the Registration Statement on FormSB-2
under the Securities Act of 1933, as amended (the "Securities Act"),
byBioShield Technologies, Inc., a Georgia corporation (the "Company"), with
the Securities and Exchange Commission on June 23, 1998 (the
"Registration Statement"), relating to the registration under the Securities
Act of 750,000 Units, consisting of common stock, no par value, and warrants.
As counsel to the Company, we have examined such corporate records,
documents, instruments, certificates of public officials and of the Company and
such questions of law as we have deemed necessary for the purpose of rendering
the opinions set forth herein. In our examination of such materials, we have
assumed the genuineness of all signatures and the authenticity of all
agreements, documents, signatures, and instruments submitted to us as originals
and the conformity with the originals of all agreements, instruments, documents,
and certificates submitted to us as copies.
We are of the opinion that (a) the securities to be offered and sold
pursuant to the Registration Statement have been duly authorized and, when
issued and sold by the Company in the manner described in the Registration
statement and in accordance with the resolutions adopted by the Board of
Directors of the Company, will be legally issued, fully paid, and non-
assessable, and (b) the shares of stock that may be sold by the selling
shareholders pursuant to the over-allotment option are legally and validly
issued, fully paid, and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement and any amendment thereto. In giving the foregoing consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SIMS MOSS KLINE & DAVIS LLP
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1998, by and between BIOSHIELD TECHNOLOGIES, INC., a
Georgia corporation (hereinafter called the "Company") and Timothy C. Moses,
President and Chief Executive Officer (hereinafter called the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to enter into an employment
agreement to establish the rights and obligations of the Executive and the
Company in such employment relationship;
WHEREAS, the terms of this Agreement have been approved by the Compensation
Committee of the Board of Directors of the Company;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Executive hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company upon the terms and
conditions hereinafter set forth. The Executive shall serve the Company as its
President and Chief Executive Officer. In such capacity, the Executive shall
have all powers, duties, and obligations as are normally associated with such
position. The Executive shall further perform such other duties related to the
business of the Company, including travel, as may from time to time be
reasonably requested of him by the Company's Board of Directors. The Executive
shall devote all of his skills, time, and attention solely and exclusively to
said position and in furtherance of the business and interests of the Company
except for:
(a) time spent in managing his personal, financial and legal affairs and
serving on corporate, civic or charitable boards or committees, in each case
only if and to the extent not substantially interfering with the performance of
such responsibilities, and
(b) periods of vacation to which he is entitled.
Executive shall promptly notify the Company of his election or appointment to
any corporate, civic or charitable boards or committees on or after the date of
this Agreement.
2. TERM OF EMPLOYMENT. The term of employment shall begin, or be deemed
to have begun, on January 1, 1998 (the "Effective Date") and shall expire on
January 1, 2003, (the "Expiration Date") subject, however, to prior termination
or to extension, as herein provided. On each January 1st while this Agreement
is in force beginning January 1, 2001, the term of this Agreement shall
automatically be extended so that new term of the Agreement expires three years
from such date, unless either party notifies the other party in writing of an
intent not to renew at least ninety (90) days prior to the applicable January 1.
3. BASE SALARY. For such services, the Executive shall receive an annual
base salary of $125,000 (the "Base Salary"), which Base Salary shall be reviewed
annually by the Compensation Committee of the Board of Directors and which may
be increased, but not decreased, by the Company during the term of this
Agreement. In the event that the Company increases the Executive's Base Salary,
the amount of the prior Base Salary, together with any increase(s), shall be his
new Base Salary. The Base Salary shall be payable in equal installments, no
less frequently than semi-monthly, in accordance with the Company's regular
payroll practices.
4. BONUS. For each fiscal year of the Company during which he is
employed by the Company on the last day of the fiscal year, the Executive shall
be eligible to receive an annual bonus ("Annual Bonus") under the bonus plan
established by the Compensation Committee of the Board for the Executive. Such
Annual Bonus shall be determined by the Compensation Committee of the Board and
shall not exceed $50,000. Each Annual Bonus shall be paid in cash as soon as
practical after the year for which the Annual Bonus is earned or awarded, unless
electively deferred by the Executive pursuant to any deferral programs or
arrangements that the Company may make available to the Executive.
<PAGE>
5. FRINGE BENEFITS. The Company shall further provide the Executive with
all health and life insurance coverages, sick leave and disability programs,
tax-qualified retirement plans, stock option plans, paid holidays and vacations,
expense reimbursement policies, moving and relocation policies, perquisites, and
such other fringe benefits of employment as the Company may provide from time to
time to actively employed senior executives of the Company who are similarly
situated. Notwithstanding the preceding provisions of this Paragraph 5, during
the term of this Agreement (including extensions thereof) the Company shall
provide the Executive;
(a) reimbursement for all reasonable expenses incurred by the Executive in
connection with the conduct of the Company's business on presentation of
reasonable and appropriate receipts and in accordance with the Company's regular
reimbursement policy applicable to senior executives;
(b) an individual disability insurance policy, at the Company's expense,
in addition to the long-term disability plan maintained by the Company generally
for its employees, which provides long-term disability insurance which replaces
at least $6,000 of the Executive's monthly Base Salary;
(c) a minimum of four (4) weeks of paid vacation per year; and
(d) an automobile allowance of up to $1,200 per month for automobile lease
payments, maintenance, insurance and fuel.
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6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF EMPLOYMENT OTHER THAN BY EXECUTIVE. The Executive's
employment hereunder may be terminated by the Company without any breach of this
Agreement under the following circumstances:
(1) DEATH OR DISABILITY. The Executive's employment hereunder shall
terminate upon his death, and may be terminated by the Company in the event of
his Disability for a continuous period of at least one hundred eighty (180)
days, provided that the Executive does not return to work on a substantially
full-time basis within thirty (30) days after Notice of Termination is given by
the Company pursuant to the provisions of Paragraphs 6(c) and 6(d)(2). A return
to work of less than thirty (30) days shall not interrupt a continuous period of
Disability.
(2) CAUSE. The Company may terminate the Executive's employment hereunder
for Cause.
(3) WITHOUT CAUSE. The Company may terminate the Executive's employment
hereunder without Cause.
(b) TERMINATION OF EMPLOYMENT BY EXECUTIVE. The Executive may terminate
his employment at any time with or without Good Reason.
(c) NOTICE OF TERMINATION. Any termination of the Executive's employment
by the Company, or by the Executive other than termination upon the Executive's
death, shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" means a notice
that shall indicate the specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(d) DATE OF TERMINATION. "Date of Termination" means:
(1) If the Executive's employment is terminated by his death, the date of
his death.
(2) If the Executive's employment is terminated by the Company as a result
of Disability pursuant to Paragraph 6(a)(1), the date that is thirty (30) days
after Notice of Termination is given; provided the Executive shall not have
returned to the performance of his duties on a full-time basis during such
thirty (30) day period.
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(3) If the Executive terminates his employment for Good Reason pursuant to
Paragraph 6(b), the date that is ten (10) days after Notice of Termination is
given (provided that the Company does not cure such event during the ten (10)
day period).
(4) If the Executive terminates his employment other than for Good Reason,
the date that is two (2) weeks after Notice of Termination is given; provided,
in the sole discretion of the Company, such date may be any earlier date after
Notice of Termination is given.
(5) If the Executive's employment is terminated by the Company without
Cause pursuant to Section 6(a)(3), the date that is two (2) weeks after Notice
of Termination is given.
(6) If the Executive's employment is terminated by the Company for Cause
pursuant to Paragraph 6(a)(2), the date on which the Notice of Termination is
given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING DISABILITY.
Upon the termination of the Executive's employment with the Company, the Company
shall have the following obligations (including the obligation to pay the cost
of all benefits provided by the applicable benefit plan to the Executive and the
Executive's family under this Section 7, except normal employee contributions
required by the applicable benefit plan of other participating executives with
comparable responsibilities); provided, however, that any item paid or payable
under this Agreement shall be reduced by any amount paid or payable to the
Executive and the Executive's family with respect to the same type of payment
under any severance plan or policy now maintained or at any time in the future
maintained by the Company. For this purpose, any payment under this Agreement
or any severance plan or policy made over time shall be discounted to present
value at the Interest Rate before reducing any payment under this Agreement by
any amount paid or payable to the Executive under such severance plan or policy.
(a) DEATH. If the Executive's employment is terminated by his death, the
Executive's beneficiary (as designated by the Executive in writing with the
Company prior to his death) shall be entitled to payment of all Accrued
Obligations. Unless otherwise directed by the Executive all Accrued Obligations
shall be paid to the Executive's beneficiaries in a lump sum in cash within
thirty (30) days of the Date of Termination. In the absence of a beneficiary
designation by the Executive, or, if the Executive's designated beneficiary does
not survive the Executive, benefits described in this Paragraph 7(a) shall be
paid to the Executive's estate. In addition, all stock options that have been
granted to the Executive at least six months prior to the date of his death
(measured from the date of grant of each such stock option), if any, shall be
and become fully vested and may be executed by the estate of the Executive for a
period equal to the earlier to occur of five (5) years from the date of the
death of the Executive or the date the option would have otherwise expired
without regard to the Executive's death or other termination of employment. If
the Executive dies after the date of grant of any stock options, the Executive's
estate may exercise any stock options which were then vested for a period equal
to the earlier to occur of five (5) years from the date of the death of the
Executive or the date the option would have expired without regard to the
Executive's death or other termination of employment.
(b) DISABILITY.
(1) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his base salary
at the rate then in effect for such period until his employment is terminated
pursuant to Paragraph 6(a)(1); provided, however, that payments of Base Salary
so made to the Executive shall be reduced by the sum of the amounts, if any,
that were payable to the Executive at or before the time of any such salary
payment under any disability benefit plan or plans of the Company and that were
not previously applied to reduce any payment of Base Salary.
(2) Upon his termination of employment because of Disability (as described
in Paragraph 6(a)(1)), the Executive shall be entitled to the payments and
benefits described in Paragraph 7(a) as if the Executive had died on his Date of
Termination. In the event of the Executive's death prior to the time that all
payments described in Paragraph 7(a) have been completed, such payments and
benefits shall be paid to the Executive's beneficiary (as designated pursuant to
Paragraph 7(a)), or, in the absence of a beneficiary designation of the
designated beneficiary does not survive the Executive, to the Executive's
estate.
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(3) The Executive and the Executive's family shall be entitled to receive
disability and other welfare plan benefits (other than continued group long-term
disability coverage) generally available to executives with comparable
responsibilities or positions for a period of two (2) years from the Date of
Termination at the same cost to the Executive as is charged to such executives
from time to time for comparable coverage.
(c) TERMINATION BY COMPANY WITHOUT CAUSE OR TERMINATION BY EXECUTIVE FOR
GOOD REASON. In the event that the Company terminates the Executive's
employment without Cause or the Executive terminates his employment for Good
Reason before the expiration of the term of this Agreement, including any
extension thereof, the Executive shall be entitled to the following payments and
benefits:
(1) Those described in Paragraph 7(a) as if the Executive had died on his
Date of Termination.
(2) Payment of an amount equal to the sum of the Base Salary (assuming no
increases) payable to the Executive for remaining term of this Agreement
assuming no termination, plus (B) two (2) times the average of the Annual
Bonuses paid or payable to the Executive during the term of this Agreement,
payable in twelve (12) equal, consecutive monthly installments commencing no
later than thirty (30) days after the Date of Termination.
(3) All outstanding options, stock grants, share of restricted stock or
any other equity, incentive compensation shall be and become fully vested and
nonforfeitable.
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(4) The Executive and the Executive's family shall be entitled to receive
welfare plan benefits (other than continued group long-term disability coverage)
generally available to executives with comparable responsibilities or positions
for a period of the lessor of two (2) years from the Date of Termination or
until the Expiration Date of this Agreement at the same cost to the Executive as
is charged to such executives from time to time for comparable coverage.
(d) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON, OR TERMINATION BY
COMPANY FOR CAUSE. In the event that the Executive terminates his employment
other than for Good Reason or the Company terminates his employment for Cause,
the Executive shall not be entitled to any compensation except as set forth
below:
(1) Any Base Salary that is accrued but unpaid, any vacation that is
accrued but unused, and any business expenses that are unreimbursed, all as of
the Date of Termination.
(2) Any other rights and benefits (if any) provided under plans and
programs of the Company (excluding any bonus program), determined in accordance
with the applicable terms and provisions of such plans and programs.
8. RESTRICTIVE COVENANTS. The Executive agrees that, during the term of
this Agreement, including an extension thereof, and for a period of one year
thereafter, he shall not, directly or indirectly:
(a) on Executive's own behalf or on behalf of any other person or entity,
solicit, contact, call upon, communicate with, or attempt to communicate with
any person or entity who was a customer of the Company at any time within the
one-year period ending on the Date of Termination or any representative of any
such customer of the Company, with the intent or purpose of selling or providing
of any product or service competitive with any product or service sold or
provided or under development by the Company during the period of one year
immediately preceding termination of Executive's employment and which is still
being offered by or is still under development by the Company; and
(b) employ or attempt to employ or assist anyone else in employing in any
Competing Business any person who, at any time within the period commencing one
year prior to the Date of Termination and ending one year after the Date of
Termination, was, is or shall be an employee of the Company (whether or not such
employment is full-time or is pursuant to a written contract with the Company).
9. CONFIDENTIAL INFORMATION. The Executive agrees that:
(a) during the term of this Agreement and, with respect to Confidential
Information, for a period of five (5) years following his Date of Termination,
or with respect to Trade Secrets, for so long as the respective information
qualifies as a trade secret under applicable law, he will receive and hold all
Company Information in trust and in strictest confidence;
(b) he will use his best effort to protect the Company Information from
disclosure and will in no event take any action causing any Company Information
to lose its character as Company Information; and
(c) except as required by Executive's duties in the course of employment
by the Company, he will not, directly or indirectly, use, publish, disseminate
or otherwise disclose any Company Information to any third party without the
prior written consent of the Company, which may be withheld in the Company's
absolute discretion.
All documents or tangible or intangible materials, including computer data,
provided to or obtained by Executive during the course of employment by the
Company which contain Company Information are the property of the
Company(collectively, the "Materials"). Executive will not remove from the
Company's premises or copy or reproduce any Materials (except as Executive's
employment by the Company shall require), and at the termination of Executive's
employment, regardless of the reason for such termination, Executive will leave
with the Company, or immediately return to the Company, all Materials or copies
or reproductions thereof in Executive's possession, power or control.
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10. ACKNOWLEDGMENT; REMEDIES.
(a) Executive has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred to the Company under
Sections 8 and 9 of this Agreement, and hereby acknowledges and agrees that the
same are reasonable in time, necessary to protect the business, interests and
properties of the Company, are designed to eliminate competition which would be
unfair to the Company, do not stifle the inherent skill and experience of
Executive, would not operate as a bar to Executive's sole means of support, are
fully required to protect the legitimate interests of the Company and do not
confer a benefit upon the Company disproportionate to the detriment of
Executive.
(b) In the event of any violation of the provisions of Sections 8 or 9 of
this Agreement by Executive, the parties hereby recognize and acknowledge that
remedy at law will be inadequate and the Company may suffer irreparable injury.
Accordingly, Executive consents to injunctive and other appropriate equitable
relief upon the institution of proceedings therefor by the Company in order to
protect the Company's rights under such Sections. Such relief shall be in
addition to any other relief to which the Company may be entitled at law or in
equity. Covenants contained in Sections 8 or 9 hereof shall be treated the same
as a termination by the Company for Cause and shall entitle the Company to cease
the provision of any welfare plan benefits being afforded to the Executive or
his family after the termination of his employment with the Company, cease any
payments to be made to the Executive pursuant to this Agreement in connection
with such termination (other than accrued and unpaid Base Salary and vacation)
or recover from the Executive any payments made to the Executive under this
Agreement in respect of such termination (other than accrued Base Salary and
vacation). In no event shall such actions preclude the Company from any
equitable relief to which it may otherwise be entitled and such remedies shall
be cumulative.
11. CERTAIN FURTHER PAYMENTS BY THE COMPANY.
(a) Tax Reimbursement Payment. In the event that any amount or benefit
paid or distributed to the Executive by the Company or any Affiliated Company,
whether pursuant to this Agreement or otherwise (collectively, the "Covered
Payments"), is or becomes subject to the tax (the "Excise Tax") imposed under
Section 4999 of the Code or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive, at the time specified in Section 11(e)
below, the Tax Reimbursement Payment (as defined below). The Tax Reimbursement
Payment is defined as an amount, which when added to the Covered Payments and
reduced by any Excise Tax on the Covered Payments and any federal, state and
local income tax and Excise Tax on the Tax Reimbursement Payment provided for by
this Agreement (but without reduction for any federal, state or local income or
employment tax on such Covered Payments), shall be equal to the sum of (i) the
amount of the Covered Payments, and (ii) an amount equal to the product of any
deductions disallowed for federal, state or local income tax purposes because of
the inclusion of the Tax Reimbursement Payment in the Executive's adjusted gross
income and the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is to be made.
(b) DETERMINING EXCISE TAX. For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax and the amount of such
Excise Tax,
(1) such Covered Payments will be treated as "parachute payments" within
the meaning of Section 280G of the Code, and all "parachute payments" in excess
of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless, and except to the extent that, in
the opinion of the Company's independent certified public accountants, which, in
the case of Covered Payments made after the Change of Control Date, shall be the
Company's independent certified public accountants appointed prior to the Change
of Control Date, or tax counsel selected by such accountants (the
"Accountants"), such Covered Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable compensation for
services actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount", or such "parachute payments" are otherwise
not subject to such Excise Tax, and
(2) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Accountants in accordance with the principles of
Section 280G of the Code.
(c) APPLICABLE TAX RATES AND DEDUCTIONS. For purposes of determining the
amount of the Tax Reimbursement Payment, the Executive shall be deemed:
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(1) to pay federal income taxes at the highest applicable marginal rate of
federal income taxation for the calendar year in which the Tax Reimbursement
Payment is to be made,
(2) to pay any applicable state and local income taxes at the highest
applicable marginal rate of taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from the deduction of such state or local
taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of the Executive's adjusted gross income), and
(3) to have otherwise allowable deductions for federal, state and local
income tax purposes at least equal to those disallowed because of the inclusion
of the Tax Reimbursement Payment in the Executive's adjusted gross income.
(d) SUBSEQUENT EVENTS. In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such prior Tax Reimbursement
Payment that has been paid to the Executive or to federal, state or local tax
authorities on the Executive's behalf and that would not have been paid if such
Excise Tax had been applied in initially calculating such Tax Reimbursement
Payment, plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event
any portion of the Tax Reimbursement Payment to be refunded to the Company has
been paid to any federal, state or local tax authority, repayment thereof shall
not be required until actual refund or credit of such portion has been made to
the Executive, and interest payable to the Company shall not exceed interest
received or credited to the Executive by such tax authority for the period it
held such portion. The Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund or credit is denied. In
the event that the Excise Tax is later determined by the Accountants to exceed
the amount taken into account hereunder at the time the Tax Reimbursement
Payment is made (including, but not limited to, by reason of any payment the
existence or amount of which cannot be determined at the time of the Tax
Reimbursement Payment), the Company shall make an additional Tax Reimbursement
Payment in respect of such excess (which Tax Reimbursement Payment shall include
any interest or penalty payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(e) DATE OF PAYMENT. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Executive within ten
business days following the payment of the Covered Payment. If the amount of
such Tax Reimbursement Payment (or portion thereof) cannot be finally determined
on or before the date on which payment is due, the Company shall pay to the
Executive an amount estimated in good faith by the Accountants to be the minimum
amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall include interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than 45 calendar days after
payment of the related Covered Payment. In the event that the amount of the
estimated Tax Reimbursement Payment exceeds the amount subsequently determined
to have been due, such excess shall be repaid or refunded pursuant to the
provisions of Section 11(d) above.
12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
Affiliated Companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise prejudice such rights as the Executive may have under
any other agreements with the Company or any Affiliated Companies, including,
but not limited to stock option or restricted stock agreements. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan or program.
13. NOTICE OF TERMINATION FOR GOOD CAUSE. In the event that the Executive
shall in good faith give a Notice of Termination for Good Reason and it shall
thereafter be determined that Good Reason did not take place, the employment of
the Executive shall, unless the Company and the Executive shall otherwise
mutually agree, be deemed to have terminated, at the date of giving such
purported Notice of Termination, by mutual consent of the
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Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date had he
terminated his employment voluntarily at such date under this Agreement.
14. DEFINITIONS.
(a) "Accountants" shall have the meaning set forth in Section 11(b).
(b) "Accrued Obligations" shall mean (i) the Executive's full Base Salary
through the Date of Termination, (ii) the product of the Annual Bonus paid to
the Executive for the last full fiscal year of the Company and a fraction, the
numerator of which is the number of days in the current fiscal year of the
Company through the Date of Termination, and the denominator of which is 365,
(iii) any compensation previously deferred by the Executive (together with any
accrued earnings thereon) and not yet paid by the Company and any accrued
vacation pay for the current year not yet paid by the Company, (iv) any amounts
or benefits owing to the Executive or to the Executive's beneficiaries under the
then applicable employee benefit plans or policies of the Company and (v) any
amounts owing to the Executive for reimbursement of expenses properly incurred
by the Executive prior to the Date of Termination and which are reimbursable in
accordance with the reimbursement policy of the Company described in Section
5(a).
(c) "Affiliated Company" shall mean any company controlling, controlled by
or under common control with the Company.
(d) "Annual Bonus" shall have the meaning set forth in Section 4.
(e) "Base Salary" shall have the meaning set forth in Section 3.
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Cause" shall mean either:
(1) any act that constitutes, on the part of the Executive, (A) fraud,
dishonesty, or a felony and (B) that directly results in material injury to the
Company;
(2) Executive's conduct as the President and Chief Executive Officer of
the Company is grossly inappropriate and demonstrably likely to lead to material
injury to the Company; or
(3) the Executive otherwise materially breaches this Agreement; provided,
however, that in the case of Clause (2) or (3) above, such conduct shall not
constitute Cause unless the Board shall have delivered to the Executive notice
setting forth with specificity (A) the conduct deemed to qualify as Cause, (B)
reasonable action that would remedy such objection, and (C) a reasonable time
(not less than thirty (30) days) within which the Executive may take such
remedial action, and the Executive shall not have taken such specified remedial
action within such specified reasonable time.
(h) A "Change of Control" means:
(1) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of voting securities
of the corporation where such acquisition causes such person to own thirty-five
percent (35%) or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this Subsection (A), the following acquisitions shall not be
deemed to result in a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction that complies with clauses (i), (ii) and
(iii) of Subsection (3) below; and provided further, that if any Person's
beneficial ownership of the Outstanding Company Voting Securities reaches or
exceeds thirty-five percent (35%) as a result of a transaction described in
clause (i) or (ii)
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above, and such Person subsequently acquires beneficial ownership of additional
voting securities of the Company, such subsequent acquisition shall be treated
as an acquisition that causes such Person to own thirty-five percent (35%) or
more of the Outstanding Company Voting Securities; or
(2) individuals who as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) the approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company ("Business Combination") or, if consummation of
such Business Combination is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by consummation);
excluding, however, such a Business Combination pursuant to which (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Voting
Securities, (ii) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, thirty-five percent
(35%) or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(4) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred for purposes of this Agreement by reason of any actions or events in
which the Executive participates in a capacity other than in his capacity as
executive (or as a director of the Company or a Subsidiary, where applicable).
(i) "Change of Control Date" shall mean the date on which a Change of
Control shall be deemed to have occurred.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(k) "Company Information" means Confidential Information and Trade
Secrets.
(l) "Competing Business" means any business engaging in the exploitation
or development of antimicrobial products.
(m) "Confidential Information" means confidential data and confidential
information relating to the business of the Company (which does not rise to the
status of a trade secret under applicable law) which is or has been disclosed to
Executive or of which Executive became aware as a consequence of or through his
employment with the Company and which has value to the Company and is not
generally known to its competitors and which is designated by the Company as
confidential. Confidential Information shall not include any data or information
that (i) has been voluntarily disclosed to the general public by the Company,
(ii) has been independently developed and disclosed to the general public by
others, or (iii) otherwise enters the public domain
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through lawful means.
(n) "Date of Termination" shall have the meaning set forth in Section
6(d).
(o) "Disability" shall mean disability which would entitle the Executive
to receive full long-term disability benefits under the Company's long-term
disability plan on terms substantially similar to those of the long-term
disability plan as in effect on the date of this Agreement.
(p) "Excise Tax" shall have the meaning as set forth in Section 11(a).
(q) "Good Reason" shall mean the occurrence of one of the following events
(provided the Company does not cure such event on a retroactive basis to the
extent possible within thirty days following its receipt of the Executive's
Notice of Termination):
(1) The Executive's title is changed in a materially adverse manner.
(2) The Executive's base salary is reduced for any reason other than in
connection with the termination of his employment.
(3) For any reason other than in connection with the termination of the
Executive's employment, the Company materially reduces any fringe benefit
provided to the Executive under Section 5 below the level of such fringe benefit
provided generally other actively employed similarly situated executives of the
Company. Notwithstanding the foregoing, if the Company agrees to fully
compensate the Executive for any such material reduction for a period ending on
the earlier to occur of (i) the date such fringe benefit is no longer provided
to other actively employed similarly situated executives of the Company or (ii)
four (4) years, then such event shall not constitute Good Reason.
(4) A change of over fifty (50) miles in the Executive's principal place
of employment in Atlanta, Georgia.
(5) The Company otherwise materially breaches, or is unable to perform its
obligations under this Agreement.
(6) The occurrence of a Change of Control.
Notwithstanding the foregoing, the occurrence of one of the event in Paragraphs
(1) through (6) hereof shall not be considered Good Reason for the Executive's
termination, unless the Executive delivers a Notice of Termination pursuant to
Paragraphs 6(c) and 6(d)(3) hereof, within one hundred eighty (180) days after
the Executive has actual notice of the occurrence of any of the events listed in
Paragraphs (1) through (6) hereof.
(r) "Interest Rate" shall mean the interest rate payable on one year
Treasury Bills in effect on the day that is 30 business days (days other than
Saturday, Sunday or legal holidays in the City of New York) prior to the Date
of Termination.
(s) "Notice of Termination" shall have the meaning as set forth in
Section 6(c).
(t) "Subsidiary" shall mean any majority owned subsidiary of the Company.
(u) "Tax Reimbursement Payment" shall have the meaning set forth in
Section 11(a).
(v) "Trade Secrets" means information of the Company, without regard to
form, including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product or service plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which information (1) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (2) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
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15. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall
at any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall be binding upon and inure
to the benefit of the company resulting from such merger or consolidation or to
which such assets have been transferred, and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.
16. NOTICES. Any notice given to either party to this Agreement shall be
in writing, and shall be deemed to have been given when delivered personally or
sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: BioShield Technologies, Inc.
4405 International Boulevard
Suite B109
Norcross, Georgia 30093
Attn: Board of Directors
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with a copy to: Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, Georgia 30328
Attn: Raymond L. Moss, Esq.
If to the Executive: Timothy C. Moses
405 North Errol Court, N.W.
Atlanta, Georgia 30327
17. INDEMNIFICATION. The Executive shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Bylaws, to the maximum extent permitted under applicable law.
18. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Executive shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that is satisfied that all requirements of the law affecting its
responsibilities to withhold such taxes have been satisfied.
19. ENFORCEMENT OF RIGHTS. All legal and other fees and expenses,
including, without limitation, any arbitration expenses, incurred by the
Executive in connection with seeking to obtain or enforce any right or benefit
provided for in this Agreement, or in otherwise pursuing any right or claim,
shall be paid by the Company, to the extent permitted by law, provided that the
Executive is successful in whole or in part as to such claims as the result of
litigation, arbitration, or settlement.
In the event that the Company refuses or otherwise fails to make a payment when
due and it is ultimately decided that the Executive is entitled to such payment,
such payment shall increased to reflect an interest equivalent for the period of
delay, compounded annually, equal to four (4) percentage points over the
Interest Rate in effect as of the date the payment was first due.
20. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Georgia. The
captions of this Agreement shall not be part of the provisions hereof, and shall
have no force or effect. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. Except as otherwise specifically provided in this
paragraph, the failure of either party to insist in any instance on the strict
performance of any provision of this Agreement or to exercise any right
hereunder shall not constitute a waiver of such provision or right in any other
instance. The parties hereto consent to the jurisdiction of the state and
federal courts of the State of Georgia located in Fulton County, Georgia, with
respect to any action arising or relating to this Agreement and said courts of
the State of Georgia shall have sole and exclusive jurisdiction with respect to
any such action or related action.
21. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. This Agreement may be
amended at any time by written agreement of both parties, but it shall not be
amended by oral agreement.
IN WITNESSETH WHEREOF, the parties have executed this Agreement on the date
first above written.
BIOSHIELD TECHNOLOGIES, INC. EXECUTIVE:
- ----------------------------------
By: By: Timothy C. Moses
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1998, by and between BIOSHIELD TECHNOLOGIES, INC., a
Georgia corporation (hereinafter called the "Company") and Timothy C. Moses,
President and Chief Executive Officer (hereinafter called the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to enter into an employment
agreement to establish the rights and obligations of the Executive and the
Company in such employment relationship;
WHEREAS, the terms of this Agreement have been approved by the Compensation
Committee of the Board of Directors of the Company;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Executive hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company upon the terms and
conditions hereinafter set forth. The Executive shall serve the Company as its
President and Chief Executive Officer. In such capacity, the Executive shall
have all powers, duties, and obligations as are normally associated with such
position. The Executive shall further perform such other duties related to the
business of the Company, including travel, as may from time to time be
reasonably requested of him by the Company's Board of Directors. The Executive
shall devote all of his skills, time, and attention solely and exclusively to
said position and in furtherance of the business and interests of the Company
except for:
(a) time spent in managing his personal, financial and legal affairs and
serving on corporate, civic or charitable boards or committees, in each case
only if and to the extent not substantially interfering with the performance of
such responsibilities, and
(b) periods of vacation to which he is entitled.
Executive shall promptly notify the Company of his election or appointment to
any corporate, civic or charitable boards or committees on or after the date of
this Agreement.
2. TERM OF EMPLOYMENT. The term of employment shall begin, or be deemed
to have begun, on January 1, 1998 (the "Effective Date") and shall expire on
January 1, 2003, (the "Expiration Date") subject, however, to prior termination
or to extension, as herein provided. On each January 1st while this Agreement
is in force beginning January 1, 2001, the term of this Agreement shall
automatically be extended so that new term of the Agreement expires three years
from such date, unless either party notifies the other party in writing of an
intent not to renew at least ninety (90) days prior to the applicable January 1.
3. BASE SALARY. For such services, the Executive shall receive an annual
base salary of $125,000 (the "Base Salary"), which Base Salary shall be reviewed
annually by the Compensation Committee of the Board of Directors and which may
be increased, but not decreased, by the Company during the term of this
Agreement. In the event that the Company increases the Executive's Base Salary,
the amount of the prior Base Salary, together with any increase(s), shall be his
new Base Salary. The Base Salary shall be payable in equal installments, no
less frequently than semi-monthly, in accordance with the Company's regular
payroll practices.
4. BONUS. For each fiscal year of the Company during which he is employed
by the Company on the last day of the fiscal year, the Executive shall be
eligible to receive an annual bonus ("Annual Bonus") under the bonus plan
established by the Compensation Committee of the Board for the Executive. Such
Annual Bonus shall be determined by the Compensation Committee of the Board and
shall not exceed $50,000. Each Annual Bonus shall be paid in cash as soon as
practical after the year for which the Annual Bonus is earned or awarded, unless
electively deferred by the Executive pursuant to any deferral programs or
arrangements that the Company may make available to the Executive.
5. FRINGE BENEFITS. The Company shall further provide the Executive with
all health and life insurance
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coverages, sick leave and disability programs, tax-qualified retirement plans,
stock option plans, paid holidays and vacations, expense reimbursement
policies, moving and relocation policies, perquisites, and such other fringe
benefits of employment as the Company may provide from time to time to
actively employed senior executives of the Company who are similarly situated.
Notwithstanding the preceding provisions of this Paragraph 5, during the term
of this Agreement (including extensions thereof) the Company shall provide the
Executive;
(a) reimbursement for all reasonable expenses incurred by the Executive in
connection with the conduct of the Company's business on presentation of
reasonable and appropriate receipts and in accordance with the Company's regular
reimbursement policy applicable to senior executives;
(b) an individual disability insurance policy, at the Company's expense,
in addition to the long-term disability plan maintained by the Company generally
for its employees, which provides long-term disability insurance which replaces
at least $6,000 of the Executive's monthly Base Salary;
(c) a minimum of four (4) weeks of paid vacation per year; and
(d) an automobile allowance of up to $1,200 per month for automobile lease
payments, maintenance, insurance and fuel.
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6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF EMPLOYMENT OTHER THAN BY EXECUTIVE. The Executive's
employment hereunder may be terminated by the Company without any breach of this
Agreement under the following circumstances:
(1) DEATH OR DISABILITY. The Executive's employment hereunder shall
terminate upon his death, and may be terminated by the Company in the event of
his Disability for a continuous period of at least one hundred eighty (180)
days, provided that the Executive does not return to work on a substantially
full-time basis within thirty (30) days after Notice of Termination is given
by the Company pursuant to the provisions of Paragraphs 6(c) and 6(d)(2). A
return to work of less than thirty (30) days shall not interrupt a continuous
period of Disability.
(2) CAUSE. The Company may terminate the Executive's employment
hereunder for Cause.
(3) WITHOUT CAUSE. The Company may terminate the Executive's
employment hereunder without Cause.
(b) TERMINATION OF EMPLOYMENT BY EXECUTIVE. The Executive may terminate
his employment at any time with or without Good Reason.
(c) NOTICE OF TERMINATION. Any termination of the Executive's employment
by the Company, or by the Executive other than termination upon the Executive's
death, shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" means a notice
that shall indicate the specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(d) DATE OF TERMINATION. "Date of Termination" means:
(1) If the Executive's employment is terminated by his death, the
date of his death.
(2) If the Executive's employment is terminated by the Company as a
result of Disability pursuant to Paragraph 6(a)(1), the date that is thirty
(30) days after Notice of Termination is given; provided the Executive shall
not have returned to the performance of his duties on a full-time basis during
such thirty (30) day period.
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(3) If the Executive terminates his employment for Good Reason
pursuant to Paragraph 6(b), the date that is ten (10) days after Notice of
Termination is given (provided that the Company does not cure such event
during the ten (10) day period).
(4) If the Executive terminates his employment other than for Good
Reason, the date that is two (2) weeks after Notice of Termination is given;
provided, in the sole discretion of the Company, such date may be any earlier
date after Notice of Termination is given.
(5) If the Executive's employment is terminated by the Company
without Cause pursuant to Section 6(a)(3), the date that is two (2) weeks
after Notice of Termination is given.
(6) If the Executive's employment is terminated by the Company for
Cause pursuant to Paragraph 6(a)(2), the date on which the Notice of
Termination is given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING DISABILITY.
Upon the termination of the Executive's employment with the Company, the Company
shall have the following obligations (including the obligation to pay the cost
of all benefits provided by the applicable benefit plan to the Executive and the
Executive's family under this Section 7, except normal employee contributions
required by the applicable benefit plan of other participating executives with
comparable responsibilities); provided, however, that any item paid or payable
under this Agreement shall be reduced by any amount paid or payable to the
Executive and the Executive's family with respect to the same type of payment
under any severance plan or policy now maintained or at any time in the future
maintained by the Company. For this purpose, any payment under this Agreement
or any severance plan or policy made over time shall be discounted to present
value at the Interest Rate before reducing any payment under this Agreement by
any amount paid or payable to the Executive under such severance plan or policy.
(a) DEATH. If the Executive's employment is terminated by his death, the
Executive's beneficiary (as designated by the Executive in writing with the
Company prior to his death) shall be entitled to payment of all Accrued
Obligations. Unless otherwise directed by the Executive all Accrued
Obligations shall be paid to the Executive's beneficiaries in a lump sum in
cash within thirty (30) days of the Date of Termination. In the absence of a
beneficiary designation by the Executive, or, if the Executive's designated
beneficiary does not survive the Executive, benefits described in this
Paragraph 7(a) shall be paid to the Executive's estate. In addition, all stock
options that have been granted to the Executive at least six months prior to
the date of his death (measured from the date of grant of each such stock
option), if any, shall be and become fully vested and may be executed by the
estate of the Executive for a period equal to the earlier to occur of five (5)
years from the date of the death of the Executive or the date the option would
have otherwise expired without regard to the Executive's death or other
termination of employment. If the Executive dies after the date of grant of
any stock options, the Executive's estate may exercise any stock options which
were then vested for a period equal to the earlier to occur of five (5) years
from the date of the death of the Executive or the date the option would have
expired without regard to the Executive's death or other termination of
employment.
(b) DISABILITY.
(1) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his base salary
at the rate then in effect for such period until his employment is terminated
pursuant to Paragraph 6(a)(1); provided, however, that payments of Base Salary
so made to the Executive shall be reduced by the sum of the amounts, if any,
that were payable to the Executive at or before the time of any such salary
payment under any disability benefit plan or plans of the Company and that
were not previously applied to reduce any payment of Base Salary.
(2) Upon his termination of employment because of Disability (as
described in Paragraph 6(a)(1)), the Executive shall be entitled to the
payments and benefits described in Paragraph 7(a) as if the Executive had died
on his Date of Termination. In the event of the Executive's death prior to the
time that all payments described in Paragraph 7(a) have been completed, such
payments and benefits shall be paid to the Executive's beneficiary (as
designated pursuant to Paragraph 7(a)), or, in the absence of a beneficiary
designation of the designated beneficiary does not survive the Executive, to
the Executive's estate.
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(3) The Executive and the Executive's family shall be entitled to
receive disability and other welfare plan benefits (other than continued group
long-term disability coverage) generally available to executives with
comparable responsibilities or positions for a period of two (2) years from
the Date of Termination at the same cost to the Executive as is charged to
such executives from time to time for comparable coverage.
(c) TERMINATION BY COMPANY WITHOUT CAUSE OR TERMINATION BY EXECUTIVE FOR
GOOD REASON. In the event that the Company terminates the Executive's
employment without Cause or the Executive terminates his employment for Good
Reason before the expiration of the term of this Agreement, including any
extension thereof, the Executive shall be entitled to the following
payments and benefits:
(1) Those described in Paragraph 7(a) as if the Executive had died
on his Date of Termination.
(2) Payment of an amount equal to the sum of the Base Salary
(assuming no increases) payable to the Executive for remaining term of this
Agreement assuming no termination, plus (B) two (2) times the average of the
Annual Bonuses paid or payable to the Executive during the term of this
Agreement, payable in twelve (12) equal, consecutive monthly installments
commencing no later than thirty (30) days after the Date of Termination.
(3) All outstanding options, stock grants, share of restricted stock
or any other equity, incentive compensation shall be and become fully vested
and nonforfeitable.
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(4) The Executive and the Executive's family shall be entitled to
receive welfare plan benefits (other than continued group long-term disability
coverage) generally available to executives with comparable responsibilities
or positions for a period of the lessor of two (2) years from the Date of
Termination or until the Expiration Date of this Agreement at the same cost to
the Executive as is charged to such executives from time to time for
comparable coverage.
(d) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON, OR TERMINATION BY
COMPANY FOR CAUSE. In the event that the Executive terminates his employment
other than for Good Reason or the Company terminates his employment for Cause,
the Executive shall not be entitled to any compensation except as set forth
below:
(1) Any Base Salary that is accrued but unpaid, any vacation that is
accrued but unused, and any business expenses that are unreimbursed, all as of
the Date of Termination.
(2) Any other rights and benefits (if any) provided under plans and
programs of the Company (excluding any bonus program), determined in
accordance with the applicable terms and provisions of such plans and
programs.
8. RESTRICTIVE COVENANTS. The Executive agrees that, during the term of
this Agreement, including an extension thereof, and for a period of one year
thereafter, he shall not, directly or indirectly:
(a) on Executive's own behalf or on behalf of any other person or entity,
solicit, contact, call upon, communicate with, or attempt to communicate with
any person or entity who was a customer of the Company at any time within the
one-year period ending on the Date of Termination or any representative of any
such customer of the Company, with the intent or purpose of selling or providing
of any product or service competitive with any product or service sold or
provided or under development by the Company during the period of one year
immediately preceding termination of Executive's employment and which is still
being offered by or is still under development by the Company; and
(b) employ or attempt to employ or assist anyone else in employing in any
Competing Business any person who, at any time within the period commencing one
year prior to the Date of Termination and ending one year after the Date of
Termination, was, is or shall be an employee of the Company (whether or not such
employment is full-time or is pursuant to a written contract with the Company).
9. CONFIDENTIAL INFORMATION. The Executive agrees that:
(a) during the term of this Agreement and, with respect to Confidential
Information, for a period of five (5) years following his Date of Termination,
or with respect to Trade Secrets, for so long as the respective information
qualifies as a trade secret under applicable law, he will receive and hold all
Company Information in trust and in strictest confidence;
(b) he will use his best effort to protect the Company Information from
disclosure and will in no event take any action causing any Company Information
to lose its character as Company Information; and
(c) except as required by Executive's duties in the course of employment
by the Company, he will not, directly or indirectly, use, publish, disseminate
or otherwise disclose any Company Information to any third party without the
prior written consent of the Company, which may be withheld in the Company's
absolute discretion.
All documents or tangible or intangible materials, including computer data,
provided to or obtained by Executive during the course of employment by the
Company which contain Company Information are the property of the
Company(collectively, the "Materials"). Executive will not remove from the
Company's premises or copy or reproduce any Materials (except as Executive's
employment by the Company shall require), and at the termination of Executive's
employment, regardless of the reason for such termination, Executive will leave
with the Company, or immediately return to the Company, all Materials or copies
or reproductions thereof in Executive's possession, power or control.
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10. ACKNOWLEDGMENT; REMEDIES.
(a) Executive has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred to the Company under
Sections 8 and 9 of this Agreement, and hereby acknowledges and agrees that the
same are reasonable in time, necessary to protect the business, interests and
properties of the Company, are designed to eliminate competition which would be
unfair to the Company, do not stifle the inherent skill and experience of
Executive, would not operate as a bar to Executive's sole means of support, are
fully required to protect the legitimate interests of the Company and do not
confer a benefit upon the Company disproportionate to the detriment of
Executive.
(b) In the event of any violation of the provisions of Sections 8 or 9 of
this Agreement by Executive, the parties hereby recognize and acknowledge that
remedy at law will be inadequate and the Company may suffer irreparable injury.
Accordingly, Executive consents to injunctive and other appropriate equitable
relief upon the institution of proceedings therefor by the Company in order to
protect the Company's rights under such Sections. Such relief shall be in
addition to any other relief to which the Company may be entitled at law or in
equity. Covenants contained in Sections 8 or 9 hereof shall be treated the same
as a termination by the Company for Cause and shall entitle the Company to cease
the provision of any welfare plan benefits being afforded to the Executive or
his family after the termination of his employment with the Company, cease any
payments to be made to the Executive pursuant to this Agreement in connection
with such termination (other than accrued and unpaid Base Salary and vacation)
or recover from the Executive any payments made to the Executive under this
Agreement in respect of such termination (other than accrued Base Salary and
vacation). In no event shall such actions preclude the Company from any
equitable relief to which it may otherwise be entitled and such remedies shall
be cumulative.
11. CERTAIN FURTHER PAYMENTS BY THE COMPANY.
(a) Tax Reimbursement Payment. In the event that any amount or benefit
paid or distributed to the Executive by the Company or any Affiliated Company,
whether pursuant to this Agreement or otherwise (collectively, the "Covered
Payments"), is or becomes subject to the tax (the "Excise Tax") imposed under
Section 4999 of the Code or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive, at the time specified in Section 11(e)
below, the Tax Reimbursement Payment (as defined below). The Tax Reimbursement
Payment is defined as an amount, which when added to the Covered Payments and
reduced by any Excise Tax on the Covered Payments and any federal, state and
local income tax and Excise Tax on the Tax Reimbursement Payment provided for by
this Agreement (but without reduction for any federal, state or local income or
employment tax on such Covered Payments), shall be equal to the sum of (i) the
amount of the Covered Payments, and (ii) an amount equal to the product of any
deductions disallowed for federal, state or local income tax purposes because of
the inclusion of the Tax Reimbursement Payment in the Executive's adjusted gross
income and the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is to be made.
(b) DETERMINING EXCISE TAX. For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax and the amount of such
Excise Tax,
(1) such Covered Payments will be treated as "parachute payments"
within the meaning of Section 280G of the Code, and all "parachute payments"
in excess of the "base amount" (as defined under Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, unless, and except to the
extent that, in the opinion of the Company's independent certified public
accountants, which, in the case of Covered Payments made after the Change of
Control Date, shall be the Company's independent certified public accountants
appointed prior to the Change of Control Date, or tax counsel selected by such
accountants (the "Accountants"), such Covered Payments (in whole or in part)
either do not constitute "parachute payments" or represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4) of the Code) in excess of the "base amount", or such "parachute
payments" are otherwise not subject to such Excise Tax, and
(2) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.
(c) APPLICABLE TAX RATES AND DEDUCTIONS. For purposes of determining the
amount of the Tax Reimbursement Payment, the Executive shall be deemed:
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(1) to pay federal income taxes at the highest applicable marginal
rate of federal income taxation for the calendar year in which the Tax
Reimbursement Payment is to be made,
(2) to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in which
the Tax Reimbursement Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from the deduction of such state
or local taxes if paid in such year (determined without regard to limitations
on deductions based upon the amount of the Executive's adjusted gross income),
and
(3) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed because of the
inclusion of the Tax Reimbursement Payment in the Executive's adjusted gross
income.
(d) SUBSEQUENT EVENTS. In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment made, the Executive
shall repay to the Company, at the time that the amount of such reduction in
the Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that has been paid to the Executive or to federal, state
or local tax authorities on the Executive's behalf and that would not have
been paid if such Excise Tax had been applied in initially calculating such
Tax Reimbursement Payment, plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement Payment to be
refunded to the Company has been paid to any federal, state or local tax
authority, repayment thereof shall not be required until actual refund or
credit of such portion has been made to the Executive, and interest payable to
the Company shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to be pursued (and the
method of allocating the expenses thereof) if the Executive's good faith claim
for refund or credit is denied. In the event that the Excise Tax is later
determined by the Accountants to exceed the amount taken into account
hereunder at the time the Tax Reimbursement Payment is made (including, but
not limited to, by reason of any payment the existence or amount of which
cannot be determined at the time of the Tax Reimbursement Payment), the
Company shall make an additional Tax Reimbursement Payment in respect of such
excess (which Tax Reimbursement Payment shall include any interest or penalty
payable with respect to such excess) at the time that the amount of such
excess is finally determined.
(e) DATE OF PAYMENT. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Executive within ten
business days following the payment of the Covered Payment. If the amount of
such Tax Reimbursement Payment (or portion thereof) cannot be finally determined
on or before the date on which payment is due, the Company shall pay to the
Executive an amount estimated in good faith by the Accountants to be the minimum
amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall include interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than 45 calendar days after
payment of the related Covered Payment. In the event that the amount of the
estimated Tax Reimbursement Payment exceeds the amount subsequently determined
to have been due, such excess shall be repaid or refunded pursuant to the
provisions of Section 11(d) above.
12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
Affiliated Companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise prejudice such rights as the Executive may have under
any other agreements with the Company or any Affiliated Companies, including,
but not limited to stock option or restricted stock agreements. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any Affiliated Companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan or program.
13. NOTICE OF TERMINATION FOR GOOD CAUSE. In the event that the Executive
shall in good faith give a Notice of Termination for Good Reason and it shall
thereafter be determined that Good Reason did not take place, the employment of
the Executive shall, unless the Company and the Executive shall otherwise
mutually agree, be deemed to have terminated, at the date of giving such
purported Notice of Termination, by mutual consent of the
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Company and the Executive and, except as provided in the last preceding
sentence, the Executive shall be entitled to receive only those payments and
benefits which he would have been entitled to receive at such date had he
terminated his employment voluntarily at such date under this Agreement.
14. DEFINITIONS.
(a) "Accountants" shall have the meaning set forth in Section 11(b).
(b) "Accrued Obligations" shall mean (i) the Executive's full Base Salary
through the Date of Termination, (ii) the product of the Annual Bonus paid to
the Executive for the last full fiscal year of the Company and a fraction, the
numerator of which is the number of days in the current fiscal year of the
Company through the Date of Termination, and the denominator of which is 365,
(iii) any compensation previously deferred by the Executive (together with any
accrued earnings thereon) and not yet paid by the Company and any accrued
vacation pay for the current year not yet paid by the Company, (iv) any amounts
or benefits owing to the Executive or to the Executive's beneficiaries under the
then applicable employee benefit plans or policies of the Company and (v) any
amounts owing to the Executive for reimbursement of expenses properly incurred
by the Executive prior to the Date of Termination and which are reimbursable in
accordance with the reimbursement policy of the Company described in Section
5(a).
(c) "Affiliated Company" shall mean any company controlling, controlled by
or under common control with the Company.
(d) "Annual Bonus" shall have the meaning set forth in Section 4.
(e) "Base Salary" shall have the meaning set forth in Section 3.
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Cause" shall mean either:
(1) any act that constitutes, on the part of the Executive, (A)
fraud, dishonesty, or a felony and (B) that directly results in material
injury to the Company;
(2) Executive's conduct as the President and Chief Executive Officer
of the Company is grossly inappropriate and demonstrably likely to lead to
material injury to the Company; or
(3) the Executive otherwise materially breaches this Agreement;
provided, however, that in the case of Clause (2) or (3) above, such conduct
shall not constitute Cause unless the Board shall have delivered to the
Executive notice setting forth with specificity (A) the conduct deemed to
qualify as Cause, (B) reasonable action that would remedy such objection, and
(C) a reasonable time (not less than thirty (30) days) within which the
Executive may take such remedial action, and the Executive shall not have
taken such specified remedial action within such specified reasonable time.
(h) A "Change of Control" means:
(1) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the corporation where such acquisition causes such person
to own thirty-five percent (35%) or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this Subsection (A), the following
acquisitions shall not be deemed to result in a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a transaction
that complies with clauses (i), (ii) and (iii) of Subsection (3) below; and
provided further, that if any Person's beneficial ownership of the Outstanding
Company Voting Securities reaches or exceeds thirty-five percent (35%) as a
result of a transaction described in clause (i) or (ii)
9
<PAGE>
above, and such Person subsequently acquires beneficial ownership of
additional voting securities of the Company, such subsequent acquisition shall
be treated as an acquisition that causes such Person to own thirty-five
percent (35%) or more of the Outstanding Company Voting Securities; or
(2) individuals who as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least two-thirds of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(3) the approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Business Combination") or, if
consummation of such Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be,
of the corporation resulting from such Business Combination (including,
without limitation, a corporation that as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Voting Securities, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, thirty-five percent (35%) or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(4) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred for purposes of this Agreement by reason of any actions or events in
which the Executive participates in a capacity other than in his capacity as
executive (or as a director of the Company or a Subsidiary, where applicable).
(i) "Change of Control Date" shall mean the date on which a Change of
Control shall be deemed to have occurred.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(k) "Company Information" means Confidential Information and Trade
Secrets.
(l) "Competing Business" means any business engaging in the exploitation
or development of antimicrobial products.
(m) "Confidential Information" means confidential data and confidential
information relating to the business of the Company (which does not rise to the
status of a trade secret under applicable law) which is or has been disclosed
to Executive or of which Executive became aware as a consequence of or through
his employment with the Company and which has value to the Company and is not
generally known to its competitors and which is designated by the Company as
confidential. Confidential Information shall not include any data or
information that (i) has been voluntarily disclosed to the general public by
the Company, (ii) has been
10
<PAGE>
independently developed and disclosed to the general public by others, or
(iii) otherwise enters the public domain through lawful means.
(n) "Date of Termination" shall have the meaning set forth in Section
6(d).
(o) "Disability" shall mean disability which would entitle the Executive
to receive full long-term disability benefits under the Company's long-term
disability plan on terms substantially similar to those of the long-term
disability plan as in effect on the date of this Agreement.
(p) "Excise Tax" shall have the meaning as set forth in Section 11(a).
(q) "Good Reason" shall mean the occurrence of one of the following events
(provided the Company does not cure such event on a retroactive basis to the
extent possible within thirty days following its receipt of the Executive's
Notice of Termination):
(1) The Executive's title is changed in a materially adverse manner.
(2) The Executive's base salary is reduced for any reason other than
in connection with the termination of his employment.
(3) For any reason other than in connection with the termination of
the Executive's employment, the Company materially reduces any fringe benefit
provided to the Executive under Section 5 below the level of such fringe
benefit provided generally other actively employed similarly situated
executives of the Company. Notwithstanding the foregoing, if the Company
agrees to fully compensate the Executive for any such material reduction for a
period ending on the earlier to occur of (i) the date such fringe benefit is
no longer provided to other actively employed similarly situated executives of
the Company or (ii) four (4) years, then such event shall not constitute Good
Reason.
(4) A change of over fifty (50) miles in the Executive's principal
place of employment in Atlanta, Georgia.
(5) The Company otherwise materially breaches, or is unable to
perform its obligations under this Agreement.
(6) The occurrence of a Change of Control.
Notwithstanding the foregoing, the occurrence of one of the event in Paragraphs
(1) through (6) hereof shall not be considered Good Reason for the Executive's
termination, unless the Executive delivers a Notice of Termination pursuant to
Paragraphs 6(c) and 6(d)(3) hereof, within one hundred eighty (180) days after
the Executive has actual notice of the occurrence of any of the events listed in
Paragraphs (1) through (6) hereof.
(r) "Interest Rate" shall mean the interest rate payable on one year
Treasury Bills in effect on the day that is 30 business days (days other than
Saturday, Sunday or legal holidays in the City of New York) prior to the Date
of Termination.
(s) "Notice of Termination" shall have the meaning as set forth in
Section 6(c).
(t) "Subsidiary" shall mean any majority owned subsidiary of the Company.
(u) "Tax Reimbursement Payment" shall have the meaning set forth in
Section 11(a).
(v) "Trade Secrets" means information of the Company, without regard to
form, including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product or service plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which information (1) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (2) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
11
<PAGE>
15. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall
at any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall be binding upon and inure
to the benefit of the company resulting from such merger or consolidation or to
which such assets have been transferred, and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.
16. NOTICES. Any notice given to either party to this Agreement shall be
in writing, and shall be deemed to have been given when delivered personally or
sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: BioShield Technologies, Inc.
4405 International Boulevard
Suite B109
Norcross, Georgia 30093
Attn: Board of Directors
12
<PAGE>
with a copy to: Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, Georgia 30328
Attn: Raymond L. Moss, Esq.
If to the Executive: Timothy C. Moses
405 North Errol Court, N.W.
Atlanta, Georgia 30327
17. INDEMNIFICATION. The Executive shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Bylaws, to the maximum extent permitted under applicable law.
18. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Executive shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that is satisfied that all requirements of the law affecting its
responsibilities to withhold such taxes have been satisfied.
19. ENFORCEMENT OF RIGHTS. All legal and other fees and expenses,
including, without limitation, any arbitration expenses, incurred by the
Executive in connection with seeking to obtain or enforce any right or benefit
provided for in this Agreement, or in otherwise pursuing any right or claim,
shall be paid by the Company, to the extent permitted by law, provided that the
Executive is successful in whole or in part as to such claims as the result of
litigation, arbitration, or settlement.
In the event that the Company refuses or otherwise fails to make a payment when
due and it is ultimately decided that the Executive is entitled to such payment,
such payment shall increased to reflect an interest equivalent for the period of
delay, compounded annually, equal to four (4) percentage points over the
Interest Rate in effect as of the date the payment was first due.
20. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Georgia. The
captions of this Agreement shall not be part of the provisions hereof, and shall
have no force or effect. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. Except as otherwise specifically provided in this
paragraph, the failure of either party to insist in any instance on the strict
performance of any provision of this Agreement or to exercise any right
hereunder shall not constitute a waiver of such provision or right in any other
instance. The parties hereto consent to the jurisdiction of the state and
federal courts of the State of Georgia located in Fulton County, Georgia, with
respect to any action arising or relating to this Agreement and said courts of
the State of Georgia shall have sole and exclusive jurisdiction with respect to
any such action or related action.
21. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. This Agreement may be
amended at any time by written agreement of both parties, but it shall not be
amended by oral agreement.
IN WITNESSETH WHEREOF, the parties have executed this Agreement on the date
first above written.
BIOSHIELD TECHNOLOGIES, INC. EXECUTIVE:
- ---------------------------------- ------------------------------------
By: By: Timothy C. Moses
13
<PAGE>
EXHIBIT 10.4
BIOSHIELD TECHNOLOGIES, INC
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 11th day of March, 1997, between BioShield
Technologies, Inc., a Georgia corporation, having an address of 1380 W. Marietta
Street, N.W., Atlanta, Georgia 30318, its successors and assigns, ("BIOSHIELD"
or "COMPANY") and WILLIAM O. HITT ("EMPLOYEE") having an address of 1795
Ridgewood Drive, N.E., Atlanta, GA 30307.
WITNESSETH
WHEREAS, BioShield is engaged in the business of the development, manufacture,
marketing, distribution and sale of antimicrobial and biostatic products; and
WHEREAS, BioShield is desirous of obtaining the services of Employee in the
capacity of Industrial and Institutional Business Unit Manager; and Secondary
Retail Manager (i.e., Sam's, Costco, Home Depot and Lowes).
WHEREAS, Employee is desirous of entering into employment as a Business Unit
Manager of BioShield for compensation on a base salary and commission overrides
as per Addendum I;
NOW THEREFORE, for the mutual covenants set forth herein and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is mutually agreed as follows:
ARTICLE 1 - GENERAL PROVISIONS
A. GENERAL COVENANTS AND REPRESENTATIONS - BIOSHIELD
1. The attached letter of offer and these terms and conditions become an
agreement only when accepted and signed by both parties.
2. BioShield agrees to compensate Employee for a base salary of $65,000.00
per annum. The incentive based portion of compensation shall be computed and
payable pursuant to the provisions of Addendum 1, or as subsequently revised.
Employee will receive his/her compensation in accordance with the Company's
regular practices.
3. BioShield shall provide to Employee any medical or dental insurance
otherwise available to the employees of BioShield in general, on the same terms
and conditions as such insurance is provided, if at all, to other employees of
BioShield. Employee acknowledges that all benefits are subject to change.
(Current insurance provided by BioShield after 90 days service is 50% of the
employee cost.)
4. Employee shall be entitled to vacations and holidays as generally
available to the employees of BioShield.
<PAGE>
B. GENERAL COVENANTS AND REPRESENTATIONS - EMPLOYEE
1. During the Term of this Agreement, Employee shall use his/her best efforts
to perform as a Business Unit Manager for BioShield including all duties
required in furtherance of his/her position or as are assigned to him from
time to time by an officer of BioShield and as outlined in Addendum I.
Employee shall make his/her best efforts to meet the goals identified in
Addendum Number 1 attached hereto or as subsequently modified.
2. Employee shall diligently and faithfully devote his/her entire time,
energy, skill, and best efforts during usual business hours to promote
BioShield's business and affairs and perform his/her duties under this
Agreement. Employee shall at all times act so as to advance the best interests
of BioShield, and shall not undertake or engage in any other business activity
or continue or assume any other business affiliations which conflict or
interfere with the performance of his/her services hereunder without the prior
written consent of BioShield.
3. During the Term of this Agreement, Employee shall be governed by and be
subject to all of BioShield's rules and regulations whether written or oral,
which are applicable to BioShield employees in general, and agrees to render
his/her duties at such place and at such times as BioShield shall in good faith
require.
4. Employee agrees to domestic and foreign travel as required in pursuit of
the Employee's responsibilities. Employee acknowledges that in performance of
his/her duties he will be required to work with existing clients, contact
potential clients, and present workshops or informational exchanges. Employee
further acknowledges that he may be required to travel to and possibly spend
significant periods of time at clients' facilities.
5. It is expressly agreed that Employee in performing services pursuant to
this Agreement is not one of BioShield's officers and has no authority to commit
or to bind BioShield under any contract, obligation or liability, or to obligate
BioShield for any expenses, including without limitation, expenses for materials
and services.
6. Employee acknowledges and understands that BioShield shall withhold
federal and state income taxes and FICA from Employee's salary hereunder, and
BioShield shall issue to Employee a federal and state Form W-2 with respect to
such fees and withholdings at the end of each calendar year during which
Employee is employed.
7. Employee agrees not to discuss his/her fees for service, or the fee
BioShield charges its clients, with any persons other than designated BioShield
management personnel.
ARTICLE II - PROPRIETARY INFORMATION AND RESTRICTIVE COVENANTS
NECESSITY OF RESTRICTIVE COVENANTS. Employee agrees that while working under
this Agreement, he will learn and come in contact with certain Trade Secrets and
other Proprietary Information and will develop certain relationships with
BioShield's clients and employees which BioShield has expended significant time
and funds to create, perfect, maintain and protect. Employee acknowledges that
his/her agreement not to solicit BioShield's clients or employees is necessary
to protect BioShield's investment in its Trade Secrets, Proprietary Information,
client base and goodwill.
A. NONDISCLOSURE OF PROPRIETARY INFORMATION AND TRADE SECRETS
1. All information relating to BioShield's business shall be safeguarded and
treated as confidential by Employee, in compliance with paragraphs 2-4
hereunder. To the extent, however, that such information is publicly available
or has here to fore been made public by BioShield, Employee shall bear no
responsibility for its disclosure, inadvertent or otherwise.
2. TRADE SECRETS AND PROPRIETARY INFORMATION. "Trade Secrets" means
information related to BioShield or its affiliates (1) which derives economic
value, actual or potential, from not being generally known to or readily
ascertainable by other persons who can obtain economic value from its disclosure
or use; and (2) which is the
<PAGE>
subject of efforts that are reasonable under the circumstances to maintain its
secrecy. Assuming the foregoing criteria are met, Trade Secrets include, but
are not limited to, technical and non-technical data related to computer
programming methods and procedure, application development and, in-house
developed protocols, company rules and regulations, the formulas, patterns,
designs, compilations, programs, methods, techniques, drawings, processes,
finances, lists of actual or potential customers and suppliers, and existing
and future products of BioShield or its affiliates. Proprietary Information
includes the foregoing, as well as methods of doing business, sales, service,
or distribution techniques, selling prices, and the names and addresses of
present or prospective customers. Proprietary Information also includes
information which has been disclosed to BioShield or its affiliates by a
client or other third party and which BioShield or its affiliates are
obligated to treat as confidential.
3. All Trade Secrets and Proprietary Information and all physical embodiments
thereof received or developed by the Employee while employed by BioShield are
confidential to and will remain the sole and exclusive property of BioShield.
Except to the extent necessary to perform the duties assigned to him by
BioShield, Employee will hold such Trade Secrets or Proprietary Information in
trust and strictest confidence. Employee may in no event take any action
causing or fail to take the action necessary in order to prevent any Trade
Secrets or Proprietary Information disclosed to or developed by Employee to lose
its character or cease to qualify as a Trade Secret or Proprietary Information.
Employee will not, either during or for two (2) years subsequent to Employee's
employment with BioShield, use, reproduce, distribute, disclose or otherwise
disseminate the any Proprietary Information or any physical embodiments thereof
4. Upon request by BioShield, and in any event upon termination of the
employment of Employee with BioShield for any reason, Employee will promptly
deliver to BioShield all property belonging to BioShield, including, without
limitation, all Trade Secrets or Proprietary Information (and all physical
embodiments thereof) then in his/her custody, control or possession.
B. RESTRICTIVE COVENANTS
1. NON-DISPARAGEMENT. Employee recognizes and acknowledges that the success
of BioShield's business is largely dependent upon and attributable to the
goodwill which BioShield has, at great expense, established over a period of
years. Therefore, Employee will not, during the term of his/her employment, and
for one (1) year thereafter, disparage BioShield, its officers, employees,
products, or methods and techniques of doing business. Employee hereby agrees
to indemnify and hold BioShield harmless from and against any and all losses,
claims, damages, or expenses, including attorneys' fees, arising from or growing
out of disparagement in violation of this paragraph.
2. NON-SOLICITATION AGREEMENT.
(A) NON-SOLICITATION OF CUSTOMERS. Employee agrees that while working
pursuant to this Agreement and for a period of one (1) year following the
termination or expiration of this Agreement ("Non-solicitation Period"),
Employee will not, for any reason, directly or indirectly, for himself/herself
or on behalf of any person, partnership, corporation or other entity, either
as an employee, officer, director, partner, shareholder, agent, consultant, or
independent contractor:
(i) engage in any business activity as a Salesman for or provide any
consulting service to any person or entity who was a client or
actively sought prospective client of BioShield during the term of
this Agreement; and
(ii) for whom Employee provided services pursuant to this Agreement or with
whom Employee had regular, meaningful contact.
Employee further agrees that with respect to such clients identified herein he
will not request or advise any such customers of BioShield to withdraw from or
cancel any of their business with BioShield.
<PAGE>
(B) NON-SOLICITATION OF EMPLOYEES. Employee agrees that during the Non-
solicitation Period he will not, directly or indirectly, for himself/herself
or on behalf of any other person, partnership, corporation, or other entity:
hire, solicit, interfere with or endeavor to entice away from BioShield any
employee of BioShield.
3. NON-COMPETITION AGREEMENT. Employee agrees that while working pursuant to
this Agreement and for a period of one (1) year following the termination or
expiration of this Agreement ("Non-competition Period"), Employee will not, for
any reason, directly or indirectly, for himself/herself or on behalf of any
person , partnership, corporation or other entity, engage in any business
activity as a Salesman for or provide consulting services to any person,
corporation, partnership or other entity, directly or indirectly, which is in
competition with BioShield in the specific geographic territory in which
Employee actually performed services for BioShield during the term of this
Agreement. At the time of the execution of this Agreement, such specific
geographic territory included: The World. The parties acknowledge that such
geographic location is subject to change and will include all territory in which
Employee actually performed services for BioShield. For the purposes of this
paragraph "competition" shall mean providing antimicrobial products to
businesses, governmental agencies, academic institutions and health care
facilities.
4. TOLLING OF NON-DISPARAGEMENT, NON-COMPETITION AND NON-SOLICITATION PERIOD.
If BioShield or its successors in interest shall make application to a court of
competent jurisdiction for injunctive relief, then the one year periods
specified herein shall be tolled from the time of application for injunctive
relief until the date of final injunctive relief, including all periods of
appeal.
5. IRREPARABLE INJURY / INJUNCTIVE RELIEF. Employee acknowledges that a
breach of any of the restrictive covenants provided in Article II of this
Agreement will harm BioShield's client base and goodwill and will inhibit the
operation of its business thereby, giving rise to irreparable injury to
BioShield which is not adequately compensable in damages or at law.
Accordingly, Employee agrees that BioShield, its successor and assigns may
obtain injunctive relief against the breach or threatened breach of the
foregoing provisions, in addition to any other legal remedies which may be
available to it under this Agreement. Employee further acknowledges that in the
event of termination or expiration of this Agreement, his/her knowledge,
experience and capabilities are such that he can obtain contracts and work in
business activities which are of a different or non-competing nature than those
performed in the course of this Agreement and that the enforcement of a remedy
hereunder by way of injunction will not prevent Employee from earning a
reasonable livelihood.
6. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he violates
the provisions of Article II of this Agreement, BioShield shall be entitled to
an accounting and repayment of all profits, compensation, commissions,
remuneration or other benefits that he has realized and/or may realize as a
result of or in connection with any such violation. These remedies shall be in
addition and not in limitation of any other rights or remedies to which
BioShield is or may be entitled at law, in equity or under this Agreement.
7. SEVERABILITY AND SCOPE OF RESTRICTIVE COVENANTS. If in any judicial
proceeding, a court shall refuse to enforce any of the Restrictive Covenants
provided in Article II of this Agreement, whether because the time limit is too
long or because the restrictions contained herein are more extensive (whether as
to geographic area, scope of business or otherwise) than is necessary to protect
the business and goodwill of BioShield, it is expressly understood and agreed
between the parties hereto that this Agreement is deemed modified to the extent
necessary to permit this Agreement to be enforced in any such proceedings, as
long as such modifications shall not be unreasonable, arbitrary or against
public policy. Alternatively, if any provision of this Agreement is found to be
unenforceable as written, or so modified, then, and in that event, such
provision shall be automatically deleted from this Agreement, and the balance of
this Agreement shall remain in full force and effect.
8. COSTS OF ENFORCEMENT. In the event either party initiates action to
enforce his/her or its rights hereunder, the substantially prevailing party
shall recover from the substantially non-prevailing party its reasonable
expenses, court costs and reasonable attorneys' fees, whether suit be brought or
not. As used herein, expenses, court costs and attorneys' fees include
expenses, court costs and attorneys' fees incurred in any appellate proceeding.
All such expenses shall bear interest at the rate of Twelve Percent (12%) per
annum from the date the prevailing party pays such expenses until the date the
non-prevailing party repays such expenses. Expenses incurred in enforcing this
paragraph
<PAGE>
shall be covered by this paragraph.
ARTICLE III - DURATION AND TERMINATION
1. The term of this Agreement is one (1) year from the date of its execution,
and within the first year, is only terminable for "cause" as outlined below.
Termination after the first full year shall be at BioShield's sole discretion.
This Agreement shall automatically renew at the end of each one (1) year period
until it is terminated by one or both of the parties hereto.
<PAGE>
1. Either party may terminate this Agreement for "cause" within the first
year of service by giving two weeks notice in writing. Termination is
effective two weeks from receipt of such notice by either party. In the
event of termination by either party, BioShield, at its sole option, may
require the Employee to use any accrued vacation as a portion of the two
week notice period.
Cause is defined as: 1) Dereliction of duty, fraud, embezzlement,
wanton misconduct, malice and any violation of article II.
ARTICLE IV - MISCELLANEOUS
1. COPYRIGHTS AND PATENTS. Employee agrees that all property rights,
including but not limited to trademarks, copyrights and patents, in respect of
every invention, product, method, system, program or any intellectual property
or trade secret created by him during the course of or related to his/her
employment shall belong to BioShield and all such rights are hereby assigned to
BioShield which shall be exclusively entitled to the property therein.
2. This Agreement shall be governed by the laws of the State of Georgia.
3. This Agreement sets forth the entire agreement between the parties and
supersedes all contracts, proposals, oral or written, and all other
communications between the parties with respect to the subject matter hereof.
4. This Agreement can only be modified, amended or supplemented by the
express written agreement of both parties.
5. The obligations of Employee which arise under this Agreement shall survive
the termination of this Agreement, regardless of the manner, fashion or
circumstance surrounding the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Employee: BIOSHIELD TECHNOLOGIES, INC.,
a Georgia corporation
Signed: ___________________________ Signed: _______________________________
Timothy C. Moses
Printed Name: _______________________________________ Title: President
Address: ___________________________ Date: _________________________________
___________________________
Telephone: ________________________________________
Soc. Sec. #: _______________________ AGREEMENT NO.: _________________________
<PAGE>
EXHIBIT 10.5
COVER PAGE
The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein.
LANDLORD: WEEKS REALTY, L.P., a Georgia limited partnership, with its
principal office located at 4497 Park Drive, Norcross, Georgia
30093
TENANT: BIO-SHIELD TECHNOLOGIES, INC., a corporation duly organized and
existing under the laws of the State of Georgia.
LEASED
PREMISES: (a) Address: 4405 International
(b) Suite: B-109
(c) Rentable Area: 6,885 square feet
(d) Pro Rata Share:____________________________
(e) Project:___________________________________
TERM: Three (3) years
COMMENCEMENT DATE: May 1, 1997
TERMINATION DATE: April 30, 2000
BASE RENT
(PER YEAR): $48,195.00
BASE YEAR: 1997
SECURITY DEPOSIT: $4,262.96.00 (?? check with Bruce)
TENANT'S AGENT: ________________
<PAGE>
<TABLE>
<CAPTION>
_______________________________
LEASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
<S> <C>
1 LEASED PREMISES..................... 1
2 TERM................................ 1
3 RENTAL.............................. 1
4 DELAY IN DELIVERY................... 3
5 USE OF LEASED PREMISES.............. 3
6 UTILITIES........................... 4
7 ACCEPTANCE OF PREMISES.............. 4
8 ALTERATIONS, MECHANICS' LIENS....... 4
9 QUIET CONDUCT/QUIET ENJOYMENT....... 5
10 FIRE INSURANCE, HAZARDS............. 5
11 LIABILITY INSURANCE................. 6
12 INDEMNIFICATION..................... 6
13 WAIVER OF CLAIMS.................... 7
14 REPAIRS............................. 7
15 SIGNS, LANDSCAPING.................. 8
16 ENTRY BY LANDLORD................... 8
17 TAXES AND INSURANCE INCREASE........ 8
18 ABANDONMENT......................... 10
19 DESTRUCTION......................... 10
20 ASSIGNMENT AND SUBLETTING........... 11
21 INSOLVENCY OF TENANT................ 11
22 BREACH BY TENANT.................... 12
23 ATTORNEYS' FEES/COLLECTION CHARGES.. 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
24 CONDEMNATION...................................... 13
25 NOTICES........................................... 13
26 WAIVER............................................ 14
27 EFFECT OF HOLDING OVER............................ 14
28 SUBORDINATION..................................... 14
29 ESTOPPEL CERTIFICATE.............................. 15
30 PARKING........................................... 15
31 MORTGAGEE PROTECTION.............................. 15
32 PROTECTIVE COVENANTS.............................. 16
33 GOVERNMENTAL REGULATIONS.......................... 16
34 RELOCATION........................................ 16
35 BROKERAGE COMMISSIONS............................. 16
MISCELLANEOUS PROVISIONS.............................. 17
</TABLE>
EXHIBITS:
EXHIBIT "A": Site Plan
EXHIBIT "B": Floor Plan of the Leased Premises
EXHIBIT "C": Tenant's Acceptance of Premises
EXHIBIT "D": Subordination, Non-disturbance and
Attornment Agreement
EXHIBIT "E": Special Stipulations
EXHIBIT "F": Guaranty
<PAGE>
STATE OF GEORGIA
GWINNETT COUNTY
This Lease Agreement is made this _____ day of April, 1997, by and between
WEEKS REALTY, L.P., a Georgia limited partnership, hereinafter referred to as
"Landlord", and BIO-SHIELD TECHNOLOGIES, INC., a Georgia corporation,
hereinafter referred to as "Tenant".
LEASED PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as approximately 6,885 rentable square feet of office/warehouse at 4405
International, Suite B-109, Norcross, Georgia 30093, Gwinnett County, Building
____, in _______________________, as shown on the plan attached hereto as
Exhibit "A" and by reference incorporated herein. The building in which the
Leased Premises are located is herein referred to as the "Building"; and the
real property on which the building is situated is herein referred to as the
"Land".
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of Three (3)
years, commencing on May 1, 1997, and continuing until midnight on April 30,
2000.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to Landlord,
without offset or abatement, the sum of Forty-eight Thousand One Hundred Ninety-
five and 00/100 Dollars ($48,195.00) per year, payable in monthly installments
each in the amount of Four Thousand Sixteen and 25/100 ($4,016.25) Dollars on or
before the first day of each calendar month beginning on May 1, 1997 and
thereafter for the remainder of the term, together with any other additional
rental as hereinafter set forth. Tenant shall pay interest at a rate of twelve
percent (12%) per annum on all late payments of rent. If the Lease shall
commence on any date other than the first day of a calendar month, or end on any
date, other than the last day of a calendar month, rent for such month shall be
prorated. Tenant has deposited with Landlord, upon delivery of this Lease
Agreement, an amount equal to _____________________________________ ($______)
Dollars, half of which, or ________________________________ ($_______) Dollars,
is to be applied as first month's rental, the other half, or
_____________________ ($__________) Dollars, shall be held as a refundable
security deposit. Landlord may apply all or any part of the security deposit to
cure any default by Tenant hereunder and Tenant shall promptly restore to the
security deposit all amounts so applied upon invoice therefor. If Tenant shall
fully perform each provision of this Lease, any portion of the security deposit
which has not been appropriated by Landlord in accordance with the provisions
hereof shall be returned to Tenant, without interest, within thirty (30) days
after the expiration of the term of this Lease.
3.02 The rental provided in paragraph 3.01 "Rental" above, includes the
construction of tenant improvements on the basis set forth in the plans and
specifications attached, or to be attached, hereto in Exhibit "B".
3.03 In addition to the base rental, Tenant agrees to pay Landlord as
additional rental, its pro rata share of the amounts described in subparagraphs
(a) and (b) below. Each year during the term hereof, Landlord shall give Tenant
written notice of its estimate of the amount of common area maintenance charges
and common area utility charges (collectively "Charges") for the Leased Premises
for the calendar year. Tenant shall, thereafter, during that calendar year, pay
to Landlord one-twelfth (1/12) of the amount set forth in said statement at such
time as its monthly installments of base rental hereunder are due and payable.
At such time as Landlord is able to determine the actual Charges for such
calendar year, Landlord shall deliver to Tenant a statement thereof and in the
event the estimated Charges differ from the actual Charges, any adjustment
necessary shall be made to additional rental payments next coming due under this
paragraph.
(a) Landlord agrees to maintain those areas around the Building and in the
Project, including parking areas, planted areas, signs and landscaped areas
which are from time to time designated by Landlord. Tenant agrees to pay to
Landlord as additional rental its pro rata share of all ground maintenance
charges and other common area charges and expenses for the Building and the Land
("CAM Charges"). The term "grounds maintenance" shall include, without
limitation, all landscaping, planting, lawn and grounds care, all repairs and
maintenance to the grounds, signs and other common areas around the Building and
in the Project and to all sidewalks, driveways, loading areas and parking areas.
CAM Charges shall not include items of a capital nature.
(b) In the event any utilities furnished to the Building or the Leased
Premises are not separately metered, Tenant shall pay to Landlord, as additional
rental, Tenant's pro rata share of the gas, water, electricity, fuel, irrigation
costs, light and heat, garbage collection services and for all other sanitary
services rendered to the Leased Premises used by Tenant. Tenant's prorated
amount shall be determined on the basis of the size of the Leased Premises,
unless Landlord determines that Tenant's use of the Leased Premises justifies a
disproportionate allocation of utility costs to Tenant.
3.04 Tenant agrees to pay as additional rent to Landlord, upon demand, its
pro rata share of any utility
<PAGE>
surcharges, or any other costs levied, assessed or imposed by, or at the
direction of, or resulting from statutes or regulations, or interpretations
thereof, promulgated by any Federal, State, Municipal or local governmental
authorities in connection with the use or occupancy of the Leased Premises.
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever, cannot deliver possession of
the Leased Premises to Tenant at the commencement of the term of this Lease,
this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant
for any loss or damage resulting therefrom, but in that event there shall be a
proportionate reduction of rent covering the period between the commencement of
the term and the time when Landlord can deliver possession. If delay is longer
than three (3) months, Landlord will provide Tenant such space (not exceeding in
area the Leased Premises) as Landlord may have available, until the Leased
Premises can be completed, at no charge to Tenant. The term of this Lease shall
be extended by such delay.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, testing, warehousing and distribution, showroom and
offices and for no other purpose or purposes, without Landlord's prior written
consent. Tenant shall promptly comply at its sole expense with all laws,
ordinances, orders, and regulations affecting the Leased Premises and their
cleanliness, safety, occupation and use. Tenant shall not do or permit anything
to be done in or about the Leased Premises that will in any way increase the
fire insurance upon the building. Tenant will not perform any act or carry on
any practices that may injure the building or be a nuisance or menace to tenants
of adjoining premises. Tenant shall not cause, maintain or permit any outside
storage on or about the Leased Premises, including pallets or other refuse. The
rear loading areas of the Tenant's unit must be clean and unobstructed. On or
before the Commencement Date, Tenant shall take possession of, and, thereafter,
continuously occupy the Leased Premises during the term of this Lease, and
operate thereon the normal business operations of Tenant.
5.02 Tenant shall, at Tenant's sole cost and expense, comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use and
occupancy of, the Leased Premises. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Project any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local
laws and the regulations adopted under these acts. If any lender or
governmental agency shall ever require testing to ascertain whether or not there
has been any release of hazardous materials, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand as additional charges if
such requirement applies to the Leased Premises. In addition, Tenant shall
execute affidavits, representations and the like from time to time at Landlord's
request concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Leased Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the expiration or earlier termination of the
lease term.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in the
supply of any utilities. Tenant agrees that it will not install any equipment
which will exceed or overload the capacity of any utility facilities and that if
any equipment installed by Tenant shall require additional utility facilities,
the same shall be installed by Tenant at Tenant's expense in accordance with
plans and specifications approved in writing by Landlord. Tenant shall be
solely responsible for and shall pay all charges for use or consumption of
sanitary sewer, water, gas, electricity and any other utility services. In the
event Landlord determines that it is advisable to separately meter any utility
services provided to the Leased Premises, Landlord shall have the right to
install a sub-meter and bill Tenant for the actual cost thereof, which shall be
paid to Landlord within fifteen (15) days following billing.
ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant. Upon delivery of
possession of the Leased Premises to Tenant, Tenant agrees to execute and
deliver to Landlord a Tenant's Acceptance of Premises, in the form attached
hereto as Exhibit "C".
ALTERATIONS, MECHANICS' LIENS
8.01 Alterations may not be made to the Leased Premises without prior
written consent of Landlord, and
<PAGE>
any alterations of the Leased Premises excepting movable furniture and trade
fixtures shall at Landlord's option become part of the realty and belong to
Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord gives
written consent to such alterations, at Landlord's option, Tenant shall contract
with a contractor approved by Landlord for the construction of such alterations.
8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions of
this Lease, and the Leased Premises are not damaged by such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear only excepted.
Tenant shall keep the Leased Premises, the building and property in which the
Leased Premises are situated free from any liens arising out of any work
performed for, materials furnished to, or obligations incurred by Tenant. All
such work provided for above, shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant shall give Landlord written
notice five (5) days prior to employing any laborer or contractor to perform
work resulting in an alteration of the Leased Premises so that Landlord may post
a notice of non-responsibility.
QUIET CONDUCT/QUIET ENJOYMENT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.
9.02 So long as Tenant is not in default in the payment of rent, or other
charges or in the performance of any of the other terms, covenants, or
conditions of the Lease, Tenant shall not be disturbed by Landlord or anyone
claiming by, through or under Landlord in Tenant's possession, enjoyment, use
and occupancy of the Leased Premises during the original or any renewal term of
the Lease or any extension or modification thereof.
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the Leased Premises,
nor acts done which might increase the existing rate of insurance upon the
building or cause the cancellation of any insurance policy covering the
building, or any part thereof, nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the Standard form of fire insurance policies. Tenant shall, at its sole cost
and expense, comply with any and all requirements pertaining to the Leased
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance, covering the
Leased Premises, building and appurtenances.
10.02 Tenant shall maintain in full force and effect on all of its
inventory, fixtures and equipment in the Leased Premises a policy or policies of
fire and extended coverage insurance with standard coverage endorsement to the
extent of at least eighty percent (80%) of their insurable value. During the
term of this Lease the proceeds from any such policy or policies of insurance
shall be used for the repair or replacement of the fixtures, and Landlord will
sign all documents necessary or proper in connection with the settlement of any
claim or loss by Tenant. Landlord will not carry insurance on Tenant's
possessions. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect.
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord public liability insurance for the benefit of
Landlord and Tenant jointly against liability for bodily injury and property
damage in the amount of not less than Three Million Dollars ($3,000,000.00) in
respect to injuries to or death of more than one person in any one occurrence,
in the amount of not less than One Million Dollars ($1,000,000.00) in respect to
injuries to or death of any one person, and in the amount of not less than One
Million Dollars ($1,000,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably indicated by
circumstances from time to time existing. Tenant shall furnish Landlord with a
certificate of such policy within thirty (30) days of the commencement date of
this Lease and whenever required shall satisfy Landlord that such policy is in
full force and effect. Such policy shall name Landlord as an additional insured
and shall be primary and non-contributing with any insurance carried by
Landlord. The policy shall contain a contractual liability endorsement. The
policy shall further provide that it shall not be canceled or altered without
twenty (20) days prior written notice to Landlord.
INDEMNIFICATION
12.01 Tenant shall indemnify and hold harmless Landlord against and from
any and all claims arising from Tenant's use of the Leased Premises (other than
those arising solely from negligence of Landlord or its agents or employees), or
the conduct of its business or from any activity, work, or thing done, permitted
or suffered by the Tenant in or about the Leased Premises, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be
<PAGE>
performed under the terms of this Lease, or arising from any act, neglect,
fault or omission of the Tenant, or of its agents or employees, and from and
against all costs, attorney's fees, expenses and liabilities incurred in or
about such claim or any action or proceeding brought relative thereto and in
case any action or proceeding be brought against Landlord by reason of any
such claim, Tenant upon notice from Landlord shall defend the same at Tenant's
expense by counsel, chosen by Tenant and who is reasonably acceptable to
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in or about the
Leased Premises from any cause whatsoever except that which is caused by the
failure of Landlord to observe any of the terms and conditions of this Lease
where such failure has persisted for an unreasonable period of time after
written notice of such failure, and Tenant hereby waives all claims in respect
thereof against Landlord.
12.02 Landlord shall indemnify Tenant and hold Tenant harmless against and
from all claims arising from the negligence or willful misconduct of Landlord,
its agents, employees or contractors, with respect to the Leased Premises that
is not insured against or required to be insured against under the insurance
policies Tenant is required to maintain under this Lease.
12.03 The obligations of Landlord and Tenant under this paragraph arising
by reason of any occurrence taking place during the term of this Lease shall
survive the termination or expiration of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered to
Landlord, hereby waives all claims against Landlord for damages to goods, wares
and merchandise in, upon or about the Leased Premises and for injury to Tenant,
its agents, employees, invitees, or third persons in or about the Leased
Premises from any cause arising at any time.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls and
roofs which Landlord agrees to repair) including by way of illustration and not
by way of limitation all windows, and skylights, doors, any store front and the
interior of the Leased Premises, including all plumbing, heating, air
conditioning, sewer, electrical systems and all fixtures and all other similar
equipment serving the Leased Premises in good and sanitary order, condition, and
repair. Tenant shall be responsible for all pest control within the Leased
Premises, including, but not limited to the eradication of any ants or termites
should infestation be observed during the term of the Lease. Tenant shall, at
its sole cost, keep and maintain all utilities, fixtures and mechanical
equipment used by Tenant in good order, condition, and repair. All windows
shall be washed and cleaned as often as necessary to keep them clean and free
from smudges and stains. In the event Tenant fails to maintain the Leased
Premises as required herein or fails to commence repairs (requested by Landlord
in writing) within thirty (30) days after such request, or fails diligently to
proceed thereafter to complete such repairs, Landlord shall have the right in
order to preserve the Leased Premises or portion thereof, and/or the appearance
thereof, to make such repairs or have a contractor make such repairs and charge
Tenant for the cost thereof as additional rent, together with interest at the
rate of twelve percent (12%) per annum from the date of making such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations, and
exterior walls of the Leased Premises except repairs rendered necessary by the
negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of Leased Premises and shall be under no obligations to
inspect said Leased Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to it which Landlord is required to
repair, and Landlord shall move with reasonable diligence to repair such item.
Failure to report such defects shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such defects.
14.03 Tenant shall obtain upon occupancy and keep current during the lease
term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall
be between Tenant and a dealer-authorized company acceptable to Landlord, and
shall at a minimum provide for an equipment check and tune-up service each
spring and fall, and filter and lubrication service every three months. A copy
of said contract shall be provided to Landlord, as well as any modification,
extension, renewal or replacement thereof.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and Tenant
shall make no alterations or additions to the landscaping. Landlord shall have
the right to approve the placing of signs and the size and quality of the same.
Tenant shall place no exterior signs on the Leased Premises without the prior
written consent of Landlord. Any signs not in conformity with the Lease may be
immediately removed by Landlord.
ENTRY BY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times for the purpose of inspecting the same
or for the purpose of maintaining the building, or for the purpose of making
repairs, alterations, or additions to any portion of the building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, or for the purpose of posting notices of
<PAGE>
non-responsibility for alterations, additions, or repairs, or for the purpose
of showing the Leased Premises to prospective tenants, or placing upon the
building any usual or ordinary "for sale" signs, without any rebate of rent
and without any liability to Tenant for any loss of occupation or quiet
enjoyment of the Leased Premises thereby occasioned; and shall permit Landlord
at any time within six (6) months prior to the expiration of this Lease, to
place upon the Leased Premises any usual or ordinary "to let" or "to lease"
signs. For each of the aforesaid purposes, Landlord shall at all times have
and retain a key with which to unlock all of the exterior doors about the
Leased Premises.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency any and all taxes, assessments,
license fees, and public charges levied, assessed, or imposed and which become
payable during the Lease upon Tenant's fixtures, furniture, appliances and
personal property installed or located in the Leased Premises.
17.02 Tenant shall pay, as additional rental during the term of this Lease
and any extension or renewal thereof, the amount by which all taxes (as herein
defined) for each tax year exceeds all taxes for 199__. In the event the Leased
Premises are less than the area of the entire property assessed for such taxes
for any such tax year, then the tax for any such year applicable to the Leased
Premises shall be determined by proration on the basis that the rentable floor
area of the Leased Premises bears to the rentable floor area of the entire
property assessed. The term "taxes" shall include all ad valorem taxes, special
assessments, and governmental charges assessed against the Building or the Land;
and such term shall also include any reasonable expenses, including fees and
disbursements of attorneys, tax consultants, arbitrators, appraisers, experts
and other witnesses, incurred by Landlord in contesting any taxes or the
assessed valuation of all or any part of the Building or the Land. If the final
year of the lease term fails to coincide with the tax year, then any excess for
the tax year during which the term ends shall be reduced by the pro rata part of
such tax year beyond the lease term. The agent's commission shall not apply to
any such additional rental resulting from the provisions of this paragraph.
17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so-called sales tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes of
Landlord shall be payable by Tenant). Such taxes shall be due and payable at
the same time as and in addition to each payment of rent.
17.04 Commencing in the year 199__ and during each remaining year of the
lease term or any extension or renewal thereof, in the event that the insurance
premiums payable by the Landlord for insurance coverage on the property are
increased, whether such increase is due to an increase in the valuation of the
building, or in the applicable rate of insurance, then Tenant agrees to pay
Landlord as additional rental, Tenant's pro rata share of the increase in said
insurance premiums over the base amount paid in the year 199__. The term
"insurance" shall include all fire and extended coverage insurance on the
Building and all liability insurance coverage on the common areas of the
Building, and the grounds, sidewalks, driveways and parking areas on the Land,
together with such other insurance coverages, including, but not limited to,
rent interruption insurance, as are from time to time obtained by Landlord.
Tenant's pro rata share shall be based on the square footage of the Leased
Premises leased to Tenant (as specified in paragraph 1.01 hereof) compared to
the total square footage of leasable space in the entire building. If during
the final year of the Lease, or any extension or renewal thereof, the term does
not coincide with the year upon which the insurance rate is determined, the
increase in premiums for the portion of that year shall be prorated according to
the number of months during which Tenant is in possession of the Leased
Premises.
17.05 On or about January 1 of each calendar year during the term of this
Lease, Landlord shall provide Tenant with a good faith estimate of the amount by
which taxes and insurance will exceed the base amounts during such calendar
year. Tenant shall thereafter pay one-twelfth (1/12) of its pro rata share of
such increase at such time as its monthly installments of base rental hereunder
are due and payable. When the actual bills have been received by Landlord,
Landlord shall notify Tenant of the actual taxes and insurance for such calendar
year. If Tenant has paid more than it would have paid had the actual bills been
known, Landlord shall credit such excess against the next additional rent
payments coming due; if Tenant has not paid enough, Tenant shall pay the
remainder to Landlord within fifteen (15) days following receipt of a statement
from Landlord.
17.06 The provisions of paragraphs 17.01, 17.02, 17.03, 17.04 and 17.05
hereof shall survive the expiration or earlier termination of this Lease.
ABANDONMENT
18.01 Tenant shall not vacate nor abandon the Leased Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or surrender
the Leased Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Leased Premises shall, at
the option of the Landlord, be deemed abandoned and be and become the property
of Landlord.
DESTRUCTION
19.01 If the Leased Premises or any portion thereof are destroyed by
storm, fire, lightning, earthquake or other casualty, Tenant shall immediately
notify Landlord. In the event the Leased Premises cannot, in Landlord's
judgment, be restored within one hundred eighty (180) days of the date of such
damage or destruction, this Lease
<PAGE>
shall terminate as of the date of such destruction, and all rent and other
sums payable by Tenant hereunder shall be accounted for as between Landlord
and Tenant as of that date. Landlord shall notify Tenant within thirty (30)
days of the date of the damage or destruction whether the Leased Premises can
be restored within one hundred eighty (180) days. If this Lease is not
terminated as provided in this Paragraph, Landlord shall, to the extent
insurance proceeds payable on account of such damage or destruction are
available to Landlord (with the excess proceeds belonging to Landlord), within
a reasonable time, repair, restore, rebuild, reconstruct or replace the
damaged or destroyed portion of the Leased Premises to a condition
substantially similar to the condition which existed prior to the damage or
destruction. Provided, however, Landlord shall only be required to repair,
restore, rebuild, reconstruct and replace the Landlord's Work shown on Exhibit
"B", and Tenant shall, at its sole cost and expense, upon completion of the
Landlord's Work, repair, restore, rebuild, reconstruct and replace, as
required, any and all improvements installed in the Leased Premises by Tenant
and all trade fixtures, personal property, inventory, signs and other contents
in the Leased Premises, and all other repairs not specifically required of
Landlord hereunder, in a manner and to at least the condition existing prior
to the damage. Tenant's obligation to pay Base Rent shall abate until Landlord
has repaired, restored, rebuilt, reconstructed or replaced the Leased
Premises, as required herein, in proportion to the part of the Leased Premises
which are unusable by Tenant. If the damage or destruction is due to the act,
neglect, fault or omission of Tenant, there shall be no rent abatement except
to the extent of rent loss insurance. In the event of any dispute between
Landlord and Tenant relative to the provisions of this paragraph, they may
each select an arbitrator, the two arbitrators so selected shall select a
third arbitrator and the three arbitrators so selected shall hear and
determine the controversy and their decision thereon shall be final and
binding on both Landlord and Tenant who shall bear the cost of such
arbitration equally between them. Landlord shall not be required to repair any
property installed in the Leased Premises by Tenant. Tenant waives any right
under applicable laws inconsistent with the terms of this paragraph and in the
event of a destruction agrees to accept any offer by Landlord to provide
Tenant with comparable space within the project in which the Leased Premises
are located on the same terms as this Lease. Notwithstanding the provisions of
this paragraph, if any such damage or destruction occurs within the final two
(2) years of the term hereof, then Landlord, in its sole discretion, may,
without regard to the aforesaid 180-day period, terminate this Lease by
written notice to Tenant.
ASSIGNMENT AND SUBLETTING
20.01 Landlord shall have the right to transfer and assign, in whole or in
part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of the Landlord.
In the event of any assignment or subletting, Tenant shall nevertheless at all
times, remain fully responsible and liable for the payment of the rent and for
compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. If all or any part of the Leased Premises are then
assigned or sublet, Landlord, in addition to any other remedies provided by this
Lease or provided by law, may at its option, collect directly from the assignee
or subtenant all rents becoming due to Tenant by reason of the assignment or
sublease, and Landlord shall have a security interest in all properties on the
Leased Premises to secure payment of such sums. Any collection directly by
Landlord from the assignee or subtenant shall not be construed to constitute a
novation or a release of Tenant from the further performance of its obligations
under this Lease. In the event that Tenant sublets the Leased Premises or any
part thereof, or assigns this Lease and at any time receives rent and/or other
consideration which exceeds that which Tenant would at that time be obligated to
pay to Landlord, Tenant shall pay to Landlord 100% of the gross excess in such
rent as such rent is received by Tenant and 100% of any other consideration
received by Tenant from such subtenant in connection with such sublease or, in
the case of any assignment of this Lease by Tenant, Landlord shall receive 100%
of any consideration paid to Tenant by such assignee in connection with such
assignment. In addition, should Landlord agree to an assignment or sublease
agreement, Tenant will pay to Landlord on demand the sum of $500.00 to partially
reimburse Landlord for its costs, including reasonable attorneys' fees, incurred
in connection with processing such assignment or subletting request.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a trustee to take possession of all or
substantially all of the assets of Tenant, or (b) a general assignment by Tenant
for the benefit of creditors, or (c) any action taken or suffered by Tenant
under any insolvency or bankruptcy act shall, if any such appointments,
assignments or action continues for a period of thirty (30) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election without notice,
terminate this Lease and in that event be entitled to immediate possession of
the Leased Premises and damages as provided below.
BREACH BY TENANT
22.01 In the event of a default, Landlord in addition to any and all other
rights or remedies that it may have hereunder, at law or in equity shall have
the right to either terminate this Lease or from time to time, without
terminating this Lease relet the Leased Premises or any part thereof for the
account and in the name of Tenant or otherwise, for any such term or terms and
conditions as Landlord in its sole discretion may deem advisable with the right
to make reasonable alterations and repairs to the Leased Premises. Tenant shall
pay to Landlord, as soon as ascertained, the costs and expenses incurred by
Landlord in such reletting or in making such reasonable alterations and repairs.
Should such rentals received from time to time from such reletting during any
month be less than that agreed to be paid during that month by Tenant hereunder,
the Tenant shall pay such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly.
<PAGE>
22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting
without termination, Landlord may immediately or at any time thereafter
terminate this Lease, and this Lease shall be deemed to have been terminated
upon receipt by Tenant of notice of such termination; upon such termination
Landlord shall recover from Tenant all damages that Landlord may suffer by
reason of such termination including, without limitation, all arrearages in
rentals, costs, charges, additional rentals, and reimbursements, the cost
(including court costs and attorneys' fees actually incurred) of recovering
possession of the Leased Premises, the actual or estimated (as reasonably
estimated by Landlord) cost of any alteration of or repair to the Leased
Premises which is necessary or proper to prepare the same for reletting and, in
addition thereto, Landlord shall have and recover from Tenant the difference
between the present value (discounted at a rate per annum equal to the discount
rate of the Federal Reserve Bank of Atlanta at the time the Event of Default
occurs) of the rental to be paid by Tenant for the remainder of the lease term,
and the present value (discounted at the same rate) of the rental for the Leased
Premises for the remainder of the lease term, taking into account the cost, time
and other factors necessary to relet the Leased Premises; provided, however that
such payment shall not constitute a penalty or forfeiture, but shall constitute
full liquidated damages due to Landlord as a result of Tenant's default.
Landlord and Tenant acknowledge that Landlord's actual damages in the event of a
default by Tenant under this Lease will be difficult to ascertain, and that the
liquidated damages provided above represent the parties' best estimate of such
damages. The parties expressly acknowledge that the foregoing liquidated
damages are intended not as a penalty, but as full liquidated damages, as
permitted by Section 13-6-7 of the Official Code of Ga. Annotated.
ATTORNEY'S FEES
23.01 If Landlord and Tenant litigate any provision of this Lease or the
subject matter of this Lease, the unsuccessful litigant will pay to the
successful litigant all costs and expenses, including reasonable attorneys' fees
and court costs, incurred by the successful litigant at trial and on any appeal.
If, without fault, either Landlord or Tenant is made a party to any litigation
instituted by or against the other, the other will indemnify the faultless one
against all loss, liability, and expense, including reasonable attorneys' fees
and court costs, incurred by it in connection with such litigation.
CONDEMNATION
24.01 If, at any time during the term of this Lease, title to the entire
Leased Premises should become vested in a public or quasi-public authority by
virtue of the exercise of expropriation, appropriation, condemnation or other
power in the nature of eminent domain, or by voluntary transfer from the owner
of the Leased Premises under threat of such a taking then this Lease shall
terminate as of the time of such vesting of title, after which neither party
shall be further obligated to the other except for occurrence antedating such
taking. The same results shall follow if less than the entire Leased Premises
be thus taken, or transferred in lieu of such a taking, but to such extent that
it would be legally and commercially impossible for Tenant to occupy the portion
of the Leased Premises remaining, and impossible for Tenant to reasonably
conduct his trade or business therein.
24.02 Should there be such a partial taking or transfer in lieu thereof,
but not to such an extent as to make such continued occupancy and operation by
Tenant an impossibility, then this Lease shall continue on all of its same terms
and conditions subject only to an equitable reduction in rent proportionate to
such taking.
24.03 In the event of any such taking or transfer, whether of the entire
Leased Premises, or a portion thereof, it is expressly agreed and understood
that all sums awarded, allowed or received in connection therewith shall belong
to Landlord, and any rights otherwise vested in Tenant are hereby assigned to
Landlord, and Tenant shall have no interest in or claim to any such sums or any
portion thereof, whether the same be for the taking of the property or for
damages, or otherwise. Nothing herein shall be construed, however, to preclude
Tenant from prosecuting any claim directly against the condemning authority for
loss of business, moving expenses, damage to, and cost of, trade fixtures,
furniture and other personal property belonging to Tenant; provided, however,
that Tenant shall make no claim which shall diminish or adversely affect any
award claimed or received by Landlord.
NOTICES
25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be sufficiently
given and served upon the other party, (i) by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
requiring signed receipt; (iii) by delivering the same in person to such party;
or (iv) by prepaid telegram, telecopy or telex with delivery of an original copy
of any such notice delivered pursuant to (ii) or (iii) above to be received no
later than the next business day. Notice personally delivered or sent by
courier service, telegram, telecopy or telex shall be effective upon receipt.
Any notice mailed in the foregoing manner shall be effective three (3) business
days after its deposit in the United States mail. Either party may change its
address for notices by giving notice to the other as provided above. For
purposes of notice, the addresses of the parties shall be as follows:
(a) To Tenant at the Leased Premises;
<PAGE>
(b) To Landlord, addressed to Landlord at 4497 Park Drive, Norcross,
Georgia 30093, with a copy to such other place as Landlord may from
time to time designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant, or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises after
the expiration of the lease term and without executing a new lease, then such
holding over shall be construed as a tenancy from month to month, subject to all
the conditions, provisions, and obligations of this Lease insofar as the same
are applicable to a month to month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be 150% of the rent payable pursuant
to subparagraph 3.01.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any ground
lease, first priority mortgage, first priority deed of trust, or first priority
security deed now or hereafter placed upon the real property of which the Leased
Premises are a part and to any and all advances made on the security thereof and
to all renewals, modifications, consolidations, replacements and extensions
thereof.
28.02 Tenant agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any such ground lease,
mortgage, deed of trust, or security deed, as the case may be, including
specifically a subordination, non-disturbance and attornment agreement in the
form hereto attached as Exhibit "D", and failing to do so within ten (10) days
after written demand, does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney in fact and in Tenant's name, place and stead, to
do so. If requested to do so, Tenant agrees to attorn to any person or other
entity that acquires title to the real property encompassing the Leased
Premises, whether through judicial foreclosure, sale under power, or otherwise,
and to any assignee of such person or other entity.
ESTOPPEL CERTIFICATE
29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the first day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating but not limited to
the following: (i) the commencement date of this Lease; (ii) the space occupied
by Tenant hereunder; (iii) the expiration date hereof; (iv) a description of any
renewal or expansion options; (v) the amount of rental currently and actually
paid by Tenant under this Lease; (vi) the nature of any default or claimed
default hereunder by Landlord and (vii) that Tenant is not in default hereunder
nor has any event occurred which with the passage of time or the giving of
notice would become a default by Tenant hereunder.
PARKING
30.01 Tenant shall be entitled to park in common with other tenants of
Landlord. Tenant agrees not to overburden the parking facilities and agrees to
cooperate with Landlord and other tenants in the use of parking facilities.
Landlord reserves the right in its absolute discretion to determine whether
parking facilities are becoming crowded and, in such event, to allocate parking
spaces among Tenant and other tenants. There will be no assigned parking unless
Landlord, in its sole discretion, may deem advisable. Tenant agrees to park all
Tenant's trucks in the parking spaces provided at the rear of the building.
"Parking" as used herein means the use by Tenant's employees, its visitors,
invitees, and customers for the parking of motor vehicles for such periods of
time as are reasonably necessary in connection with use of and/or visits to the
Leased Premises. No vehicle may be repaired or serviced in the parking area and
any vehicle deemed abandoned by Landlord will be towed from the project and all
costs therein shall be borne by the Tenant. All driveways, ingress and egress,
and all parking spaces are for the joint use of all tenants. No area outside of
the Leased Premises shall be used by Tenant for storage without Landlord's prior
written permission. There shall be no parking permitted on any of the streets or
roadways located in _________________________.
MORTGAGEE PROTECTION
31.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
<PAGE>
PROTECTIVE COVENANTS
32.01 This Lease is subject to the Protective Covenants of
_______________________, and to such rules and regulations as may hereafter be
adopted and promulgated. In addition, Tenant shall comply with all covenants,
restrictions and other matters of record in the deed records of the county in
which the Leased Premises are located which affect or encumber the Leased
Premises, the Building or the Land.
RELOCATION
33.01 At Landlord's option, to be exercised by notice to Tenant specifying
the date of relocation, Landlord may designate any other space in the Project to
be occupied by Tenant in lieu of the Leased Premises, provided that said other
space is of substantially equal size and area and equivalent base rental per
square foot. Landlord shall bear the expense of Tenant's move as well as the
expense of any renovation or alterations necessary to make the new space
substantially conform in layout and appointment with the original Leased
Premises.
BROKERAGE COMMISSIONS
34.01 Tenant's Agent and Landlord's Agent (collectively, "Agent") shall
each be entitled to receive a commission in the amounts, and upon the terms and
conditions, contained in a commission agreement between Landlord and such
parties.
34.02 Tenant warrants and represents to Landlord that, other than Agent,
no other party is entitled, as a result of the actions of Tenant, to a
commission or other fee resulting from the execution of this Lease; and in the
event Tenant extends or renews this Lease, or expands the Leased Premises, and
Tenant's Agent is entitled to a commission under the above-referenced commission
agreement, Tenant shall pay all commissions and fees payable to any party (other
than Tenant's Agent) engaged by Tenant to represent Tenant in connection
therewith. Landlord warrants and represents to Tenant that, except as set forth
above, no other party is entitled, as a result of the actions of Landlord, to a
commission or other fee resulting from the execution of this Lease. Landlord
and Tenant agree to indemnify and hold each other harmless from any loss, cost,
damage or expense (including reasonable attorneys' fees) incurred by the
nonindemnifying party as a result of the untruth or incorrectness of the
foregoing warranty and representation, or failure to comply with the provisions
of this subparagraph.
34.03 Tenant's Agent is representing Tenant in connection with this Lease,
and is not representing Landlord. Landlord's Agent, or employees of Landlord or
its affiliates, are representing Landlord and are not representing Tenant.
34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when required by
the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and the word "person" shall include
corporation, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
B. The headings or titles to paragraphs of this Lease are for convenience
only and shall have no effect upon the construction or interpretation of any
part of this Lease.
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by agreement in writing signed by all parties to this Lease.
D. Where the consent of a party is required, such consent will not be
unreasonably withheld.
E. This Lease shall create the relationship of Landlord and Tenant between
Landlord and Tenant; no estate shall pass out of Landlord; Tenant has only a
usufruct, not subject to levy and/or sale and not assignable by Tenant except as
provided in paragraph 20.01 hereof.
F. Except as otherwise expressly stated, each payment required to be made
by Tenant shall be in addition to and not in substitution for other payments to
be made by Tenant.
G. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
H. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or payment of
rent shall be deemed an accord and satisfaction. Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
installment or payment of rent, or pursue any other remedies available to
Landlord.
<PAGE>
I. Subject to paragraph 20, the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
successors, and assigns of Landlord and Tenant. In the event of any conveyance
by Landlord of its interest in and to the Leased Premises, the Building or the
Land, all obligations under this Lease of the conveying party shall cease and
Tenant shall thereafter look solely to the party to whom the Leased Premises
were conveyed for performance of all of Landlord's duties and obligations under
this Lease.
J. Tenant acknowledges and agrees that Landlord shall not provide guards or
other security protection for the Leased Premises and that any and all security
protection shall be the sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Time is of the essence of each term and provision of this Lease.
M. Tenant shall not record this Lease or a memorandum thereof without the
written consent of Landlord. Upon the request of Landlord, Tenant shall join in
the execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Said memorandum or short form of this Lease shall
describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.
N. Landlord's liability for performance of its obligations under the terms
of this Lease shall be limited to its interest in the Leased Premises.
O. It is a condition to Landlord's obligations under this Lease that
Tenant, and Tenant agrees to, obtain and deliver to Landlord a fully executed
guaranty in the form attached to this Lease as Exhibit "F", within five (5) days
following written demand from Landlord.
(SIGNATURES CONTAINED ON FOLLOWING PAGE)
<PAGE>
IN WITNESS WHEREOF, the parties hereto who are individuals have set their
hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
Signed, sealed and delivered LANDLORD:
as to Landlord, in the
presence of: WEEKS REALTY, L.P.,
a Georgia limited partnership
___________________________ By: Weeks GP Holdings, Inc.
a Georgia corporation,
its sole general partner
___________________________
Notary Public By:__________________________
Name:_______________________
Its:__________________________
Signed, sealed and delivered TENANT:
as to Tenant, in the presence
of:
___________________________ By:__________________________
Name:_______________________
Its:__________________________
___________________________
Notary Public
ATTEST:
By:__________________________
Name:_______________________
Its:__________________________
(Corporate Seal)
<PAGE>
EXHIBIT "C"
ACCEPTANCE OF PREMISES
Lessee: __________________________________________________
Lessor: __________________________________________________
Date Lease Signed: ________________________________________
Term of Lease: _____________________________________________
Address of Leased Premises: Suite ______ containing approximately
________________ square feet, located at
_____________________________________________________
_____________________________________________________
Commencement Date: ________________________________________
Expiration Date: ________________________________________
The above described premises are accepted by Lessee as suitable for the purpose
for which they were let. The above described lease term commences and expires
on the dates set forth above. Lessee acknowledges that it has been received
from Lessor ________ number of keys to the leased premises. It is understood
that there is a punch list which will be completed after move-in and will be an
exhibit to the Tenant Estoppel.
LESSEE
_______________________________
(Type Name of Lessee)
WITNESS
By: ___________________________ ________________________
(Signature) (Signature)
_______________________________ ________________________
(Type Name and Title) (Company)
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<PAGE>
EXHIBIT "D"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS AGREEMENT, made as of the ___ day of ____________, 1995, between
_________________________________________ with offices at
_______________________________________________ ("Tenant") and
____________________________________ (herein, together with its successors,
transferees and assigns, the "Mortgagee");
W I T N E S S E T H:
WHEREAS, Mortgagee is about to or has heretofore granted to
_____________________________, a Georgia limited partnership (the "owner") a
first mortgage loan, which loan is secured by a security deed (herein
"Mortgage") dated as of _____________, 199_ and duly recorded on ____________,
199_ in the land records of Gwinnett County, Georgia; and
WHEREAS, the Mortgage is to be a first and prior lien upon the Owner's fee
estate in the real property described in Exhibit "A" annexed hereto ("Mortgaged
Premises"); and
WHEREAS, Tenant is occupying a portion of the Mortgaged Premises under a
lease dated as of _______________, 199_ in which Owner is Landlord (the "Lease")
covering that portion of the Mortgaged Premises therein more particularly
described (the "Leased Premises"); and
WHEREAS, Tenant desires to be assured of its continued and undisturbed
occupancy of the Leased Premises should the Mortgage be foreclosed or the
Mortgaged Premises sold pursuant to any power of sale contained therein and
Mortgagee is agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and in further consideration of the sum of ONE DOLLAR ($1.00) each to
the other in hand paid, the receipt whereof is hereby acknowledged, Tenant and
Mortgagee mutually covenant and agree as follows:
FIRST: The Lease and all of Tenant's rights, interest and estate therein
and thereunder are hereby made subject and subordinate to the lien of the
Mortgage and to any extensions, renewals, replacements, modifications, additions
or consolidations thereof and to all rights, title and interest of Mortgagee and
its successors and assigns therein and thereunder.
SECOND: In the event, however, proceedings shall ever be instituted by
Mortgagee to foreclose or liquidate the Mortgage, the Tenant's possession of its
leased portion of the Mortgaged Premises shall not be disturbed by the
foreclosure proceedings and the Mortgaged Premises shall be sold at any
foreclosure sale subject to Tenant's possession on condition that:
(a) there shall be, at the time of commencement of foreclosure
proceedings, as well as all subsequent times, no default by Tenant in
the due and timely observance and performance of any covenant and
agreement in the Lease to be observed and performed by Tenant; and
(b) the Tenant shall not have entered into any agreement modifying any
term, condition or agreement of the Mortgagee-approved Lease without
the prior written consent of Mortgagee.
1
<PAGE>
THIRD: Tenant shall attorn to Mortgagee while Mortgagee is in possession
of the Mortgaged Premises, or to a Receiver appointed in any action or
proceeding to foreclose the Mortgage. In the event of the completion of
foreclosure proceedings and sale of the Mortgaged Premises or in the event the
Mortgagee should otherwise acquire possession of the Mortgaged Premises, the
Tenant will promptly upon demand attorn to the purchaser at the foreclosure sale
or to the Mortgagee, as the case may be, and will recognize such purchaser or
the Mortgagee as the Tenant's landlord. The Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the Mortgagee or
the purchaser at the foreclosure sale, as the case may be, any instrument which
may be necessary or appropriate to such successor landlord to evidence such
attornment. The Tenant shall, upon demand of the Mortgagee or any Receiver or
purchaser at the foreclosure sale, pay to the Mortgagee or to such Receiver or
purchaser, as the case may be, all rental monies then due or as they thereafter
become due.
FOURTH: Upon the attornment provided for in preceding Paragraph THIRD the
Tenant's occupancy shall thereafter be in full force and effect as under a
direct Lease between Mortgagee, the Receiver or the purchaser at the foreclosure
sale, as the case may be, and Tenant. It is specifically understood and agreed
that Mortgagee or any such Receiver or purchaser shall not be:
(a) liable for any act, omission, negligence or default of any prior
landlord, or
(b) subject to any offsets, claims or defenses which Tenant might have
against any prior landlord; or
(c) bound by any rent or additional rent which Tenant might have paid for
more than one month in advance to any prior landlord; or
(d) bound by any amendment or modification of the Lease made without the
prior written consent of the Mortgagee.
FIFTH: On and after the date Tenant in good standing attorns to Mortgagee
or any Receiver or subsequent owner in pursuance of its agreement herein set
forth, Mortgagee, the Receiver or such subsequent owner will undertake and
perform all subsequent obligations of the Landlord as set forth in the Lease for
the benefit of and undisturbed occupancy of Tenant under the Lease.
SIXTH: Tenant agrees it will not amend, modify nor abridge the Lease in
any way, nor cancel or surrender the same without prior written approval of the
Mortgagee other than by reason of a continued uncured material default of the
landlord under the Lease, nor will the Lease ever merge into the fee in the
event that Mortgagee acquires fee title to the Mortgaged Premises.
SEVENTH: Any notices or other communication to be given hereunder by
either party shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if sent by registered or certified mail with
return receipt requested to the other party hereto at its address above stated
or such other address of which written notification has been timely given to the
other party.
EIGHTH: Mortgagee has and shall have the continuing right to execute and
record in the Land Records of Gwinnett County, Georgia at any time, in its
unilateral discretion, a Declaration of Subordination for the purpose of
thereby subordinating its rights, title and interest in and under the Mortgage
to the rights, title and interest of Tenant under the Lease. Such Declaration
of Subordination shall, at Mortgagee's election, operate, function and be in
full force and effect for whatever period of time Mortgagee declares therein
that it shall be in force not exceeding the term of the Lease and any extensions
thereof and the said Declaration may be voided unilaterally by Mortgagee when it
so elects.
NINTH: Tenant waives any and all rights it may have to execute and record
after the date hereof any document purporting to again or further subordinate
its right, title or interest under the Lease to the lien of either the Mortgage
or any other mortgage or deed of trust or any ground lease or any agreement
modifying or amending the Mortgage except with the written consent of Mortgagee.
TENTH: This Agreement cannot be changed orally but only in writing signed
by both parties hereto.
ELEVENTH: This Agreement may be recorded by either party at its own
expense in the Land Records of Gwinnett County, Georgia whenever, in its sole
discretion, either party elects so to do.
TWELFTH: All of the terms, covenants and conditions hereof shall run with
the Mortgaged Premises and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, acknowledged and delivered the day and year first above written.
SIGNED, SEALED AND DELIVERED TENANT:
in the presence of:
___________________________
___________________________ BY:_____________________________
MORTGAGEE:
___________________________ BY:______________________________
___________________________
The undersigned Owner of the leased and mortgaged premises hereby consents
to the foregoing Agreement and agrees to be bound by and subject to the terms
thereof.
BY:_______________________________
3
<PAGE>
EXHIBIT "E"
SPECIAL STIPULATIONS
1
<PAGE>
EXHIBIT "F"
GUARANTY OF LEASE
THIS GUARANTY, made and entered into as of the ______ day of ___________,
19___ by and between ___________________ (hereinafter referred to as
"Guarantor"), and WEEKS REALTY, L.P. (hereinafter referred to as "Landlord").
W I T N E S S E T H
-------------------
WHEREAS, __________________________ (hereinafter referred to as "Tenant"),
-------
is desirous of entering into the Lease hereinafter mentioned, as Tenant, and
WHEREAS, Guarantor has requested Landlord to enter into that certain lease
-------
(hereinafter referred to as the "Lease") attached hereto as Exhibit "A" and made
a part hereof with Tenant, as Tenant, of the premises described therein, and
WHEREAS, Landlord has refused to enter into the Lease unless Guarantor
-------
guarantees the Lease in the manner hereinafter set forth;
WHEREAS, Guarantor acknowledges that Landlord's entering into the Lease
-------
will confer significant financial, business and other benefits on Guarantor;
NOW THEREFORE, to induce Landlord to enter into the Lease, which Lease is
-------------
dated this day and is being executed simulta-neously herewith, Guarantor hereby
agrees:
1. (a) Subject to the provisions hereof, Guarantor unconditionally
guarantees to Landlord and the successors and assigns of Landlord the full and
punctual payment, performance and observance by Tenant of all the terms,
covenants and conditions in the Lease contained on Tenant's part to be kept,
performed or observed. This guaranty shall include any liability of Tenant
which shall accrue under the Lease for any period preceding as well as any
period following the term specified in the Lease. Guarantor waives notice of
any breach of default by Tenant.
(b) If, at any time, default shall be made by Tenant in the
performance or observance of any of the terms, covenants or conditions in the
Lease contained on Tenant's part to be kept, performed or observed, Guarantor
will keep, perform and observe the same, as the case may be, in the place and
stead of Tenant.
(c) This is a guaranty of payment and performance and not of
collection. Guarantor's obligations hereunder are independent of the obligations
of Tenant and a separate action or actions for payment, damages or performance
may be brought and prosecuted against Guarantor, whether or not an action is
brought against Tenant, whether or not Tenant be joined in such action or
actions and whether or not notice be given or demand be made upon Tenant.
Landlord shall not be required to pursue any other remedies before invoking the
benefits of this guaranty.
2. Any act of Landlord, or the successors or assigns of Landlord,
consisting of a waiver of any of the terms or conditions of the Lease, or the
giving of any consent to any manner or thing relating to the Lease, or the
granting of any indulgences or extensions of time to Tenant, may be done without
notice to Guarantor and without releasing the obligations of Guarantor
hereunder.
3. The obligations of Guarantor hereunder shall not be released by
Landlord's receipt, application or release of security given for the performance
and observance of the terms, covenants and conditions in the Lease contained on
Tenant's part to be performed or observed; nor by any modification of the Lease.
4. The liability of Guarantor hereunder shall in no way be affected by
(a) the release or discharge of Tenant in any creditors', receivership,
bankruptcy or other proceedings; (b) the impairment, limitation or modification
of the liability of Tenant or the estate of Tenant in bankruptcy, or of any
remedy for the enforcement of Tenant's liability under the Lease, resulting from
the operation of any present or future provision of the National Bankruptcy Act
or other status or from the decision of any court; (c) the rejection or
disaffirmance of the Lease in any such proceedings; (d) the assignment or
transfer of the Lease by Tenant; (e) any disability or other defense of Tenant;
(f) the cessation from any cause whatsoever of the liability of Tenant under the
Lease; (g) any action of Landlord permitted hereunder; (h) any right or power of
Tenant or anyone else to assert any claim or defense as to the invalidity or
unenforceability of the Lease; or (i) the assignment by Landlord of its interest
in the Lease.
5. Until all covenants and conditions in the Lease on Tenant's part to be
performed and observed are fully performed and observed, Guarantor: (a) shall
have no right of subrogation against Tenant by reason of any payments or acts of
performance by Guarantor; (b) waives any right to enforce any remedy which
Guarantor now or hereafter shall have against Tenant by reason of any one or
more payments or acts of performance in compliance with the obligations of
Guarantor hereunder.
1
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6. This guaranty shall apply to the Lease, any extension or renewal
thereof and to any holdover term following the term thereby granted or any
extension or renewal thereof.
7. This instrument may not be changed, modified, discharged or terminated
orally or in any manner other than by an agreement in writing signed by
Guarantor and Landlord.
8. This guaranty shall be governed by and construed and enforced in
accordance with the laws of the State of Georgia. Whenever possible, each
provision of this guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this guaranty
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
guaranty.
9. Guarantor hereby waives the benefits of Section 10-7-24 of the
Official Code of Georgia Annotated to the fullest extent permitted under
applicable law.
10. Guarantor agrees to pay any and all reasonable attorney's fees and
other expenses Landlord incurs in enforcing any of the obligations of Guarantor
hereunder. This obligation for payment of reasonable attorney's fees is in
addition to any limitations on liability that may be included elsewhere herein.
11. No delay or failure on the part of the Landlord in the exercise of any
right of remedy shall operate as a waiver thereof, and no single or partial
exercise by Landlord of any right or remedy herein shall preclude other or
further exercise thereof or the exercise of any other right or remedy whether
contained herein or in the Lease.
2
<PAGE>
12. All notices, requests, demands and other communications required or
permitted to be given hereunder to Guarantor shall be sufficiently given if in
writing and delivered in person or sent by United States certified mail, return
receipt requested, postage prepaid, at the address set forth below or at such
other address as Guarantor shall have provided Landlord in writing. Any such
notice, request, demand or other communication by mail shall be deemed received
on the date appearing on the return receipt therefor. Rejection or other refusal
to accept or inability to deliver because of changed address of which no notice
has been received by Landlord shall constitute receipt of the notice, request,
demand or other communication sent. Notices, requests, demands and other
communications to Landlord shall be given as provided in the Lease.
IN WITNESS WHEREOF, Guarantor has hereunto set his hand and seal as of the
day and year first above written.
Guarantor:
____________________________
By:_________________________
Name:_______________________
Title:______________________
(Corporate Seal)
GUARANTOR'S ADDRESS:
- -------------------
_________________________
_________________________
_________________________
Address Space:
The within and foregoing guaranty is hereby accepted as of the day and year
first above written.
Accepted By
Landlord:
By: _________________________
Address Space:
3
<PAGE>
STATE OF GEORGIA)
COUNTY OF DEKALB )
EXHIBIT 10.6
COMMERCIAL LEASE AGREEMENT
THIS COMMERCIAL LEASE AGREEMENT (this "Lease"), made and entered into
this ___________ day of _____________________, 1997, by and among the
Landlord, the Tenant and the Agent, if any, hereinafter named.
W I T N E S S E T H :
For and in consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of Tenant to be observed and
performed, Landlord demises and leases to Tenant, and Tenant leases, rents
and accepts from Landlord the Premises, as hereinafter defined.
ARTICLE I
DEFINITIONS AND EXHIBITS
1.1 DEFINITIONS. In addition to other terms which are elsewhere
-----------
defined in this Lease, each of the following terms when used in this Lease
with an initial capital letter shall have the meanings set forth in this
Paragraph 1.1, and only such meanings, unless such meanings are expressly
limited or expanded elsewhere in this Lease:
(A) "Landlord": SELIG ENTERPRISES, INC., A GEORGIA
CORPORATION
(B) Landlord's Mailing Address: 1100 SPRING STREET, SUITE 550
---------------------------
ATLANTA, GEORGIA 30309
(C) "Tenant": BIO-SHIELD TECHNOLOGIES, INC.,
A GEORGIA CORPORATION
(D) Tenant's Mailing Address: 4405 INTERNATIONAL BOULEVARD
-------------------------
SUITE D-109
NORCROSS, GEORGIA 30093
(E) "Development": That certain property commonly known as 2565-2579
-----------
PARK CENTRAL BOULEVARD, located within the City of ATLANTA, County
of FULTON and State of GEORGIA, which presently contains
approximately 50,000 gross rentable square feet of building area,
which size shall by agreement of the parties hereto be deemed to be
the size of the Development.
(F) "Premises": That certain one (1)-story unit without basement
--------
commonly known as 2575 PARK CENTRAL BOULEVARD situated within the
Development and containing approximately 6,000 gross rentable square
feet, which size shall by agreement of the parties hereto be deemed
to be the size of the Premises.
(G) "Lease Term": The term of this Lease shall commence on the
----------
Commencement Date, and, unless sooner terminated as hereinafter
provided, shall terminate on the last day of SEPTEMBER 30, 2000.
(H) "Commencement Date": The Commencement Date shall be the sooner to
-----------------
occur of the following two (2) dates: (i) OCTOBER 1, 1997, or (ii)
the date on which possession of the Premises is delivered to Tenant.
(I) "Minimum Rent": The monthly Minimum Rent shall be:
------------
Period Monthly Amount
(I) COMMENCEMENT DATE TO SEPTEMBER 30, 1997 $ 0.00;
(II) OCTOBER 1, 1997 TO SEPTEMBER 30, 1998 $1,375.00;
(III) OCTOBER 1, 1998 TO SEPTEMBER 30, 1999 $1,475.00; AND,
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<PAGE>
(IV) OCTOBER 1, 1999 TO SEPTEMBER 30, 2000 $1,575.00.
(J) "Initial Payment": A total of $2,995.00, of which (i) $1,420.00
---------------
represents the first month's Minimum Rent and Tenant's Proportionate
Share of Common Area Maintenance, and (ii) $1,575.00 represents the
Security Deposit.
(K) "Tenant's Proportionate Share": A fraction, the numerator of which
----------------------------
shall be the total gross rentable square footage of the Premises as
defined in Subparagraph 1.1(F), and the denominator of which shall be
the total gross rentable square footage of all buildings in the
Development as defined in Subparagraph 1.1(E), all as determined by
Landlord. Landlord's estimate of Tenant's Proportionate Share of
Common Area Maintenance for the period commencing on the Commencement
Date and expiring on December 31 of the same Calendar Year is:
(i) Common Area Maintenance per month $ 45.00
(ii) plus monthly Minimum Rent $1,375.00
---------
equals initial monthly payment due $1,420.00
=========
(L) "Security Deposit":$1,575.00
(M) "Use of Premises":LABORATORY PURPOSES.
(N) "Base Year":1997
(O) "Agent": KING INDUSTRIAL REALTY, INC., A GEORGIA CORPORATION.
-----
(P) "Aggregate Rent": All Minimum Rent, Common Area Maintenance, Taxes
and Insurance payable under this Lease.
(Q) "Calendar Year": Each annual period from January 1 through December
-------------
31.
(R) "Claims": All liabilities, demands, claims, costs, suits, actions,
------
judgments, expenses and obligations, including court costs and
attorney's fees related thereto.
(S) "Commission Agreement": The agreement, if any, between Landlord and
--------------------
Agent annexed to this Lease as Exhibit "F".
(T) "Common Area Maintenance": All expenses and costs arising out of or
-----------------------
related to the operating, managing, policing, equipping, lighting,
painting, cleaning, repairing, administering and maintaining of the
Development, including, without limitation, any replacement which is
incidental or related thereto, specifically including, without
limitation, the landscaping (including, without limitation,
irrigating, planting, replanting and replacing flowers, trees, shrubs
and grass), lighting, traffic control, if any, sanitary assessments
and services, removal of snow, trash, rubbish and garbage and other
refuse, security services, pest control, rental fees for machinery or
other equipment with respect to such maintenance, all costs for or
associated with supplies, material and personnel to implement such
maintenance, all as determined by Landlord, and twelve (12%) percent
of all of the foregoing costs to be applied against administrative
expenses with respect to such Common Area Maintenance.
(U) "Common Areas": The parking areas, driveways, sidewalks, landscaped
------------
areas and other common areas of the Development as they are or may be
from time to time constituted.
(V) "Compliance Cost": The total cost of the Compliance Work.
---------------
(W) "Compliance Work": All repairs, replacements, alterations or
---------------
additions necessary to comply with all Laws with respect to the
Premises.
(X) "Consumer Price Index": The "Consumer Price Index, All Urban
--------------------
Consumers; U.S. City Average, All Items; (1982-84 = 100)" issued by
the United States Department of Labor, Bureau of Labor Statistics. In
the event that the Consumer Price Index published by the United
States Bureau of Labor Statistics is discontinued, then the Consumer
Price Index published by the United States Department of Commerce
shall be used (with proper adjustment); and if the United States
Department of Commerce Index is discontinued, then Landlord and
Tenant shall, in good faith, agree on a suitable substitute.
(Y) "Condemnation": Any taking by eminent domain for any public or
------------
quasi-public usage or purpose, including, without limitation, any
conveyance in lieu of or under threat of condemnation.
(Z) "Default Termination": The date of termination of this Lease arising
-------------------
out of or due to a Tenant Default.
(AA) "First Mortgage": Any Mortgage which now or hereafter has a first
--------------
priority over all other Mortgages encumbering the Premises.
(BB) "Hazardous Substance": Any element, compound, chemical mixture,
-------------------
contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as toxic or hazardous under any
Laws, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Water
Act, the Clean Air Act, the Safe Drinking
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Water Act, the National Environmental Policy Act of 1969, the
Superfund Amendment and Reauthorization Act of 1986, and all Laws
that are similar thereto.
(CC) "Insurance": Liability and rents and fire and extended coverage
---------
insurance premiums for the Development and Common Areas.
(DD) "Invitees": Employees, agents, servants, assignees, subtenants,
--------
invitees, licensees, customers, visitors, concessionaires and
contractors.
(EE) "Landlord Group": Landlord and Landlord's agents, servants,
--------------
employees, officers, attorneys, shareholders and directors.
(FF) "Landlord Repairs": Necessary repairs to lines for Utilities which
----------------
serve the Premises and are located outside the perimeter walls of the
Premises, necessary roof repairs and necessary structural repairs to
the exterior walls and foundations of the Premises, specifically
excluding any repair, replacement, rebuilding, painting, cleaning, or
maintenance, whether structural or non-structural, foreseen or
unforeseen, ordinary or extraordinary: (i) to the Premises or any
building or improvement thereon or any portion thereof, except as
expressly defined as a Landlord Repair herein, (ii) to any damage
caused by wood-destroying organisms, (iii) to any exterior or
interior portions of any windows, doors, glass, plate glass, store
fronts, locks, hardware, Signs, or any casing, frames or caulking
which support or surround same, (iv) made necessary by or arising out
of any act or omission or negligence of Tenant or any Invitees of
Tenant, or (v) which is designated in this Lease as a Tenant Repair.
(GG) "Laws": All zoning ordinances, laws, statutes, ordinances, orders,
----
regulations, directives, rules or requirements of all federal, state,
city, county or other governmental, public or quasi-public
authorities, bodies, boards or agencies, or all departments or
bureaus thereof, now existing or hereafter created, including,
without limitation, all building, zoning, environmental, health and
fire-safety laws, the Americans With Disabilities Act of 1990, the
Occupational and Safety and Health Act of 1970, and all laws related
to Hazardous Substances, including all amendments thereto and all
regulations promulgated thereunder.
(HH) "Lease Year": Each and every successive twelve (12)-month period
----------
during the Lease Term, as same may be extended or renewed; provided,
however, the first such twelve (12)-month period shall be deemed to
commence on the first day of the month in which the Commencement Date
falls.
(II) "Mortgage": Any mortgage, deed of trust or security deed
--------
encumbering the Premises.
(JJ) "Mortgagee": Any holder of a Mortgage.
---------
(KK) "Obligated Party": The party obligated to perform the Compliance
---------------
Work in accordance with the terms of Paragraph 3.4.
(LL) "Rate": The total of (i) the annual percentage rate announced by
----
Wachovia Bank of Georgia, N.A., as its prime rate, plus (ii) two (2%)
percent, but in no event higher than the highest rate enforceable by
Laws.
(MM) "Remaining Term": That portion of the Lease Term commencing with the
--------------
Default Termination and ending on the Termination Date.
(NN) "Rent Inducements": The combined aggregate dollar amount of: (i) all
----------------
improvements, alterations, construction or Work to the Premises
performed by or on behalf of Landlord in conjunction with this Lease
or Tenant's use of the Premises, including, without limitation, such
improvements, alterations, construction or Work as is described in
Exhibit "B"; plus (ii) all real estate brokerage commissions paid or
incurred by Landlord with respect to this Lease; plus (iii) all other
costs and liabilities whatsoever paid or incurred by Landlord in any
way arising out of or related to this Lease; plus (iv) the excess of
(x) the Aggregate Rent payable over the Lease Term, divided by the
number of months in the Lease Term, multiplied by the number of
months elapsed from the Commencement Date to the date of Default
Termination, over (y) the Aggregate Rent paid by Tenant and actually
received by Landlord from the Commencement Date to the date of
Default Termination.
(OO) "Restoration Cost": The total cost to restore damage or destruction
----------------
to the Premises.
(PP) "Signs": All lettering, signs, awnings, advertising matter, or any
-----
other items of any kind on the roof, door, windows, store front, or
the exterior of the Premises or Common Areas.
(QQ) "Special Stipulations": Those special stipulations, if any, annexed
--------------------
to this Lease as Exhibit "A".
(RR) "Taxes": All general and special real estate taxes, ad valorem
-----
taxes, assessments (including, without limitation, general and
special assessments for public improvements or benefits whether or
not commenced or completed during the Lease Term, as same may be
extended or renewed, and sanitary and trash removal assessments),
water charges, sewer rents and all other taxes and assessments
levied, assessed or imposed at any time by any municipal, county or
state government or any other governmental authority or agency upon
or against the Development or any portion thereof, and also any tax
or assessment levied, assessed or imposed against the Development or
any portion thereof at any time by any governmental authority or
agency in connection with any franchise or the receipt of any income,
rent or profit from the Development to the extent that same shall be
in lieu of all or a portion of any of the aforesaid taxes or
assessments upon or against the Development, and any sales or use tax
imposed by any Laws by reason of or in any way related to the
occupancy or use of the Premises or the payment of rental therefor by
Tenant.
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<PAGE>
(SS) "Tenant Default": The occurrence of any one or more of the following
--------------
events or occurrences, each of which shall be deemed to be a material
default and breach of this Lease by Tenant: (i) Landlord does not
actually receive any payment of the full amount of Aggregate Rent or
additional rent or any other payment or reimbursement due hereunder
punctually on the due date thereof; (ii) Tenant fails to fully and
punctually observe or perform any of the terms or covenants of this
Lease; (iii) any representation, statement or warranty made by Tenant
orally, in this Lease, or in any information sheet or document
furnished by Tenant or any guarantor hereof with respect to the net
worth, liabilities, assets or financial condition of Tenant or any
guarantor hereof, or any other matters, shall be or prove to be
untrue or misleading; or (iv) Tenant shall be in default, in the
payment of rent or otherwise, under another lease or leases with
Landlord or any affiliate of Landlord.
(TT) "Tenant Repairs": All repairs, replacements, rebuilding, painting,
--------------
cleaning and maintenance, foreseen or unforeseen, ordinary or
extraordinary, which are not expressly defined as Landlord Repairs,
to the Premises and all portions thereof, including, without
limitation, all trade fixtures and other fixtures and equipment
contained in or on the Premises, all improvements and alterations to
the Premises, the exterior and interior portions of all windows,
doors, glass, plate glass, store fronts, locks, hardware, Signs, or
any casing, frames or caulking which support or surround same, any
damages caused by wood-destroying organisms, all grease traps, and
all plumbing, sewage, drainage, fire protection sprinkler system,
electrical, heating, ventilating and air conditioning equipment and
systems located in the interior, or within or on the walls, of the
Premises, and all interior walls, floors and ceilings.
(UU) "Termination Date": The date of termination of the Lease Term, as
----------------
set forth in Subparagraph 1.1(G).
(VV) "Unamortized Portion": The remaining balance as of the date of
-------------------
Default Termination of the portion of the Rent Inducements,
calculated as if the Rent Inducements were paid monthly over the
Lease Term, together with interest compounded monthly thereon at the
rate of ten (10%) percent per annum. By way of example, if the Rent
Inducements equal One Thousand and No/100 ($1,000.00) Dollars and the
Lease Term is for five (5) years, the Unamortized Portion of Rent
Inducements at the end of the third year of the Lease Term equals
Four Hundred Sixty and 44/100 ($460.44) Dollars.
(WW) "Utilities": All water, water pressure, gas, electricity, fuel,
---------
light, heat, power, telephone, sewage service, trash removal,
sanitary charges and assessments, security protection, or any other
utilities or services attributable to or servicing the Premises or
Development.
(XX) "Work": All work, labor or service done, or materials furnished for
----
any work, repair, rebuilding, replacement, painting, cleaning,
maintenance, improvement, alteration, or addition to the Premises or
the Development, including, without limitation, Compliance Work,
Landlord Repairs and Tenant Repairs.
1.2 EXHIBITS. The Exhibits enumerated in this Paragraph 1.2 (if used)
--------
and annexed to this Lease are incorporated in this Lease by this reference
and are to be construed as part of this Lease:
Intentionally Deleted
(B) Exhibit "B": Description of initial Work to be performed by
Landlord.
ARTICLE II
RENT
2.1 MINIMUM RENT. (A) Tenant shall pay the Minimum Rent to Landlord
------------
at Landlord's address set forth above, or at such other place as Landlord
may designate from time to time, without notice or demand therefor, and
without any abatement, deduction, diminution or set-off whatsoever,
punctually in advance on the Commencement Date and the first day of each
succeeding calendar month thereafter throughout the Lease Term, as same
may be extended or renewed. If mailed, the Minimum Rent and all other
payments under this Lease shall be mailed in sufficient time and with
adequate postage thereon to be actually received by Landlord not later than
the due date. A pro rata monthly installment of the Minimum Rent shall be
due for the first month of the Lease Term if the Commencement Date is a day
other than the first day of a calendar month, and for the last month of the
Lease Term if the Lease Term for any reason terminates on a day other than
the last day of a calendar month.
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<PAGE>
2.2 SECURITY DEPOSIT. Tenant has, simultaneously with the execution of
----------------
this Lease, deposited with Landlord the Initial Payment, which sum consists
of the first month's Minimum Rent and Landlord's estimate of Tenant's
Proportionate Share of Common Area Maintenance, and the Security Deposit.
The Security Deposit represents security for the faithful performance and
observance by Tenant of each and every term and covenant of this Lease. In
the event of any Tenant Default, including, without limitation, the payment
of any rental or other sum payable hereunder, Landlord may, but shall not
be required to, use, apply or retain the whole or any part of the Security
Deposit to the extent required for the payment of any rent, or for any
other sum which Landlord may expend or be required to expend by reason of
or related to such Tenant Default, including, without limitation, any
damages or deficiency in the reletting of the Premises, whether such
damages or deficiency accrue before or after summary proceedings, or other
re-entry by Landlord. In the event that Tenant shall fully and faithfully
comply with all of the terms and covenants of this Lease, the Security
Deposit (or the balance thereof in the event Landlord has utilized any
portions thereof) shall be returned to Tenant within thirty (30) days after
(A) the Termination Date, and (B) physical delivery of possession of the
entire Premises by Tenant to Landlord. Whenever and as often as the amount
of Security Deposit shall be diminished by Landlord's application thereof,
Tenant shall, within five (5) days after Landlord's request therefor,
deposit additional money with Landlord sufficient to restore the Security
Deposit to its original amount. The Security Deposit shall not constitute
liquidated damages. No interest shall be payable to Tenant related to the
Security Deposit. Landlord may commingle the Security Deposit with any of
Landlord's other funds. In the event of sale or transfer of the Premises,
or any cessation of Landlord's interest therein, Landlord shall assign any
unapplied portion of the Security Deposit to the succeeding owner of the
Premises, and from and after such assignment, Landlord shall be relieved of
any liability with respect thereto, and Tenant shall look solely to such
new owner for the return of the Security Deposit.
2.3 RENT INDUCEMENTS. The Rent Inducements are absolutely and
----------------
irrevocably due and payable by Tenant to Landlord at the time of execution
of this Lease as accrued and presently due additional rent, and not as
damages or a penalty, subject only to the potential waiver thereof by
Landlord as expressly set forth in this Paragraph 2.3. Based upon the
covenant of Tenant to perform all obligations of Tenant under this Lease
throughout the entire Lease Term in timely and exact accordance with the
terms of this Lease, Landlord has agreed to defer the right to receive
payment of the Rent Inducements until the earlier to occur of (A) the
Termination Date, or (B) the date of Default Termination, rather than at
the time of execution of this Lease. In the event that no Default
Termination occurs, then on the Termination Date Landlord shall, at such
time and in such event, waive the right to collect the Unamortized Portion
of the Rent Inducements, but in no other event shall there be any such
waiver. Nothing contained in this Lease shall create any Rent Inducements,
except to the extent that Rent Inducements are expressly provided for in
this Lease. The recovery of Rent Inducements is not an exclusive remedy
available to Landlord in the event of Tenant Default, but is an additional
remedy.
ARTICLE III
PREMISES
3.1 PREMISES DEMISED. The Premises are located in the Development.
----------------
The Premises are demised and leased subject to all Laws, and the state of
title of the Development, and any statement of facts which an accurate
survey may disclose, together with all easements, Mortgages, agreements,
encumbrances, and all other liens, charges or other matters of any nature,
recorded or unrecorded, affecting the Premises or the Development.
Notwithstanding the definition or description of the Premises or the method
of calculation of the gross rentable square footage of the Premises, the
Premises demised hereunder do not include the right to any usage whatsoever
of the exterior walls, roof, or the land beneath the Premises, and Tenant
shall not attach or place anything on the roof or exterior walls of the
Premises, and Tenant shall not have access to the roof. No rights,
licenses or easements are given to Tenant hereunder, except as expressly
demised hereunder, and no easement for light or air is leased with or
included in the Premises.
3.2 DELIVERY AND ACCEPTANCE OF POSSESSION. Landlord shall exercise a
-------------------------------------
good faith effort with respect to delivering possession of the Premises to
Tenant, but in the event that possession of the Premises is not delivered
to Tenant within ninety (90) days after the date first specified in
Subparagraph 1.1(H), then and in that event either Landlord or Tenant shall
have the right to terminate this Lease by delivering written notice of such
termination to the other, whereupon this Lease shall thereupon become null
and void and of no further force or effect whatsoever in law or equity, and
Landlord shall not be liable to Tenant for any loss or damages related to
such failure to deliver possession. Tenant shall occupy the Premises as
soon as the Commencement Date occurs. Tenant has examined the Premises and
the Development, and has accepted same in their present condition (subject
only to such initial improvements to the Premises, if any, as Landlord is
obligated to perform pursuant to Exhibit "B"), and without any
representation or warranty by Landlord, express or implied, as to the
condition thereof, or as to the use or occupancy which may be made thereof,
or the effect of any Laws thereon.
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<PAGE>
3.3 USE OF PREMISES. The Premises shall be used only for the purposes
---------------
described in Subparagraph 1.1(M) and for no other purposes whatsoever. In
no event shall the Premises or any portion thereof be used in any of the
following manners, nor for any of the following purposes: (A) any illegal
usage, (B) any violation of any Laws or certificate of occupancy, (C) any
manner which creates or permits a nuisance or trespass, (D) any manner
which vitiates or increases the rate of Insurance, (E) any manner which
produces, reproduces or transmits sounds which are audible outside the
Premises, or any manner which emits an odor outside the Premises, (F) any
manner which obstructs or encumbers the sidewalks or other Common Areas of
the Development, (H) any hazardous or wasteful manner, (I) any manner which
exceeds the floor load which such floor was designed, or is permitted by
Laws, to carry, or (J) any manner which generates, stores, treats, disposes
of, installs or otherwise causes or permits any Hazardous Substance to be
brought upon, or kept or used in or on the Premises. Tenant shall not
burn any materials or rubbish upon or in the Premises or the Development.
Tenant shall, at Tenant's expense, keep the Premises and the immediately
adjacent Common Areas free of rubbish, and in a clean and orderly
condition. This Lease does not contain any express or implied exclusive
use provisions.
3.4 COMPLIANCE WITH LAWS. (A) Landlord shall, at all times during the
--------------------
Lease Term, as same may be extended or renewed, perform all Compliance Work
which is applicable to (i) the Premises in general, and is not in any way
related to Tenant's particular or specific use or occupancy of the
Premises, or (ii) any Hazardous Substance which was placed in, on or upon
the Premises prior to the Commencement Date by any party other than Tenant
or the Invitees of Tenant.
(B) Except with respect to those items of Compliance Work which are the
responsibility of Landlord in accordance with the express terms of
Subparagraph 3.4(A), Tenant shall not violate, nor take any action or fail
to take any action which would result in Landlord or the Premises being in
violation of, any Laws, whether or not the Laws relate to or be for a
period prior to the Commencement Date, or relate to or involve any
extraordinary or ordinary, or structural or non-structural, Compliance Work
of or to any structure upon or adjacent to the Premises, irrespective of
whether the Laws or Compliance Work be of a kind that might be deemed to be
now within the contemplation of Landlord and Tenant, and Tenant shall, at
all times during the Lease Term, as same may be extended or renewed,
promptly comply with (i) all provisions, recommendations and requirements
of any fire, liability or other insurer affecting or covering the Premises
and Development, or any part thereof, and (ii) all Compliance Work arising
out of or related to Tenant's particular or specific use or occupancy of
the Premises. Tenant shall, and does hereby, indemnify and hold harmless
Landlord from and against all Claims arising out of or related to the
obligations of Tenant under this Subparagraph 3.4(B). Tenant shall
promptly procure and thereafter maintain all licenses and permits which are
necessary or desirable to maintain and operate the business of Tenant in
the Premises.
(C) Notwithstanding anything contained in this Paragraph 3.4 to the
contrary, in the event that the Compliance Cost exceeds the aggregate sum
of Minimum Rent for the Lease Year in which the need to perform the
Compliance Work arises, the Obligated Party shall be entitled to elect to
terminate this Lease rather than perform the Compliance Work, by giving
written notice of termination to the other party, which notice must be
given within twenty (20) days after the Obligated Party (i) becomes aware
of the requirement for the Compliance Work, and (ii) ascertains the
approximate or exact Compliance Cost. In the event that the Obligated
Party terminates this Lease pursuant to this Subparagraph 3.4(C), the other
party may, within ten (10) days after such notice of termination, agree to
perform the Compliance Work at such other party's sole expense, in which
event this Lease shall continue in effect unless the other party fails to
perform the Compliance Work within any applicable time limitation imposed
by Laws.
3.5 ACCESS TO PREMISES. Landlord shall be entitled to have free access
------------------
to the Premises at all times for purposes of inspecting, examining, showing
or displaying the Premises, or for making any repairs thereto or to
Landlord's adjoining property, and also during the last ninety (90) days of
the Lease Term (or commencing on such earlier date, if any, as Tenant
advises Landlord that Tenant does not intend to extend or renew the Lease
Term) for purposes of placing any "For Lease" notices on the Premises. No
such notices shall be removed, molested or hidden by Tenant. Any such
entry or action shall not be deemed an actual or constructive eviction or
disturbance of Tenant, nor shall Tenant be allowed any abatement of rent of
any sort, or damages for any injury and inconvenience occasioned thereby.
Nothing contained in this Paragraph 3.5 or elsewhere in this Lease shall
obligate Landlord in any fashion under any circumstances to enter or
inspect the Premises.
3.6 QUIET ENJOYMENT. Tenant, upon paying the Minimum Rent and all
---------------
other sums and charges provided for in this Lease, and in observing and
keeping all covenants of this Lease on the part of Tenant to be observed
and kept, shall quietly have and enjoy the Premises during the Lease Term,
as same may be extended or renewed, without hindrance or molestation by
anyone claiming by, through or under Landlord, subject, however, to the
exceptions, reservations and conditions of this Lease.
ARTICLE IV
COMMON AREAS AND DEVELOPMENT
4.1 COMMON AREAS. Landlord hereby grants to Tenant a non-exclusive
------------
license to use the Common Areas, such usage to be in common with the usage
of Landlord and the tenants of the Development and any third parties
designated by Landlord, and their respective Invitees. Notwithstanding any
other provision of this Lease, Landlord shall be entitled to designate
specific areas or spaces in the
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parking lot of the Development for the parking of automobiles and other
vehicles of Tenant and Tenant's employees, and upon such designation Tenant
and Tenant's employees shall park their automobiles and other vehicles in
such areas or spaces only.
4.2 COMMON AREA MAINTENANCE. Tenant shall pay to Landlord as
-----------------------
additional rental on the first day of each month in advance during the
Lease Term, as same may be extended or renewed, Landlord's estimate of
Tenant's Proportionate Share of Common Area Maintenance, as set forth
herein. At any time after the expiration of each Calendar Year, Landlord
shall determine the costs and expenditures of Common Area Maintenance for
such Calendar Year, together with the determination of Tenant's
Proportionate Share thereof. In the event that the amounts for the
preceding Calendar Year paid by Tenant under this Paragraph 4.2 shall be
(A) less than Tenant's Proportionate Share thereof, as so determined by
Landlord, the deficiency shall be paid by Tenant to Landlord within twenty
(20) days after notice of such determination, or (B) more than Tenant's
Proportionate Share thereof, as so determined by Landlord, the excess shall
be retained by Landlord and credited to the next sums due from Tenant under
this Paragraph 4.2. At the time of such determination of the cost of
Common Area Maintenance for each Calendar Year, Landlord shall notify
Tenant of the monthly sum to be paid by Tenant to Landlord during the
remaining months of such Calendar Year, which determination shall be based
in part on the statement of expenses for the preceding Calendar Year as
modified by any known or anticipated increases in the cost of said
services. Tenant shall make such payments in such amounts as are provided
for herein until receipt of notice from Landlord of any change in such
amounts.
4.3 DEVELOPMENT. Landlord shall have the unrestricted right to
-----------
construct additional improvements in the Development or increase, reduce,
eliminate, relocate or change the size, dimensions, design, height, number
of stories or location of any or all Common Areas, buildings or other
improvements in the Development, from time to time in any manner whatsoever
as Landlord shall deem appropriate.
ARTICLE V
UTILITIES AND SERVICES
5.1 UTILITIES AND SERVICES. Tenant shall contract for all Utilities
----------------------
in Tenant's name and pay when due all costs, charges and deposits related
to the hook-up, furnishing, consumption, maintenance and installation of
all Utilities; provided, however, that Landlord shall be entitled, but not
required, to pay any costs or charges for or related to any Utilities,
whereupon such costs or charges, or Tenant's pro rata share of same, or
Landlord's estimate thereof, together with an administrative fee equal to
twelve (12%) percent of such amount, shall be payable by Tenant to Landlord
upon demand, and shall constitute additional rent hereunder. Landlord
shall have no liability to Tenant or any other party for any inadequacy,
cessation or interruption of any Utilities.
ARTICLE VI
REPAIRS AND MAINTENANCE
6.1 TENANT REPAIRS. (A) All Tenant Repairs shall be made promptly as
--------------
and when needed by Tenant. Except for those items which are expressly
defined as Landlord Repairs, Tenant shall keep and maintain the Premises
and all buildings and improvements thereon and all portions thereof,
throughout the Lease Term, as same may be extended or renewed, in first
class order, condition and repair. All Tenant Repairs shall be performed
at Tenant's sole expense with materials and labor of the kind and quality
equal or superior to the original Work. Tenant shall keep in force at all
times during the Lease Term, and all extensions and renewals thereof, a
standard maintenance agreement which requires at least a semi-annual
inspection of all heating, ventilating and air conditioning equipment, and
provide a copy of such agreement to Landlord. Tenant shall permit no
waste, damage or injury to the Premises, or any part or system thereof.
Tenant shall surrender the Premises at the expiration of the Lease Term, as
same may be extended or renewed, broom clean and in as good condition as
when received, or in such better condition as the Premises may be put
during the Lease Term, as same may be extended or renewed, except only that
deterioration caused by normal and ordinary wear and tear, or fire or other
casualty not caused by Tenant.
(B) In the event that (i) Tenant fails to promptly perform the Tenant
Repairs, (ii) Landlord, in the exercise of Landlord's sole discretion,
determines that emergency Tenant Repairs are necessary or desirable, or
(iii) Landlord Repairs or Tenant Repairs are made necessary by any act or
omission or negligence of Tenant or Invitees of Tenant, then in any of such
events, Landlord shall be entitled, but not obligated, to perform or cause
to be performed same without incurring any liability to Tenant for any
damage caused thereby, and Tenant shall pay the cost thereof to Landlord
upon demand, as additional rent.
6.2 LANDLORD REPAIRS. Landlord shall make necessary Landlord Repairs
----------------
only. Landlord has delivered exclusive control of the Premises to Tenant,
and Landlord shall have no obligation to inspect the Premises. Tenant
shall promptly report in writing to the property manager of Landlord any
need for Landlord Repairs, and failure to so report shall make Tenant
liable to Landlord for any liability incurred by Landlord arising out of or
related thereto. Landlord's obligation for Landlord Repairs is expressly
conditioned upon actual receipt by Landlord's property manager of written
notice of the need for such Landlord Repairs, and upon actual receipt of
such notice Landlord shall commence such Landlord Repairs within a
reasonable time. In no event shall Tenant be entitled to withhold or
offset any payment of Minimum Rent or any other sum payable under this
Lease due to any breach by Landlord of this Paragraph
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6.2 or any other provision of this Lease.
6.3 FIXTURES AND PERSONAL PROPERTY All trade fixtures installed in the
------------------------------
Premises by Tenant may be removed at any time by Tenant provided that
Tenant is not in default in the performance of any obligations of Tenant
hereunder, and further provided that Tenant shall, at Tenant's sole
expense, simultaneously restores any damage to the Premises caused by such
removal. All carpeting, floor covering and other fixtures and equipment
installed in the Premises by Tenant shall, at the option of Landlord, be
promptly removed by Tenant on termination of this Lease, whereupon Tenant
shall promptly restore any damage to the Premises caused by such removal;
provided, however, that in the event that Landlord does not so elect to
cause Tenant to remove any of said carpeting, floor covering, fixtures or
equipment, all of same remaining on the Premises shall become the sole
property of Landlord upon the termination of this Lease, without the
necessity of further documentation.
6.4 ALTERATIONS BY TENANT. Tenant shall not alter the Premises or any
---------------------
part thereof without first: (A) submitting to Landlord written plans and
specifications in reasonable detail of any proposed alterations, and (B)
obtaining Landlord's prior written approval thereof. All repairs to such
alterations shall be Tenant Repairs. Any such alterations shall immediately
upon installation become the property of Landlord and shall remain upon the
Premises upon termination of this Lease unless Landlord at Landlord's
option shall require the restoration of the Premises to the condition
thereof on the Commencement Date, in which event Tenant shall so restore
the Premises prior to the Termination Date.
6.5 LIENS. Tenant shall promptly pay for all Work performed by or on
-----
behalf of Tenant or any party holding the Premises through or under Tenant,
and Tenant shall not permit any mechanic's, materialman's or any other type
of lien or claim of lien to be filed against the Premises by reason of or
related to any Work supplied or claimed to have been supplied to Tenant or
anyone holding the Premises through or under Tenant. In the event that any
such mechanic's, materialman's or other lien or claim of lien shall at any
time be filed against or affecting Landlord, the Premises or the
Development, whether said lien or claim of lien be valid or not, Tenant
shall indemnify and hold Landlord harmless from same and shall, within ten
(10) days after notice of the filing thereof, cause such lien to be
canceled and discharged of record. Nothing in this Lease shall be
construed in any way as: (A) constituting the consent, authorization or
request, express or implied, of Landlord to any contractor, subcontractor,
laborer, mechanic, materialman or any other party for the performance of
any Work to or for the benefit of Landlord, or (B) giving Tenant the right,
power or authority to act as agent of Landlord or on behalf of Landlord in
causing, contracting for, or permitting any Work.
ARTICLE VII
SIGNS
7.1 SIGNS. Tenant shall not place or maintain any Signs on the
-----
Premises or Common Areas, without first obtaining prior written consent
from both Landlord and all governmental bodies having jurisdiction thereof.
Those Signs which both comply with this Paragraph 7.1 and are within the
criteria for Signs set forth in Exhibit "C", if any, are deemed approved by
Landlord. All Signs shall be Tenant Repairs and comply with all Laws. In
the event that Landlord elects to remodel or renovate all or a substantial
portion of the Development, Landlord shall be entitled to require Tenant to
replace any or all of such Signs with such substitute Signs as are
furnished by Landlord, at Landlord's sole expense, provided such Signs so
provided by Landlord are consistent with the overall remodeling or
renovation plan of Landlord.
ARTICLE VIII
INSURANCE, INDEMNITY, DAMAGE AND DESTRUCTION
8.1 INSURANCE. Tenant shall obtain and maintain in full force during
---------
the Lease Term, as same may be extended or renewed, with respect to the
Premises, comprehensive general public liability insurance, with
contractual liability endorsement, with coverage in amounts not less than
One Million and No/100 ($1,000,000.00) Dollars with respect to property
damage, bodily injury, personal injury or death to one or more persons,
which insurance shall insure the interest of Landlord and Tenant and any
designees of Landlord, including without limitation, any Mortgagee.
8.2 INDEMNITY; LIABILITY OF LANDLORD. (A) Tenant shall, and does
--------------------------------
hereby, indemnify, release and save harmless the Landlord Group from and
against all Claims arising out of or related to (i) any loss of life,
personal injury or property damage, (ii) this Lease, or (iii) any
transaction or occurrence in, on, upon or near or involving the Premises,
Common Areas or the Development or the occupancy or use thereof.
(B) Tenant shall store, sell and use Tenant's property, fixtures,
inventory and equipment, and shall use and occupy the Premises and all
other portions of the Common Areas and the Development, at Tenant's sole
risk, and Tenant shall and does hereby release the Landlord Group from and
against all Claims of any nature arising out of or related thereto.
(C) Notwithstanding anything in this Lease to the contrary, neither
Landlord nor the Landlord Group shall have any personal liability hereunder
and Tenant shall look solely to the estate and property of Landlord in the
land and buildings comprising the Development for the collection of any
judgment or other judicial process arising out of any Claims arising out of
or related to any default or breach by Landlord
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under this Lease, and no other assets of Landlord, or the Landlord Group,
shall be subject to levy, execution or other procedures for the
satisfaction of any remedies of Tenant.
(D) This Paragraph 8.2 shall survive the termination of this Lease.
8.3 INSURANCE REIMBURSEMENT. (A) Tenant shall pay to Landlord upon
-----------------------
demand, as additional rent, without offset or deduction, throughout the
Lease Term, as same may be extended or renewed, the amount by which
Tenant's Proportionate Share of such Insurance as is carried by Landlord
for the then Calendar Year exceeds Tenant's Proportionate Share of such
Insurance as is carried by Landlord for the Base Year.
(B) A pro rata installment of Tenant's Proportionate Share of such
Insurance as is carried by Landlord shall be due for the last Lease Year of
the Lease Term, as same may be extended or renewed, if the Lease Term for
any reason terminates on a day other than the 31st day of December. The
obligation of Tenant with respect to this Paragraph 8.3 shall survive the
expiration of the Lease Term, the recovery of Tenant's Proportionate Share
hereunder being a recovery for the Calendar Year in which payable
hereunder.
(C) Any delay or failure of Landlord in computing or billing under this
Paragraph 8.3 not prejudice the right of Landlord to thereafter render
bills for such period or any subsequent period, nor constitute a waiver of
or in any way impair the continuing obligation of Tenant to pay Tenant's
Proportionate Share of Insurance. Photostatic copies of bills for
Insurance submitted by Landlord to Tenant shall be conclusive evidence of
the actual amount thereof.
8.4 DAMAGE BY FIRE OR OTHER CASUALTY. Tenant shall immediately notify
--------------------------------
Landlord of any damage or destruction to the Premises. In the event that
(A) by reason of any damage or destruction, the Premises are rendered
wholly untenantable, (B) the Premises are damaged as a result of a
casualty, event, or risk which is not adequately covered by Landlord's fire
insurance, (C) the Premises are damaged in whole or in part during the last
twelve (12) months of the Lease Term or any extension or renewal thereof,
(D) the building of which the Premises are a part (whether the Premises are
damaged or not) or the buildings which then comprise the Development should
be damaged to the extent that the Restoration Cost equals or exceeds thirty
(30%) percent of the monetary value of such building, at the time of such
damage, or (E) any buildings or Common Areas are damaged, whether or not
the Premises are damaged, to such an extent that the Development cannot, in
the sole judgment of Landlord, be profitably operated as an integral unit,
then, in any of such events, Landlord may elect either to (i) repair the
damage to the Premises (provided that Landlord's obligations to so repair
shall not exceed in scope or expense the work done by Landlord with respect
to the Premises prior to the Commencement Date), whereupon the Minimum Rent
shall be abated proportionately as to that portion of the Premises
rendered untenantable during the period of such repair and restoration, or
(ii) terminate this Lease by notice of termination delivered to Tenant at
any time after the occurrence of such damage, whereupon this Lease shall
expire upon the date set forth in such notice, and Tenant shall vacate and
surrender the Premises to Landlord on such date. Landlord shall give
notice to Tenant of such election within sixty (60) days after the
occurrence of such damage or destruction. In the event that Landlord does
repair any damage as provided hereunder, any abatement of rent shall end
when the Premises have been substantially repaired. In the event of
abatement of Minimum Rent as expressly provided in this Paragraph 8.4,
there shall be no abatement of additional rent or any other sums payable by
Tenant under this Lease. In the event that the damage or destruction is
caused by any act, omission or negligence of Tenant or any Invitees of
Tenant, there shall be no abatement of Minimum Rent. Notwithstanding
anything contained in this Paragraph 8.4 to the contrary, in the event that
the Restoration Cost exceeds the aggregate sum of Minimum Rent for the
Lease Year in which the damage or destruction occurs, Landlord shall be
entitled to terminate this Lease rather than perform such repairs and
restoration, by giving notice of termination to Tenant, which notice must
be given within twenty (20) days after Landlord (x) becomes aware of such
damage or destruction, and (y) ascertains the approximate or exact
Restoration Cost. Nothing contained in Paragraph 8.1 or in this Paragraph
8.4, or any other provision in this Lease, shall be deemed to obligate
Landlord to obtain or maintain any insurance of any nature.
ARTICLE IX
ASSIGNMENT, SUBLETTING AND SUCCESSORS
9.1 ASSIGNMENT AND SUBLETTING. Without the express prior written
-------------------------
consent of Landlord, neither Tenant, nor Tenant's legal representatives or
successors in interest by operation of Laws or otherwise, shall directly or
indirectly assign this Lease or sublet all or any part of the Premises, or
use or permit the Premises or any part thereof to be used, occupied or
managed by any party or parties other than Tenant. For purposes of this
Paragraph 9.1, an assignment of this Lease, as prohibited hereunder, shall
include, without limitation: (A) any voluntary or involuntary transfer,
including, without limitation, any transfer by operation of Laws, (B) any
merger, consolidation or liquidation involving Tenant or any stock of
Tenant, (C) any entry into or change in any license, concession, management
or operating agreement or arrangement with respect to the management or
operation of the business conducted on the Premises, (D) in the event that
Tenant is a partnership, a transfer of a general partnership interest or a
majority of limited partnership interests, or the right to vote such
interests, or (E) in the event that Tenant is a corporation whose stock is
not listed on a nationally recognized security exchange, one or more sales
or transfers of stock, or of the right to vote such stock, by operation of
Laws or otherwise, or creation of a new stock, by which an aggregate of
fifty (50%) percent or more of Tenant's stock or the right to vote such
stock shall be vested in a party or parties who are non-stockholders as of
the date of execution of this Lease, which stock
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ownership shall be determined in accordance with the principles set forth
in Section 544 of the Internal Revenue Code of 1986, and the term "right to
vote" shall refer to shares of stock regularly entitled to vote for the
election of directors of the corporation. Consent to any assignment or
sublease shall not vitiate or waive this provision, and all later
assignments and subleases shall likewise be made only upon the prior
written consent of Landlord. In the event that Tenant shall desire to
assign this Lease or sublet the Premises or any portion thereof, then
Tenant shall (i) promptly notify Landlord in writing of such desire,
identifying such assignee or subtenant, and furnishing Landlord with
complete financial and business information about such proposed assignee or
subtenant, and (ii) simultaneously pay to Landlord a non-refundable
processing fee in the amount of Two Hundred Fifty and No/100 ($250.00)
Dollars. Upon receipt of a request to assign or sublet as set forth in the
immediately preceding sentence, Landlord shall be entitled, at Landlord's
sole option, to approve or disapprove such assignment or sublease; any such
disapproved assignment or sublease shall be void ab initio. Tenant shall,
upon any assignment or subletting, furnish Landlord with a true and
complete copy of all assignment or sublease documents, and shall advise
Landlord of the rental amounts pursuant to such assignment or sublease.
Subtenants or assignees shall not prepay any rental to any party other than
Landlord more than one (1) month in advance, and shall become, at
Landlord's option, liable directly to Landlord if Landlord so elects. In
the event that this Lease is assigned or sublet, Landlord may, and is
hereby empowered, at Landlord's option, to collect rent from the assignee
or subtenant; in the event that Landlord does so collect rent from such
assignee or subtenant, Landlord shall apply the net amount received by
Landlord to the rent payable by Tenant, and no such receipt of rent shall
be deemed to be: (x) a waiver of the covenant herein against assignment and
subletting, (y) an acceptance of the assignee or subtenant as Landlord's
tenant, or (z) a release of Tenant from the further performance of the
obligations of Tenant under this Lease. No sublessee or assignee shall be
entitled to further assign any interest under this Lease or such sublease,
or sublet all or any portion of the Premises without the express prior
written consent of Landlord. In the event that this Lease shall be assigned
or the Premises sublet by Tenant at a rental rate that exceeds the Minimum
Rent to be paid to Landlord by Tenant hereunder or Tenant receives any
other consideration, then and in such event one-half of all such excess
Minimum Rent and all such other consideration shall be immediately paid
over to Landlord by Tenant upon receipt by Tenant as additional rent due
from Tenant to Landlord hereunder. Notwithstanding anything contained in
this Lease to the contrary, no subtenant or assignee may exercise, and
Tenant shall have no right to exercise for the benefit of any such assignee
or subtenant, any expansion option, right of first refusal option, renewal
or extension option, or similar option or rights under this Lease. Tenant
shall in all events remain fully liable to Landlord for all obligations of
Tenant under this Lease, regardless of any assignment or subletting or any
consent by Landlord thereto.
9.2 SUCCESSORS AND ASSIGNS. The provisions of this Lease shall bind
----------------------
and inure to the benefit of Landlord and Tenant and their respective
successors, heirs, legal representatives and assigns; provided, however,
that no assignment or subletting by, through or under Tenant in violation
of Paragraph 9.1 shall vest in such assignee or subtenant any right, title
or interest whatsoever. Upon any sale or conveyance of the Premises, the
Landlord named herein shall be, and hereby is, entirely free and relieved
of all covenants and obligations of Landlord hereunder arising or occurring
on or after such sale or conveyance.
ARTICLE X
CONDEMNATION
10.1 CONDEMNATION. In the event of Condemnation of the whole of the
------------
Premises, this Lease shall terminate. In the event of Condemnation of only
a part of the Premises (A) then, effective as of the date of vesting of
title, the Minimum Rent hereunder shall be abated in an amount apportioned
according to the area of the Premises so condemned, and (B) Landlord,
whether or not the Premises be affected, may, at Landlord's option,
terminate this Lease by notifying Tenant of such termination; if Landlord
elects not to so terminate this Lease, this Lease shall be and remain
unaffected by such Condemnation, except that the Minimum Rent hereunder
shall be abated to the extent, if any, hereinbefore provided. In the event
of any Condemnation of all or a portion of the Premises, Tenant shall be
entitled to an award for Tenant's relocation expenses and the leasehold
improvements placed on the Premises by Tenant at Tenant's expense; Landlord
shall be entitled to receive the balance of the award in such Condemnation
proceeding, including, without limitation, any award for the value of the
unexpired portion of the Lease Term and the interest vested by this Lease
in Tenant, and Tenant hereby expressly and irrevocably assigns to Landlord
all right, title and interest of Tenant now or hereafter arising in or to
any such award or any part thereof, and Tenant shall be entitled to receive
no part of such award. Any restoration to the Premises made necessary by
Condemnation shall be performed by Tenant at Tenant's sole expense.
ARTICLE XI
DEFAULT
11.1 DEFAULT. (A) Upon the occurrence of any one or more events of
-------
Tenant Default, Landlord may, at Landlord's option, without any demand or
notice whatsoever, except as expressly required in this Paragraph 11.1:
(i) Terminate this Lease by giving Tenant notice of termination, which
shall constitute a Default Termination, in which event this Lease shall
expire and terminate on the date specified in such notice of Default
Termination, and Tenant shall remain liable for all obligations of Tenant
under this Lease arising up to the date of Default Termination, and Tenant
shall surrender the Premises to Landlord on the date
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specified in such notice; or
(ii) Without terminating this Lease, and with or without notice to
Tenant, Landlord may in Landlord's own name but as agent for Tenant enter
into and upon take possession of the Premises or any part thereof, and, at
Landlord's option, remove persons and property therefrom, and such
property, if any, may be removed and stored in a warehouse or elsewhere at
the cost of, and for the account of, Tenant, all without being deemed
guilty of trespass or being liable for any loss or damage which may be
occasioned thereby, and Landlord may rent the Premises or any portion
thereof as the agent of Tenant with or without advertisement, and by
private negotiations and for any term upon such terms and conditions as
Landlord may deem necessary or desirable in order to relet the Premises.
Landlord shall in no way be responsible or liable for any rental
concessions or any failure to rent the Premises or any part thereof, or for
any failure to collect any rent due upon such reletting. Upon each such
reletting, all rentals received by Landlord from such reletting shall be
applied: first, to the payment of any indebtedness (other than any rent
due hereunder) from Tenant to Landlord; second, to the payment of any costs
and expenses of such reletting, including, without limitation, brokerage
fees and attorney's fees and costs of alterations and repairs; third, to
the payment of rent and other charges then due and unpaid hereunder; and
the residue, if any, shall be held by Landlord to the extent of and for
application in payment of future rent as the same may become due and
payable hereunder. In reletting the Premises as aforesaid, Landlord may
grant rent concessions and Tenant shall not receive credit therefor. In
the event that such rentals received from such reletting shall at any time
or from time to time be less than sufficient to pay to Landlord the entire
sums then due from Tenant hereunder, Tenant shall pay any such deficiency
to Landlord. Such deficiency shall, at Landlord's option, be calculated
and paid monthly. No such reletting shall be construed as an election by
Landlord to terminate this Lease unless a written notice of such election
has been given to Tenant by Landlord. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate
this Lease for any such previous Tenant Default, provided such Tenant
Default has not been cured; or
(iii) Terminate this Lease and recover from Tenant all damages which
Landlord may incur by reason of Tenant Default, including, without
limitation, a sum which, at the date of Default Termination represents the
present value (discounted at a rate equal to the then average rate for
Moody's "AAA" rated corporate bonds with maturities equal to the Remaining
Term) of the excess, if any, of (x) the Aggregate Rent, and all other
charges and sums which would have been payable hereunder by Tenant for the
Remaining Term, over (y) the aggregate reasonable rental value of the
Premises for the same period, all of which present value of such excess sum
shall be immediately due and payable. In determining the aggregate
reasonable rental value pursuant to item (y) above, all relevant factors
shall be considered as of the time of Default Termination, including,
without limitation (aa) the length of time remaining in the Lease Term,
(bb) the then-current market conditions in the general area in which the
Premises are located, (cc) the likelihood of reletting the Premises for a
period of time equal to the Remaining Term, (dd) the net effective rental
rates (taking into account all concessions) then being obtained for space
of similar type and size in similar type buildings in the general area in
which the Premises are located, (ee) the vacancy levels in comparable
quality buildings in the general area in which the Premises are located,
(ff) the anticipated duration of the period that the Premises will be
unoccupied prior to reletting, (gg) the anticipated cost of reletting, and
(hh) the current levels of new construction that will be completed during
the remainder of the Lease Term and the degree to which such new
construction will likely affect vacancy rates and rental rates in
comparable quality buildings in the general area in which the Premises are
located. Such payment shall constitute liquidated damages to Landlord,
Landlord and Tenant acknowledging and agreeing that it is difficult to
determine the actual damages Landlord would suffer by virtue of Tenant
Default and that the agreed-upon liquidated damages are not punitive or a
penalty and are just, fair and reasonable, all in accordance with O.C.G.A.
(S) 13-6-7; or
(iv) Without liability to Tenant or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any Work, Utilities or other services, so
long as the Tenant Default continues; or
(v) Allow the Premises to remain unoccupied and collect rent from
Tenant as it comes due; or
(vi) Take possession of and sell any personal property on the Premises,
and apply the net proceeds therefrom as a credit against all Minimum Rent
or other sums due by Tenant to Landlord; or
(vii) Pursue such other remedy or remedies as are available at law or
equity, including, without limitation, an action for specific performance
requiring Tenant to perform Tenant's obligations under this Lease.
(B) The late payment by Tenant to Landlord of Minimum Rent or any other
sums due hereunder shall cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which would be extremely difficult and
impractical to ascertain. Such costs include, without limitation,
processing, clerical and accounting charges, lost interest and late charges
which may be imposed on Landlord by the terms of a Mortgage. Therefore, in
the event that Landlord does not actually receive any installment of
Minimum Rent or any other sum due under this Lease by 5:00 p.m. on the
fourth (4th) day after the due date thereof, Tenant shall pay to Landlord
as additional rent, and not as a penalty, a late charge equal to five (5%)
percent of each such installment of Minimum Rent or other sum, or Fifty and
No/100 ($50.00) Dollars, whichever is greater. In addition, Tenant shall
pay to Landlord Fifty and No/100 ($50.00) Dollars for each check presented
to Landlord in payment of Minimum Rent or other obligations hereunder which
is not paid by the bank upon which such check is drawn.
(C) Landlord's pursuit of any remedy or remedies, including, without
limitation, any one or more of the remedies stated in Subparagraph 11.1(A),
shall not (i) constitute an election of remedies or preclude pursuit of any
other remedy or remedies provided in this Lease or any other legal or
equitable remedy or
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remedies separately or concurrently or in any combination, or (ii) serve as
the basis for any claim of actual or constructive eviction, or allow Tenant
to withhold any payments under this Lease.
(D) In the event of Default Termination, any funds of Tenant held by
Landlord may be applied by Landlord to any damages payable by Tenant
(whether provided for herein or by Laws) as a result of such Default
Termination.
(E) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be
a bar to the maintenance of any subsequent actions or proceedings for the
recovery of such sum or sums so omitted.
(F) No termination of this Lease prior to the normal expiration
thereof, by lapse of time or otherwise, shall affect Landlord's right to
collect rent for the period prior to termination thereof. Tenant shall not
vacate the Premises or exercise any right of termination arising out of any
breach by Landlord of any provision of this Lease or the condition or state
of repair of the Premises. No surrender of the Premises or any part
thereof by delivery of keys or otherwise shall operate to terminate this
Lease unless and until such termination is expressly accepted in writing by
an authorized officer of Landlord.
(G) All Minimum Rent, additional rent, other rent, and any other costs,
expenses, sums or amounts payable or reimbursable hereunder by Tenant to
Landlord shall be deemed to be rental hereunder whether or not designated
as such, which, if not promptly paid on or before the date due, time being
of the essence, shall bear interest at the rate of the greater of (i)
twelve (12%) percent per annum, or (ii) the Rate, from the due date until
paid. In the event that any amounts owing under this Lease by Tenant are
collected by or with any assistance from or consultation with any attorney
at law, whether or not such attorney at law is an employee of Landlord,
Tenant shall pay as Landlord's attorney's fees fifteen (15%) percent of
such amounts. Tenant shall pay all attorney's fees incurred by Landlord
arising out of or related to any litigation, appeal or negotiation in which
Landlord shall become involved in connection with this Lease or the use or
occupancy of the Premises. Tenant waives all homestead rights and
exemptions which Tenant may have under any Laws against any obligations
owing under this Lease, and Tenant hereby assigns to Landlord all of
Tenant's homestead and exemptions.
(H) The foregoing provisions of this Paragraph 11.1 shall apply to any
renewal or extension of this Lease.
ARTICLE XII
MORTGAGES
12.1 MORTGAGES. (A) Upon request by any holder of a First Mortgage,
---------
Tenant shall subordinate Tenant's rights under this Lease to such First
Mortgage, and to any advances to be made thereunder and the interest
thereon, and to all renewals, modifications, replacements and extensions
thereof. Tenant's rights under this Lease shall not be subordinate to the
holder of the First Mortgage unless the holder thereof has requested that
this Lease be subordinate thereto. Any Mortgagee, whether the holder of
the First Mortgage or any other Mortgage affecting the Development, may
elect to have this Lease made prior to such Mortgage, and in the event of
such election and upon notification by any such Mortgagee to Tenant to that
effect, this Lease shall be deemed prior in lien to any such Mortgage,
whether this Lease is dated or filed prior to or subsequent to the date of
such Mortgage.
(B) Tenant shall, in the event of exercise of the power of sale or deed
in lieu of foreclosure under any Mortgage, attorn to and recognize such
purchaser as landlord under this Lease; provided that said purchaser shall
not be liable for any act or omission of any prior landlord or subject to
any offsets or defenses which Tenant may have against any prior landlord or
be bound by any amendment or modification of this Lease made without the
prior written consent of such Mortgagee. Should any Mortgagee or purchaser
require a separate agreement of attornment regarding the matters covered by
this Lease, Tenant shall promptly, upon request, enter into any such
attornment agreement.
(C) At any time and from time to time, Tenant shall, upon request from
Landlord, execute, acknowledge and deliver to Landlord or any potential
purchaser of the Development, or to any Mortgagee or potential Mortgagee,
an estoppel certificate or statement in writing certifying to all or any
part of the following information as Landlord shall request, provided such
facts are true and ascertainable: (i) that this Lease constitutes the
entire agreement between Landlord and Tenant and is unmodified and in full
force and effect (or if there have been modifications, that same is in full
force and effect as modified and stating the modification), (ii) the
amounts of Minimum Rent, additional rent and other charges under this Lease
and the dates to which same have been paid, and that there are no prepaid
rents or other sums hereunder, and the amount of Security Deposit, (iii)
that the Premises have been satisfactorily completed, and that all
conditions precedent to this Lease taking effect have been carried out,
(iv) that Tenant has accepted possession of the Premises, that the Lease
Term has commenced, that Tenant is occupying the Premises and operating
Tenant's business full-time therefrom, and there are no defaults or offsets
which Tenant has against enforcement of this Lease by Landlord, and (v) the
actual Commencement Date and Termination Date. Tenant's certificate or
statement shall also contain such other information as may be reasonably or
customarily required by the present or potential purchaser or Mortgagee.
(D) In the event that, in connection with obtaining financing or
refinancing for the Development, any banking, insurance or other recognized
institutional lender shall request reasonable modifications in this Lease
as a condition to such financing, Tenant shall not unreasonably withhold,
delay or defer Tenant's consent thereto, provided that such modifications
do not materially increase the obligations of Tenant hereunder or
materially adversely affect the interest of Tenant hereby created.
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ARTICLE XIII
TAXES
13.1 TAX REIMBURSEMENT. (A) Tenant shall pay to Landlord upon demand,
-----------------
as additional rent, without offset or deduction, throughout the Lease
Term, as same may be extended or renewed, the amount by which Tenant's
Proportionate Share of Taxes for the then Calendar Year exceeds Tenant's
Proportionate Share of Taxes for the Base Year.
(B) A pro rata installment of Tenant's Proportionate Share of Taxes
shall be due for the last year of the Lease Term, as same may be extended
or renewed, if the Lease Term, as same may be extended or renewed, for any
reason terminates on a day other than the 31st day of December. The
obligation of Tenant with respect to this Paragraph 13.1 shall survive the
expiration of the Lease Term, as same may be extended or renewed, the
recovery of Tenant's Proportionate Share hereunder being a recovery for the
year in which payable hereunder.
(C) Landlord may, at Landlord's option, contest or seek a reduction of
any Taxes, and the cost for any such contest or protest shall be considered
part of the Taxes.
(D) No delay or failure of Landlord in computing or billing Tenant's
Proportionate Share of Taxes shall prejudice the right of Landlord to
thereafter render bills for such period or any subsequent period, nor
constitute a waiver of nor in any way impair the continuing obligation of
Tenant to pay Tenant's Proportionate Share of Taxes. In the event that the
Development does not comprise exactly one tax parcel, Tenant shall pay
Tenant's Proportionate Share of Taxes based upon the estimate of Landlord
of the amount thereof. Photostatic copies of bills for Taxes submitted by
Landlord to Tenant shall be conclusive evidence of the actual amount
thereof.
13.2 PERSONAL PROPERTY. Tenant shall pay, prior to delinquency, all
-----------------
personal property taxes payable with respect to all property of Tenant
located in the Premises, and shall promptly provide Landlord upon request
therefor with proof of such payment.
ARTICLE XIV
MISCELLANEOUS
14.1 NO ESTATE IN LAND. This contract shall create the relationship of
-----------------
landlord and tenant between the parties hereto, and no estate shall pass
out of Landlord. Tenant has only a usufruct hereunder, not subject to levy
and sale, and not assignable by Tenant except as expressly provided in
Paragraph 9.1.
14.2 HOLDING OVER. In the event that Tenant remains in possession of
------------
the Premises or any part thereof after expiration of the Lease Term with
Landlord's express written consent, and without any express agreement
between the parties as to rent, Tenant shall be a tenant at will and such
tenancy shall be subject to all the provisions hereof except that the
Minimum Rent for the entire hold-over period shall be at the rate of one
hundred fifty (150%) percent of the rate of Minimum Rent in effect
immediately prior to the expiration of the Lease Term, and there shall be
no extension or renewal of this Lease by operation of Laws. In the event
that Landlord does not expressly consent in writing to Tenant's holding
over beyond the expiration of the Lease Term, then Tenant shall be a tenant
at sufferance and shall owe Landlord compensation for the period of
occupancy subsequent to the expiration of the Lease Term at a rate of one
hundred fifty (150%) percent of the Minimum Rent in effect immediately
prior to the expiration of the Lease Term, plus Tenant shall pay all other
additional rents and other sums under this Lease, and there shall be no
extension or renewal of this Lease by operation of Laws. Nothing in this
Paragraph 14.2 or elsewhere in this Lease shall be construed as consent by
Landlord to possession of the Premises by Tenant after the expiration of
the Lease Term.
14.3 RECORDING. Neither this Lease nor any memorandum thereof shall be
---------
recorded in any public record without Landlord's express prior written
consent.
14.4 NON-WAIVER. No failure by Landlord to timely bill Tenant for any
----------
payments hereunder, or to insist upon the strict performance, in any of one
or more instances, upon any breach of any term, covenant or condition
herein contained shall be deemed to be a waiver of such term, covenant or
condition, nor of any subsequent breach of the same or any other term,
covenant or condition herein contained. Any subsequent acceptance by
Landlord of any Minimum Rent, additional rent, other rent, or any other
sums due hereunder shall not be deemed to be a waiver of any preceding
Tenant Default, other than the failure of Tenant timely to pay the
particular sum so accepted, regardless of Landlord's knowledge of such
preceding Tenant Default at the time of acceptance of such sum. No
covenant, term or condition of this Lease shall be deemed to have been
waived by Landlord unless such waiver be specifically expressed in writing
by an authorized officer of Landlord.
No payment by Tenant or receipt by Landlord of an amount less than the
Minimum Rent or other rent or other sum herein stipulated shall be deemed a
waiver of Landlord's right to receive the entire amount herein stipulated.
No partial payment or endorsement on any check or letter accompanying such
payment or rent shall be deemed an accord and satisfaction, and Landlord
may accept such payment without prejudice to Landlord's right to collect
the balance of any rents due under the terms of this Lease. After service
of any notice of termination, or other notice, or commencement of any suit
or dispossessory or distress proceeding, Landlord may receive and collect
any rent due and such collection or receipt shall not operate as a (A)
reinstatement, continuance, renewal or extension of the Lease Term, or (B)
waiver
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affecting such notice, suit or proceeding.
14.5 TIME OF THE ESSENCE. Time is of the essence of this Lease and all
-------------------
provisions contained herein.
14.6 SEVERABILITY. If any clause, provision, Article, Paragraph or
------------
Subparagraph of this Lease is or becomes unconstitutional, illegal, invalid
or unenforceable because of present or future Laws, the remaining parts of
this Lease shall not be affected thereby unless such invalidity is, in the
sole determination of Landlord, essential to the rights of both parties, in
which event Landlord shall be entitled to terminate this Lease by giving
notice to Tenant.
14.7 SPECIAL STIPULATIONS. Any Special Stipulations which are annexed
--------------------
hereto shall control if in conflict with any of the provisions of this
Lease.
14.8 NOTICES. All notices or demands with respect to this Lease shall
-------
be in writing. Tenant hereby appoints as Tenant's agent to receive service
of any suits, dispossessory or distraint proceedings, and any demands or
notices thereunder, and any notices or demands permitted or required under
this Lease or related to this Lease, the person in charge of or occupying
the Premises at the time of such proceeding, demand or notice; and if no
person be in charge of or occupying the Premises, then such service or
notice shall be deemed properly given if attached to the front entrance of
the Premises. Such appointment of an agent to receive service, notices and
demands shall be in addition to those provided by Laws or otherwise, and
Landlord shall have the option of selecting either the agent appointed
herein or any other agent available by Laws or otherwise. Landlord may
give Tenant any notice or demand hereunder in lieu of, or in addition to,
the manner prescribed above by mailing same, at Landlord's election to (A)
the Premises, or (B) Tenant's last known address if different from the
Premises, and any notice so sent should be deemed duly delivered to Tenant
upon the date of mailing. No demands or notices to Tenant with respect to
performance of any of Tenant's obligations hereunder shall be required
unless expressly required under the terms of this Lease, and Tenant hereby
waives any such notices or demands. In the event that the term Tenant, as
used in this Lease, refers to more than one party, any notice, consent,
approval, request, bill, demand or statement given as aforesaid to any of
such parties shall be deemed to have been duly given to Tenant. Rejection
or refusal by Tenant to accept, or inability to deliver, because of changed
address of which no notice has been received, shall also constitute
properly given notice. All notices or demands to Landlord shall be either
hand-delivered or by receipted courier service or sent, certified mail,
return receipt requested, to the address of Landlord specified in
Subparagraph 1.1(B), or at such other place as an authorized officer of
Landlord may designate to Tenant in writing, and such notices to Landlord
shall be deemed validly and effectively given only if and when said hand-
delivery or certified letter shall be actually received by Landlord. Upon
request by Landlord or Mortgagee, a copy of all notices or demands to
Landlord shall also be sent to Mortgagee, and Tenant shall not exercise any
remedies due to any default by Landlord under this Lease unless and until
Mortgagee shall have received such notice or demand and failed to cure such
default within thirty (30) days after such receipt.
14.9 HEADINGS AND TERMINOLOGY. The headings or captions contained in
------------------------
this Lease are for convenience and reference only and in no way define,
affect or limit the scope or content of this Lease. All personal pronouns,
if any, used in this Lease, whether used in the masculine, feminine or
neuter gender, shall include all other genders; the singular shall include
the plurals; and the plurals shall include the singular. All references in
this Lease to any Article, Paragraph or Subparagraph shall refer to the
corresponding Article, Paragraph or Subparagraph of this Lease unless
specific reference is made to the articles, paragraphs, subparagraphs,
sections, subsections or subdivisions of another document or instrument.
14.10 ENTIRE AGREEMENT; AMENDMENT; CONSENTS. This Lease sets forth the
-------------------------------------
entire agreement between the parties hereto concerning the Premises, and no
representation, inducement, promise or agreement, oral or otherwise,
between the parties not embodied herein, shall be of any force or effect.
Tenant acknowledges that no real estate broker or agent, nor any of
Landlord's agents, managers or leasing representatives have the power or
authority to amend, modify, terminate or accept a surrender of this Lease,
and such power and authority is vested solely in Landlord acting in writing
through Landlord's duly authorized corporate officers. No amendment,
modification, termination, change or addition to this Lease shall be
binding upon either party unless reduced to writing and signed by Tenant
and a duly authorized corporate officer of Landlord. Any consent required
or requested of Landlord under this Lease or any portion thereof,
including, without limitation, Paragraph 9.1, must be in writing, and may
be granted or withheld by Landlord in Landlord's sole and absolute
discretion, which may be exercised arbitrarily, without inquiry into the
reasonableness or unreasonableness of the granting or withholding of same.
14.11 TENANT OBLIGATIONS. All rental payable under this Lease shall be
------------------
absolutely "net" to Landlord except as to the obligations of Landlord
expressly contained herein, and accordingly, all Claims related to all
Taxes, Insurance or Work which are not specifically assumed by Landlord
under this Lease are deemed to be the responsibility of Tenant, and Tenant
shall, and does hereby, release and indemnify Landlord from and against all
such Claims not specifically assumed by Landlord in this Lease. In the
event of Tenant Default, Landlord, without thereby waiving such Tenant
Default, may perform such action as will cure such Tenant Default, for the
account and at the expense of Tenant (but shall have no obligation
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to do so), without notice by Landlord to Tenant of Landlord's intention to
do so. Tenant shall not be entitled to terminate this Lease, nor receive
any abatement, deduction, deferment, suspension or reduction of, or setoff,
defense or counterclaim against any rentals, charges or other sums payable
by Tenant under this Lease, the parties hereto intending that the Minimum
Rent and all other charges and sums payable by Tenant hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease. In
the event that more than one Tenant is designated in Subparagraph 1.1(C) or
elsewhere in this Lease, or more than one party executes this Lease as
Tenant, then all of such parties shall be jointly and severally liable for
all obligations of Tenant under this Lease.
14.12 AGENT. Agent is a party to this Lease for the sole and limited
-----
purpose of recognizing the right of Agent to a real estate brokerage
commission with respect to this Lease pursuant solely to the terms of the
Commission Agreement. Agent has no authority, express or implied, to (A)
amend, modify, renew, extend or terminate this Lease, (B) bind Landlord in
any fashion, (C) make any representation, statement, warranty or agreement
as agent or on behalf of Landlord, or (D) give or receive any notice or
demand on behalf of Landlord. In the event that Landlord sells or
transfers the Premises, and the purchaser or transferee thereof assumes the
obligations of Landlord under the Commission Agreement, then in such event
Landlord shall be fully released from any further obligations to Agent
under the Commission Agreement. Tenant hereby represents and warrants to
Landlord that Tenant has had no involvement, contact or agreement with any
real estate broker or agent other than Agent. Tenant and Agent shall, and
do hereby, indemnify and hold harmless Landlord from and against all Claims
asserted by any party other than Agent for real estate brokerage commission
or fees arising out of or related to this Lease, which indemnity shall
survive the termination of this Lease.
ARTICLE XV
EXECUTION AND AUTHORITY
15.1 EXECUTION AND AUTHORITY. (A) Submission or preparation of this
-----------------------
Lease by Landlord shall not constitute an offer by Landlord or option for
the Premises, and this Lease shall constitute an offer, acceptance or
contract only as expressly specified by the terms of this Subparagraph
15.1(A). In the event that Tenant executes this Lease first, such action
shall constitute an offer to Landlord, which may be accepted by Landlord by
executing this Lease, and once this Lease is so executed by Landlord, such
offer may not be revoked by Tenant and this Lease shall become a binding
contract. In the event that Landlord executes this Lease first, such
action shall constitute an offer to Tenant, which may be accepted by Tenant
only by delivering to Landlord a fully executed copy of this Lease,
together with a fully executed copy of all guaranty agreements, if any, of
the obligations of Tenant under this Lease, all of which documents must be
received by Landlord within seven (7) days after execution of this Lease by
Landlord; provided that in the event that any party other than Landlord
makes any material or minor alteration of any nature whatsoever to any of
said documents, then such action shall merely constitute a counteroffer,
which Landlord may, at Landlord's election, accept or reject.
Notwithstanding that the Commencement Date may occur and the Lease Term
may commence after the date of execution of this Lease, upon delivery and
acceptance of this Lease in accordance with the terms of this Lease, this
Lease shall be fully effective, and in full force and effect and valid and
binding against the parties in accordance with, but on and subject to, the
terms and conditions of this Lease.
(B) As a material inducement to Landlord to enter into this Lease,
Tenant (and, individually each party executing this Lease on behalf of
Tenant), intending that Landlord rely thereon, represents and warrants to
Landlord that:
(i) Tenant and the party executing on behalf of Tenant are fully and
properly authorized to execute and enter into this Lease on behalf of
Tenant and to deliver this Lease to Landlord;
(ii) This Lease constitutes a valid and binding obligation of Tenant,
enforceable against Tenant in accordance with the terms of this Lease;
(iii) Tenant is duly organized, validly existing and in good standing
under the Laws of the state of Tenant's organization and has full power and
authority to enter into this Lease, to perform Tenant's obligations under
this Lease in accordance with the terms of this Lease, and to transact
business in the state in which the Premises are located; and
(iv) The execution of this Lease by the individual or individuals
executing this Lease on behalf of Tenant, and the performance by Tenant of
Tenant's obligation under this Lease, have been duly authorized and
approved by all necessary corporate or partnership action, as the case may
be, and the execution, delivery and performance of this Lease by Tenant is
not in conflict with Tenant's bylaws or articles of incorporation (if a
corporation), agreement of partnership (if a partnership), and other
charters, agreements, rules or regulations governing Tenant's business as
any of the foregoing may have been supplemented or amended in any manner.
(C) In the event that the Premises are located in Georgia, this Lease
shall be deemed to have been executed in Georgia, and the interpretation,
construction and performance of this Lease shall be governed by the Laws of
the State of Georgia. In the event that the Premises are not located in
Georgia, then the interpretation, construction and performance of this
Lease shall be governed by the Laws of the state in which the Premises are
located.
(D) This Lease shall be executed in duplicate, each counterpart of
which shall be deemed an original and any of which shall be deemed to be
complete of itself and may be introduced into evidence or used for any
purpose without the production of the other counterpart or counterparts.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease in
duplicate, individually or through their authorized officers, agents, or
attorneys-in-fact, as the case may be, causing their respective seals to be
affixed hereto the day and year first above written.
TENANT:BIO-SHIELD TECHNOLOGIES, INC. LANDLORD:SELIG ENTERPRISES, INC.
By _____________________________(SEAL) By
______________________________(SEAL)
its: ___________________________ its: ___________________________
(CORPORATE SEAL) (CORPORATE SEAL)
AGENT:KING INDUSTRIAL REALTY, INC.
By _____________________________(SEAL)
its: ___________________________
(CORPORATE SEAL)
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EXHIBIT "B"
DESCRIPTION OF INITIAL WORK TO BE PERFORMED BY LANDLORD
ON OR ABOUT THE COMMENCEMENT DATE, LANDLORD AGREES TO PERFORM THE FOLLOWING
WORK:
1. INSTALL FLOOR DRAIN
2. INSTALL 2" GAS LINE
3. INSTALL A 10" VENT
4. ADD ONE (1) 120 VOLT OUTLET
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EXHIBIT 10.11
EXHIBIT "B"
CONSULTING AGREEMENT
This Agreement ("Agreement") is entered into as of this 5th day of December,
1997, by and between BioShield Technologies, Inc., a Georgia corporation
("Corporation"), and R.T. Consulting, Services Inc. ("Consultant").
In consideration of the mutual promises of the parties and other good and
valuable consideration, the parties hereby agree:
Section 1. Engagement. During the term of this Agreement, the Corporation
- --------- ----------
agrees to engage the Consultant, and the Consultant agrees to serve the
Corporation, to provide the following services: Rendering strategic and
financial advice, including, but not limited to, advice relating to the
development of marketing plans and materials, financial plans and budgets,
advertising plans, initiating strategic business initiatives, interviewing
prospective employees and alliances, and such other services as may reasonably
be requested by the Company, but expressly excluding finding sources of
financing. The Consultant shall be available for work at reasonable times and
for reasonable periods of time to perform such services at the location or
locations reasonably designated upon reasonable notice by orally and followed up
in writing by the Corporation in Atlanta, Georgia, which shall include
availability by telephone. The Consultant shall orally report to the President
at the Corporation.
Section 2. Term. This Agreement shall commence no earlier than the effective
- --------- ----
date of a registration statement filed with the U.S. Securities and Exchange
Commission from which the Company raises proceeds from a public offering of the
Company's common stock in recognition of the Company's current limited financial
resources and shall terminate on the fourth anniversary thereof (the
"Termination Date"), unless earlier terminated as described herein.
Section 3. Compensation.
- --------- ------------
(a) Base Rate. The Corporation shall pay the Consultant for the services
---------
described herein at the rate of $3,000 per calendar month payable in advance by
the end of the preceding calendar month (the "Base Rate") and shall reimburse
the Consultant for reasonable travel expenses pre-approved by the Corporation.
The Service to be performed by Consultant shall not exceed 10 hours per month
inclusive of telephone calls and travel time to the extent such travel is
requested or approved in advance by the Corporation (the "Monthly Commitment").
Consultant shall be compensated at the rate of $100 per hour for any services
authorized by the Corporation in excess of the Monthly Commitment. However, to
the extent that the Corporation does not utilize the services of the Consultant
hereunder for 10 hours per month, any unused time shall be carried forward from
month to month and shall offset at the rate of $100 per hour any additional
compensation owed to Consultant for services rendered by Consultant in excess of
the Monthly Commitment. In no event, however, shall Consultant be required to
provide more than 20 hours of consulting services in any calendar month or in
any ten (10) day period. During the term of this Agreement, the Consultant
shall either obtain direct payment of expenses by the Company which are pre-
approved by the Company or shall deliver an invoice to the Corporation for such
services and expenses within ten days of the end of each calendar month and the
Corporation shall pay any undisputed portion of such invoice within fifteen days
of such delivery.
Section 4. Independent Contractor. The parties intend that the relationship
- --------- ----------------------
between them created under this Agreement is that of an independent contractor
only. The Consultant is not to be considered an agent or employee of the
Corporation for any purpose, and the Corporation is interested only in the
results obtained under this Agreement; the manner and means of performing the
services are subject to the Consultant's sole control. Consultant shall be
responsible for all state, federal, and local taxes, including estimated taxes,
social security, disability insurance, if any, and any other similar form of
payments, as well as all employment reporting, for the Consultant and any of the
Consultant's employees or agents.
Section 5. Proprietary Rights. The Consultant agrees that all Work Product
- --------- ------------------
created solely or jointly by the Consultant, the Consultant's employees,
associates, or subcontractors, arising from work performed hereunder, or
previously conceived in anticipation of consulting work to be performed in
regard to the Corporation's engagement of the Consultant, shall be deemed "work
made for hire." The Consultant shall cause all of the Consultant's employees,
associates, or subcontractors assisting in creating the Work Product to execute
a similar
<PAGE>
acknowledgment that the Work Product is a "work made for hire." The Consultant
subcontractors assisting in creating the Work Product shall execute all such
assignments, oaths, declarations, and other documents as may be prepared by
the Corporation to effect the foregoing.
"Work Product" shall mean all documentation, manuals, teaching materials,
creative works, know-how, and information created on behalf of the Corporation,
in whole or in part, by the Consultant and all of the Consultant's employees,
associates, or subcontractors assisting in creating the Work Product within the
scope of this Agreement, whether or not copyrightable or otherwise protectable.
Section 6. Confidentiality. In order to induce the Corporation to enter into
- --------- ---------------
this Agreement, the Consultant hereby agrees that, except with the written
consent of the Corporation, the Consultant shall keep confidential and not
divulge to any person that is not affiliated with the Corporation, during the
term of this Agreement or any time thereafter, any of the Corporation's
confidential information and business secrets, including, without limitation,
confidential information and business secrets relating to such matters as the
Corporation's finances and operations, the materials, processes, and procedures
used in the Corporation's operations, the names of the Corporation's customers
and their requirements, and the names of the Corporation's suppliers. All
papers, books, and records of every description, including, without limitation,
computer software, programs, modules, source codes, data, designs, and results,
as well as all reproductions thereof, relating to the business and affairs of
the Corporation, or its customers, whether or not prepared by Consultant, shall
be the sole and exclusive property of the Corporation. Upon termination of this
Agreement, or upon request by the Corporation, the Consultant shall surrender
all tangible evidence of such information to the Corporation. This Section 6
shall not apply to information that is or becomes public without breach of the
Consultant's duty of confidentiality hereunder, or to information provided to
the Consultant by an independent third party who to the best of the Consultant's
knowledge after diligent inquiry is not under a duty of confidentiality
regarding such information, or to information that the Consultant is required by
law to disclose, provided that Consultant shall provide the Corporation with at
least five (5) days prior written notice of the making of any such required
disclosure as well as the information which will be disclosed by Consultant.
This Section 6 shall not restrict the disclosure of information by the
Consultant to its professional advisors and employees on a "need-to-know" basis,
provided that such advisors and employees shall be subject to this
confidentiality covenant.
The obligations of secrecy shall continue throughout the duration of this
Agreement and for ten years thereafter.
Section 7. Records. The Consultant shall maintain reasonable records of
- --------- -------
consulting work performed under this Agreement. All records, sketches,
drawings, prints, computations, charts, reports, and other documentation made in
the course of the consulting work performed hereunder, or in anticipation of the
consulting work to be performed in regard to this Agreement, shall at all times
be and remain the sole property of the Corporation. The Consultant shall turn
over to the Corporation all copies of such documentation on request by the
Corporation.
Section 8. Early Termination. This Agreement may be terminated by the
- --------- -----------------
Corporation at its discretion: (i) in the event that the Consultant or its
members or managers is convicted of any felony crime; (ii) upon the disclosure
of unauthorized material confidential information by the Consultant reasonably
known by Consultant to be confidential, (iii) in the event that the Consultant
fails to perform the services contemplated by this Agreement with diligence or
competence, or the Consultant materially breaches this Agreement and fails to
remedy such failure and/or breach within thirty (30) days after receipt of
notice describing in detail the nature of such breach.
Section 9. Notices. Notice under this Agreement shall be in writing and shall
- --------- -------
be effective when actually delivered or the date when delivered by Federal
Express or other courier service. If mailed, notice shall be mailed as
registered or certified mail, return receipt requested, postage prepaid,
directed to the other party at the address set forth below or such other address
as the party may indicate by written notice to the other:
BioShield Technologies, Inc. Suite B109
4405 International Boulevard
Norcross, Georgia 30083
R.T. Consulting, Inc. 16719 Senterra Drive
Del Ray, Florida 33484
Section 10. No Release. The termination of this Agreement or the expiration of
- ---------- ----------
the term of this Agreement
2
<PAGE>
shall not release Consultant from any obligations under Sections 4, 5, 6, and
7 herein.
Section 11. Survival. Any of the terms and covenants contained in this
- ---------- --------
Agreement which require the performance of either party after the Closing shall
survive the Closing.
3
<PAGE>
Section 12. Waiver. Failure of either party at any time to require performance
- ---------- ------
of any provision of this Agreement shall not limit the party's right to enforce
the provision, nor shall any waiver of any breach of any provision be a waiver
of any succeeding breach of any provision or a waiver of the provision itself
for any other provision.
Section 13 Assignment. Except as otherwise provided within this Agreement,
- ---------- ----------
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
Section 14 Law Governing. This Agreement shall be governed by and construed in
- ---------- -------------
accordance with the laws of the State of Georgia.
Section 15 Arbitration. If at any time during the term of this Agreement any
- ---------- -----------
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof. The
arbitration shall take place in Atlanta, Georgia.
Section 16 Attorney Fees. In the event an arbitration, suit or action is
- ---------- -------------
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 17 Presumption. This Agreement or any section thereof shall not be
- ---------- -----------
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 18 Titles and Captions. All article, section and paragraph titles or
- ---------- -------------------
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
Section 19 Pronouns and Plurals. All pronouns and any variations thereof shall
- ---------- --------------------
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
Section 20 Entire Agreement. This Agreement contains the entire understanding
- ---------- ----------------
between and among the parties with respect to the subject matter hereof and
supersedes any prior understandings and agreements among them respecting the
subject matter of this Agreement.
Section 21 Agreement Binding. This Agreement shall be binding upon the heirs,
- ---------- -----------------
executors, administrators, successors and assigns of the parties hereto.
4
<PAGE>
Section 22 Further Action. The parties hereto shall execute and deliver all
- ---------- --------------
documents, provide all information and take or forbear from all such action as
may be reasonably necessary or appropriate to achieve the purposes of this
Agreement.
Section 23 Good Faith, Cooperation and Due Diligence. The parties hereto
- ---------- -----------------------------------------
covenant, warrant and represent to each other good faith, complete cooperation,
due diligence and honesty in fact in the performance of all obligations of the
parties pursuant to this Agreement. All promises and covenants are mutual and
dependent.
Section 24 Counterparts. This Agreement may be executed in several
- ---------- ------------
counterparts and all so executed shall constitute one Agreement, binding on all
the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
Section 25 Parties in Interest. Nothing herein shall be construed to be to the
- ---------- -------------------
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
Section 26 Savings Clause. If any provision of this Agreement, or the
- ---------- --------------
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 27 Separate Counsel. The parties acknowledge that the Company has been
- ---------- ----------------
represented in this transaction by Sims Moss Kline & Davis LLP, that the
Consultant has not been represented in this transaction by the Company's
attorneys, and Consultant has been advised that it is important for the
Consultant to seek separate legal advise and representation in this matter.
BIOSHIELD TECHNOLOGIES, INC.
By:_______________________________________
Title:______________________________________
R.T. CONSULTING SERVICES, INC.
By:_______________________________________
Title:______________________________________
5
<PAGE>
EXHIBIT 10.12
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS FROM REGISTRATION
REQUIREMENTS UNDER SAID LAWS, INCLUDING IN PARTICULAR SECTION 10-5-9(13) OF THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED. ACCORDINGLY, NO INTEREST IN THIS
NOTE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (II) AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT WHERE THE PAYEE HAS FURNISHED TO THE PAYOR AN
OPINION OF ITS COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
BioShield Technologies, Inc.
NON-NEGOTIABLE INTEREST BEARING PROMISSORY NOTE
$__________________ __________________, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, BioShield Technologies, Inc., a
Georgia corporation (the "Payor"), having its principal offices at 4405
International Boulevard, Suite B109, Norcross, Georgia, 30083, hereby promises
to pay to ________________ (the "Payee") having an address at
__________________________________________________________ on the earlier to
occur of (i) the date of a closing following the date that the U.S. Securities
and Exchange Commission declares effective the Company's registration statement
on Form SB-2 or another equivalent form (the "Effective Date") for the sale of
the Company's common stock, no par value (the "Common Stock"), in an initial
public offering (the "IPO") or (ii) ______________________, 2001 (the "Maturity
Date"), at the Payee's address set forth hereinabove, or at such other place as
the Payee shall hereafter specify in writing, the principal sum of
_______________ ($_______________________). Such principal amount and
interest, payable as specified below, shall be payable not later than 12:00
o'clock noon, New York City time, on the date when due, in such currency of the
United States of America as at the time shall be the legal tender for the
payment of public and private debts and in funds immediately available at such
payment office or in Common Stock as provided in Paragraphs 1.3 and 1.4 to the
extent applicable.
This Note is part of a unit or units (the "Units") and one of a series of
notes (the "Bridge Notes") being issued pursuant to the Payor's Confidential
Private Offering Memorandum dated January 15, 1998, together with the exhibits
(the "Memorandum") relating to the Payor's offering of up to two hundred (200)
Units, each Unit consisting of (i) a Bridge Note in the principal amount of
$5,000 and (ii) a warrant to purchase up to 5,000 shares of the Common Stock.
This Note shall rank pari passu with all other Bridge Notes.
---- -----
Reference to the Memorandum shall in no way impair the absolute and
unconditional obligation of the Payor to pay both principal and interest hereon
as provided herein.
1. Interest and Payment.
1.1 The principal amount hereof outstanding from time to time shall
bear simple interest (computed on the basis of a 360-day year, using the
number of days actually elapsed) from the date hereof at the annual rate of
(i) 10% from the date hereof until twelve (12) calendar months from the
date hereof (the "First Anniversary Date"), (ii) 13% from the First
Anniversary Date until twenty-four (24) calendar months from the date
hereof (the "Second Anniversary Date"), and (iii) 15% from the Second
Anniversary Date until thirty-six (36) calendar months from the date hereof
(the "Third Anniversary Date"). It is expressly understood that no
acceleration of this Note shall occur by reason of a failure of the Company
to make any interest payment due under this Note.
<PAGE>
1.2 Interest as described in Section 1.1 herein shall be payable
annually until the Maturity Date commencing on the First Anniversary Date,
and any accrued and unpaid interest shall be payable in full on the
Maturity Date (or on any such earlier date of payment as provided in
Section 3).
1.3 In the event that the principal amount due under this Note
together with accrued and unpaid interest is not paid in full in cash prior
to the First Anniversary Date, the Second Anniversary Date or the Third
Anniversary Date, respectively, then the interest payment due on the
respective Anniversary Date shall be payable by the Company in Common Stock
("Interest Payment Conversions") based upon a price per share ("Interest
Exercise Price") of $1.00 per share as regards the interest payment due on
the First Anniversary Date, $2.00 per share as regards the interest payment
due on the Second Anniversary Date, and $3.00 per share as regards the
interest payment due on the Third Anniversary Date. The Interest Exercise
Price shall be subject to adjustment as described below.
1.4 If the principal and accrued interest have not been paid in full
on or before the Maturity Date, then the principal amount due to the Payee
hereunder shall automatically be converted into Common Stock at a price
equal (the "Maturity Date Exercise Price") to $1.00 per share, the accrued
and unpaid interest shall automatically convert into Common Stock at the
respective Interest Exercise Price and the Unit Warrants issued as a part
of the Units shall automatically terminate and shall be null and void and
of no value (collectively, "Payoff Conversions"). The Maturity Date
Exercise Price shall be subject to adjustment as described below.
1.5 If payment of the principal amount hereof or interest accrued
thereon is not made when due and payable (including by the issuance of
Common Stock pursuant to Sections 1.3 and 1.4), or upon acceleration as
expressly provided herein, then interest shall accrue on such unpaid amount
from the date of nonpayment to the date of payment at the rate of 12% per
annum for the first twelve (12) calendar months of such nonpayment,
increasing to 15% per annum thereafter.
1.6 If any payment under this Note becomes due on a Saturday, Sunday
or any other day on which banks in New York City are required or permitted
to be closed then such payment shall be made on the next succeeding day
which is not a Saturday, Sunday, or any other day on which such banks are
required or permitted to be closed and any principal amount due shall
continue to bear interest until such payment is made.
1.7 In the event that a court of competent jurisdiction shall finally
determine that the Payor shall have paid or agreed to pay hereunder
interest in excess of the maximum rate permitted by law, it is the express
intent of the Payor and the Payee (as indicated by his acceptance of this
Note) that all such excess amounts paid shall be applied to reduce the
outstanding principal amount of this Note, and the provisions of this Note
immediately shall be deemed reformed and amounts thereafter collectible
hereunder reduced, without necessity of execution of a new document, so as
to comply with the determination of such court, but so as to permit the
recovery of the fullest amount otherwise provided for in this Note.
1.8 In the event the Company (i) declares a dividend on the
outstanding Common Stock payable in shares of its capital stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of
its capital stock by reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the
Interest Exercise Price and the Maturity Date Exercise Price in effect at
the time of the record date for such dividend or of the effective date of
such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Payee after such time shall be
entitled to receive the aggregate number and kind of shares which, if such
interest payment had been made immediately prior to such time, he would
have receive after such payment and been entitled to receive by virtue of
such dividend, subdivision, combination, or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
<PAGE>
2. Replacement of Note. In case this Note is mutilated, destroyed, lost
-------------------
or stolen, the Payor shall, at its sole expense, execute, register and deliver,
a new Note, in exchange and substitution for this Note, if mutilated, or in lieu
of and substitution for this Note, if destroyed, lost or stolen. In the case of
destruction, loss or theft, the Payee shall furnish to the Payor indemnity
reasonably satisfactory to the Payor, and in any such case, and in the case of
mutilation, the Payee shall also furnish to the Payor evidence to its reasonable
satisfaction of the mutilation, destruction, loss or theft of this Note and of
the ownership thereof. Any replacement Note so issued shall be in the same
outstanding principal amount as this Note and dated the date to which interest
shall have been paid on this Note, or if no interest shall have yet been paid,
dated the date of this Note.
3. Prepayment. At the option of the Payor, this Note may be prepaid in
----------
whole at any time, or in part from time to time, without penalty or premium. Any
such prepayments by Payor shall be made pro rata to all holders of Bridge Notes
issued pursuant to the Memorandum. Each partial prepayment of this Note shall
first be applied to interest accrued and unpaid through the date of prepayment
and then to principal. Upon any such prepayment, any accrued and unpaid
interest (other than that payable by delivery of Common Stock under paragraph
1.3) will be payable by Payor in cash.
4. Events of Default. If any of the following Events of Default shall
-----------------
occur:
4.1 The failure by the Payor to make payment, when due, of the
principal due under this Note at the Maturity Date or to issue Common Stock
when due pursuant to Section 1.3 or 1.4 hereof, following the elapse of 30
days from the date on which the Payor receives written notice of such
default; or
4.2 The dissolution of the Payor or any vote in favor thereof by
the Board of Directors and shareholders of the Payor; or
4.3 The Payor's insolvency, assignment for the benefit of creditors,
application for or appointment of a receiver, liquidator, assignee, trustee
or sequestrator (or other similar official) of the Payor, admission in
writing that the Payor cannot pay its debts as they become due, or filing
of a voluntary or involuntary petition under any provision of the Federal
Bankruptcy Code or amendments thereto or any other federal or state statute
affording relief to debtors; or there shall be commenced against the Payor
any such proceeding or filed against the Payor any such application or
petition which proceeding, application or petition is not dismissed or
withdrawn within ninety (90) days of commencement or filing, as the case
may be; or
5. Unconditional Obligation; Fees, Waivers, Other.
----------------------------------------------
5.1 The holder of this Note agrees to pay, on demand, all costs and
expenses paid or incurred by Purchaser in seeking to collect this Note,
including, without limitation, reasonable attorneys fees actually incurred,
and disbursements paid or incurred by Payee, with interest thereon at the
Default Rate until paid in full.
5.2 No forbearance, indulgence, delay or failure to exercise any
right or remedy with respect to this Note shall operate as a waiver, nor as
an acquiescence in any default, nor shall any single or partial exercise of
any right or remedy preclude any other of further exercise thereof or the
exercise of any other right or remedy.
5.3 This Note may not be modified or discharged (other than by
payment of this Note), except by a writing duly executed by the Payor and
the Payee.
5.4 The Payor hereby expressly waives demand and presentment for
payment, notice of nonpayment, notice of dishonor, protest, notice of
protest, bringing of suit, and diligence in taking any action to collect
amounts called for hereunder, and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission with respect to the
collection of any amount called for hereunder or in connection with any
right, lien, interest or property at any and all times which the Payee had
or is existing as security for any amount called for hereunder.
<PAGE>
6. Suits for Enforcement of Remedies. If any one or more Events of
---------------------------------
Default shall occur and be continuing, the Payee may proceed to protect and
enforce such holder's rights either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, condition or
agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of the Payee. No
right or remedy herein or in any other agreement or instrument conferred upon
the holder of this Note is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise.
7. Restriction on Transfer. By its acceptance of this Note the Payee
-----------------------
acknowledges that this Note is non-negotiable and, as such, non-transferable,
has not been registered or qualified under the securities laws of the United
States of America or any state thereof. By its acceptance of this Note the Payee
acknowledges and represents that this Note has been acquired for investment and,
even if this Note is subsequently amended to be negotiable, no interest in this
Note may be offered for sale, sold, delivered after sale, transferred, pledged,
or hypothecated in the absence of registration and qualification of this Note
under applicable federal and state securities laws or an opinion of counsel of
the Payee reasonably satisfactory to the Payor that such registration and
qualification are not required. The Payee will also be required to execute a
lock-up agreement, to the extent required by the Company's underwriter, the
National Association of Securities Dealers, Inc., or any state regulatory
authority in the IPO, the terms of which will require, among other things, Payee
to refrain from offering for sale, selling, soliciting an offer to buy,
contracting to sell, granting any option for the sale of or otherwise
transferring or disposing of, directly or indirectly, any shares of Common Stock
received pursuant to this Note or pursuant to the Unit Warrants for a period not
to exceed twelve (12) months after the closing of the IPO.
8. Miscellaneous.
-------------
8.1 The headings of the various paragraphs of this Note are for
convenience of reference only and shall in no way modify any of the terms
or provisions of this Note.
8.2 All notices required or permitted to be given hereunder shall be
in writing and shall be deemed to have been duly given when personally
delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, to the address of the intended recipient set
forth in the preamble to this Note or at such other address as the intended
recipient shall have hereafter given to the other party hereto pursuant to
the provisions hereof.
8.3 This Note and the obligations of the Payor and the rights of the
Payee shall be governed by and construed in accordance with the laws of the
State of Georgia without giving effect to choice of law principles.
8.4 The Payor (a) agrees that any legal suit, action or proceeding
arising out of or relating to this Note will be instituted exclusively in
Superior Court of Fulton County of Georgia or in the United States District
Court for the Northern District of Georgia (b) waives any objection which
the Payor may have now or hereafter to the venue of any such suit, action
or proceeding, and (c) irrevocably consents to the jurisdiction of the
Superior Court of Fulton County and the United States District Court for
the Northern District of Georgia in any such suit, action or proceeding.
The Payor further agrees to accept and acknowledge service of any and all
process which may be served in any such suit, action or proceeding in the
United States District Court for the Northern District of Georgia and
agrees that service of process upon the Payor mailed by certified mail to
the Payor's address will be deemed in every respect effective service of
process upon the Payor, in any suit, action or proceeding.
8.5 This Note shall bind the Payor and its successors and assigns.
<PAGE>
BIOSHIELD TECHNOLOGIES, INC.
By:___________________________________
Name: Timothy C. Moses
Title: President
<PAGE>
EXHIBIT 10.13
SETTLEMENT AGREEMENT AND RELEASE
--------------------------------
This Settlement Agreement and Release (the "Agreement") is made and entered
into on May _____, 1998, by and between BioShield Technologies, Inc.
("BioShield" or the "Company") and Stephen M. Dale (the "Investor")
(collectively, the "Parties");
W I T N E S S E T H :
WHEREAS, pursuant to a Confidential Private Placement Memorandum, dated
January 15, 1998, as supplemented on February 11, 1998, Company offered to sell
Investor on a private placement basis (the "Private Placement") up to 200 units
(the "Units") at a purchase price of $5,000.00 per Unit. Each Unit was to
consist of a Non-Negotiable Interest Bearing Promissory Note and warrants ("Unit
Warrants") to purchase up to 5,000 shares of Company's common stock, no par
value per share (the"Common Stock");
WHEREAS, Investor delivered to Company a Subscription Agreement dated March
5, 1998 (the "Subscription Agreement") to purchase 50 Units for an aggregate of
$250,000.00 and in consideration therefor received from Company a Non-Negotiable
Interest Bearing Promissory Note in the form attached hereto as Exhibit "A" (the
-----------
"Investment Note") for $250,000.00 and Company's agreement to deliver, as soon
as practicable following delivery of the Investment Note, Unit Warrants to
purchase 250,000 shares of Common Stock in the form attached hereto as Exhibit
-------
"B" (the "Subscription Amount");
- ---
WHEREAS, Investor desires to cancel the purchase of the 50 Units and
Company is willing to cooperate in the cancellation of such purchase in
connection with the full accord, satisfaction, settlement and release of all
potential claims and counterclaims which the Parties have or may have against
each other arising prior to the date hereof;
WHEREAS, the Parties have agreed that, simultaneously with the Parties'
execution and delivery of this Agreement, (i) Company will deliver to Investor
(a) a check of even date hereof in good funds, payable to Investor in the sum of
One Hundred Twenty-Five Thousand and no/100 Dollars ($125,000.00) (the "Initial
Payment); and (b) a promissory note of even date hereof, substantially in the
form attached hereto as Exhibit "C", on which Company will be obligated as the
-----------
borrower, in the aggregate principal amount of One Hundred Twenty Five Thousand
and no/100 Dollars ($125,000.00), with interest payable on such note in the
annual amount of ten percent (10%) (the
<PAGE>
"New Note"; the Initial Payment and the New Note are collectively referred to
herein as the "Settlement Payment"), (ii) Investor will deliver to Company the
Investment Note, and (iii) without any action on the part of either Investor or
Company, the Investment Note will be immediately cancelled and rendered null and
void, and Company's obligation to deliver the Unit Warrants shall be null and
void; and
WHEREAS, the Parties agree to keep this Agreement and its terms
confidential, except to the extent required by law;
NOW, THEREFORE, for and in consideration of the mutual agreement
hereinafter made, the payment of good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, BioShield and Investor hereby
agree as follows:
FIRST: Investor, for himself, his successors and assigns, hereby releases,
remises, acquits, and forever discharges BioShield and its successors, assigns,
representatives, officers, shareholders, directors, agents, attorneys, and
employees from any and all manner of actions, causes of action, suits, debts,
dues, sums of money, accounts, reckonings, covenants, contract, agreements,
promises, damages, claims, and demands whatsoever and from any and all liability
or responsibility whatsoever with respect thereto whether known or unknown,
liquidated, or contingent, at law or in equity, which Investor now has or may
have against BioShield arising out of any transactions, facts, acts, or
omissions, matters or things whatsoever occurring prior to the date hereof,
including, but not limited to, all claims of whatever type or kind that were
asserted or could have been asserted in contract, law, or in equity by Investor
in connection with the Private Placement;
SECOND: BioShield, for itself, its successors and assigns, hereby
releases, remises, acquits, and forever discharges Investor and his heirs,
executors, administrators, assigns, representatives, agents, attorneys, and
employees from any and all manner of actions, causes of action, suits, debts,
dues, sums of money, accounts, reckonings, covenants, contract, agreements,
promises, damages, claims, and demands whatsoever and from any and all liability
or responsibility whatsoever with respect thereto whether known or unknown,
liquidated, or contingent, at law or in equity, which BioShield now have or may
have against Investor arising out of any transactions, facts, acts, or
omissions, matters or things whatsoever occurring prior to the date hereof,
including, but not limited to, all claims of whatever type or kind that were
asserted or could have been asserted in contract, law, or in equity by BioShield
in connection with the Private Placement;
2
<PAGE>
THIRD: The Parties agree that, simultaneously with the Parties' execution
and delivery of this Agreement, (i) Company shall deliver to Investor the
Settlement Payment, which shall be comprised of the Initial Payment and the New
Note, (ii) Investor shall deliver to Company the Investment Note, and (iii)
without any action on the part of either Investor or Company, the Investment
Note shall be immediately cancelled and rendered null and void, and Company's
obligation to deliver the Unit Warrants shall be null and void.
FOURTH: The New Note provides for payment to Investor in full, within six
months of the date hereof, the aggregate principal amount due thereunder plus
all accrued interest. In the event that some or all of the aggregate principal
amount remains unpaid at the end of such period, BioShield agrees to pay
interest on unpaid funds at a default rate of twelve percent (12%) per annum.
BioShield also agrees that, during the period in which any balance remains owing
on the New Note, in the event that BioShield is successful in raising equity or
debt capital, whether through the Private Placement or otherwise (the
"Placement"), any unpaid balance on principal and interest on the New Note will
be funded from the proceeds, from time to time of any such offerings as follows:
fifty percent (50%) of the net proceeds to BioShield of any such Placement up to
$200,000.00 shall be paid to Investor and one hundred percent (100%) of the net
proceeds to BioShield in excess of $200,000.00 shall be paid to Investor until
all amounts payable under the New Note, including any accrued interest, are paid
in full.
FIFTH: The Parties further agree that this Agreement is expressly
conditioned upon each Party's full execution and delivery of this Agreement,
BioShield's payment of the Settlement Payment and the Investment Note and Unit
Warrants being cancelled and becoming null and void.
SIXTH: BioShield and Investor represent and agree that they have
thoroughly discussed all aspects of this Agreement with their private attorneys,
that they are fully aware of their right to discuss any and all aspects of this
matter with an attorney chosen by them, that they have carefully read and fully
understand all the provisions of this Agreement and that they are voluntarily
entering into this Agreement.
SEVENTH: BioShield and Investor represent and acknowledge in executing
this Agreement that they do not rely and have not relied on any representation
or statement made by the other Party or by any of the other Party's agents,
representatives, or attorneys with regard to the subject matter, basis or effect
of this Agreement.
EIGHTH: This Agreement shall in all respects be interpreted, enforced, and
governed pursuant to the laws of the State of Georgia. The venue of any legal
action to enforce or interpret any portion of this Agreement or the
3
<PAGE>
New Note shall be Fulton County, Georgia. The language of this Agreement shall
in all cases be construed as a whole and be accorded its fair meaning, and shall
not be strictly construed for or against any of the Parties.
NINTH: Should any provision of this Agreement be declared or determined by
any court of competent jurisdiction to be illegal or invalid, the validity of
the remaining parts, terms, or provisions shall not be affected thereby and said
illegal or invalid part, term, or provisions shall be deemed not to be a part of
this Agreement.
TENTH: This Agreement does not constitute an admission of liability by any
Party to any other Party and both BioShield and Investor expressly deny any
liability to one another with respect to the Private Placement.
ELEVENTH: This Agreement may be executed in a number of identical
counterparts. If so executed, each of such counterparts shall be deemed an
original for all purposes and all such counterparts, collectively, constitute
one agreement.
TWELFTH: The Parties agree that the existence and terms of this Agreement,
the amount of the Settlement Payment, and the contribution of any Party, shall
be kept confidential and not disclosed to any non-parties to this Agreement,
except attorneys of the Parties and as necessary to comply with a valid subpoena
or applicable law. Investor and BioShield agree to provide the other with at
least five days prior written notice of any disclosure necessitated by subpoena
or applicable law.
THIRTEENTH: This Agreement sets forth the entire agreement between the
Parties hereto and fully supersedes any and all prior agreements,
understandings, representations or undertakings between the Parties hereto
pertaining to the subject matter hereof.
BIOSHIELD TECHNOLOGIES, INC.
By:__________________________________
Its: _________________________________
WITNESS:
_____________________________
______________________________________
Stephen M. Dale
WITNESS:
_____________________________
4
<PAGE>
EXHIBIT 10.14
PERSONAL AND CONFIDENTIAL
------------------------
May 28, 1998
Board of Directors
Bioshield Technologies, Inc.
4405 International Boulevard
Suite B-109
Norcross, GA 30093
Attention: Timothy C. Moses
Co-Chairman of the Board, President, and Chief Executive
Officer
Gentlemen:
Bioshield Technologies, Inc. ("BioShield" or the "Company") hereby engages
Revere Financial Group, Inc. ("RFG") to provide Edgarization and Pre-press
services and preparation of the Roadshow on the proposed public offering of the
Company. Using our system, we believe that we can hold the Part II Expenses of
the Offering to less than $325,000. The following sets forth the primary terms
and conditions under which the Company and RFG will process the Registration
Statement and prepare the Roadshow:
The RFG will provide the current draft of the Registration Statement by
disk, RFG will convert the disk, make all such changes as the Underwriter's
counsel, Company counsel, the Underwriter or the Company shall require. Black-
lined copies will be provided to all parties by fax or Fed-Ex. When final
approval have been received from all parties, RFG will Edgarize the document and
file the registration statement with the Securities and Exchange Commission.
The RFG will provide camera ready copy to the financial printer of the Company's
choice for final printing of Red Herrings and Final Prospectuses and for any
bound copies need for filing or distribution. The printing charges from such
printer are the responsibility of the Company.
RFG will work with the Company to prepare an eight to twelve minute "slide-
show" in video formats of VHS and Hi- 8MM. In addition, RFG will coordinate all
travel plans for the "Roadshow." All airfares, hotels, car services, and
presentation expenses are the responsibility of the Company.
Further, RFG will assist the Underwriters' with introductions to various
broker/dealers with whom we have close relationships.
Finally, we believe that not only will we save BioShield more than the
$50,000 in printing and "Roadshow" expenses, we may also be instrumental in
helping to negotiate lower legal fees and a $25,000 decrease in the
nonaccountable expense allowance
The RFG fee is $50,000 of which $25,000 should be wire transfer upon
closing of the bridge financing and $25,000 at the closing of the Offering. The
wire instructions are BankOne Dallas, ABA# 111000614 for the account of Revere
Financial Group, Inc. #1885457893
We look forward to a successful transaction as a continuation of our
mutually beneficial relationship.
Agreed to and Accepted this ___th day of May 1998
BIOSHIELD TECHNOLOGIES, INC. REVERE FINANCIAL GROUP, INC.
By: _______________________ By: _________________________
Timothy C. Moses Robert A. Shuey, III
Co-Chairman of the Board,
President, and Chief
Executive Officer
President Managing Director
<PAGE>
EXHIBIT 10.15
PROMISSORY NOTE
$30,000.00 January 16, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, BioShield Technologies, Inc., a
Georgia corporation (the "Borrower"), promises to pay to the order of Judith B.
Turner, a Georgia citizen (the "Holder"), at 700 River Knoll Drive, Marietta,
Georgia, 30067 or at such other place as Holder may designate to Borrower in
writing from time to time, the principal sum of Thirty Thousand and no/100
Dollars ($30,000.00), together with interest on so much thereof as is from time
to time outstanding and unpaid, at the rate hereinafter set forth, in lawful
money of the United States of America, such principal and interest to be paid in
the following manner:
From and after the date hereof (until maturity, whether by acceleration or
otherwise), interest on the outstanding principal indebtedness evidenced hereby
shall accrue at the rate of eight percent (8%) per annum. The entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable the earlier of: one year from the
date of this instrument; or upon the consummation of the Borrower's Initial
Public Offering (the ADue Date@).
It is hereby expressly agreed that should any installment of principal or
interest not be paid when due or should any other default occur, then, and in
such event, the principal indebtedness evidenced hereby, and any other sums
advanced hereunder, together with all unpaid interest accrued thereon, shall, at
the option of Holder, upon notice or demand to Borrower, at once become due and
payable and may be collected forthwith, regardless of the stipulated date of
maturity. Interest shall accrue on the outstanding principal balance of this
Note, commencing from a date ten (10) days after the occurrence of any such
default and continuing for so long as such default continues, regardless of
whether or not there has been an acceleration of the indebtedness evidenced
hereby as set forth herein and whether or not such default is cured pursuant to
any applicable cure period or otherwise, at the rate equal to two percent (2%)
per annum in excess of the applicable interest rate at the time of such default.
Time is of the essence of this Note. Borrower agrees to pay all costs and
expenses of collection of the indebtedness evidenced by this Note which, in the
event that this Note or any part thereof shall be collected by or through
Page 1 of 9
<PAGE>
an attorney-at-law, shall include, but not be limited to, fifteen percent (15%)
of the amount due (including principal and interest) as attorneys= fees, and
other legal and court costs.
Borrower hereby waives presentment for payment, demand, protest and notice
of demand, dishonor, protest and nonpayment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a past due
installment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or as requiring Holder
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by the laws of the State of Georgia; and Borrower hereby expressly
waives the benefit of any statute or rule of law or equity now provided, or
which may hereafter be provided, which would produce a result contrary to or in
conflict with the foregoing. No extension of the time for the payment of this
Note or any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note, shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part, unless Holder agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note is intended as a contract under and shall be construed and
enforced in accordance with the laws of the State of Georgia.
Page 2 of 9
<PAGE>
Borrower may prepay this Note in full or in part at any time without
notice, penalty, prepayment fee, or payment of unearned interest.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by Borrower or in advertently received by
Holder, then such excess sum shall be credited as a payment of principal, unless
Borrower shall notify Holder in writing that Borrower elects to have such excess
sum returned to it forthwith. It is the express intent hereof that Borrower not
pay and Holder not receive, directly or indirectly, in any manner whatsoever,
interest in excess of which may be lawfully paid by Borrower under applicable
law.
Whenever used in this Note, the words "Borrower" and "Holder" shall be
deemed to include the Borrower and the Holder named in the opening paragraph of
this Note and their respective heirs, executors, administrators, legal
representatives, successors, and assigns.
IN WITNESS WHEREOF, the undersigned, has executed this instrument under
seal as of the day and year first above written.
BORROWER:
BIOSHIELD TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
----------------------------------
[CORPORATE SEAL]
Page 3 of 9
<PAGE>
PROMISSORY NOTE
$25,000.00 May 27, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, BioShield Technologies, Inc., a
Georgia corporation (the "Borrower"), promises to pay to the order of Judith B.
Turner, a Georgia citizen (the "Holder"), at 700 River Knoll Drive, Marietta,
Georgia, 30067 or at such other place as Holder may designate to Borrower in
writing from time to time, the principal sum of Twenty Five Thousand and no/100
Dollars ($25,000.00), together with interest on so much thereof as is from time
to time outstanding and unpaid, at the rate hereinafter set forth, in lawful
money of the United States of America, such principal and interest to be paid in
the following manner:
From and after the date hereof (until maturity, whether by acceleration or
otherwise), interest on the outstanding principal indebtedness evidenced hereby
shall accrue at the rate of eight percent (8%) per annum. The entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable the earlier of: one year from the
date of this instrument; or upon the consummation of the Borrower's Initial
Public Offering (the Due Date).
It is hereby expressly agreed that should any installment of principal or
interest not be paid when due or should any other default occur, then, and in
such event, the principal indebtedness evidenced hereby, and any other sums
advanced hereunder, together with all unpaid interest accrued thereon, shall, at
the option of Holder, upon notice or demand to Borrower, at once become due and
payable and may be collected forthwith, regardless of the stipulated date of
maturity. Interest shall accrue on the outstanding principal balance of this
Note, commencing from a date ten (10) days after the occurrence of any such
default and continuing for so long as such default continues, regardless of
whether or not there has been an acceleration of the indebtedness evidenced
hereby as set forth herein and whether or not such default is cured pursuant to
any applicable cure period or otherwise, at the rate equal to two percent (2%)
per annum in excess of the applicable interest rate at the time of such default.
Time is of the essence of this Note. Borrower agrees to pay all costs and
expenses of collection of the indebtedness evidenced by this Note which, in the
event that this Note or any part thereof shall be collected by or through an
attorney-at-law, shall include, but not be limited to, fifteen percent (15%) of
the amount due (including principal and interest) as attorneys' fees, and other
legal and court costs.
Page 4 of 9
<PAGE>
Borrower hereby waives presentment for payment, demand, protest and notice
of demand, dishonor, protest and nonpayment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a past due
installment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or as requiring Holder
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by the laws of the State of Georgia; and Borrower hereby expressly
waives the benefit of any statute or rule of law or equity now provided, or
which may hereafter be provided, which would produce a result contrary to or in
conflict with the foregoing. No extension of the time for the payment of this
Note or any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note, shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part, unless Holder agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note is intended as a contract under and shall be construed and
enforced in accordance with the laws of the State of Georgia.
Borrower may prepay this Note in full or in part at any time without
notice, penalty, prepayment fee, or payment of unearned interest.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by Borrower or inadvertently received by
Holder, then such excess sum shall be credited as a payment of principal, unless
Borrower shall notify Holder in writing that Borrower elects to have such excess
sum returned to it forthwith. It is the express intent hereof that Borrower not
pay and Holder not receive, directly or indirectly, in any manner whatsoever,
interest in excess of which may be lawfully paid by Borrower under applicable
law.
Whenever used in this Note, the words "Borrower" and "Holder" shall be
deemed to include the Borrower and the Holder named in the opening paragraph of
this Note and their respective heirs, executors, administrators, legal
representatives, successors, and assigns.
Page 5 of 9
<PAGE>
IN WITNESS WHEREOF, the undersigned, has executed this instrument under
seal as of the day and year first above written.
BORROWER:
BIOSHIELD TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
----------------------------------
[CORPORATE SEAL]
Page 6 of 9
<PAGE>
PROMISSORY NOTE
$25,000.00 June 5, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, BioShield Technologies, Inc., a
Georgia corporation (the "Borrower"), promises to pay to the order of Judith B.
Turner, a Georgia citizen (the "Holder"), at 700 River Knoll Drive, Marietta,
Georgia, 30067 or at such other place as Holder may designate to Borrower in
writing from time to time, the principal sum of Twenty Five Thousand and no/100
Dollars ($25,000.00), together with interest on so much thereof as is from time
to time outstanding and unpaid, at the rate hereinafter set forth, in lawful
money of the United States of America, such principal and interest to be paid in
the following manner:
From and after the date hereof (until maturity, whether by acceleration or
otherwise), interest on the outstanding principal indebtedness evidenced hereby
shall accrue at the rate of eight percent (8%) per annum. The entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable the earlier of: one year from the
date of this instrument; or upon the consummation of the Borrower's Initial
Public Offering (the Due Date).
It is hereby expressly agreed that should any installment of principal or
interest not be paid when due or should any other default occur, then, and in
such event, the principal indebtedness evidenced hereby, and any other sums
advanced hereunder, together with all unpaid interest accrued thereon, shall, at
the option of Holder, upon notice or demand to Borrower, at once become due and
payable and may be collected forthwith, regardless of the stipulated date of
maturity. Interest shall accrue on the outstanding principal balance of this
Note, commencing from a date ten (10) days after the occurrence of any such
default and continuing for so long as such default continues, regardless of
whether or not there has been an acceleration of the indebtedness evidenced
hereby as set forth herein and whether or not such default is cured pursuant to
any applicable cure period or otherwise, at the rate equal to two percent (2%)
per annum in excess of the applicable interest rate at the time of such default.
Time is of the essence of this Note. Borrower agrees to pay all costs and
expenses of collection of the indebtedness evidenced by this Note which, in the
event that this Note or any part thereof shall be collected by or through an
attorney-at-law, shall include, but not be limited to, fifteen percent (15%) of
the amount due (including principal and interest) as attorneys' fees, and other
legal and court costs.
Page 7 of 9
<PAGE>
Borrower hereby waives presentment for payment, demand, protest and notice
of demand, dishonor, protest and nonpayment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a past due
installment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or as requiring Holder
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by the laws of the State of Georgia; and Borrower hereby expressly
waives the benefit of any statute or rule of law or equity now provided, or
which may hereafter be provided, which would produce a result contrary to or in
conflict with the foregoing. No extension of the time for the payment of this
Note or any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note, shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part, unless Holder agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note is intended as a contract under and shall be construed and
enforced in accordance with the laws of the State of Georgia.
Borrower may prepay this Note in full or in part at any time without
notice, penalty, prepayment fee, or payment of unearned interest.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by Borrower or inadvertently received by
Holder, then such excess sum shall be credited as a payment of principal, unless
Borrower shall notify Holder in writing that Borrower elects to have such excess
sum returned to it forthwith. It is the express intent hereof that Borrower not
pay and Holder not receive, directly or indirectly, in any manner whatsoever,
interest in excess of which may be lawfully paid by Borrower under applicable
law.
Whenever used in this Note, the words "Borrower" and "Holder" shall be
deemed to include the Borrower and the Holder named in the opening paragraph of
this Note and their respective heirs, executors, administrators, legal
representatives, successors, and assigns.
Page 8 of 9
<PAGE>
IN WITNESS WHEREOF, the undersigned, has executed this instrument under
seal as of the day and year first above written.
BORROWER:
BIOSHIELD TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
----------------------------------
[CORPORATE SEAL]
Page 9 of 9
<PAGE>
EXHIBIT 10.16
BIOSHIELD TECHNOLOGIES, INC.
1996 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
-------
2.
3. The purpose of this Directors' Stock Option Plan (the "PLAN") is to secure
for Bioshield Technologies, Inc., a Georgia corporation (the "COMPANY"), and its
shareholders the benefits arising from capital stock ownership by Directors of
the Company who are expected to contribute to the Company's future growth and
success.
4.
5.
6. ADMINISTRATION
--------------
7.
8. (a) SHAREHOLDER CONTROL. The Plan is effective only upon adoption by the
-------------------
shareholders and will remain in effect at the pleasure of the shareholders of
the Company. The Shareholders reserve the right to terminate or modify the Plan
at any time, although such modification or termination shall not affect any
options granted prior to the time of such modification or termination.
9.
10. (b) ADMINISTRATION. The Plan shall be administered by the Board of
--------------
Directors of the Company or the Board may appoint a Plan committee (the
"COMMITTEE") of one or more of its members to administer this Plan. The
Committee shall have the authority, subject to the rights of the shareholders
and other express provisions of the Plan, to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all other determinations which, in the
judgment of the Committee, are necessary or desirable for the administration of
the Plan. The Committee may correct any defect, supply any omission, or
reconcile any inconsistency in the Plan or in any option agreement in the manner
and to the extent it shall be deemed expedient to carry the Plan into effect,
and it shall be the sole and final judgment of such expediency.
11.
12. (c) INDEMNIFICATION. In addition to such other rights and indemnification
---------------
that they may have as Directors of the Company or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorney's fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with the defense of any action, or appeal therefrom, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment, except in relation to matters as to which it shall
be adjudged in such action that such Committee member is liable for negligence
or misconduct in the performance of his or her duties; provided that within 60
days after institution of any such action a Committee member shall in writing
offer the Company the opportunity, at its own expense, to handle and defend the
same.
13.
14.
15. STOCK SUBJECT TO PLAN.
---------------------
16.
17. Subject to adjustment as provided in Sections 9 and 10 hereof, the Company
will reserve 1,000,000 shares of common stock of the Company for issuance under
the Plan. If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for subsequent option grants under the
Plan. If the Company repurchases such shares which are issued pursuant to the
Plan and repurchased by the Company from the grantee in accordance with the
Stockholder Agreement entered into in connection with the exercise of the
option, if any, the repurchase shares shall again be available for subsequent
option grants under the Plan. Stock issuable upon exercise of an option granted
under the Plan may be subject to such restrictions or transfer, repurchase
rights, or other restrictions as shall be determined by the Committee.
18.
19. TERMS AND CONDITIONS OF DIRECTORS' OPTIONS.
------------------------------------------
20.
21. (a) INITIAL GRANT. Upon their initial election to the Board of Directors
-------------
of the Company, each new Director shall receive an option to acquire 10,000
shares of common stock of the Company (the "INITIAL OPTION"), subject to the
terms and conditions contained herein.
<PAGE>
22.
23. (b) SUBSEQUENT OPTIONS. On each of the first, second, third and fourth
------------------
anniversary of a Director's initial election to the Board of Directors, the
Director shall receive an additional option to acquire 5,000 shares of common
stock of the Company (the "SUBSEQUENT OPTIONS"), subject to the terms and
conditions contained herein.
24.
25. (c) OPTION PRICE. The purchase price per share of Common Stock (the
------------
"OPTION PRICE") for all options granted hereunder shall be the Fair Market Value
of a share of Common Stock as of the date of the grant as determined herein;
provided, however, that the first series of Initial Options granted to Directors
on January 1, 1996 shall be set at an Option Price of $2.00 per share regardless
of the Fair Market Value.
26.
27. (d) DETERMINATION OF FAIR MARKET VALUE. The Committee shall determine
----------------------------------
the Fair Market Value of the stock from all relevant available facts, which
may (but need not) include opinions of independent experts as to the value and
may take into account any recent sales and purchases of such stock to the
extent they are represented.
28.
29. (e) PAYMENT OF PURCHASE PRICE. The Option Price shall be payable upon
-------------------------
the exercise of the option in an amount equal to the number of shares being
purchased times the per share Option Price. The Option Price shall be paid in
cash or by check in United States currency; provided, however, the Committee
may, in its discretion, provide that the exercise price of an option can also be
paid by delivery to the Company of shares of stock of the Company already owned
by the optionee having a fair market value (as determined pursuant to paragraph
(c) of this section as of the date of transfer) equal in amount to the exercise
price of the options being exercised, or by a combination of delivery of such
stock and cash or check.
30.
31. (f) TERM OF OPTIONS. Each option granted hereunder shall be exercisable
---------------
immediately upon grant, and shall expire on the fifth anniversary following the
day on which the option is granted. Notwithstanding the foregoing, in the event
that any Director is no longer a member of the Board, whether the Director's
termination is voluntary or involuntary by death or otherwise, all options
granted to such Director shall expire 60 days following the last date on which
the Director is a member of the Board of Directors. The option may be exercised
at any time during such 60 day period by the Director, his or her executor or
personal representative, but if not exercised in full, all options shall expire
on the 60th day following the Director's last day as a member of the Board of
Directors.
32.
33. (g) EXERCISE OF OPTIONS. Each option granted under the Plan shall be
-------------------
exercisable either in full or in part at such time or times as the holder of the
option may choose during the option period.
34.
35.
36. METHOD OF EXERCISE; CLASSIFICATION OF SHARES ACQUIRED PURSUANT TO
-----------------------------------------------------------------
EXERCISE OF CERTAIN INCENTIVE STOCK OPTIONS.
-------------------------------------------
All options granted hereunder shall be exercised by written notice
directed to the Treasurer of the Company (or such other person that the
Committee may designate) at its principal place of business, accompanied by
payment, make in accordance with the terms of paragraph (e) of Section 4
hereof, of the Option Price for the number of shares specified in the notice
of exercise, and by any documents otherwise required. The Company shall make
delivery of such shares within a reasonable period of time; provided, however,
-------- -------
that if any law or regulation required the Company to take any action
(including, but not limited to, the filing of a registration statement under
the Securities Act of 1933 and causing such registration statement to become
effective) with respect to the shares specified in such notice before the
issuance thereof, then the date of delivery of such shares shall be extended
for the period necessary to take such action.
1. NONTRANSFERABILITY OF OPTIONS.
-----------------------------
2. No option granted under the Plan shall be assignable or transferable by
the person to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution. During the life of the
recipient, the option shall be exercisable only by such person or his guardian
or legal representative.
3.
4.
5. GENERAL RESTRICTIONS.
--------------------
2
<PAGE>
(a) INVESTMENT REPRESENTATIONS. The Company may require any Director to
--------------------------
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Stock subject to the option for his or
her own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
-------------------------------
requirement that, if at any time counsel to the Company shall determine that the
listing, registration, or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
to approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
option may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been affected or
obtained on conditions acceptable to the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration, or qualification.
1. RIGHTS AS A SHAREHOLDER.
-----------------------
2.
3. The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares and only after such shares are fully
paid. Except as otherwise expressly provided in the Plan, no adjustment shall
be made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
4.
5.
6. RECAPITALIZATION.
----------------
7.
8. In the event that the outstanding shares of Stock of the Company are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, stock dividend, combination, or subdivision, appropriate adjustment
shall be made in the number and kind of shares available under the Plan and
under any options granted under the Plan. No fractional shares shall be issued
or optioned in making the foregoing adjustments. All adjustments made by the
Committee under this Section shall be conclusive.
9.
10.
11. REORGANIZATION.
--------------
12. In case the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or in case all or substantially
all of the assets or more then 50% of the outstanding voting stock of the
Company is acquired by another corporation, or in case of a reorganization or
liquidation of the Company, the Committee, or the Board of Directors of any
corporation assuming the obligations of the Company, shall, as to outstanding
options, either (a) make appropriate provisions for the protection of any such
outstanding options by the substitution on an equitable basis of appropriate
stock of the Company, or of the merged, consolidated, or otherwise reorganized
corporation that will be issuable in respect to the shares of Stock of the
Company, or (b) upon written notice to the optionees, provide that all
unexercised options must be exercised within a specified number of days of the
date of such notice or they will be terminated. In any such case, the Committee
may, in its discretion, accelerate the date on which outstanding options become
exercisable.
1. RESTRICTION ON TRANSFER.
-----------------------
2.
3. The Company reserves to itself or its assignee the right of first refusal
to purchase the Shares, or any portion thereof, that an Optionee (or a
subsequent transferee) proposes to transfer to a third party. The purchase
shall be completed within thirty (30) days of the receipt of notice by the
Company that an offer has been made by a third party to purchase the Shares.
The price to be paid for the Shares shall be the lesser of (i) their fair market
value on the date of purchase, which fair market value shall be determined by
the Board of Directors of the Company who
3
<PAGE>
may use such methods and methodology as it deems appropriate, and (ii) the
price per Share offered by the proposed purchaser. Payment shall be made in
cash on the date of the purchase unless the Optionee and Company shall agree
otherwise. In the event that the Company fails to exercise its option, then
the Optionee may sell the Shares to the proposed transferee at a price per
Share not less than the price offered by the proposed transferee at any time
within 90 days following the receipt by the Company of the original notice.
4.
5.
6. NO SPECIAL EMPLOYMENT RIGHTS.
----------------------------
7.
8. Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the Company (or any Parent of Subsidiary) or interfere in
any way with the right of the company (or any Parent of Subsidiary), subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
option holder from the rate in existence at the time of the grant of an option.
9.
10.
11. DEFINITION OF SUBSIDIARY AND PARENT.
-----------------------------------
12.
13. (a) SUBSIDIARY. The term "Subsidiary" as used in the Plan shall mean any
----------
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the determination, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
14.
15. (b) PARENT. The term "Parent" used in the Plan shall mean any corporation
------
(other than the Company) in an unbroken chain of corporations ending with the
Company if each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
16.
17.
18. WITHHOLDING.
-----------
19. The Company's obligation to deliver shares upon the exercise of any option
granted under the Plan shall be subject to the option holder's satisfaction of
all applicable federal, state, and local income and employment tax and
withholding requirements in a manner and form satisfactory to the Company.
1. EFFECTIVE DATE AND DURATION OF THE PLAN.
---------------------------------------
2.
3. (a) EFFECTIVE DATE. The plan shall become effective when adopted by the
--------------
Board of Directors and Shareholders. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.
4.
5. (b) TERMINATION. Unless sooner terminated in accordance with the terms
-----------
herein, the Plan shall terminate upon the earlier of (i) the close of the
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise of options granted under the Plan. If the date of termination is
determined under (i) above, then options outstanding on such date shall continue
to have force and effect in accordance with the provisions of the instruments
evidencing such options.
6.
7.
8. 1871\1\dirstkop.pln
9.
4
<PAGE>
BIOSHIELD TECHNOLOGIES, INC.
DIRECTOR STOCK OPTION AGREEMENT
PURSUANT TO
1996 DIRECTORS' STOCK OPTION PLAN
THIS AGREEMENT, made on the ______ day of _______, 1996, by and between
BIOSHIELD TECHNOLOGIES, INC. (hereinafter referred to as the "Company") and
___________________________ (hereinafter referred to as "Optionee").
WHEREAS, the Company has adopted a stock option plan known as the 1996
Directors' Stock Option Plan (hereinafter referred to as the "Plan") for the
purpose of advancing the interests of the Company and its shareholders by
strengthening the ability of the Company to attract and retain members of its
Board of Directors with experience and ability, and to furnish an additional
incentive to those Directors of the Company upon whose judgment, initiative and
efforts the successful conduct and growth of its and their business largely
depend, by encouraging Directors to have a material interest in the increase in
value of, and to become owners or increase their ownership of, the common stock
of the Company ("Common Stock"); and
WHEREAS, Optionee is now a Director of the Company, and the Company desires
to afford Optionee the opportunity to acquire or enlarge Optionee's stock
ownership in the Company, so that Optionee may have a direct proprietary
interest in the Company's success;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
the Company grants to Optionee a nonqualified stock option (the "Option") to
purchase from the Company all or any part of ___________________ (__________)
shares of Common Stock ("Shares").
2.
3. TERM OF EXERCISE OF OPTION.
4.
5. (a) The term of the Option granted herein shall commence as of the date of
this Agreement and end on ___________, 200__ (the "Option Period").
6.
7. (b) The option shall be exercisable at any time during the five-year Option
Period.
8.
9. (c) The Option hereby granted shall be exercised by Optionee delivering to
the Treasurer of the Company, from time to time, on any business day, written
notice specifying the number of Shares Optionee then desires to purchase and
reaffirming that the representations made in Section 8 hereof are true and
correct as of the date of exercising the option. A copy of the form of written
notice to be used is attached hereto as Exhibit A.
10.
11. EXERCISE PRICE.
12.
13. (a) Option must pay ______________ Dollars ($__________) per share
(subject to adjustment pursuant to Section 7 hereof) for the Shares acquired
pursuant to this Agreement.
14.
15. (b) Payment of the option price of the Shares shall be made in cash at the
time an Option is exercised, or in any other form permitted by Section 4(e) of
the Plan.
16.
17. RESTRICTION ON SHARES. The Company reserves to itself or its assignee the
right of first refusal to purchase the Shares, or any portion thereof, that an
Optionee (or a subsequent transferee) proposes to transfer to a third party.
The purchase shall be completed within thirty (30) days of the receipt of
notice by the Company that an offer has been made by a third party to purchase
the Shares. The price to be paid for the Shares shall be the lesser of (i)
their
5
<PAGE>
fair market value on the date of purchase, which fair market value shall be
determined by the Board of Directors of the Company who may use such methods
and methodology as it deems appropriate, and (ii) the price per Share offered
by the proposed purchaser. Payment shall be made in cash on the date of the
purchase unless the Optionee and Company shall agree otherwise. In the event
that the Company fails to exercise its option, then the Optionee may sell the
Shares to the proposed transferee at a price per Share not less than the price
offered by the proposed transferee at any time within 90 days following the
receipt by the Company of the original notice. By signing a copy of this
Agreement, Optionee agrees to be bound by the terms of this Section 4.
18.
19. TERMINATION OF OPTION.
20.
21. (a) Except as otherwise provided below, the Option hereby granted shall
terminate and be of no force or effect upon the happening of the first of the
following events:
22.
23. (i) The expiration of the Option Period;
24.
25. (ii) 60 days following the termination of the Optionee's status as a
Director of the Company, whether voluntary or involuntary, including the death
of the Optionee.
26.
27. (b) The Option evidenced hereby is nontransferable except as provided in
subsection (c) below with respect to the death of an Optionee, and shall be
exercisable during the lifetime of Optionee only by Optionee.
28.
29. (c) If Optionee ceases to be a Director of the Company for any reason
including death, any unexpired portion of the option held by Optionee and not
exercised may be exercised by a legatee or legatees under Optionee's last will
and testament or by his personal representative or representatives (to the
extent the option would have been exercisable by Optionee) at any time within
sixty days after the date of Optionee's last date as a member of the Board of
Directors.
30.
31. RIGHTS AS A SHAREHOLDER. Optionee shall have no rights as a shareholder
of the Company with respect to any Shares covered by this Option until the
issuance of a stock certificate to him for such Shares.
32.
33. CHANGE IN CAPITALIZATION.
34.
35. (a) As provided in Sections 9 and 10 of the Plan, and upon the
occurrence of any of the conditions listed therein, the Committee in its sole
discretion shall make any adjustments as may be appropriate in the number and
kind of Shares as to which this Option shall be exercisable and in the option
rights granted. These adjustments shall be made without change in the total
price applicable to the Option and with a corresponding adjustment in the option
price per Share. Any adjustment may provide for the elimination of fractional
shares.
36.
37. COVENANTS AND REPRESENTATIONS OF OPTIONEE. Optionee represents,
warrants, covenants and agrees with the Company as follows:
38.
39. (a) The Option is being received for Optionee's own account without the
participation of any other person, with the intent of holding the Option and the
Shares issuable pursuant thereto for investment and without the intent of
participating, directly or indirectly, in a distribution of the Shares and not
with a view to, or for resale in connection with, any distribution of the Shares
or any portion thereof;
40.
41. (b) Optionee is not acquiring the Option based upon any representation,
oral or written, by any person with respect to the future value of, or income
from, the Shares subject to this Option, but rather upon an independent
examination and judgment as to the prospects of the Company;
42.
43. (c) Optionee has received a copy of the Plan and has had complete access
to and the opportunity to review and make copies of all material documents
related to the business of the Company; Optionee has examined all of these
documents as he wished, is familiar with the business and affairs of the
Company, and realizes that the receipt of the Shares is a speculative
investment and that any possible profit therefrom is uncertain;
44.
6
<PAGE>
45. (d) Optionee has had the opportunity to ask questions of and receive
answers from the Company and any person acting on its behalf and to obtain all
information available with respect to the Plan, the Company and its affairs, and
has received all information and data with respect to the Plan and the Company
that he has requested and which he has deemed relevant in connection with his
receipt of the Option and the Shares subject thereto;
46.
47. (e) Optionee is able to bear the economic risk of the investment,
including the risk of a complete loss of his investment, and Optionee
acknowledges that he must continue to bear the economic risk of the investment
in the Shares received upon Option exercise for an indefinite period;
48.
49. (f) Optionee understands and agrees that the Shares subject to the Option
may be issued and sold to Optionee without registration under any state or
federal law relating to the registration of securities for sale, and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws;
50.
51. (g) The Shares issued to Optionee upon exercise of the option will not be
offered for sale, sold or transferred by Optionee other than pursuant to:
52.
53. (i) an effective registration under applicable state securities laws or in
a transaction which is otherwise in compliance with those laws;
55. (ii) an effective registration under the Securities Act of 1933 (the "1933
Act") or a transaction otherwise in compliance with the 1933 Act; and
56.
57. (iii) evidence satisfactory to the Company of compliance with the
applicable securities laws. The Company shall be entitled to rely upon an
opinion of counsel satisfactory to it with respect to compliance with the
foregoing laws;
58.
59. (h) The Company will be under no obligation to register the Shares
issuable pursuant to the Option or to comply with any exemption available for
sale of the Shares by the Optionee without registration, and the Company is
under no obligation to act in any manner so as to make Rule 144 promulgated
under the 1933 Act available with respect to sale of the Shares by the Optionee;
60.
61. (i) A legend indicating that the Shares issued pursuant to the Option has
not been registered under the applicable securities laws and referring to any
applicable restrictions on transferability and sale of the Shares may be placed
on the certificate or certificates delivered to Optionee, and any transfer agent
of the Company may be instructed to require compliance therewith;
62.
63. (j) Optionee will notify the Company in writing at least sixty (60) days
prior to any sale of Shares;
64.
65. (k) The agreements, representations, warranties, and covenants made by
Optionee herein with respect to the Option shall also extend to and apply to all
of the Shares of the Company issued to Optionee from time to time pursuant to
this Option. Acceptance by Optionee of the certificate(s) representing Shares
shall constitute a confirmation by Optionee that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at that time.
66.
67. COMPLIANCE WITH SECURITIES LAWS. Anything in this agreement to the
contrary notwithstanding, if, at any time specified herein for the issuance of
Shares to Optionee, any federal or state securities law, any regulation or
requirement of the Securities and Exchange Commission or any other governmental
authority having jurisdiction shall require either the Company or Optionee to
take any action in connection with the Shares then to be issued, the issuance of
the Shares shall be deferred until that action shall have been taken; however,
the Company shall be under no obligation to take action, and the Company shall
have no liability whatsoever as a result of the nonissuance of the Shares,
except to refund to Optionee any consideration tendered in respect of the
exercise price.
68.
69. RESOLUTION OF DISPUTES. Any dispute or disagreement which shall arise
under, as a result of, or pursuant to, this agreement shall be determined by the
President of the Company, in his absolute and sole discretion, and any
7
<PAGE>
such determination or any other determination by the President under or
pursuant to this Agreement and any interpretation by the President of the
terms of this Agreement shall be final, binding and conclusive on all persons
affected thereby; provided, however, the Committee, as defined in the Plan,
shall have the right, in its absolute and sole discretion, to overrule or
modify any determination or interpretation made by the President, in which
event any determination or interpretation by the Committee shall be final,
binding and conclusive on all persons affected thereby.
70.
71. NOTICE. Any notice which either party hereby may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the President
of the Company, or to the Company (attention of the President), at 3340
Peachtree Road, N.E., Suite 1800, Atlanta, Georgia 30326, or at any other
address as the Company, by notice to Optionee, may designate in writing from
time to time; to Optionee, at Optionee's address as shown on the records of the
Company, or at any other address as Optionee, by notice to the Company, may
designate in writing from time to time.
72.
73. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors and permitted assigns of
the parties.
74.
75. SEVERABILITY. In the event that any one or more of the provisions or
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.
76.
77. ENTIRE AGREEMENT. Subject to the terms and conditions of the Plan, which
is incorporated herein by reference, this Agreement expresses the entire
understanding and agreement of the parties hereto. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
78.
79. IN WITNESS WHEREOF, the parties have executed and sealed this Directors'
Stock Option Agreement on the date and year set forth above.
80.
81. BIOSHIELD TECHNOLOGIES, INC.
82.
83.
84.
85. Attest:________________________________
By:___________________________________________
86.
87. Title:_________________________________
Title:________________________________________
88.
89. [CORPORATE SEAL]
90.
91.
92.
8
<PAGE>
OPTIONEE:
--------
_______________________________________(SEAL)
1871\1\dirstkop.agr
9
<PAGE>
EXHIBIT A
---------
Bioshield Technologies, Inc.
3340 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326
Attention: Treasurer
RE: Exercise of Directors' Option under the Bioshield Technologies,
Inc. Directors' Stock Option Agreement dated ________, 1996 (the
"Agreement")
Dear Treasurer:
I desire to purchase _______ shares of Bioshield Technologies, Inc.
and hereby tender payment in full for such Shares in accordance with the terms
of the Agreement.
I hereby reaffirm that the representations made in Section 8 of the
Agreement are true and correct as of the date of exercising this option.
Very truly yours,
- -------------------------------------------
Name of
Optionee:______________________
1871\1\dirskop.agr
10
<PAGE>
EXHIBIT 10.17
BIOSHIELD TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1: DEFINITIONS 1
1.1 Definitions 1
SECTION 2: THE STOCK INCENTIVE PLAN 3
2.1 Purpose of the Plan 3
2.2 Stock Subject to the Plan 3
2.3 Administration of the Plan 3
2.4 Eligibility and Limits 4
SECTION 3: TERMS OF STOCK INCENTIVES 4
3.1 Terms and Conditions of All Stock Incentives 4
3.2 Terms and Conditions of Options 5
(a) Option Price 5
(b) Option Term 5
(c) Payment 5
(d) Conditions to the Exercise of an Option 6
(e) Termination of Incentive Stock Option 6
(f) Special Provisions for Certain Substitute Options 6
3.3 Omitted 7
3.4 Omitted 7
3.5 Omitted 7
3.6: Omitted 7
3.7 Omitted 7
3.8 Treatment of Awards Upon Termination of Employment 7
SECTION 4: RESTRICTIONS ON STOCK 7
4.1 Escrow of Shares. 7
4.2 Restrictions on Transfer 8
SECTION 5: GENERAL PROVISIONS 8
5.1 Withholding 8
5.2 Changes in Capitalization; Merger; Liquidation 8
5.3 Cash Awards 9
5.4 Compliance with Code 9
5.5 Right to Terminate Employment 9
5.6 Non-alienation of Benefits 9
5.7 Restrictions on Delivery and Sale of Shares; Legends 10
5.8 Listing and Legal Compliance 10
5.9 Termination and Amendment of the Plan 10
5.10 Stockholder Approval 10
5.11 Choice of Law 10
5.12 Effective Date of Plan 11
</TABLE>
i
<PAGE>
BIOSHIELD TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1: DEFINITIONS
1.1. DEFINITIONS. Whenever used herein, the masculine pronoun will be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Affiliate" means:
(1) an entity that directly or through one or more intermediaries is
controlled by the Company, and
(2) any entity in which the Company has a significant equity
interest, as determined by the Company.
(b) "Board of Directors" means the board of directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board of
Directors to administer the Plan. The Board of Directors shall consider the
advisability of whether the members of the Committee shall consist solely of at
least two members of the Board of Directors who are both "outside directors" as
defined in Treas. Reg. 1.162-27(e) as promulgated by the Internal Revenue
Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as
promulgated under the Exchange Act.
(e) "Company" means BioShield Technologies, Inc., a Georgia
corporation.
(f) "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any Affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability means that condition described in Code
Section 22(e)(3), as amended from time to time. In the event of a dispute, the
determination of Disability will be made by the Committee and will be supported
by advice of a physician competent in the area to which such Disability relates.
(g) Omitted
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(i) "Fair Market Value" with regard to a date means the closing price
at which Stock was sold on the last trading date prior to that date as reported
by the Nasdaq Stock Market (or, if applicable, as reported by a national
securities exchange selected by the Committee on which the shares of Stock are
then actively traded) and published in The Wall Street Journal; provided that,
for purposes of granting awards other than Incentive Stock Options, Fair Market
Value of the shares of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for the shares of Stock (if settlement of an
award is triggered by such an event) or to any other reasonable measure of fair
market value.
(j) "Option" means a non-qualified stock option or an incentive stock
option.
(k) "Over 10% Owner" means an individual who at the time an Incentive
Stock Option is granted owns Stock possessing more than 10% of the total
combined voting power of the Company or one of its Subsidiaries, determined by
applying the attribution rules of Code Section 424(d).
1
<PAGE>
(l) "Participant" means an individual who receives a Stock Incentive
hereunder.
(m) Omitted
(n) Omitted
(o) "Plan" means the BioShield Technologies, Inc. 1997 Stock
Incentive Plan.
(p) "Stock" means the Company's common stock.
(q) Omitted
(r) "Stock Award" means a stock award described in Section 3.4.
(s) "Stock Incentive Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(t) "Stock Incentive Program" means a written program established by
the committee, pursuant to which Stock Incentives are awarded under the Plan
under uniform terms, conditions and restrictions set forth in such written
program.
(u) "Stock Incentives" means, collectively, incentive stock options,
non-qualified stock options and Stock Awards.
(v) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, with respect to
Incentive Stock Options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(w) "Termination of Employment" means the termination of the
employee-employer relationship between a Participant and the Company and its
Affiliates, regardless of whether severance or similar payments are made to the
Participant for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, Disability or retirement. The
committee will, in its absolute discretion, determine the effect of all matters
and questions relating to a Termination of Employment, including, but not by way
of limitation, the question of whether a leave of absence constitutes a
Termination of Employment.
SECTION 2: THE STOCK INCENTIVE PLAN
2.1. PURPOSE OF THE PLAN. The Plan is intended to: (a) provide incentive
to officers and key employees of the Company and its Affiliates to stimulate
their efforts toward the continued success of the Company and to operate and
manage the business in a manner that will provide for the long-term growth and
profitability of the Company; (b) encourage stock ownership by officers and key
employees by providing them with a means to acquire a proprietary interest in
the Company, acquire shares of Stock, or to receive compensation which is based
upon appreciation in the value of Stock; and (c) provide a means of obtaining,
rewarding and retaining key personnel and consultants.
2.2. STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 5.2, 400,000 shares of Stock (the "Maximum Plan Shares") are hereby
reserved exclusively for issuance pursuant to Stock Incentives. At no time may
the Company have outstanding under the Plan, Stock Incentives subject to Section
16 of the Exchange Act and shares of Stock issued in respect of Stock Incentives
under the Plan in excess of the Maximum Plan Shares. The shares of Stock
attributable to the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Stock Incentive that is forfeited or canceled or
expires or terminates for any reason without becoming vested, paid, exercised,
converted or otherwise settled in full will again be available for purposes of
the Plan.
2.3. ADMINISTRATION OF THE PLAN. The Plan is administered by the
Committee. The Committee has full
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authority in its discretion to determine the officers and key employees of the
Company or its Affiliates to whom Stock Incentives will be granted and the
terms and provisions of Stock Incentives, subject to the Plan. Subject to the
provisions of the Plan, the Committee has full and conclusive authority to
interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective
Stock Incentive Agreements and to make all other determinations necessary or
advisable for the proper administration of the Plan. The Committee's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly situated). The
Committee's decisions are final and binding on all Participants.
2.4. ELIGIBILITY AND LIMITS. Stock Incentives may be granted only to
officers, and key employees and consultants of the Company, or any Affiliate of
the Company; provided, however, that an incentive stock option may only be
granted to an employee of the Company or any Subsidiary; provided, however, that
no Stock Incentives may be granted to an Over 10% Owner. In the case of
incentive stock options, the aggregate Fair Market Value (determined as at the
date an incentive stock option is granted) of stock with respect to which stock
options intended to meet the requirements of Code Section 422 become exercisable
for the first time by an individual during any calendar year under all plans of
the Company and its Subsidiaries may not exceed $100,000; provided further, that
if the limitation is exceeded, the incentive stock option(s) which cause the
limitation to be exceeded will be treated as non-qualified stock option(s).
SECTION 3: TERMS OF STOCK INCENTIVES
3.1. TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The number of shares of Stock as to which a Stock Incentive may
be granted will be determined by the Committee in its sole discretion, subject
to the provisions of Section 2.2 as to the total number of shares available for
grants under the Plan and subject to the limits on Options in the following
sentence. To the extent required under Section 162(m) of the Code and the
regulations thereunder for compensation to be treated as qualified performance
based compensation, the maximum number of shares of Stock with respect to which
Options may be granted during any one year period to any employee may not exceed
25,000.
(b) Each Stock Incentive will either be evidenced by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine to be appropriate, or be made
subject to the terms of a Stock Incentive Program, containing such terms,
conditions and restrictions as the Committee may determine to be appropriate.
Each Stock Incentive Agreement or Stock Incentive Program is subject to the
terms of the Plan and any provisions contained in the Stock Incentive Agreement
or Stock Incentive Program that are inconsistent with the Plan are null and
void.
(c) The date a Stock Incentive is granted will be the date on which
the Committee has approved the terms and conditions of the Stock Incentive and
has determined the recipient of the Stock Incentive and the number of shares
covered by the Stock Incentive, and has taken all such other actions necessary
to complete the grant of the Stock Incentive.
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(d) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise
or vesting of a Stock Incentive granted in connection with another Stock
Incentive may result in a pro rata surrender or cancellation of any related
Stock Incentive, as specified in the applicable Stock Incentive Agreement or
Stock Incentive Program.
(e) Stock Incentives are not transferable or assignable except by
will or by the laws of descent and distribution and are exercisable, during the
Participant's lifetime, only by the Participant; or in the event of the
Disability of the Participant, by the legal representative of the Participant;
or in the event of death of the Participant, by the legal representative of the
Participant's estate or if no legal representative has been appointed, by the
successor in interest determined under the Participant's will.
3.2. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the Plan
must be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee will determine whether the Option is to be an incentive
stock option described in Code Section 422 or a non-qualified stock option, and
the Option must be clearly identified as to its status as an incentive stock
option or a non-qualified stock option. Incentive stock options may only be
granted to employees of the Company or any Subsidiary. At the time any
incentive stock option granted under the Plan is exercised, the Company will be
entitled to legend the certificates representing the shares of Stock purchased
pursuant to the Option to clearly identify them as representing the shares
purchased upon the exercise of an incentive stock option. An incentive stock
option may only be granted within ten (10) years from the earlier of the date
the Plan is adopted or approved by the Company's stockholders.
(a) OPTION PRICE. Subject to adjustment in accordance with Section
5.2 and the other provisions of this Section 3.2, the exercise price (the
"Exercise Price") per share of Stock purchasable under any Option must be as set
forth in the applicable Stock Incentive Agreement, but in no event may it be
less than the Fair Market Value on the date the Option is granted. The Exercise
Price of an Option may not be amended or modified after the grant of the Option,
and an Option may not be surrendered in consideration of or exchanged for a
grant of a new Option having an Exercise Price below that of the Option which
was surrendered or exchanged.
(b) OPTION TERM. Any incentive stock option is not exercisable after
the expiration of ten (10) years after the date the Option is granted. The term
of any non-qualified Stock Option must be as specified in the applicable Stock
Incentive Agreement.
(c) PAYMENT. Payment for all shares of Stock purchased pursuant to
exercise of an Option will be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement or by amendment thereto, including,
but not limited to, cash or, if the Stock Incentive Agreement provides:
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(i) by delivery to the Company of a number of shares of Stock which
have been owned by the holder for at least six (6) months prior to the date of
exercise having an aggregate Fair Market Value of not less than the product of
the Exercise Price multiplied by the number of shares the Participant intends to
purchase upon exercise of the Option on the date of delivery;
(ii) in a cashless exercise through a broker; or
(iii) by having a number of shares of Stock withheld, the Fair Market
Value of which as of the date of exercise is sufficient to satisfy the Exercise
Price. In its discretion, the Committee also may authorize (at the time an
Option is granted or thereafter) Company financing to assist the Participant as
to payment of the Exercise Price on such terms as may be offered by the
Committee in its discretion. Payment must be made at the time that the Option
or any part thereof is exercised, and no shares may be issued or delivered upon
exercise of an option until full payment has been made by the Participant. The
holder of an Option, as such, has none of the rights of a stockholder.
(d) CONDITIONS TO THE EXERCISE OF AN OPTION. Each Option granted
under the Plan is exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee
specifies in the Stock Incentive Agreement; provided, however, that subsequent
to the grant of an Option, the Committee, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part, including, without limitation, upon
a Change in Control and may permit the Participant or any other designated
person to exercise the Option, or any portion thereof, for all or part of the
remaining Option term, notwithstanding any provision of the Stock Incentive
Agreement to the contrary.
(e) TERMINATION OF INCENTIVE STOCK OPTION. With respect to an
incentive stock option, in the event of termination of employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised will expire, terminate, and become unexercisable no sooner than 30
days and no later than the expiration of three (3) months after the date of
termination of employment; provided, however, that in the case of a holder whose
termination of employment is due to death or Disability, one (1) year will be
substituted for such three (3) month period; provided further, that such time
limits may be exceeded by the Committee under the terms of the grant, in which
case, the incentive stock option will be a nonqualified option if it is
exercised after the time limits that would otherwise apply. For purposes of
this Subsection (e), termination of employment of the Participant will not be
deemed to have occurred if the Participant is employed by another corporation
(or a parent or subsidiary corporation of such other corporation) which has
assumed the incentive stock option of the Participant in a transaction to which
Code Section 424(a) is applicable.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3. [OMITTED]
3.4. [OMITTED]
3.5. [OMITTED]
3.6. [OMITTED]
3.7. [OMITTED]
3.8. TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who has experienced a Termination of Employment may
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be canceled, accelerated, paid or continued, as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, or, in the absence of
such provision, as the Committee may determine. The portion of any award
exercisable in the event of continuation or the amount of any payment due
under a continued award may be adjusted by the Committee to reflect the
Participant's period of service from the date of grant through the date of the
Participant's Termination of Employment or such other factors as the Committee
determines are relevant to its decision to continue the award.
SECTION 4: RESTRICTIONS ON STOCK
4.1. ESCROW OF SHARES. Any certificates representing the shares of Stock
issued under the Plan will be issued in the Participant's name, but, if the
applicable Stock Incentive Agreement or Stock Incentive Program so provides, the
shares of Stock will be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian must appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian olds the shares subject to this Section, the
Participant is entitled to all rights, except as provided in the applicable
Stock Incentive Agreement or Stock Incentive Program, applicable to shares of
Stock not so held. Any dividends declared on shares of Stock held by the
Custodian must provide in the applicable Stock Incentive Agreement or Stock
Incentive Program, be paid directly to the Participant or, in the alternative,
be retained by the Custodian or by the Company until the expiration of the term
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specified in the applicable Stock Incentive Agreement or Stock Incentive Program
and shall then be delivered, together with any proceeds, with the shares of
Stock to the Participant or to the Company, as applicable.
4.2. RESTRICTIONS ON TRANSFER. The Participant does not have the right to
make or permit to exist any disposition of the shares of Stock issued pursuant
to the Plan except as provided in the Plan or the applicable Stock Incentive
Agreement or Stock Incentive Program. Any disposition of the shares of Stock
issued under the Plan by the Participant not made in accordance with the Plan or
the applicable Stock Incentive Agreement or Stock Incentive Program will be
void. The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program, and the shares so transferred
will continue to be bound by the Plan and the applicable Stock Incentive
Agreement or Stock Incentive Program.
SECTION 5: GENERAL PROVISIONS
5.1. WITHHOLDING. The Company must deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company has the right to require the recipient to remit to the Company an amount
sufficient to satisfy any federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such shares or the
vesting of such Stock Award. A Participant may pay the withholding tax in cash,
or, if the applicable Stock Incentive Agreement or Stock Incentive Program
provides, a Participant may elect to have the number of shares of Stock he is to
receive reduced by, or with respect to a Stock Award, tender back to the
Company, the smallest number of whole shares of Stock which, when multiplied by
the Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding taxes arising from exercise or payment of a Stock Incentive (a
"Withholding Election"). A Participant may make a Withholding Election only if
both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable except on six
months advance written notice delivered to the Company; however, the Committee
may in its sole discretion disapprove and give no effect to the Withholding
Election.
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5.2. CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION.
(a) The number of shares of Stock reserved for the grant of Options
and Stock Awards; the number of shares of Stock reserved for issuance upon the
exercise or payment, as applicable, of each outstanding Option and upon vesting
or grant, as applicable, of each Stock Award; the Exercise Price of each
outstanding Option and the specified number of shares of Stock to which each
outstanding Option and Stock Award pertains must be proportionately adjusted for
any increase or decrease in the number of issued shares of Stock resulting from
a subdivision or combination of shares or the payment of a stock dividend in
shares of Stock to holders of outstanding shares of Stock or any other increase
or decrease in the number of shares of Stock outstanding effected without
receipt of consideration by the Company.
(b) In the event of a merger, consolidation or other reorganization
of the Company or tender offer for shares of Stock, the Committee may make such
adjustments with respect to awards and take such other action as it deems
necessary or appropriate to reflect such merger, consolidation, reorganization
or tender offer, including, without limitation, the substitution of new awards,
or the adjustment of outstanding awards, the acceleration of awards, the removal
of restrictions on outstanding awards, or the termination of outstanding awards
in exchange for the cash value determined in good faith by the Committee of the
vested portion of the award. Any adjustment pursuant to this Section 5.2 may
provide, in the Committee's discretion, for the elimination without payment
therefor of any fractional shares that might otherwise become subject to any
Stock Incentive, but except as set forth in this Section may not otherwise
diminish the then value of the Stock Incentive.
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan must not affect in any way the right or power of the
Company to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or consolidation
of the Company, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or liquidation
of the Company, any sale or transfer of all or any part of its business or
assets, or any other corporate act or proceeding.
5.3. CASH AWARDS. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
5.4. COMPLIANCE WITH CODE. All incentive stock options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all incentive stock options granted hereunder must be construed in
such manner as to effectuate that intent.
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5.5. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any Stock
Incentive confers upon any Participant the right to continue as an employee or
officer of the Company or any of its Affiliates or affect the right of the
Company or any of its Affiliates to terminate the Participant's employment at
any time.
5.6. NON-ALIENATION OF BENEFITS. Other than as specifically provided with
regard to the death of a Participant, no benefit under the Plan may be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; and any attempt to do so shall be void. No such benefit
may, prior to receipt by the Participant, be in any manner liable for or subject
to the debts, contracts, liabilities, engagements or torts of the Participant.
5.7. RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares thereunder, the delivery of any or all shares pursuant to such Stock
Incentive may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise deliverable under
Stock Incentives then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Stock pursuant
to a Stock Incentive, that the Participant or other recipient of a Stock
Incentive represent, in writing, that the shares received pursuant to the Stock
Incentive are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 and any applicable state securities laws. The
Company may include on certificates representing shares delivered pursuant to a
Stock Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
5.8. LISTING AND LEGAL COMPLIANCE. The Committee may suspend the exercise
or payment of any Stock Incentive so long as it determines that securities
exchange listing or registration or qualification under any securities laws is
required in connection therewith and has not been completed on terms acceptable
to the Committee.
5.9. TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive may adversely
affect the rights of the Participant under such Stock Incentive.
5.10. STOCKHOLDER APPROVAL. The Plan must be submitted to the
stockholders of the Company for their approval within twelve (12) months before
or after the adoption of the Plan by the Board of Directors of the Company. If
such approval is not obtained, any Stock Incentive granted hereunder will be
void.
5.11. CHOICE OF LAW. The laws of the State of Georgia govern the Plan, to
the extent not preempted by federal law, without reference to the principles of
conflict of laws.
5.12. EFFECTIVE DATE OF PLAN. The Plan shall become effective
_______________, 1997, the date of its adoption by the Board of Directors,
subject, however, to the approval of the Plan by the Company's shareholders.
Stock Incentives granted hereunder prior to such approval shall be conditioned
upon such approval. Unless such approval is obtained by ______________, 1997
this Plan and any Stock Incentives awarded hereunder shall become void
thereafter.
BIOSHIELD TECHNOLOGIES, INC.
By:
Title:
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ATTEST:
By:
Title:
[CORPORATE SEAL]
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EXHIBIT 21.1
We have issued our reports dated July 28, 1997, which will be signed upon
consummation of the Initial Public Offering described in Note J to the financial
statements, of Bioshield Technologies, Inc. contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned reports
in the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."
GRANT THORNTON LLP
Atlanta, Georgia
June 22, 1998
