<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIOSHIELD TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BIOSHIELD TECHNOLOGIES, INC
4405 INTERNATIONAL BOULEVARD
SUITE 109
NORCROSS, GEORGIA 30093
November , 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of BioShield Technologies, Inc. (the "Company"), to be held on Monday, November
22, 1999 at a.m. Eastern Standard Time at , Atlanta, Georgia.
At this meeting, you will be asked to vote, in person or by proxy, on the
following matters: (i) the election of two directors to serve on the Board of
Directors of the Company; (ii) the amendment of the Company's Articles of
Incorporation and Bylaws to provide that holders of 10 percent or more of the
Company's capital stock may call a special meeting of shareholders and to
eliminate certain "fair price" requirements enacted by the Company pursuant to
Georgia law; (iii) the ratification of the issuance of common stock of a
subsidiary of the Company (which, under certain circumstances, may be exchanged
for Common Stock of the Company) and certain related warrants to purchase shares
of Common Stock of the Company, and to approve the issuance of shares of Common
Stock of the Company in excess of 19.99 percent of the outstanding shares, if
required in connection with the exchange of the common stock and the exercise of
such warrants; (iv) the ratification of an amendment to the Company's Stock
Incentive Plan to increase the number of options issuable thereunder and to
allow holders of more than 10% of the Company's stock to participate in the
Stock Incentive Plan; (v) the ratification of the appointment of Grant Thornton
LLP as the Company's independent accountants; and (vi) any other business as may
properly come before the meeting or any adjournments thereof. The official
Notice of Meeting, Proxy Statement and form of proxy are included with this
letter. The matters listed in the Notice of Meeting are described in detail in
the accompanying Proxy Statement.
Regardless of your plans for attending in person, it is important that your
shares be represented and voted at the Annual Meeting. Accordingly, you are
urged to complete, sign and mail the enclosed proxy card as soon as possible.
Sincerely,
/s/ Timothy C. Moses
Timothy C. Moses
Co-Chairman, President and Chief Executive Officer
<PAGE> 3
BIOSHIELD TECHNOLOGIES, INC.
4405 INTERNATIONAL BOULEVARD, SUITE 109
NORCROSS, GEORGIA 30093
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 22, 1999
To the Stockholders of BioShield Technologies, Inc.:
Notice if hereby given that the 1999 Annual Meeting of Stockholders of
BioShield Technologies, Inc. (the "Company") will be held at ,
Atlanta, Georgia on Monday, November 22, 1999, at a.m., Atlanta time, for the
following purposes:
1. To elect two directors to serve on the Board of Directors;
2. To amend the Company's Articles of Incorporation and Bylaws to
provide that holders of 10 percent or more of the Company's capital stock may
call a special meeting of shareholders and to eliminate certain "fair price"
requirements enacted by the Company pursuant to Georgia law;
3. To ratify the issuance of common stock of Electronic Medical
Distribution, Inc., a subsidiary of the Company (which common stock, under
certain circumstances, may be exchanged for Common Stock of the Company) and
certain related warrants to purchase shares of Common Stock of the Company, and
to approve the issuance of shares of Common Stock of the Company in excess of
19.99 percent of the outstanding shares, if required in connection with the
exchange of the common stock for Common Stock of the Company and the exercise of
such warrants;
4. To ratify an amendment to the Company's Stock Incentive Plan to
increase the number of shares reserved for issuance thereunder from 400,000
shares to 1,200,000 shares, and to allow holders of more than 10% of the
Company's stock to participate in the Stock Incentive Plan;
5. To ratify the appointment of Grant Thornton LLP as the Company's
independent accountants for the fiscal year ending June 30, 2000; and
6. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on [ ], 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof. A list of such stockholders will
be open to examination of any stockholder at the Company's offices at 4405
International Boulevard, Suite 109, Norcross, Georgia 30093 during ordinary
business hours, for a period of at least ten days prior to the meeting. All
stockholders are cordially invited to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jacques Elfersy
Co-Chairman, Senior Vice President and Secretary
Norcross, Georgia
October ___, 1999
<PAGE> 4
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY.
<PAGE> 5
BIOSHIELD TECHNOLOGIES, INC.
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
INCORPORATION OF DOCUMENTS BY REFERENCE.....................
PROPOSAL ONE -- ELECTION OF DIRECTORS.......................
MANAGEMENT
Directors and Executive Officers..........................
Board Committees..........................................
Meetings and Attendance...................................
Director Compensation.....................................
Executive Compensation....................................
Option Grants in Last Fiscal Year.........................
Option Exercises in Last Fiscal and Year-End Option
Values.................................................
Employment Agreements.....................................
Stock Option Plans........................................
Agreements with Employees.................................
CERTAIN TRANSACTIONS........................................
Section 16(a) Beneficial Ownership Reporting Compliance...
PROPOSAL TWO -- AMENDMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION AND BY-LAWS.................................
PROPOSAL THREE -- TO RATIFY THE ISSUANCE OF SHARES OF COMMON
STOCK OF A SUBSIDIARY OF THE COMPANY AND CERTAIN RELATED
WARRANTS, AND TO APPROVE THE ISSUANCE OF COMMON STOCK IN
EXCESS OF 19.99 PERCENT OF THE OUTSTANDING SHARES.........
PROPOSAL FOUR -- TO RATIFY THE AMENDMENT OF THE STOCK
INCENTIVE PLAN............................................
PROPOSAL FIVE -- TO RATIFY THE APPOINTMENT OF ACCOUNTANTS ..
BENEFICIAL OWNERSHIP OF COMMON STOCK........................
OTHER BUSINESS TO BE TRANSACTED.............................
EXHIBITS
Appendix "A" -- Proposed Amended and Restated Articles of
Incorporation............................................. A-1
Appendix "B" -- Proposed Amended and Restated By-Laws ............ B-1
Appendix "C" -- Form of Securities Purchase Agreement............. C-1
Appendix "D" -- Form of Registration Rights Agreement ............ D-1
Appendix "E" -- Form of Warrant Agreement......................... E-1
Appendix "F" -- Private Equity Credit Agreement................... F-1
Appendix "G" -- Form of Registration Rights Agreement............. G-1
Appendix "H" -- Amended And Restated 1997 Stock Incentive Plan ... H-1
</TABLE>
iv
<PAGE> 6
BIOSHIELD TECHNOLOGIES, INC.
4405 INTERNATIONAL BOULEVARD, SUITE 109
NORCROSS, GEORGIA 30093
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 22, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being furnished, on or about November __, 1999, to the
stockholders of BioShield Technologies, Inc. (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company to be used
at the 1999 Annual Meeting of Stockholders of the Company (the "Annual Meeting")
to be held on Monday, November 22, 1999 at 9:00 a.m. Eastern Standard Time at ,
Atlanta, Georgia, and any adjournment thereof.
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions thereon. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED: (i) "FOR" PROPOSAL ONE TO ELECT TWO NOMINEES TO
SERVE ON THE BOARD OF DIRECTORS FOR THE TERMS SPECIFIED HEREIN AND UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED; (ii) "FOR" PROPOSAL TWO TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS TO PROVIDE THAT HOLDERS OF 10
PERCENT OR MORE OF THE COMPANY'S CAPITAL STOCK MAY CALL A SPECIAL MEETING OF
SHAREHOLDERS AND TO ELIMINATE CERTAIN "FAIR PRICE" REQUIREMENTS ENACTED BY THE
COMPANY PURSUANT TO GEORGIA LAW; (iii) "FOR" PROPOSAL THREE TO RATIFY THE
ISSUANCE OF COMMON STOCK OF A SUBSIDIARY OF THE COMPANY (WHICH COMMON STOCK,
UNDER CERTAIN CIRCUMSTANCES, MAY BE EXCHANGED FOR COMMON STOCK OF THE COMPANY)
AND CERTAIN RELATED WARRANTS, AND TO APPROVE THE ISSUANCE OF SHARES OF COMMON
STOCK OF THE COMPANY IN EXCESS OF 19.99 PERCENT OF THE OUTSTANDING SHARES, IF
REQUIRED IN CONNECTION WITH THE EXCHANGE OF THE COMMON STOCK OF THE SUBSIDIARY;
(iv) "FOR" PROPOSAL FOUR TO RATIFY AN AMENDMENT TO THE COMPANY'S STOCK INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER FROM
400,000 SHARES TO 1,200,000 SHARES, AND TO ALLOW HOLDERS OF MORE THAN 10% OF THE
COMPANY'S STOCK TO PARTICIPATE IN THE STOCK INCENTIVE PLAN, AND (v) "FOR"
PROPOSAL FIVE TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2000. If any other
matters are properly brought before the Annual Meeting, proxies will be voted in
the discretion of the proxy holders. The Company is not aware of any such
matters that are proposed to be presented at the Annual Meeting.
The cost of soliciting proxies in the form enclosed herewith will be borne
entirely by the Company. In addition to the solicitation of proxies by mail,
proxies may be solicited by directors, officers and regular employees of the
Company, without extra remuneration, by personal interviews, telephone, fax,
email or otherwise. The Company will request persons, firms and corporations
holding shares in their name or in the names of their nominees, which are
beneficially owned by others, to send proxy materials to and obtain proxies from
the beneficial owners and will reimburse the holders for their reasonable
expenses in doing so.
The securities that may be voted at the Annual Meeting consist of shares of
Common Stock, no par value, of the Company (the "Common Stock"). Each
outstanding share of Common Stock entitles its owner to one vote on each matter
as to which a vote is taken at the Annual Meeting. The close of business on
_________________, 1999, has been fixed by the Board of Directors as the record
date (the "Record Date") for determination of stockholders entitled to vote at
the Annual Meeting. On the Record Date, __________________ shares of Common
Stock were outstanding and entitled to vote. The presence, in person or by
proxy, of at least a majority of the shares of Common Stock issued and
outstanding and entitled to vote on the Record Date is necessary to constitute a
quorum at the Annual Meeting.
<PAGE> 7
Assuming the presence of a quorum at the Annual Meeting: (a) a plurality of
the votes present in person or represented by proxy and entitled to vote is
required for approval of Proposal One, to elect two directors; (b) the
affirmative vote of a majority of the outstanding shares of Common Stock is
required to approve Proposal Two, to amend the Company's Articles of
Incorporation and Bylaws to provide that holders of 10 percent or more of the
Company's capital stock may call a special meeting of shareholders, to eliminate
certain "fair price" requirements enacted by the Company pursuant to Georgia
law, and to make certain technical amendments; (c) a majority of the total votes
cast on the proposal is required for approval of Proposal Three, to ratify the
issuance of common stock of a subsidiary of the Company (which common stock,
under certain circumstances, may be exchanged for Common Stock of the Company)
and certain related warrants, and to approve the issuance of shares of Common
Stock of the Company in excess of 19.99 percent of the outstanding shares, if
required in connection with the exchange of the common stock of the subsidiary
for Common Stock of the Company; and (d) the affirmative vote of a majority of
the votes present in person or represented by proxy and entitled to vote is
required to approve Proposals Four and Five, to ratify an amendment to the
Company's Stock Incentive Plan to increase the number of shares reserved for
issuance thereunder from 400,000 shares to 1,200,000 shares and to allow holders
of more than 10% of the Company's stock to participate in the Stock Incentive
Plan; and to ratify the appointment of the Company's independent accountants.
Unless otherwise required by law or the Company's Articles of Incorporation or
Bylaws, any other matter put to a stockholder vote will be decided by the
affirmative vote of a majority of the votes present in person or represented by
proxy at the Annual Meeting and entitled to vote on the matter.
Abstentions and broker non-votes will be treated as shares that are
present, in person or by proxy, and entitled to vote for purposes of determining
the presence of a quorum at the Annual Meeting. As a result, abstentions and
broker non-votes will have the same effect as a vote "against" Proposals Two,
Four and Five. Abstentions and broker non-votes on Proposals One and Three will
not have any effect on the approval of those Proposals. The stockholders of the
Company will not have dissenters' rights of appraisal with respect to any of the
actions to be taken at the meeting.
The presence of a stockholder at the Annual Meeting will not automatically
revoke such stockholder's proxy. Stockholders may, however, revoke a proxy at
any time prior to its exercise by filing with the Secretary of the Company a
written notice of revocation, by delivering to the Company a duly executed proxy
bearing a later date or by attending the Annual Meeting and voting in person.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
INCORPORATION OF DOCUMENTS BY REFERENCE
A copy of the Company's most recent Annual Report to Security Holders for
the fiscal year ended June 30, 1999 accompanies this Proxy Statement.
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933 and the Securities Exchange Act of 1934 are hereby incorporated by
reference in this Proxy Statement: the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1999 and Amendment No.1 thereto; and the
Company's Post-Effective Amendment No. 1 to Registration Statement on Form SB-2
filed with the Commission on June 3, 1999.
You may read and copy any reports, statements, or other information
that the Company files at the Commission's public reference rooms in Washington,
D.C.; New York, New York; and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. The
Company's public filings are also available to the public from commercial
document retrieval services and at the commission at "http:\www.sec.gov."
All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Annual Meeting to which this Proxy Statement relates
shall be deemed to be incorporated by referenced in this Proxy Statement and to
be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes
<PAGE> 8
such statement. Any such statement so modified or superseded shall not be deemed
to constitute a part of this Proxy Statement except as so modified or
superseded.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE
NOT SPECIFICALLY INCORPORATED HEREIN BY REFERENCE). WRITTEN REQUESTS FOR SUCH
DOCUMENTS RELATING TO THE COMPANY SHOULD BE DIRECTED TO CORPORATE COMMUNICATIONS
AND INVESTOR RELATIONS, BIOSHIELD TECHNOLOGIES, INC., 4405 INTERNATIONAL
BOULEVARD, SUITE 109, NORCROSS, GEORGIA 30093; AND TELEPHONE REQUESTS MAY BE
DIRECTED TO CORPORATE COMMUNICATIONS AND INVESTOR RELATIONS AT (770) 925-3432.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE
BY NOVEMBER 12, 1999.
<PAGE> 9
PROPOSAL ONE
ELECTION OF DIRECTORS
The Certificate of Incorporation provides that the Board of Directors shall
consist of not fewer than three directors nor more than twenty-one, with the
exact number determined by resolution of a majority of the Board of Directors.
The Board of Directors currently consists of four directors, divided into three
classes of directors serving staggered three-year terms. Currently, Michel M.
Azran is serving as a Class I director, with a term that would have expired at
the Company's 1998 annual meeting of shareholders, if the Company had held such
a meeting; Carl T. Garner is serving as a Class II director, with a term
expiring at the Annual Meeting; and Messrs. Moses and Elfersy are serving as
Class III directors, with terms expiring at the 2000 Annual Meeting. At the
Annual Meeting, one director will be elected to Class I, with a term expiring
with the 2001 annual meeting of shareholders, and one director with will be
elected to Class II, with a term expiring with the 2002 annual meeting of
shareholders. The Board of Directors' nominee for Class I is Michel M. Azran,
and the Board of Directors' nominee for Class II is Carl. T. Garner.
Unless otherwise instructed on the proxy, properly executed proxies will be
voted for the election of Mr. Azran and Mr. Garner as directors. The Board of
Directors believes that such nominees will stand for reelection and will serve
if elected. However, if Mr. Azran or Mr. Garner fails to stand for reelection or
is unable to accept election, proxies will be voted by the proxy holders for the
election of such other person as the Board of Directors may recommend. Nominees
for election as directors are nominated by a majority of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ITS NOMINEES
FOR DIRECTOR.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information regarding the Board of
Director's nominees for election as director and those directors who will
continue to serve as such after the Annual Meeting.
<TABLE>
<CAPTION>
AGE AT PRESENT POSITION
NAME NOVEMBER 1, 1999 WITH COMPANY
- ---- ----------------- ----------------
<S> <C> <C>
NOMINEE FOR CLASS I
Michel M. Azran (1) ................. 53 Director
NOMINEE FOR CLASS II
Carl T. Garner(1).................... 52 Director
CONTINUING DIRECTORS
Timothy C. Moses (2)................. 43 Co-Chairman of the Board, President,
Chief Executive Officer and Director
Jacques Elfersy (2) ................. 49 Co-Chairman of the Board, Senior Vice
President, Secretary, Treasurer and
Director
</TABLE>
(1) Member of Audit Committee.
(2) Class III Director who shall serve until the 2000 annual meeting of
shareholders.
<PAGE> 10
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names of the directors, executive officers and significant employees of
the Company, their ages as of November 1, 1999 and certain information about
them are set forth below.
<TABLE>
<CAPTION>
AGE AT PRESENT POSITION
NAME NOVEMBER 1, 1999 WITH COMPANY
- ---- ----------------- ----------------
<S> <C> <C>
Timothy C. Moses .................... 43 Co-Chairman of the Board, President,
Chief Executive Officer and Director
Jacques Elfersy ..................... 49 Co-Chairman of the Board, Senior Vice
President, Secretary, Treasurer and
Director
Dr. Joachim Berkner.................. 32 Director of Research and Development,
Organic Chemistry
Daniel E. Swaye...................... 47 Chief Financial Officer
Michel M. Azran (1) ................. 53 Director
Carl T. Garner(1).................... 52 Director
</TABLE>
(1) Member of Audit Committee.
The principal occupations for the past five years or more of the nominees
for director, continuing directors, executive officers and significant employees
are set forth below.
Mr. Timothy C. Moses, a Director and Founder, is the Company's
Co-Chairman, President, and Chief Executive Officer, 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 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
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 a silicone and siloxane-based
technology company, Mr. Elfersy was instrumental in the implementation of
research and development on projects requiring antimicrobial-based coating
<PAGE> 11
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.
Dr. Joachim Berkner is a significant employee and 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.
Daniel E. Swaye has been the Chief Financial Officer of the Company
since November, 1998. Mr. Swaye began his career in 1974 as an auditor with
Arthur Andersen & Co. In 1976 he was recruited and joined U.S. Specialty
Retailing to manage the financial and retail accounting departments. In 1979 he
joined Scientific Atlanta, Inc. as the Corporate Internal Audit Supervisor.
During his six years with that Company, Mr. Swaye was promoted to the positions
of Division Controller and International Group Controller. In 1985 he joined
Dental One, Inc. as Corporate Controller and in 1987 joined Delta International
Marketing, Ltd. as General Manager. In 1988, he joined AVL Scientific
Corporation as Corporate Controller where he was a key member of the Senior
Management Team responsible for all strategies and major decisions. Mr. Swaye
received a Bachelors' of Science degree in Accounting in 1974 from Lehigh
University. He received his CPA Certificate in 1976.
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. The Class III directors (Messrs. Moses and Elfersy) will serve until
the 2000 annual meeting of shareholders; the Class I director (for which the
Board of Directors has nominated Mr. Azran) will serve until the 2001 annual
meeting of shareholders; and the Class II director (for which the Board of
Directors has nominated Mr. Garner) will serve until the 2002 annual meeting of
shareholders. The classification of the Board of Directors could have the effect
of making it more difficult for a third party to acquire control of the Company.
Officers are elected at the first meeting of the Board of Directors following
the stockholders meeting at which directors are elected, and officers serve at
the discretion of the Board of Directors. Each executive officer of the Company
was chosen by the Board of Directors and serves at the pleasure of the Board of
Directors until his or her successor is appointed or until his or her earlier
resignation or removal. There are no family relationships between any of the
directors or executive officers of the Company.
BOARD COMMITTEES
The Board of Directors has a standing Audit Committee. The Audit Committee
recommends the Company's independent auditors and reviews the results and scope
of audit and other accounting-related services provided by such auditors.
MEETINGS AND ATTENDANCE
The full Board of Directors met ____ times and the Audit Committee _____
times during the fiscal year ending June 30, 1999. [All of the directors
attended at least 75% of the meetings of the full Board of Directors and, as to
the members of the Audit Committee, at least 75% of the meetings of the Audit
Committee, during the fiscal year ending June 30, 1999.]
<PAGE> 12
DIRECTOR COMPENSATION
The Company currently pays 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.
EXECUTIVE COMPENSATION
The following table sets forth for the three fiscal years ended June
30, 1999, compensation paid by the Company to its Co-Chairman of the Board,
Chief Executive Officer, and Director; its Co-Chairman of the Board, Senior Vice
President, acting Chief Financial Officer, Secretary, Treasurer, and Director;
and its Chief Operating Officer (the "Named Executive Officers"). None of the
Company's other executive officers had annual compensation in excess of $100,000
for services rendered during any of the three years ended June 30, 1999, 1998 or
1997.
Summary Compensation Table
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------------------- PAYOUT
OTHER RESTRICTED SECURITIES -------
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
- --------------------------- ---- -------- ----- ------------ ----------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Timothy C. Moses.............. 1999 140,000 -- 10,000 -- 150,000 -- --
Co-Chairman of the Board, 1998 120,000 -- -- -- -- -- --
President, Chief Executive 1997 120,000 -- -- -- -- -- --
Officer and Director
Jacques Elfersy............... 1999 140,000 -- 10,200 -- 150,000 -- --
Co-Chairman of the Board, 1998 120,000 -- -- -- -- -- --
Executive, Vice President, 1997 120,000 -- -- -- -- -- --
Acting Chief Financial
Officer,
Director of Regulatory
Affairs,
Secretary, Treasurer, and
Director
Jeff Parker................... 1999 102,000 -- -- -- 150,000 -- --
Chief Operating Officer (1)
</TABLE>
(1) Mr. Parker terminated his employment with the Company effective August 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS/SARS
NUMBER OF GRANTED TO EXERCISE
SECURITIES UNDERLYING EMPLOYEES IN OR BASE EXPIRATION
NAME OPTIONS/SARS FISCAL YEAR PRICE DATE
- ---- --------------------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Timothy C. Moses.............................. 150,000 20% $ 2.94 2/1/03
Jacques Elfersy............................... 150,000 20% $ 2.94 2/1/03
Jeffrey Parker................................ 150,000 20% $ 5.00 10/8/03
</TABLE>
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth the aggregate dollar value of all options
exercised in the fiscal year ended June 30, 1999, and the total number of
unexercised options held on June 30, 1999, by the Named Executive Officers:
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED JUNE 30, 1999 JUNE 30, 1999
ON VALUE --------------------------- -----------------------------
EXECUTIVE OFFICER EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
[to be added]
</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 (3)
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. The agreements
also contain certain non-compete provisions, which provisions a state court may
determine not to enforce or only to partially enforce.
Each agreement currently provides for a base salary at the rate of
$250,000. The base salaries are then subject to increase, but not decrease, as
of January 1 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 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, 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) in 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, shares 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.
The Company has entered into an employment agreement, dated as of
September 18, 1998, with Mr. Parker. The agreement has an initial term
commencing upon the closing of the initial public offering of the Company, and
expiring on the third anniversary thereof. Under the agreement, Mr. Parker is
required to devote his substantially full time and attention to the affairs of
the Company. The agreements also contain certain non-compete provisions, which
provisions a state court may determine not to enforce or only to partially
enforce. The agreement provides for a base salary at the rate of $150,000. In
addition, the agreement provides a severance package in the event Mr. Parker is
terminated other than for cause (as defined) or the executive terminates his
agreement for good reason (as defined) an amount equal to the lessor of (i) the
remaining unexpired term of the agreement or (ii) one year from the date of
termination. He shall also be entitled to medical insurance, benefits provided
to other executives and the issuance by the Company, upon each of the first
three anniversary dates of his employment, of options to acquire 50,000 shares
of the Company's common stock. Such options shall be exercisable at five dollars
per share and which will also be subject to certain additional terms,
conditions, and restrictions. Mr. Parker terminated his employment with the
Company effective August 1999.
The Company has entered into an employment agreement, dated as of
October 8, 1998, with Mr. Swaye. The agreement has an initial term commencing on
October 27, 1998, and expiring on the third anniversary thereof. Under the
agreement, Mr. Swaye is required to devote his substantially full time and
attention to the affairs of the Company. The agreements also contain
<PAGE> 14
certain non-compete provisions, which provisions a state court may determine
not to enforce or only to partially enforce. The agreement provides for a base
salary at the rate of $130,000. In addition, the agreement provides a severance
package in the event Mr. Swaye is terminated other than for cause (as defined)
or the executive terminates his agreement for good reason (as defined) an amount
equal to the lessor of (i) the remaining unexpired term of the agreement or (ii)
nine months from the date of termination. He shall also be entitled to medical
insurance, benefits provided to other executives and the issuance by the
Company, upon each of the first two anniversary dates of his employment, of
options to acquire 30,000 shares of the Company's common stock and options to
acquire 40,000 shares of the Company's common stock on the third anniversary
date of his employment. Such options shall be exercisable at five dollars per
share and which will also be subject to certain additional terms, conditions,
and restrictions.
Advisory Board.
The Company's 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 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 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 Ohio State University. In that capacity, Dr. Smith is responsible
for the administration of an environmental, occupational health and radiation
safety program that 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 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.
Advisors receive reimbursement of travel expenses connected with
Company business, and stock options, for consultation services, which 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
<PAGE> 15
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 the ("Act") may be permitted to directors, officers, or persons
controlling the registrant pursuant to the foregoing provisions, or otherwise,
the Company 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 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 by such
director, officer, or controlling person in connection with the securities being
registered, the Company 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. The incentive plan was amended by the board
of directors in December 1998 to increase the number of shares of Common Stock
which could be issued thereunder to 1,200,000. In May 1999, the Company
registered the shares subject to the Incentive Plan with the Securities and
Exchange Commission on Form S-8.
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
1,200,000 shares of Common Stock for issuance pursuant to awards that may be
made under the Incentive Plan. As of May 21, 1999, awards of 645,000 shares of
Common Stock were granted under the Incentive Plan to key employees, of which
55,000 options are currently exercisable at a price of $1.00 per share and
300,000 are currently exercisable at $2.94 per share.
The nature, terms and conditions of awards under the Incentive Plan are
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. 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. The exercise price may not
<PAGE> 16
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.
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. The Incentive Plan was amended by the board in December of
1998, to increase the total number of shares that may be issued to 1,200,000 and
to permit 10% or more shareholders/officers to participate in the plan.
Director Plan.
The purpose of the Director Plan is to provide an incentive to outside
directors and members of the Company's advisory board for continuous association
with the Company and to reinforce the relationship between participants' rewards
and shareholder gains. The Company has reserved 1,000,000 shares of Common Stock
pursuant to awards that may be made under the Director Plan. Awards of options
for 10,000 shares of Common Stock have been issued by the Company in fiscal
1999; options for 120,000 shares of Common Stock were issued by the Company in
fiscal 1998; and options for 120,000 shares of Common Stock were issued by the
Company in 1996. Pursuant to the Director Plan, options vest in three stages,
20,000 shares at date of grant and 20,000 shares on the first and second
anniversary of the date of the stock option agreement. 210,000 of such options
are currently exercisable pursuant to the director plan.
CERTAIN TRANSACTIONS
In June 1998, Timothy C. Moses and Jacques Elfersy contributed
approximately $50,000 of capital to the Company. Subsequent to June 30, 1998,
Messrs. Moses and Elfersy contributed an additional $325,000 of capital to the
Company. Such contributions were funded by the private sale to accredited
investors of 124,995 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"). The Notes were repaid by the Company from the proceeds of
the Company's initial public offering.
Upon consummation of the Company's initial public offering, Messrs.
Moses and Elfersy received $307,133 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
June 30, 1998.
In May of 1999, the board of directors granted to each of Messrs.
Moses and Elfersy five year fully vested options to purchase 2,250,000 shares of
its subsidiary Electronic Medical Distribution, Inc. at a price of $2.00 per
share.
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. The Company will comply with Sections VII A and
B of the NASAA Statement of Policy Regarding Loans and Other Material Affiliated
Transactions, amended November 18, 1997, regarding future material affiliated
transactions. Pursuant to these Sections, the Company represents that (i) all
future material affiliated transactions and loans will be made or entered into
on terms that are no less favorable to the Company than those that could be
obtained from unaffliated third parties and (ii) all future material affiliated
transactions and loans, and any forgiveness of loans, will be approved by a
majority of the Company's independent directors who do not have an interest in
the transactions and who will have access, at the Company's expense, to the
Company's counsel or to independent legal counsel. There can be no assurance,
however, that future
<PAGE> 17
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of a registered class
of the Company's equities securities, to file reports of ownership and changes
in ownership with the SEC and the NASD. Officers, directors and greater than 10%
stockholders are also required by SEC regulations to furnish the company with
copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it, the
Company believes that, during the period July 1, 1998, to June 30, 1999 all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.
PROPOSAL TWO
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
In connection with the Company's initial public offering of stock, and
specifically the qualification of the sale of the Company's securities in the
State of California under that state's securities laws, the Company agreed to
submit to the Company's shareholders, at its next annual meeting, a proposal to
amend the Company's Articles and Bylaws to (i) provide that holders of ten
percent (10%) or more of the outstanding shares of the Company's capital stock
can call a special shareholders meeting and (ii) eliminate the "Fair Price"
requirements enacted by the Company pursuant to Sections 14-2-1110 through 1133
of the Official Code of Georgia Annotated, which are designed to encourage any
person, before acquiring fifteen percent (15%) or more of the Company's
outstanding common stock to seek approval of the Company's Board of Directors
for the terms of any contemplated business combination. The effect of these
existing provisions is to prohibit, among other things, a business combination
with an interested shareholder for five (5) years, subject to certain
exceptions, which include obtaining Board of Directors' approval of the proposed
transaction and in certain cases shareholder approval.
The Company's Articles are also proposed to be amended to make a
technical change. The present Articles name each member of the classes of the
Board by name, which will then require amendments to the Articles if and when
the composition of the Board changes in the future. For administrative
convenience, the Articles are proposed to be revised to eliminate the references
to member of the Board by name. A copy of the Company's Articles of
Incorporation, as proposed to be amended, and the Company's Bylaws, as proposed
to be amended, are attached hereto as Exhibits A and B, respectively.
Messrs. Moses and Elfersy have agreed to vote their shares in favor of
Proposal Two. Approval of these proposals will require a majority vote of the
Company's shareholders. In the event that these proposals are adopted, the
Company may be more vulnerable to, among other things, a hostile takeover or
other business combination or transaction that is not approved by the Company's
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
PROPOSAL THREE
APPROVAL OF THE ISSUANCE OF COMMON STOCK OF A SUBSIDIARY OF THE COMPANY
AND CERTAIN RELATED WARRANTS, AND THE ISSUANCE OF SHARES OF COMMON STOCK
IN EXCESS OF 19.99 PERCENT OF THE OUTSTANDING SHARES, IF REQUIRED IN CONNECTION
WITH THE EXCHANGE OF THE COMMON STOICK AND THE EXERCISE OF THE WARRANTS
In June, 1999, we entered into a private placement facility (the
"Facility") providing for the sale of up to $15,000,000 of common stock (the
"Subsidiary Stock") and warrants (the "Warrants") of a subsidiary of the Company
(the "Subsidiary")
<PAGE> 18
engaged in the development of eMD.com, a medical-related internet site. As of
the date of this proxy statement, we have sold $6,000,000 of Subsidiary Stock
and Warrants under the Facility. The Subsidiary Stock and the Warrants were sold
in reliance on Rule 506 of the Securities Act of 1933, which provides an
exemption from registration for sales to accredited investors, as defined by
Rule 501 under Regulation D of the Securities Act.
Under the terms of the private placement agreements, if the Subsidiary has
not consummated an initial public offering of its common stock by June 30, 2000,
the Subsidiary Stock will become exchangeable for Common stock of the Company
("Conversion Shares"), at the option of the holder, at a conversion price of
$5.825 per share of Subsidiary Stock (which represents 125% of the initial
purchase price of $4.66 per share), and into a number of shares of Common Stock
calculated based upon the average closing bid prices of the Company's common
stock for the twenty trading days immediately following notice of exercise of
such conversion right. No holder is entitled to exchange Subsidiary Stock which
would cause the total number of Conversion Shares beneficially owned by the
holder and its affiliates to exceed 4.9% of the outstanding shares of the Common
stock following such conversion, or exchange more than 10% of the total number
of shares of Subsidiary Stock issued to such holder (or any successor or assign)
in any thirty (30) day period. The Company has the option, in lieu of issuing
Conversion Shares, to pay cash to the holders of Subsidiary Stock seeking to
effect a conversion at a rate of $5.825 per share. The Company has the right, at
any time, to redeem any or all of the Subsidiary Stock at a price of $5.825 per
share, subject to certain conditions, including having cash, credit facilities
or standby underwriting arrangements in place sufficient to pay the redemption
price. Under the terms of the private placement agreements, the Company agreed
to file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") by December 31, 1999 to register
the shares of Common stock that would be issuable upon the exchange of the
Subsidiary Stock.
Under the terms of the private placement agreements, the Company is
permitted to cause the investors to purchase up to $6,250,000 in common stock of
the Company, priced at a 20% discount to the average bid price for the twenty
trading days following the notice of exercise of such right, subject to certain
conditions, including the effectiveness of the Registration Statement. The
Company has certain rights to suspend the exchange of the Subsidiary Stock for
Conversion Shares, including if the Subsidiary remains a reporting company under
the Securities Exchange Act of 1934 and the Subsidiary Shares have a trading
price of $6.19 or more per share. The major agreements constituting the Facility
appear in this proxy statement as Appendices C, D and E.
Rule 4460(i) of the National Association of Securities Dealers, Inc. (the
"NASD Rule") requires, among other things, stockholder approval in connection
with the issuance of common stock (or securities convertible into or exercisable
for common stock) equal to 20% or more of the common stock or 20% or more of the
voting power outstanding before the issuance. The minimum vote which constitutes
stockholder approval is a majority of the total votes cast on the proposal in
person or by proxy. Under the terms of the private placement agreements, if the
holders of the Subsidiary Stock seek to convert their Subsidiary Stock to
Conversion Shares, and the Company is unable to issue all the Conversion Shares
as a result of the NASD Rule, among other reasons, the holders have the option
to rescind their election to convert such Subsidiary Stock, or to cause the
Company to redeem such Subsidiary Stock for cash at a price of $5.825 per share.
Under the terms of the agreements governing the issuance of the Subsidiary
Stock, the Company agreed to submit for stockholder approval a proposal to
ratify the issuance of the Subsidiary Stock and the shares of Common Stock
issuable upon conversion of the Subsidiary Stock. If Proposal Three is not
approved, the Subsidiary Stock will remain outstanding, but the holders of the
Subsidiary Stock will not be able to convert the Subsidiary Stock into a number
of shares representing more than 19.99% of the Common Stock outstanding before
the execution of the Facility unless (i) the stockholders of the Company
hereinafter approve such issuance; (ii) Nasdaq waives the requirements of the
NASD Rule, or (iii) the NASD Rule (or any similar rule) is no longer applicable
to the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL THREE.
RATIFICATION OF AN AMENDMENT TO THE STOCK INCENTIVE PLAN
TO INCREASE THE NUMBER OF OPTIONS ISSUABLE THEREUNDER AND TO ALLOW
HOLDERS OF MORE THAN 10% OF THE COMPANY'S COMMON STOCK
TO PARTICIPATE IN THE STOCK INCENTIVE PLAN
(PROPOSAL FOUR)
In April, 1999, the Board of Directors adopted an amendment to the
Company's 1997 Stock Incentive Plan to increase the number of shares reserved
for issuance pursuant to options granted under the Incentive Plan from 400,000
shares to 1,200,000 shares, and to make certain technical amendments to allow
holders of more than 10% of the Company's Common Stock to
<PAGE> 19
participate in the Incentive Plan. The Incentive Plan, as amended, appears in
this proxy statement as Appendix "F" hereto, and is summarized on page XX of
this proxy statement under "Stock Option Plans.
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 Board of Directors recommends that the stockholders of the Company
adopt Proposal Four. Unless otherwise instructed on the proxy, properly executed
proxies will be voted in favor of approving the proposed amendment to the
Incentive Plan. The affirmative vote of a majority of the total votes cast on
the proposal in person or by proxy is required to approve Proposal Four.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL FOUR.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL FIVE)
The Board of Directors has appointed Grant Thornton LLP as independent
accountants to audit the consolidated financial statements of the Company for
the fisca1 year beginning July 1, 1999. Stockholders are being asked to ratify
this appointment. Representatives of Grant Thornton LLP are expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL FIVE.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table provides information as of May 21, 1999, concerning
beneficial ownership of Common Stock by (1) each person or entity known by the
Company to beneficially own more than 5% of the outstanding Common Stock, (2)
each director and nominee for director of the Company, (3) each Named Executive
Officer, and (4) all directors and executive officers of the Company as a group.
The information as to beneficial ownership has been furnished by the respective
stockholders, directors and executive officers of the Company and, unless
otherwise indicated, each of the stockholders has indicated that they have sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address Shares Percent
of Beneficial Owner(1) Owned of Class
- --------------------- --------- --------
<S> <C> <C>
Timothy C. Moses (2)
405 North Errol Court, N.W.
Atlanta, Georgia 30327 1,507,930 22.7%
Jacques Elfersy (2)
1771 East Clifton Road
Atlanta, Georgia 30307 1,655,117 24.9%
Carl T. Garner
4473 Chattahoochee Plantation
Marietta, Georgia 30067 60,000 *
Michel Azran 10,000 *
[address]
All officers and directors
as a group (6 persons) 3,233,447 48.6%
</TABLE>
* Less than 1%
<PAGE> 20
- --------
(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) Does not include 138,834 shares of Common Stock owned by each of the wives
of Messrs. Moses and Elfersy for which each of them disclaim beneficial
ownership.
<PAGE> 21
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of no
other business that may come before the Annual Meeting. If any other business is
properly brought before the Annual Meeting, it is the intention of the proxy
holders to vote or act in accordance with their best judgment with respect to
such matters.
By Order of the Board of Directors
Secretary
Atlanta, Georgia
November ______, 1999
<PAGE> 22
APPENDIX A
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> 23
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 ten percent (10%) of the outstanding shares of Voting
Stock.
(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> 24
(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:
(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
(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.
<PAGE> 25
(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.
(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> 26
APPENDIX B
AMENDED AND RESTATED
BYLAWS
OF
BIOSHIELD TECHNOLOGIES, INC.
Adopted as of _____, 1999
<PAGE> 27
BYLAWS
OF
BIOSHIELD TECHNOLOGIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
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
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
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
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
</TABLE>
ii
<PAGE> 30
<TABLE>
<S> <C>
Section 11.1 Power to Amend Bylaws 19
ARTICLE TWELVE - STATUTORY BUSINESS COMBINATION PROVISION 19
Section 12.1 Business Combinations 19
</TABLE>
iii
<PAGE> 31
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 ten percent (10%) of the
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors ("Voting Stock").
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
1
<PAGE> 32
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 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
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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
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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, 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
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business opportunity of the Corporation;
(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
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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.
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).
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Appendix C
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 30,
1999, by and among Allergy Superstore.com, Inc., a Delaware corporation, with
headquarters located at 4405 International Blvd., Norcross, Georgia (the
"COMPANY"), BioShield Technologies, Inc, a Georgia corporation located at 4405
International Blvd., Norcross, Georgia ("BSTI")and the investors listed on the
Schedule of Buyers attached hereto (individually, a "BUYER" or collectively
"BUYERS").
WHEREAS:
A. The Company, BSTI, and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Section 4(2) and/or Regulation D ("REGULATION D") as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 ACT");
B. The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, an aggregate amount of up to 3,218,884 shares of common
stock of the Company, par value $0.001 per share (such shares referred to
herein as the "COMMON STOCK"), in the respective amounts set forth opposite
each Buyer's name on the Schedule of Buyers;
C. Contemporaneously with the execution and delivery of this
Agreement, BSTI and the Buyers hereto are executing and delivering a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit "A" (the "BSTI REGISTRATION RIGHTS AGREEMENT") pursuant to which BSTI
has agreed to provide certain registration rights under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws;
D. Contemporaneously with the execution and delivery of this
Agreement, the Company and Buyers hereto are executing and delivering a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit "B" (the "COMPANY REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act
and rules and regulations promulgated thereunder and applicable state
securities laws; and
E. The holders of the Common Stock will receive stock purchase
warrants (the "WARRANTS") to acquire the Common Stock substantially in the form
attached as Exhibit "C."
NOW THEREFORE, the Company, the Buyer, and BSTI hereby agree as
follows:
1. PURCHASE AND SALE OF COMMON STOCK.
a. Purchase of Common Stock. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 5 and 6 below, the
Company shall issue and sell to the
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Buyers and the Buyers shall purchase from the Company an aggregate
principal amount of 3,218,884 shares of Common Stock and Warrants for
an aggregate purchase price of $15,000,000 (the "PURCHASE PRICE"), in
the respective amounts set forth opposite each Buyer's name on the
Schedule of Buyers (the "CLOSING").
b. Closing Date. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m. Eastern Standard Time, within five (5)
business days following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 5 and 6 below (or such later date as is mutually agreed to by
the Company and the Buyer). The Closing shall occur on the Closing
Date at the offices of Sims Moss Kline & Davis LLP, 400 Northpark Town
Center, Suite 310, 1000 Abernathy Road, N.E., Atlanta, Georgia 30328.
c. Form of Payment. On the Closing Date, (i) each Buyer shall pay
his portion of the Purchase Price to the Company for the Common Stock
to be issued and sold to such Buyer at the Closing, by wire transfer
of immediately available funds in accordance with the Company's
written wire instructions, and (ii) the Company shall deliver to each
Buyer certificates representing such Common Stock and Warrants that
such Buyer is then purchasing (as indicated opposite such Buyer's name
on the Schedule of Buyers), duly executed on behalf of the Company and
registered in the name of such Buyer or its designee (the
"CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer is acquiring the Common Stock
and Warrants and any shares of Common Stock issuable upon exercise
thereof ("WARRANT SHARES"), for its own account for investment only
and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold
any Common Stock, Conversion Shares (as defined in Section 8 hereof),
Warrants, or Warrant Shares for any minimum or other specific term and
reserves the right to dispose of Common Stock or Warrant Shares at any
time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act. Notwithstanding anything contained
herein to the contrary, each Buyer agrees to enter into any
contractual lock-up agreements with respect to the Common Stock,
Warrants, Warrant Shares, or Conversion Shares that may be required by
the Company's underwriters in connection with an underwritten public
offering of the Company's common stock or other securities or any
public offering of the Conversion Shares or other securities of BSTI.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
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<PAGE> 46
c. Reliance on Exemptions. Such Buyer understands that the Common
Stock, Conversion Shares, Warrants, and Warrant Shares are being
offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and BSTI and materials relating to the offer
and sale of the Common Stock which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and BSTI. Neither such
inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify,
amend or affect such Buyer's right to rely on the Company's or BSTI's
representations and warranties contained in Section 3 below. Such
Buyer understands that its investment in the Common Stock, Conversion
Shares, Warrants, and Warrant Shares involve a high degree of risk.
Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to its acquisition of the Common Stock, Conversion Shares,
Warrants, and Warrant Shares.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Common Stock, Conversion Shares, Warrants, and Warrant Shares, or the
fairness or suitability of the investment in the Common Stock, nor
have such authorities passed upon or endorsed the merits of the
offering of the Common Stock and Warrants.
f. Transfer or Resale. Such Buyer understands that: (i) the Common
Stock and Warrants have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (a) subsequently registered
thereunder, (b) such Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such
registration, or (c) such Buyer provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) ("RULE 144"); (ii) any sale of such securities made in
reliance on Rule 144 promulgated under the 1933 Act (or a successor
rule thereto) may be made only in accordance with the terms of Rule
144 and further, if Rule 144 is not applicable, any resale of such
securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some
other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) other than the
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Company Registration Rights Agreement and the BSTI Registration Rights
Agreement (collectively, the "REGISTRATION RIGHTS AGREEMENTS"),
neither the Company nor any other person is under any obligation to
register such securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Common Stock, Conversion Shares,
Warrants, and Warrant Shares shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the Common
Stock, Conversion Shares, Warrants and Warrant Shares upon which it is
stamped, if, unless otherwise required by state securities laws, (i)
the sale of the Common Stock, Conversion Shares, or Warrant Shares is
registered under the 1933 Act, (ii) in connection with a sale
transaction, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Common Stock, Conversion Shares,
Warrants, or Warrant Shares may be made without registration under the
1933 Act, or (iii) such holder provides the Company with reasonable
assurances that the Common Stock, Conversion Shares, Warrants, or
Warrant Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular
date that can then be immediately sold.
h. Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and
is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, subject as enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization,
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moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights
and remedies.
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<PAGE> 49
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BSTI.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company, BSTI, and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each
of the Company, BSTI and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company, BSTI and its subsidiaries taken as a
whole.
b. Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company and BSTI each have the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the Common
Stock, Conversion Shares, Warrants, and Warrant Shares in accordance
with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreements and any related
agreements by the Company and BSTI and the consummation by it of the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Common Stock and the reservation for
issuance and the issuance of the Conversion Shares issuable upon
conversion or exercise thereof as provided in Section 8 hereof, have
been duly authorized by each of the Company's and BSTI's Board of
Directors and no further consent or authorization is required by each
of the Company, BSTI, its respective Board of Directors, or its
respective stockholders, (iii) this Agreement and the Registration
Rights Agreements and any related agreements have been duly executed
and delivered by the Company and BSTI, and (iv) this Agreement, the
Registration Rights Agreements and any related agreements constitute
the valid and binding obligations of the Company and BSTI enforceable
against the Company and BSTI in accordance with their terms, except as
such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 100,000,000 shares of Common Stock,
of which as of the date hereof 30,000,000 shares were issued and
outstanding, and no series of preferred stock or debentures or notes
were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock or preferred
stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. Except
as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no
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outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or
any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may
become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities and (iii) there are no agreements
or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the
1933 Act (except the Company Registration Rights Agreement). There are
no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Common Stock
or the Conversion Shares as described in this Agreement. The Company
has furnished to or made available to Buyer, via the SEC Edgar site,
true and correct copies of BSTI's filings with the U.S. Securities and
Exchange Commission (the "SEC DOCUMENTS"), the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), the Company's By-laws, as in effect
on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Common Stock are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non assessable, are free from all
taxes, liens and charges with respect to the issue thereof and are
entitled to the rights and preferences set forth in the Common Stock.
The Conversion Shares issuable upon conversion of the Common Stock
have been duly authorized and reserved for issuance by BSTI. The
Warrants and Warrant Shares, and upon exchange of the Common Stock
into Conversion Shares as provided in Section 8 of this Agreement, the
Warrant Shares and the Conversion Shares will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of common stock of BSTI and the Company,
respectively.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company
and BSTI and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations,
preferences, and rights of any outstanding series of preferred stock
of the Company or BSTI or by-laws or (ii) conflict with or constitute
a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company, BSTI, or any
of its subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of
the principal market or exchange on which the Common Stock is traded
or listed) applicable to the Company, BSTI, or any of its subsidiaries
or by which
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any property or asset of the Company, BSTI, or any of its subsidiaries
is bound or affected. Except as disclosed in Schedule 3(e), neither
the Company, BSTI nor its subsidiaries is in violation of any term of
or in default under its Certificate of Incorporation or Bylaws or
their organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation
applicable to the Company, BSTI, or its subsidiaries. Except as
specifically contemplated by this Agreement and as required under the
1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Company Registration Rights
Agreement in accordance with the terms hereof or thereof. Except as
disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company and BSTI is required to
obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company, BSTI, and its
subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
f. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to
the knowledge of the Company , BSTI, or any of its subsidiaries,
threatened against or affecting the Company, the Common Stock, BSTI,
or any of the Company's subsidiaries, wherein an unfavorable decision,
ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company or BSTI
to perform its obligations under, this Agreement or any of the
documents contemplated herein or (iii), except as expressly set forth
in Schedule 3(h), have a material adverse effect on the business,
operations, properties, financial condition or results of operation of
the Company, BSTI, and its subsidiaries taken as a whole.
g. Acknowledgment Regarding Buyer's Purchase of Common Stock. The
Company and BSTI acknowledge and agree that the Buyer is acting solely
in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of the Company or BSTI (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer or any of their
respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Common Stock. The Company and BSTI further
represent to the Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the
Company, BSTI, and its representatives.
h. No General Solicitation. Neither the Company, BSTI, nor any of
its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation
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or general advertising (within the meaning of Regulation D under the
1933 Act) in connection with the offer or sale of the Common Stock,
Conversion Shares, Warrants, or Warrant Shares.
j. No Integrated Offering. Neither the Company, BSTI, nor any of
its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Common Stock, the Conversion Shares,
the Warrants or Warrant Shares under the 1933 Act or cause this
offering of Common Stock or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions.
k. Employee Relations. Neither the Company, BSTI, nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company, BSTI, or any of its subsidiaries, is any such dispute
threatened. None of the Company's, BSTI's or its subsidiaries'
employees is a member of a union and the Company, BSTI, and its
subsidiaries believe that their relations with their employees are
good.
l. Intellectual Property Rights. The Company, BSTI, and its
subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted. Except as set forth on Schedule 3(n), none of the Company's
or BSTI's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade
secrets, or other intellectual property rights have expired or
terminated, or are expected to expire or terminate, in the near
future. The Company, BSTI and its subsidiaries do not have any
knowledge of any infringement by the Company, BSTI or its subsidiaries
of trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of
any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule
3(n), there is no claim, action or proceeding being made or brought
against, or to the Company's or BSTI's knowledge, being threatened
against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or
other infringement; and the Company, BSTI and its subsidiaries are
unaware of any facts or circumstances which might give rise to any of
the foregoing.
m. Environmental Laws. The Company, BSTI, and its subsidiaries are
(i) in material compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
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<PAGE> 53
LAWS"), (ii) have received all material permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in material
compliance with all terms and conditions of any such permit, license
or approval.
n. Title. The Company, BSTI and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company, BSTI, and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(p) or such as do not
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company,
BSTI, and its subsidiaries. Any real property and facilities held
under lease by the Company, BSTI, and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company,
BSTI, and its subsidiaries.
o. Insurance. The Company, BSTI, and each of its subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company
and believes to be prudent and customary in the businesses in which
the Company and its subsidiaries are engaged. Neither the Company nor
BSTI any such subsidiary has been refused any insurance coverage
sought or applied for and neither the Company nor BSTI or any such
subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the Company, BSTI and its
subsidiaries, taken as a whole.
p. No Materially Adverse Contracts, Etc. Neither the Company,
BSTI, nor any of its subsidiaries is subject to any charter, corporate
or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's or BSTI's officers
has or is expected in the future to have a material adverse effect on
the business, properties, operations, financial condition, results of
operations or prospects of the Company, BSTI, or its subsidiaries.
Neither the Company nor BSTI or any of its subsidiaries is a party to
any contract or agreement which in the judgment of the Company's
officers has or is expected to have a material adverse effect on the
business, properties, operations, financial condition, results of
operations or prospects of the Company, BSTI, or its subsidiaries.
q. Tax Status. Except as set forth on Schedule 3(u), the Company,
BSTI, and each of its subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only
to the extent that the Company, BSTI, and each of its subsidiaries has
set aside on
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<PAGE> 54
its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except
those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company and BSTI know of no basis for any such claim.
r. Certain Transactions. Except as set forth on Schedule 3(v) and
in BSTI's SEC Documents and except for arm's length transactions
pursuant to which the Company and BSTI make payments in the ordinary
course of business upon terms no less favorable than the Company or
BSTI could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors,
or employees of the Company or BSTI is presently a party to any
transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company or BSTI, any corporation,
partnership, trust or other entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner.
s. Dilutive Effect. BSTI understands and acknowledges that the
number of Conversion Shares issuable upon exchange of the Common Stock
will increase in certain circumstances. BSTI further acknowledges that
its obligation to issue Conversion Shares upon exchange of the Common
Stock in accordance with this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of BSTI.
t. Fees and Rights of First Refusal. Neither the Company nor BSTI
is obligated to offer the securities offered hereunder on a right of
first refusal basis or otherwise to any third parties including, but
not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
u. Shareholder Approval. BSTI covenants to submit to its,
shareholders at its next shareholder meeting a proposal for
ratification of the issuance of the Conversion Shares, if and as
required by the rules of the National Association of Securities
Dealers, Inc. (the "NASD") applicable to the transaction.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement.
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<PAGE> 55
b. Form D. The Company agrees to file a Form D with respect to the
Common Stock and the Conversion Shares as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to
qualify the Common Stock and the Conversion Shares for, or obtain
exemption for the Common Stock and the Conversion Shares for, sale to
the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of which
the Investors (as that term is defined in the Company Registration
Rights Agreement) may sell all of the Common Stock without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold
all the Conversion Shares and (B) none of the Common Stock is
outstanding (the "REGISTRATION PERIOD"), the Company, once it becomes
a reporting company pursuant to the Securities Exchange Act of 1934,
as amended, shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even
if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Common Stock for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the following
to each Buyer once it becomes a reporting company pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, upon the
effective date of its filing on Form 10 or S-1, during the
Registration Period: (i) within five (5) days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly
Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act;
(ii) within one (1) day after release thereof, copies of all press
releases issued by the Company or any of its subsidiaries and (ii)
copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.
f. Reservation of Shares. BSTI shall take all action necessary to
at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of common stock
needed to provide for the issuance of the Conversion Shares. The
Company shall take all action necessary to at all times have
authorized and reserved for the purpose of issuance no less than 100%
of the number of shares of Common Stock needed to provide for the
issuance of the Warrant Shares.
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g. Listings. Once the Company becomes a reporting company pursuant
to the 1934 Act, the Company shall use its best efforts promptly
secure the listing of the Conversion Shares upon each national
securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares from
time to time issuable under the terms of this Agreement and the
Company Registration Rights Agreement. The Company shall maintain the
Common Stock's authorization for quotation in the over-the counter
market. The Company shall promptly provide to each Buyer copies of any
notices it receives regarding the continued eligibility of the Common
Stock for trading in the over-the-counter market.
h. Expenses. Each of the Company and the Buyer shall pay all costs
and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of
this Agreement and the Registration Rights Agreements. The placement
fees of J.P. Carey Securities, Inc. and Greenfield Capital Partners,
LLC shall be paid for by the Company at Closing.
i. Corporate Existence. So long as any Common Stock remain
outstanding, the BSTI shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of BSTI's assets or any similar transaction or
related transactions (each such transaction, a "SALE OF BSTI") except
if the surviving or successor entity in such transaction (i) expressly
assumes, in writing, BSTI's obligations hereunder and under the BSTI
Registration Rights Agreement, and any other agreements and
instruments entered into or delivered by the Company in connection
herewith and (ii) is a publicly traded corporation whose Common Stock
is listed for trading on the New York Stock Exchange, Inc., the
American Stock Exchange, or the NASDAQ Small Cap, National Market or
Electronic Bulletin Board.
(j) No Short Sales of the Common Stock. So long as a Buyer or any
of its affiliates beneficially owns any Common Stock, each Buyer and
its affiliates shall not directly or indirectly engage in any short
sales or third party short sales of the Common Shares or hold a "put
equivalent position" with respect to the Common Stock (as defined in
Rule 16a-1 under the 1934 Act).
(k) Limitation on Short Sales of Conversion Shares. Buyer and its
affiliates shall not engage in short sales of the Conversion Shares;
provided, however, that any holder may enter into any short sale or
other hedging or similar arrangement it deems appropriate with respect
to Conversion Shares to be issued pursuant to an Exchange Notice after
it delivers an Exchange Notice with respect to such Conversion Shares
to be issued pursuant to an Exchange Notice so long as such sales or
arrangements do not involve more than the number of such Conversion
Shares to be issued pursuant to an Exchange Notice (determined as of
the date of such Exchange Notice). Buyer and its affiliates agree to
provide to BSTI upon
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written request from time to time its securities trading records in
order to demonstrate that it has complied with this Section 4(k).
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Common
Stock to the Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and the
Registration Rights Agreements and delivered the same to the Company.
b. The Buyer shall have delivered to the Company the Purchase
Price for the Common Stock being purchased by the Buyer at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of the Buyer shall be true
and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
6. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Common Stock at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Buyer's sole benefit and may be waived by the Buyer at any time in its sole
discretion:
a. The Company and BSTI shall have executed this Agreement, the
Company shall have executed the Company Registration Rights Agreement
and BSTI shall have executed the BSTI Registration Rights Agreement,
and delivered the same to the Buyer.
b. The representations and warranties of the Company and BSTI
shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company and BSTI
shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied
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with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the Chief Executive Officer
of each of the Company and BSTI, each dated as of the Closing Date, to
the foregoing effect and as to such other matters as may be reasonably
requested by the Buyer including, without limitation an update as of
the Closing Date regarding the representation contained in Section
3(c) above.
c. The Buyer shall have received the opinion of the Company's and
BSTI's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially
the form of Exhibit "D" attached hereto.
d. The Company and BSTI shall have executed and delivered to the
Buyer the Certificates (in such denominations as the Buyer shall
request) for the Common Stock and Warrants being purchased by the
Buyer at the Closing.
e. The Board of Directors of the Company and BSTI shall have
adopted the resolutions in substantially the form of Exhibit "E"
attached hereto.
f. As of the Closing Date, BSTI shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of
effecting the exchange of the Common Stock for the Conversion Shares
as provided in Section 8 herein, such number of Conversion Shares
equal to or greater than 100% of the number of shares which are
issuable upon conversion of all of the Common Stock which could be
issued under this Agreement.
g. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered and
acknowledged in writing by the BSTI's transfer agent.
h. Timothy C. Moses and Jacques Elfersy shall have delivered the
voting proxies substantially in the form attached hereto as Exhibit
"F."
7. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Common Stock, the Conversion Shares, the Warrants
and the Warrant Shares hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company and BSTI jointly and severally
shall defend, protect, indemnify and hold harmless the Buyer and each other
holder of the Common Stock, the Conversion Shares, the Warrants and the Warrant
Shares and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by the
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Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by
the Company or BSTI in this Agreement, the Common Stock, the Conversion Shares,
the Warrants and the Warrant Shares or the Registration Rights Agreements or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any material breach of any covenant, agreement or obligation of the Company
or BSTI contained in this Agreement or the Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Indemnities, any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Common Stock and Warrants or the status of the Buyer or
holder of the Common Stock, the Conversion Shares, the Warrants and the Warrant
Shares, as an investor in the Company or BSTI. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company and
BSTI shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
8. EXCHANGE OF COMMON STOCK INTO CONVERSION SHARES
(a) Exchange Right. Subject to the provisions of Sections 9, 10,
12, and 13 herein, in the event that the Company has not consummated
an initial public offering of its Common Stock, at any time or times
after June 30, 2000, (the "EXCHANGE COMMENCEMENT DATE"), any holder of
Common Stock shall be entitled to exchange any Common Stock into fully
paid and nonassessable shares (rounded to the nearest whole share in
accordance with Section 8(f) below) of Conversion Shares (the
"EXCHANGE RIGHT"), at the Exchange Rate (as defined below); provided,
however, that in no event shall any holder be entitled to (i) exchange
Common Stock into Conversion Shares in excess of that number of Common
Stock which, upon giving effect to such conversion, would cause the
aggregate number of Conversion Shares beneficially owned by the holder
and its affiliates to exceed 4.9% of the outstanding shares of the
Common Stock following such conversion or (ii) exchange more than 10%
of the total number of Conversion Shares issued to such holder into
Conversion Shares (or any successor or assign) pursuant to this
transaction in any thirty (30) day period commencing on the Exchange
Commencement Date and any succeeding thirty (30) day period
thereafter. For purposes of the foregoing proviso, the aggregate
number of shares of Conversion Shares beneficially owned by the holder
and its affiliates shall include the number of shares of Conversion
Shares issuable upon exchange of the Common Stock with respect to
which the determination of such proviso is being made, but shall
exclude the number of shares of Conversion Shares which would be
issuable upon (i) exchange of the remaining, non-exchanged Common
Stock beneficially owned by the holder and its affiliates beneficially
owned by the holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended.
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(b) Exchange Rate. The number of shares of Conversion Shares
issuable after the Exchange Commencement Date upon exchange of each
share of the Common Stock pursuant to Section 8(a) shall be determined
according to the following formula (the "EXCHANGE RATE"):
(ISSUE PRICE PER SHARE)(1.25)
-----------------------------
EXCHANGE PRICE
Notwithstanding anything contained herein to the contrary, unless this
transaction has been approved by the shareholders of BSTI in accordance with
Georgia law, then as long as the Common Stock of BSTI is listed on the NASDAQ
National Market or the NASDAQ Small Cap Market, BSTI shall not issue Conversion
Shares upon exchange of Common Stock which would equal or exceed twenty percent
(20%) of the issued and outstanding Common Stock of BSTI on the date of
issuance of the Common Stock or such lesser amount as determined on a pro-rata
basis based upon the number of Common Stock issued.
For purposes of this Section 8, the following terms shall have the
following meanings:
(i) "EXCHANGE DATE" shall mean the Trading Day that an
Exchange Notice is deemed delivered pursuant to Section 8(e);
(ii) "EXCHANGE PRICE" means the Average Market Price for
the Conversion Shares for the twenty (20) consecutive Trading Days
immediately following the Exchange Date;
(iii) "AVERAGE MARKET PRICE" means, with respect to any
security for any period, that price which shall be computed as the
arithmetic average of the Closing Bid Prices (as defined below)
for such security for each trading day in such period;
(iv) "CLOSING" shall mean one of the closing of an exchange
of Common Stock for Conversion Shares pursuant to Section 8.
(v) "CLOSING DATE" shall mean with respect to a closing,
the twentieth Trading Day following the Exchange Date related to
such closings or such earlier date as BSTI and the holder shall
agree.
(vi) "CLOSING BID PRICE" means, for any security as of any
date, the last closing bid price on the Nasdaq National Market
System (the "NASDAQ-NM") as reported by Bloomberg Financial
Markets ("BLOOMBERG"), or, if the Nasdaq-NM is not the principal
trading market for such security, the last closing bid price of
such security on the principal securities exchange or
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trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last closing
bid price of such security in the over-the-counter market on the
pink sheets or bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg. If the Closing Bid Price cannot
be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such
date shall be the fair market value as reasonably determined in
good faith by the Board of Directors of the Company (all as
appropriately adjusted for any stock dividend, stock split or
other similar transaction during such period); and
(vii) "CONVERSION SHARES" shall mean those shares of common
stock of BSTI, no par value, issuable pursuant to an exchange of
Common Stock pursuant to Section 8 of this Agreement.
(viii) "ISSUANCE DATE" means the date of issuance of the
Common Stock as described herein.
(ix) "ISSUE PRICE PER SHARE" shall mean $4.67 (as adjusted
for stock splits and similar events of the Company).
(x) "PRINCIPAL MARKET" shall mean the Nasdaq National
market, the NASDAQ SmallCap Market, the American Stock Exchange or
the New York Stock Exchange, whichever at the time is the
principal trading exchange or market for the Conversion Shares.
(xi) "TRADING DAY" shall mean any day during which the
Principal Market shall be open for business.
(c) Dispute Resolution. In the case of a dispute as to the
determination of the Average Market Price or the arithmetic
calculation of the Exchange Rate, BSTI shall promptly issue to the
holder the number of Conversion Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the
holder via facsimile within three (3) business days of the Closing
Date. If such holder and BSTI are unable to agree upon the
determination of the Average Market Price or arithmetic calculation of
the Conversion Rate within three (3) business days of such disputed
determination or arithmetic calculation being submitted to the holder,
then BSTI shall within one (1) business day submit via facsimile (A)
the disputed determination of the Average Market Price to an
independent, reputable investment bank or (B) the disputed arithmetic
calculation of the Exchange Rate to its independent, outside
accountant. BSTI shall cause the investment bank or the accountant, as
the case may be, to perform the determinations or calculations and
notify BSTI and the holder of the results no later than forty-eight
(48) hours from the time it
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receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may
be, shall be binding upon all parties absent manifest error. The
person or persons entitled to receive Conversion Shares issuable upon
a conversion of Common Stock shall be treated for all purposes as the
record holder or holders of such Conversion Shares on the Conversion
Date.
(d) Adjustment to Exchange Price - Dilution and Other Events. In
order to prevent dilution of the rights granted herein, the Exchange
Price will be subject to adjustment from time to time as provided in
this Section 8(d).
(i) Reorganization, Reclassification, Consolidation,
Merger, or Sale. Any recapitalization, reorganization
reclassification, consolidation. merger, sale of all or
substantially all of BSTI's assets to another Person (as defined
below) or other similar transaction which is effected in such a
way that holders of Conversion Shares are entitled to receive
(either directly or upon subsequent liquidation) stock, securities
or assets with respect to or in exchange for Conversion Shares is
referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, BSTI will make appropriate
provision (in form and substance reasonably satisfactory to the
holders of a majority of the Common Stock issued in connection
with this transaction then outstanding) to insure that each of the
holders of the Common Stock issued in connection with this
transaction will thereafter have the right to acquire and receive
in lieu of or in addition to (as the case may be) the Conversion
Shares immediately theretofore acquirable and receivable upon the
conversion of such holder's Common Stock, such shares of stock,
securities or assets as may be issued or payable with respect to
or in exchange for the number of shares of Conversion Shares
immediately theretofore acquirable and receivable upon the
exchange of such holder's Common Stock had such Organic Change not
taken place. In any such case, BSTI will make appropriate
provision (in form and substance reasonably satisfactory to the
holders of a majority of the Common Stock issued in connection
with this transaction then outstanding) with respect to such
holders' rights and interests to insure that the provisions of
this Section 8(d) and Section 8(e) below will thereafter be
applicable to the Common Stock. BSTI will not effect any such
consolidation, merger or sale, unless prior to the consummation
thereof the successor entity (if other than BSTI) resulting from
consolidation or merger or the entity purchasing such assets
assumes, by written instrument (in form and substance reasonably
satisfactory to the holders of a majority of the Common Stock
issued in connection with this transaction then outstanding), the
obligation to deliver to each holder of Common Stock issued in
connection with this transaction such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire. For purposes of this Agreement,
"PERSON" shall mean an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
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(ii) Notices.
(A) Immediately upon any adjustment of the Exchange
Price, BSTI will give written notice thereof to each holder
of Common Stock issued in connection with this transaction,
setting forth in reasonable detail and certifying the
calculation of such adjustment.
(B) BSTI will give written notice to each holder of
Common Stock issued in connection with this transaction at
least twenty (20) days prior to the date on which BSTI
closes its books or takes a record (I) with respect to any
dividend or distribution upon the Conversion Shares, (II)
with respect to any pro rata subscription offer to holders
of Conversion Shares, or (III) for determining rights to
vote with respect to any Organic Change, dissolution or
liquidation.
(C) BSTI will also give written notice to each holder
of Common Stock issued in connection with this transaction
at least twenty (20) days prior to the date on which any
Organic Change, dissolution, or liquidation will take place.
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(e) Mechanics of Exchange of Common Stock into Conversion Shares.
(i) Holder's Delivery Requirements. Such notice exchanging
Common Stock into Conversion Shares in accordance with this
Section 8 by the holder (the "EXCHANGE NOTICE") shall (A) be
delivered by facsimile to the Company and BSTI for receipt on or
prior to 12:00 noon Eastern Standard Time or (B) the immediately
succeeding Trading Day if it is received by facsimile or otherwise
after 12:00 noon Eastern Standard Time on a Trading Day (the
"EXCHANGE DATE") and (B) the holder shall surrender to a common
carrier for delivery to BSTI as soon as practicable following such
date, but in no event later than four (4) Trading Days prior to a
Closing Date, the original certificates representing the Common
Stock being exchanged (or an indemnification undertaking with
respect to such shares in the case of their loss, theft, or
destruction) and the originally executed conversion notice.
(ii) The Company and BSTI Response. Upon receipt by the
Company and BSTI of a facsimile copy of the Exchange Notice, the
Company and BSTI shall send via facsimile, a confirmation of
receipt of such Exchange Notice to such holder. Upon receipt by
the Company of the Common Stock Certificates to be exchanged
pursuant to an Exchange Notice, together with the originally
executed Exchange Notice, BSTI or the transfer agent (as
applicable) shall, within three (3) business days of each Closing
Date (A) issue and surrender to a common carrier for overnight
delivery to the address as specified in the Exchange Notice, a
certificate, registered in the name of the holder or its designee,
for the number of Conversion Shares to which the holder shall be
entitled. In lieu of delivering physical certificates representing
the Conversion Shares issuable in accordance with this Section
8(e) and provided that the transfer agent then is participating in
the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of a holder, BSTI shall
use its commercially reasonable efforts to cause the transfer
agent to electronically transmit the applicable number of
Conversion Shares by crediting the account of the holder's prime
broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system. In addition, on or prior to such Closing Date,
each of BSTI, the Company, and the holder shall deliver to the
others all documents, instruments, and writings required to be
delivered or reasonably requested by any of them pursuant to this
Agreement in order to implement and effect the transactions
contemplated herein.
(iii) Record Holder. The person or persons entitled to
receive the Conversion Shares issuable upon an exchange of Common
Stock shall be treated for all purposes as the record holder or
holders of such shares of Conversion Shares on the Exchange Date.
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(iv) BSTI's Failure to Timely Exchange. If BSTI shall fail
to issue to a holder on a Closing Date, a certificate for the
number of shares of Conversion Shares to which such holder is
entitled upon such holder's exchange of Common Stock, in addition
to all other available remedies which such holder may pursue
hereunder (including indemnification pursuant to Section 7
hereof), the Company shall pay additional damages to such holder
on each day after the fifth (5th) Trading Day following the
applicable Closing Date for which such exchange is not timely
effected, an amount equal to 1.0% of the product of number of
Conversion Shares not issued to such holder to which such holder
is entitled by the Exchange Price for each calendar month until
such exchange is made unless Buyer elects to enforce the terms of
Section 11 herein.
(f) Fractional Shares. BSTI shall not issue any fraction of a
Conversion Share upon any exchange. All Conversion Shares (including
fractions thereof) issuable upon conversion of more than one share of
Common Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a
fraction of a Conversion Share. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction
of its Conversion Share, BSTI shall round such fraction of a
Conversion Share up or down to the nearest whole share.
(9) CASH PAYMENT OPTION BY BSTI.
In lieu of issuing the Conversion Shares in accordance with an
Exchange Notice, BSTI shall have the right, in its sole discretion, to pay to
the holder of the Common Stock an amount equal to $5.825 for each share of
Common Stock so exchanged (as adjusted for stock splits and similar events of
the Company) ("CASH OUT PRICE"). The Company shall pay the Cash Out Price to
that Holder within seven (7) Trading Days following the receipt by the Company
and BSTI of an Exchange Notice.
(10) COMPANY'S RIGHT TO REDEEM AT ITS ELECTION.
(a) At any time, the Company shall have the right, in its sole
discretion, to redeem ("REDEMPTION AT COMPANY'S ELECTION"), from time
to time, any or all of the Common Stock; provided (i) the Company
shall first provide no more than seven (7) Trading Days and no less
than one (1) Trading Day advance written notice as provided in
subparagraph 10(a)(ii) below, and (ii) that the Company shall only be
entitled to redeem Common Stock having an aggregate Stated Value (as
defined above) of at least Five Hundred Thousand Dollars ($500,000).
If the Company elects to redeem some, but not all, of the Common
Stock, the Company shall redeem a pro-rata amount from each Holder of
the Common Stock.
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(i) Redemption Price At Company's Election. The
"REDEMPTION PRICE AT COMPANY'S ELECTION" shall be calculated as
$5.825 (as adjusted for stock splits and similar events of the
Company).
(ii) Mechanics of Redemption at Company's Election. The
Company shall effect each such redemption by giving no more than
seven (7) Trading Days and no less than one (1) Trading Day prior
written notice ("NOTICE OF REDEMPTION AT COMPANY'S ELECTION") to
(A) the Holders of the Common Stock selected for redemption at the
address and facsimile number of such Holder appearing in the
Company's Common Stock register and (B) the Transfer Agent, which
Notice of Redemption At Company's Election shall be deemed to have
been delivered three (3) Trading Days after the Company's mailing
(by overnight or two (2) day courier, with a copy by facsimile) of
such Notice of Redemption at Company's Election. Such Notice of
Redemption At Company's Election shall indicate (i) the number of
shares of Common Stock that have been selected for redemption,
(ii) the date which such redemption is to become effective (the
"DATE OF REDEMPTION AT COMPANY'S ELECTION"), and (iii) the
applicable Redemption Price At Company's Election, as defined in
subsection (a)(i) above.
(b) Company Must Have Immediately Available Funds or Credit
Facilities. The Company shall not be entitled to send any Redemption
Notice and begin the redemption procedure under Sections 10(a) unless
it has:
(i) the full amount of the redemption price in cash,
available in a demand or other immediately available account in a
bank or similar financial institution; or
(ii) immediately available credit facilities, in the full
amount of the redemption price with a bank or similar financial
institution, or
(iii) an agreement with a standby underwriter willing to
purchase from the Company a sufficient number of shares of stock
to provide proceeds necessary to redeem any stock that is not
converted prior to redemptions; or
(iv) a combination of the items set forth in (i), (ii), and
(iii) above, aggregating the full amount of the redemption price.
(c) Payment of Redemption Price. Each Holder submitting Common
Stock being redeemed under this Section 10 shall send their Common
Stock Certificates to be redeemed to the Company or its Transfer
Agent, and the Company shall pay the applicable redemption price to
that Holder within five (5) business days of the Date of Redemption at
Company's Election.
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(11) INABILITY TO FULLY EXCHANGE.
(a) Holder's Option if BSTI Cannot Fully Exchange. If at any time
after the Exchange Commencement Date, upon the Company's and BSTI's
receipt of an Exchange Notice, BSTI does not issue shares which are
registered for resale under the BSTI Registration Statement within
five (5) business days of the time required for any reason or for no
reason, including, without limitation, because BSTI (x) does not have
a sufficient number of Conversion Shares authorized and available, (y)
is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over BSTI or its
securities, including without limitation The Nasdaq Stock Market, Inc.
from issuing all of the Conversion Shares which is to be issued to a
holder of Common Stock pursuant to an Exchange Notice or (z) fails to
have a sufficient number of Conversion Shares registered and eligible
for resale under the BSTI Registration Statement, then BSTI shall
issue as many Conversion Shares as it is able to issue in accordance
with such holder's Exchange Notice and pursuant to Section 8(e) above
and, with respect to the unconverted Common Stock, the holder, solely
at such holder's option, can, in addition to any other remedies such
holder may have hereunder, under this Agreement (including
indemnification under Section 7 thereof), under the BSTI Registration
Rights Agreement, at law or in equity, elect to:
(i) require BSTI to redeem from such holder those shares
of Conversion Stock for which BSTI is unable to issue Conversion
Shares in accordance with such holder's Exchange Notice
("MANDATORY REDEMPTION") at a price per share of Common Stock (the
"MANDATORY REDEMPTION PRICE") equal to $5.825 (as adjusted for
stock splits or similar events of the Company;
(ii) require BSTI to issue restricted shares of Common
Stock in accordance with such holder's Exchange Notice and
pursuant to Section 8(e) above, if BSTI's inability to fully
exchange Common Stock is pursuant to its inability to deliver
Conversion Shares registered pursuant to the 1933 Act; or
(iii) void its Exchange Notice and retain or have returned,
as the case may be, the unexchanged Common Stock that were to be
exchanged pursuant to such holder's Exchange Notice.
(b) Mechanics of Fulfilling Holder's Election. BSTI shall send via
facsimile to a holder of Common Stock, upon receipt of a facsimile
copy of an Exchange Notice from such holder which cannot be fully
satisfied as described in Section 11(a) above, a notice of BSTI's
inability to fully satisfy such holder's Exchange Notice (the
"INABILITY TO FULLY EXCHANGE NOTICE"). Such Inability to Fully
Exchange Notice shall indicate (i) the reason why BSTI is unable to
fully satisfy such holder's Exchange Notice, (ii) the number of shares
of Common Stock which cannot be exchanged, and (iii) the Mandatory
Redemption Price. Such holder must, within five (5) Trading Days of
receipt of such Inability to Fully Exchange
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Notice, deliver written notice via facsimile to BSTI ("NOTICE IN
RESPONSE TO INABILITY TO EXCHANGE") of its election pursuant to
Section 11(a) above.
(c) Payment of Redemption Price. If such holder shall elect to
have its shares redeemed pursuant to Section 11(a) above, BSTI shall
pay the Mandatory Redemption Price in cash to such holder within
thirty (30) days of BSTI's receipt of the holder's Notice in Response
to Inability to Exchange (the "MANDATORY REDEMPTION PRICE DEADLINE").
If BSTI shall fail to pay the applicable Mandatory Redemption Price to
such holder on a timely basis as described in this Section 11(c)
(other than pursuant to a dispute as to the determination of the
Closing Bid Price or the arithmetic calculation of the Redemption
Rate), such unpaid amount shall bear interest at the rate of 1% for
the first month and a rate of 2.0% per month thereafter (prorated for
partial months) until paid in full. Following the Mandatory Redemption
Price Deadline, until the full Mandatory Redemption Price is paid in
full to such holder, such holder may void the Mandatory Redemption
with respect to those shares of Common Stock for which the full
Mandatory Redemption Price has not been paid and receive back such
shares of Common Stock.
(d) Pro-rata Exchange and Redemption. In the event the Company and
BSTI each receives an Exchange Notice from more than one holder of
Common Stock on the same day and BSTI can exchange and redeem some,
but not all, of the Common Stock pursuant to this Section 11, BSTI
shall exchange and redeem from each holder of Common Stock electing to
have Common Stock exchanged and redeemed at such time an amount equal
to such holder's pro-rata amount (based on the number of shares of
Common Stock held by such holder relative to the number of shares of
Common Stock outstanding, pursuant to this Agreement) of all Common
Stock being exchanged and redeemed at such time.
12. ONE-TIME RIGHT TO SUSPEND EXCHANGE RIGHT OR EXCHANGE COMMON STOCK
INTO CONVERSION SHARES.
Notwithstanding anything contained herein to the contrary, BSTI shall
have the one-time right, without payment or penalty of any kind, for a period
of thirty (30) days from the date written notice is given to the holders of
Common Stock, to suspend the Exchange Right in the event that the Company has
received a letter of intent by the Exchange Commencement Date from a reputable
investment banking firm to underwrite the public offering of the Company's
common stock or other securities ("PUBLIC OFFERING"), and the Public Offering
has not occurred by the Exchange Commencement Date due to market conditions as
determined by such underwriter.
13. SUSPENSION OF EXCHANGE RIGHT UPON REGISTRATION OF COMMON
STOCK OF THE COMPANY UNDER THE 1934 ACT.
Notwithstanding anything contained herein to the contrary, so long as
(i) the Company becomes and remains a reporting company under the 1934 Act,
(ii) the Company has its Form 8A declared effective by the SEC, and (iii) the
trading price of the Common Stock as reported by
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Bloomberg on its principal exchange or trading market remains equal to or
greater than $6.19 per share, the holders of the Common Stock shall have no
Exchange Right.
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14. REISSUANCE OF CERTIFICATES.
In the event of an exchange or redemption pursuant to this Agreement
of less than all of the Common Stock represented by a particular Common Stock
certificate, the Company shall promptly cause to be issued and delivered, to
the holder of such Common Stock, a Common Stock certificate representing the
remaining shares of Common Stock which have not been so exchanged or redeemed.
15. TRANSFER AGENT INSTRUCTIONS.
BSTI shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of the Buyer or its respective
nominee(s), for the Conversion Shares in such amounts as specified from time to
time by the Buyer to the Company upon conversion of the Common Stock (the
"Irrevocable Transfer Agent Instructions"), except as provided in Sections 9,
10, 11, 12, and 15 herein. Prior to registration of the Conversion Shares under
the 1933 Act, all such certificates shall bear the restrictive legend specified
in Section 2(g) of this Agreement. The Company and BSTI warrant that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 15, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to registration of
such shares under the 1933 Act) will be given by the Company or BSTI to its
transfer agent and that the Common Stock and the Conversion Shares shall
otherwise be freely transferable on the books and records of the Company and
BSTI as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 15 shall affect in any way the
Buyer's obligations and agreement to comply with all applicable securities laws
upon resale of the Common Stock or Conversion Shares. If the Buyer provides the
Company and BSTI with an opinion of counsel, reasonably satisfactory in form,
and substance to the Company, that registration of a resale by the Buyer of any
of the Common Stock or Conversion Shares is not required under the 1933 Act,
the Company shall permit the transfer, and, in the case of the Conversion
Shares, BSTI shall promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Buyer.
The Company and BSTI acknowledge that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company and
BSTI acknowledge that the remedy at law for a breach of its obligations under
this Section 15 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company or BSTI of the provisions of this Section 15,
that the Buyer shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.
16. CONFIDENTIALITY.
a. Nondisclosure. As much of the information and other material
furnished under or in connection with this Agreement (whether
furnished before, on or after the date hereof) as constitutes or
contains confidential business, financial or other information of the
Company, BSTI or its subsidiaries, each Buyer covenants for itself,
and, as applicable, for
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its directors, officers, affiliates and partners, that it will use due
care to prevent its officers, directors, partners, employees, counsel,
accountants and other representatives from disclosing such information
to persons other than their respective authorized employees, counsel,
accountants, shareholders, partners, limited partners and other
authorized representatives. Notwithstanding the foregoing, if a Buyer
is advised by such counsel that such disclosure or delivery is
required by law, regulation or judicial or administrative order, then
they may disclose or deliver such information or other after giving
written notice to the Company and BSTI of such requirements. For
purposes of this Section 10a., "due care" means at least the same
level of care that a Buyer would use to protect the confidentiality of
its own sensitive or proprietary information, and this obligation
shall survive termination of this Agreement.
b. Possession of Material, Non-Public Information. To the extent
that any of the information furnished by the Company or BSTI to the
Buyers hereof would constitute material, nonpublic information for
purposes of the Exchange Act, Buyers agree not to engage in any
purchase or sale of securities while in possession of such information
and prior to the time that such information is made generally known to
the public and Buyers agree to use due care to prevent their officers,
directors, partners, employees, counsel and other representatives, who
have been given access to such material, nonpublic information, from
engaging in any such purchase or sale during such period.
17. GOVERNING LAW: MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Georgia
without regard to the principles of conflict of laws. Buyer may at any
time and at its option, whether or not an arbitration action is then
pending, initiate a civil action for temporary and permanent
injunctive and other equitable relief against Company and BSTI.
Company and BSTI acknowledges that upon any breach of Buyer's
conversion rights hereunder, Buyer's resulting injury may not be
adequately compensated by a remedy at law. Accordingly, upon such
breach, Buyer, at its election and without limitation of its other
remedies, shall be entitled to pursue a claim for specific performance
of this Agreement, and Company and BSTI hereby waive the right to
assert any defense thereto that Purchaser has an adequate remedy at
law. The parties further agree that any action between them shall be
heard in Atlanta, Georgia, and expressly consent to the jurisdiction
and venue of the Superior Court of Fulton County, Georgia, and the
United States District Court for the Northern District of Georgia,
Atlanta Division for the adjudication of any civil action asserted
pursuant to this Paragraph.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. In the event
any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original
executed signature pages to be physically delivered to the other party
within five (5) days of the execution and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of,
this Agreement.
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d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
e. Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer, the Company,
their affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the party
to be charged with enforcement.
f. Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv)
one (I) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
4405 International Blvd.
Suite B-109
Norcross, Georgia 30093
Telephone: (770) 925-3432
Facsimile: (410) 921-1062
With a copy to:
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road
Atlanta, Georgia 30328
Attn: Raymond L. Moss, Esq.
Telephone: (770) 481-7201
Facsimile: (770) 481-7210
If to the Buyer, to its address and facsimile number on the Schedule
of Buyers, with copies to the Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or
facsimile number.
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g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
successors and assigns. The Company shall not assign this Agreement or
any rights or obligations hereunder without the prior written consent
of the Buyer. The Buyer may assign its rights hereunder without the
consent of the Company, provided, however, that any such assignment
shall not release the Buyer from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented
to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyer
contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5 and 9, the indemnification provisions set forth in
Section 8, shall survive the Closing. The Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
j. Publicity. The Company, BSTI, and the Buyer shall have the
right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without
the prior approval of the Buyer, to make any press release or other
public disclosure with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be consulted
by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a
copy thereof).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
1. Termination. In the event that the Closing shall not have
occurred with respect to the Buyer on or before five (5) business days
from the date hereof due to the Company's or the Buyer's failure to
satisfy the conditions set forth in Sections 5 and 6 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other
party-provided.
m. Independent Counsel. The parties to this Agreement acknowledge
that Company and BSTI have received independent counsel from the law
firm of Sims Moss Kline & Davis LLP which is acting as their counsel.
Buyers have been advised by Sims Moss Kline & Davis LLP to seek
independent advice with respect to the terms and conditions of this
Agreement and any related agreements before signing them.
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n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be
applied against any party.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
"COMPANY"
ALLERGY SUPERSTORE.COM., INC.
By:
--------------------------------------
Name: Timothy C. Moses
Its: President
BIOSHIELD TECHNOLOGIES, INC.
By:
--------------------------------------
Name:
Title:
"BUYER"
JACKSON, LLC
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-32-
<PAGE> 76
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ADDRESS AND FACSIMILE NUMBER OF NUMBER OF SHARES NUMBER OF
BUYER'S NAME BUYER OF COMMON STOCK WARRANTS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
c/o Citco Trustees (Cayman) Ltd. 1,070,664 100,000
Jackson LLC Corporate Centre, Windwood One
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
facsimile: 345-945-7566
</TABLE>
<PAGE> 77
SCHEDULE 3(c)
CAPITALIZATION
1. Options to purchase a total of 2,250,000 shares of Common Stock to
each of Timothy Moses and Jacques Elfersy at $2.00 per share.
2. Options to purchase thirty thousand shares of common stock at $2.00
each have been issued to five of the Board Members and four of the Medical
Advisory Board Members of the Company, plus an option to purchase an additional
5,000 shares for each year of service thereafter.
<PAGE> 78
SCHEDULE 3(e)
CONFLICTS
None.
<PAGE> 79
SCHEDULE 3(h)
LITIGATION
None.
<PAGE> 80
SCHEDULE 3(i)
INTELLECTUAL PROPERTY
None.
<PAGE> 81
SCHEDULE 3(n)
LIENS
None.
<PAGE> 82
SCHEDULE 3(u)
TAX STATUS
None.
<PAGE> 83
SCHEDULE 4(d)
USE OF PROCEEDS
<TABLE>
<CAPTION>
<S> <C> <C>
1. Intercompany Debt Repayment $250,000.00
2. Design, development of Allergy Superstore $2,250,000.00
3. Increase staffing & costs related to new building $1,150,000.00
4. General & Administrative Expenses $2,500,000.00
5. Marketing & Sales (advertising/promo) $2,500,000.00
6. Branding Campaign $1,500,000.00
7. Web Server & Web Serving Tech $550,000.00
8. State-of-the-art distribution center $2,500,000.00
9. State-of-the-art e-commerce platform $450,000.00
10. Lease & Commissions $1,350,000.00
TOTAL $15,000,000.00
</TABLE>
<PAGE> 84
EXHIBIT "A"
(BSTI REGISTRATION RIGHTS AGREEMENT)
(See tab 1B for executed document.)
<PAGE> 85
EXHIBIT "B"
(COMPANY REGISTRATION RIGHTS AGREEMENT)
(See tab 1C for executed document.)
<PAGE> 86
EXHIBIT "C"
(WARRANT AGREEMENT)
(See tab 1D for executed document.)
<PAGE> 87
EXHIBIT "D"
(BSTI AND COMPANY COUNSEL'S OPINION)
(See tab 5 for executed document.)
<PAGE> 88
EXHIBIT "E"
(BSTI'S AND COMPANY'S BOARD RESOLUTIONS)
(See tabs 6 and 7 for executed documents.)
<PAGE> 89
EXHIBIT "F"
(VOTING PROXIES)
(See tab 8 for executed documents.)
<PAGE> 90
Appendix D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 30,
1999, by and among Allergy Superstore.com, Inc., a Delaware corporation, with
headquarters at Suite B109, 4405 International Boulevard, Norcross, Georgia
30083 (the "COMPANY"), and the undersigned buyer (the "BUYER").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
BioShield Technologies, Inc. ("BSTI") and the parties hereto of even date
herewith (the "SECURITIES PURCHASE AGREEMENT"), the Company has agreed, upon
the terms and subject to the conditions of the Securities Purchase Agreement,
(i) to issue and sell to the Buyer's shares of its common stock, par value
$0.0001 per share (the "COMMON STOCK"), which, under certain terms and
conditions, will be convertible into shares of BSTI's common stock, no par
value per share (as converted, the "CONVERSION SHARES") in accordance with the
terms of the Securities Purchase Agreement; and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws once the Company becomes a reporting
company under the Securities and Exchange Act of 1934, as amended (the "1934
ACT"), by making the appropriate filings with the U.S. Securities and Exchange
Commission (the "SEC"):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act
<PAGE> 91
and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("RULE 415"),
and the declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission
(the "SEC").
d. "REGISTRABLE SECURITIES" means exclusively the Common Stock and
any shares of capital stock issued or issuable as a result of any
stock split, stock dividend, recapitalization, exchange, or similar
event of the Company.
e."REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set for the in the Securities Purchase Agreement.
2. REGISTRATION.
a. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the
Company proposes to file with the SEC a Registration Statement
relating to an offering for its own account or the account of others
under the 1933 Act of any of its securities (other than pursuant to an
initial public offering of any securities of the Company or a filing
on Form S-4 or Form S-8 or their then equivalents relating to
securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection
with stock option or other employee benefit plans) the Company shall
promptly send to each Investor who is entitled to registration rights
under this Section 2(c) written notice of the Company's intention to
file a Registration Statement and of such Investor's rights under this
Section 2(c) and, if within twenty (20) days after receipt of such
notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered,
subject to the priorities set forth in Section 2(d) below. No right to
registration of Registrable Securities under this Section 2(c) shall
be construed to limit any registration required under Section 2(a).
The obligations of the Company under this Section 2(c) may be waived
by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then
each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company,
offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering.
As used herein, "REGISTRATION PERIOD" shall mean the earlier of (i)
the date as of which the Investors may sell all of the Registrable
Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investors shall have sold all the Registrable Securities.
-2-
<PAGE> 92
b. Priority in Piggy-Back Registration Rights in connection with
Registrations or Company Account. If the registration referred to in
Section 2(c) is to be an underwritten public offering for the account
of the Company and the managing underwriter(s) advise the Company in
writing, that in their reasonable good faith opinion, marketing or
other factors dictate that a limitation on the number of shares of
Common Stock which may be included in the Registration Statement is
necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1)
first, all securities the Company proposes to sell for its own
account, (2) second, up to the full number of securities proposed to
be registered for the account of the holders of securities entitled to
inclusion of their securities in the Registration Statement by reason
of demand registration rights, and (3) third, the securities requested
to be registered by the Investors and other holders of securities
entitled to participate in the registration, drawn from them pro rata
based on the number each has requested to be included in such
registration.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal
counsel without charge (i) promptly after the same is prepared and
filed with the SEC at least one copy of the Registration Statement and
any amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits, the
prospectus(es) included in such Registration Statement(s) (including
each preliminary prospectus ) and, with regards to the Registration
Statement, any correspondence by or on behalf of the Company to the
SEC or the staff of the SEC and any correspondence from the SEC or the
staff of the SEC to the Company or its representatives, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments
and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents,
including any preliminary prospectus, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
b. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration
Statement(s) under the securities or "blue sky" laws of such
jurisdictions in the United States as any Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
-3-
<PAGE> 93
advisable to quality the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a)
qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, or (c)
file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Investor who holds Registrable
Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any
of the Registrable Securities for sale under the securities or "blue
sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for
such purpose.
c. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations
under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering. The
cost of such underwriters shall be borne by the Investors.
d. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of
any event, of which the Company has knowledge, as a result of which
the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and promptly prepare a supplement or
amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement
or amendment to each Investor (or such other number of copies as such
Investor may reasonably request). The Company shall also promptly
notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be
delivered to each Investor by facsimile on the same day of such
effectiveness and by overnight mail) (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related
prospectus or related information, (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
e. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction and, if
such an order or suspension is issued, to obtain the withdrawal of
such order or suspension at the earliest possible moment and to notify
each Investor who holds Registrable Securities being sold (and, in the
event of an underwritten offering, the managing underwriters) of the
issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such
purpose.
-4-
<PAGE> 94
f. The Company shall permit each Investor at such Investors
expense a single firm of counsel or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold
a majority of the Registrable Securities being sold, to review and
comment upon the Registration Statement(s) and all amendments and
supplements thereto at least seven (7) days prior to their filing with
the SEC.
g. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if
any, for sale in connection with the Registration Statement (i) if
required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the
underwriters and the Investors.
h. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and
one firm of accountants or other agents retained by the Investors, and
(iv) one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its
due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence provided,
however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release
of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in
violation of this or any other agreement. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or
by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed
confidential. All fees, costs and expenses of the foregoing shall be
borne by the Investors.
i. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
-5-
<PAGE> 95
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction
or through other means, give prompt written notice to such Investor
and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
j. The Company shall use reasonable efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which securities of
the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, (ii) to secure designation and
quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System, (iii) if,
despite the Company's reasonable efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in satisfying the
preceding clause (i) or (ii) to secure the inclusion for quotation on
the Nasdaq SmallCap Market for such Registrable Securities or, (iv)
if, despite the Company's reasonable efforts to satisfy the preceding
clause (iii), the Company is unsuccessful in satisfying the preceding
clause (iii), to secure the inclusion for quotation on the
over-the-counter market for such Registrable Securities, and, without
limiting the generality of the foregoing, in the case of clause (iii)
or (iv), to arrange for at least two market makers to register with
the National Association of Securities Dealers, Inc. ("NASD") as such
with respect to such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under
this Section 3(j).
k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable,
any managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant
to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters,
if any, or the Investors may request. Not later than the date on which
any Registration Statement registering the resale of Registrable
Securities is declared effective, the Company shall deliver to its
transfer agent instructions, accompanied by any reasonably required
opinion of counsel, that permit sales of unlegended securities in a
timely fashion that complies with then mandated securities settlement
procedures for regular way market transactions.
l. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
m. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
-6-
<PAGE> 96
n. If reasonably requested by the managing underwriters, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters
and the Investors agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being
paid therefor by such underwriters and with respect to any other terms
of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by a shareholder
or any underwriter of such Registrable Securities. The costs of
preparation and filing of any such post-effective amendments and
supplements shall be borne by the Investors.
o. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
p. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each
such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It
shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing
of the Registration Statement(s) hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude
all of such Investor's Registrable Securities from the Registration
Statement.
c. Each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable
Securities, unless such Investor
-7-
<PAGE> 97
notifies the Company in writing of such Investor's election to exclude
all of such Investor's Registrable Securities from the Registration
Statement(s). Each Investor agrees to enter into any contractual
lock-up agreements with respect to the Common Stock or other
securities held by each Investor in connection with an underwritten
public offering of the Company's common stock or other securities.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(h) or the first sentence of 3(d), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement(s) covering such Registrable Securities until
such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or the first sentence of 3(d)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy all copies in such
Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve
such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees,
and fees and disbursements of counsel for the Company shall be borne by the
Company except as otherwise specifically proved herein.
6. INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 ACT"), and any underwriter (as defined in
the 1933 Act) for the Investors, and the directors and officers of,
and each Person, if any, who controls, any such underwriter within the
meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED
PERSON"), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS")
incurred in investigating, preparing or defending any action, claim,
-8-
<PAGE> 98
suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party
thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky"
laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, the Company
shall reimburse the Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished
in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment
thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect
to any preliminary prospectus, shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased
the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement
or mission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to
Section 3(c), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving
rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim
is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company (i) and (iv)
shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the
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<PAGE> 99
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9 for a period of
three (3) years from the Filing Deadline.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent
and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (collectively and together
with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section
6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for
only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue statement
or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration
Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
or proceeding (including any governmental action or proceeding)
involving a Claim such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying
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<PAGE> 100
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party
would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other
party represented by such counsel in such proceeding. The Company
shall pay reasonable fees for only one separate legal counsel for the
Investors, and such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of
any such action or claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action
or claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to
entry of any judgment or enter into any settlement or other compromise
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to pursuant
to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6 and (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
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<PAGE> 101
of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of fraudulent misrepresentation.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees,
once the Company becomes a reporting company under the 1934 Act upon the
effective date of its Form 10 to be filed with the SEC, to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements and the
filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a)
the name and address of such transferee or assignee, and (b) the securities
with respect to which such registration rights are being transferred or
assigned; (iii) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted
under the 1933 Act and applicable state securities laws; (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein; (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement; (vi) such transferee shall be an "ACCREDITED INVESTOR" as
that term is defined in Rule 501 of Regulation D promulgated under the 1933
Act; and (vii) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all reasonable expenses of amending
or supplementing such Registration Statement to reflect such assignment.
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<PAGE> 102
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified
mail, return receipt requested, or (d) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
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<PAGE> 103
If to the Company: Allergy Superstore.com, Inc.
Suite B109
4405 International Blvd.
Norcross, Georgia 30093
Attention: President
Facsimile: (770) 921-1065
With a copy to: Sims Moss Kline & Davis LLP
1000 Abernathy Road
Atlanta, Georgia 30328
Attention: Raymond L. Moss, Esq.
Facsimile: (770) 481-7200
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Georgia without regard to the
principles of conflict of laws. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement,
once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
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<PAGE> 104
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
- -------- -------
ALLERGY SUPERSTORE.COM, INC. JACKSON, LLC
By: By:
----------------------------- -----------------------------
Name: Name:
Its: Its:
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<PAGE> 105
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
ADDRESS AND FACSIMILE NUMBER OF NUMBER OF SHARES NUMBER OF
BUYER'S NAME BUYER OF COMMON STOCK WARRANTS
- ------------ ------------------------------- ---------------- --------
<S> <C> <C> <C>
Jackson LLC c/o Citco Trustees (Cayman) Ltd. 1,070,664 100,000
Corporate Centre, Windwood One
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
facsimile: 345-945-7566
</TABLE>
<PAGE> 106
<PAGE> 107
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 30,
1999, by and among BioShield Technologies, Inc., a Georgia corporation, with
headquarters at 4405 International Blvd., Norcross, Georgia 30093 (the
"COMPANY"), and the undersigned buyers (the "BUYER").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
Allergy Superstore.com, Inc ("ASC"), a subsidiary of the Company, has agreed,
upon the terms and subject to the conditions of the Securities Purchase
Agreement, (i) to issue and sell to the Buyers shares of ASC's common stock,
par value $0.001 per share (the "COMMON STOCK"), which, subject to certain
terms and conditions, will be exchangeable after June 30, 2000 (the "EXCHANGE
COMMENCEMENT DATE") into shares of the Company's common stock, no par value per
share (as converted, the "CONVERSION SHARES") in accordance with the terms of
the Securities Purchase Agreement; and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"),
and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness
<PAGE> 108
of such Registration Statement(s) by the United States Securities and
Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means exclusively the Conversion Shares
issued or issuable upon conversion of the Common Stock and any shares
of capital stock issued or issuable with respect to the Conversion
Shares or the Common Stock as a result of any stock split, stock
dividend, recapitalization, exchange or similar event.
e. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set for-the in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. No later than December 31, 1999, (the
"FILING DEADLINE"), the Company shall prepare and file with the SEC a
Registration Statement or Registration Statements (as is necessary) on
Form S-3 (or, if such form is unavailable for such a registration, on
such other form as is available for such a registration, subject to
the consent of each Buyer and the provisions of Section 2(e), which
consent will not be unreasonably withheld), covering the resale of all
of the Registrable Securities and no other Securities of any kind by
any person or entity, which Registration Statement(s) shall state
that, in accordance with Rule 416 promulgated under the 1933 Act, such
Registration Statement(s) also covers such indeterminate number of
additional shares of Common Stock as may become issuable to prevent
dilution resulting from stock splits, stock dividends or similar
transactions. Such Registration Statement shall initially register for
resale 1,000,000 shares of Common Stock, subject to adjustment as
provided in Section 3(b), and such registered shares of Common Stock
shall be allocated among the Investors pro rata based on the total
number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of
the Registrable Securities is declared effective by the SEC. The
Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within one hundred and twenty (120) days
after the Filing Deadline (the "REGISTRATION DEADLINE"). The Company
shall permit the registration statement to become effective within
five (5) business days after receipt of a "no review" notice from the
SEC. In the event that the Registration Statement is not declared
effective by the SEC by the Registration Deadline then the Company
shall pay a penalty to each Buyer equal to 2% of the purchase price
for Common Stock purchased by each Investor and still held by each
Buyer for each thirty (30) day period beyond the Registration Deadline
that the Registration Statement is not declared effective by the SEC
(the "REGISTRATION DEADLINE PENALTY"). The Registration Deadline
Penalty shall be immediately payable by the Company on demand by the
Investor in either cash or Common Stock of the Company at the election
of the Company upon delivery to the Company of a notice of such
default by the Investor.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) involves an
underwritten offering, the Buyers shall have the right to select one
legal counsel to represent their interests in the offering, the costs
of which shall be borne by the Investors.
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<PAGE> 109
c. Piggy-Back Registrations. If at any time after the Exchange
Commencement Date and prior to the expiration of the Registration
Period (as hereinafter defined) the Company proposes to file with the
SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its
securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to securities to be issued solely in connection
with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit
plans) the Company shall promptly send to each Investor who is
entitled to registration rights under this Section 2(c) written notice
of the Company's intention to file a Registration Statement and of
such Investor's rights under this Section 2(c) and, if within twenty
(20) days after receipt of such notice, such Investor shall so request
in writing, the Company shall include in such Registration Statement
all or any part of the Registrable Securities such Investor requests
to be registered, subject to the priorities set forth in Section 2(d)
below. No right to registration of Registrable Securities under this
Section 2(c) shall be construed to limit any registration required
under Section 2(a). The obligations of the Company under this Section
2(c) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included
in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to
the provisions of this Agreement, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering.
d. Priority in Piggy-Back Registration Rights in connection with
Registrations or Company Account. If the registration referred to in
Section 2(c) is to be an underwritten public offering for the account
of the Company and the managing underwriter(s) advise the Company in
writing, that in their reasonable good faith opinion, marketing or
other factors dictate that a limitation on the number of shares of
Common Stock which may be included in the Registration Statement is
necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1)
first, all securities the Company proposes to sell for its own
account, (2) second, up to the full number of securities proposed to
be registered for the account of the holders of securities entitled to
inclusion of their securities in the Registration Statement by reason
of demand registration rights, and (3) third, the securities requested
to be registered by the Investors and other holders of securities
entitled to participate in the registration, drawn from them pro rata
based on the number each has requested to be included in such
registration.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
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<PAGE> 110
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on
or prior to the Filing Deadline) for the registration of Registrable
Securities pursuant to Section 2(a)) and use its best efforts to cause
such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after such filing (by the one
hundred and twentieth (120th) day following the issuance of the
relevant for the registration of Registrable Securities pursuant to
Section 2(a), and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the later of (i) the date as
of which the Investors may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto) or (ii) the date on which the Investors
shall have sold all the Registrable Securities (the "REGISTRATION
PERIOD"), which Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection
with the Registration Statement(s), which prospectus(es) are to be
filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep the Registration Statement(s) effective at all times
during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement(s). In the event the number of shares available
under a Registration Statement filed pursuant to this Agreement is
insufficient to cover all of the Registrable Securities, the Company
shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case,
as soon as practicable, but in any event within thirty (30) days after
the necessity therefor arises (based on the market price of the Common
Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of
the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Common Stock is
greater than the quotient determined by dividing (i) the number of
Conversion Shares available for resale under such Registration
Statement by (ii) 1.0; provided that in the case of the initial
registration of the Registrable Securities pursuant to Section 2(a),
the Company shall be required to register for resale 1,000,000 shares
of Common Stock.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal
counsel without charge (i) promptly after the same is prepared and
filed with the SEC at least one copy of the Registration Statement and
any amendment thereto, including financial statements and schedules,
all documents
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<PAGE> 111
incorporated therein by reference and all exhibits, the prospectus(es)
included in such Registration Statement(s) (including each preliminary
prospectus ) and, with regards to the Registration Statement, any
correspondence by or on behalf of the Company to the SEC or the staff
of the SEC and any correspondence from the SEC or the staff of the SEC
to the Company or its representatives, (ii) upon the effectiveness of
any Registration Statement, ten (10) copies of the prospectus included
in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any
preliminary prospectus, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration
Statement(s) under the securities or "blue sky" laws of such
jurisdictions in the United States as any Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to maintain
the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
advisable to quality the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a)
qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, or (c)
file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Investor who holds Registrable
Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any
of the Registrable Securities for sale under the securities or "blue
sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for
such purpose.
e. [LEFT INTENTIONALLY BLANK]
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of
any event, of which the Company has knowledge, as a result of which
the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and promptly prepare a supplement or
amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement
or amendment to each Investor (or such other number of copies as such
Investor may reasonably request). The Company shall also promptly
notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be
delivered to each Investor by facsimile on the same day of such
effectiveness and by overnight mail) (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related
prospectus or related
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<PAGE> 112
information, (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction and, if
such an order or suspension is issued, to obtain the withdrawal of
such order or suspension at the earliest possible moment and to notify
each Investor who holds Registrable Securities being sold (and, in the
event of an underwritten offering, the managing underwriters) of the
issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such
purpose.
h. The Company shall permit each Investor at such Investors
expense a single firm of counsel or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold
a majority of the Registrable Securities being sold, to review and
comment upon the Registration Statement(s) and all amendments and
supplements thereto at least seven (7) days prior to their filing with
the SEC.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if
any, for sale in connection with the Registration Statement (i) if
required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the
underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys and
one firm of accountants or other agents retained by the Investors, and
(iv) one firm of attorneys retained by all such underwriters
(collectively, the "INSPECTORS") all pertinent financial and other
records, and pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its
due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence provided,
however, that each Inspector shall hold in strict confidence and shall
not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release
of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in
violation of this or any other agreement. Each Investor agrees
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that it shall, upon learning that disclosure of such Records is sought
in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. All fees, costs and expenses of the foregoing shall be
borne by the Investors.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction
or through other means, give prompt written notice to such Investor
and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
l. The Company shall use reasonable efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which securities of
the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, (ii) to secure designation and
quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market System, (iii) if,
despite the Company's reasonable efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in satisfying the
preceding clause (i) or (ii) to secure the inclusion for quotation on
the Nasdaq SmallCap Market for such Registrable Securities or, (iv)
if, despite the Company's reasonable efforts to satisfy the preceding
clause (iii), the Company is unsuccessful in satisfying the preceding
clause (iii), to secure the inclusion for quotation on the
over-the-counter market for such Registrable Securities, and, without
limiting the generality of the foregoing, in the case of clause (iii)
or (iv), to arrange for at least two market makers to register with
the National Association of Securities Dealers, Inc. ("NASD") as such
with respect to such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under
this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable,
any managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant
to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing
underwriter or underwriters, if any, or, if there is no managing
underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters,
if any, or the Investors may request. Not later than the date on which
any Registration Statement registering the resale of Registrable
Securities is declared
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effective, the Company shall deliver to its transfer agent
instructions, accompanied by any reasonably required opinion of
counsel, that permit sales of unlegended securities in a timely
fashion that complies with then mandated securities settlement
procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters of an Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters
and the Investors agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being
paid therefor by such underwriters and with respect to any other terms
of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by a shareholder
or any underwriter of such Registrable Securities. The costs of
preparation and filing of any such post-effective amendments and
supplements shall be borne by the Investors.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
r. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each
such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It
shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be
reasonably
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required to effect the registration of such Registrable Securities and
shall execute such documents in connection with such registration as
the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing
of the Registration Statement(s) hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude
all of such Investor's Registrable Securities from the Registration
Statement.
c. Each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such
offering and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable
Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement(s) covering such Registrable Securities until
such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(g) or the first sentence of 3(f)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy all copies in such
Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve
such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees,
and fees and disbursements of counsel for the Company shall be borne by the
Company except as otherwise specifically provided herein.
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6. INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 ACT"), and any underwriter (as defined in
the 1933 Act) for the Investors, and the directors and officers of,
and each Person, if any, who controls, any such underwriter within the
meaning of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED
PERSON"), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS")
incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party
thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky"
laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the
statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, the Company
shall reimburse the Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished
in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment
thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c); (ii) with respect
to any preliminary prospectus, shall not inure to the benefit of any
such person from whom the person
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asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or mission of material fact contained
in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available
by the Company pursuant to Section 3(c), and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus
prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it; (iii) shall not be
available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made
available by the Company; and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the
prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9 for a period of
three (3) years from the Filing Deadline.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent
and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each Person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act (collectively and together
with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in
each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section
6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made
by or on behalf of such Indemnified Party and shall survive the
transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit
of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on
a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration
Statement.
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d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
or proceeding (including any governmental action or proceeding)
involving a Claim such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Company shall pay
reasonable fees for only one separate legal counsel for the Investors,
and such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified
Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of
any such action or claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action
or claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to
entry of any judgment or enter into any settlement or other compromise
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the
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indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set
forth in Section 6; (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees,
to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the
filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such
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assignment; (ii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such transferee shall be an "ACCREDITED INVESTOR" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and
(vii) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all reasonable expenses of amending
or supplementing such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified
mail, return receipt requested, or (d) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
BioShield Technologies, Inc.
Suite B109
4405 International Blvd.
Norcross, Georgia 30093
Telephone: (770) 925-3432
Facsimile: (770) 921-1065
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with a copy (which shall not constitute notice) to:
Sims Moss Kline & Davis LLP
1000 Abernathy Road
Atlanta, Georgia 30328
Attention: Raymond L. Moss, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Georgia without regard to the
principles of conflict of laws. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement,
once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
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i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
BIOSHIELD TECHNOLOGIES, INC. JACKSON, LLC
By: By:
------------------------------ ----------------------------------
Name: Name:
---------------------------- --------------------------------
Its: Its:
----------------------------- ---------------------------------
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SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
ADDRESS AND FACSIMILE NUMBER OF NUMBER OF SHARES NUMBER OF
BUYER'S NAME BUYER OF COMMON STOCK WARRANTS
- ------------ ------------------------------- --------------- --------
<S> <C> <C> <C>
c/o Citco Trustees (Cayman) Ltd. 1,070,664 100,000
Jackson LLC Corporate Centre, Windwood One
West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
facsimile: 345-945-7566
</TABLE>
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Appendix F
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
JACKSON LLC
AND
BIOSHIELD TECHNOLOGIES, INC.
Dated as of June 30, 1999
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ARTICLE I CERTAIN DEFINITIONS........................................................................ 1
Section 1.1 Defined Terms....................................................... 1
ARTICLE II PURCHASE AND SALE OF COMMON STOCK.......................................................... 8
Section 2.1 Investments......................................................... 8
Section 2.2 Mechanics........................................................... 8
Section 2.3 Closings............................................................ 9
Section 2.4 Special Circumstances; Adjustment Period............................ 9
Section 2.5 Termination of Investment Obligation............................... 10
Section 2.6 Blackout Shares.................................................... 10
Section 2.7 Liquidated Damages................................................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTOR................................................ 11
Section 3.1 Intent............................................................. 11
Section 3.2 Sophisticated Investor............................................. 11
Section 3.3 Authority.......................................................... 11
Section 3.4 Not an Affiliate................................................... 11
Section 3.5 Organization and Standing.......................................... 12
Section 3.6 Absence of Conflicts............................................... 12
Section 3.7 Disclosure; Access to Information.................................. 12
Section 3.8 Manner of Sale..................................................... 12
Section 3.9 Financial Capacity................................................. 12
Section 3.10 No SEC or NASD Proceedings......................................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................. 13
Section 4.1 Organization of the Company........................................ 13
Section 4.2 Authority.......................................................... 13
Section 4.3 Capitalization..................................................... 13
Section 4.4 Common Stock....................................................... 14
Section 4.5 SEC Documents...................................................... 14
Section 4.6 Exemption from Registration; Valid Issuances....................... 14
Section 4.7 No General Solicitation or Advertising in
Regard to this Transaction......................................... 15
Section 4.8 Corporate Documents................................................ 15
Section 4.9 No Conflicts....................................................... 15
Section 4.10 No Material Adverse Change......................................... 16
Section 4.11 No Undisclosed Liabilities......................................... 16
Section 4.12 No Undisclosed Events or Circumstances............................. 16
Section 4.13 No Integrated Offering............................................. 16
Section 4.14 Litigation and Other Proceedings................................... 16
Section 4.15 No Misleading or Untrue Communication.............................. 17
Section 4.16 Material Non-Public Information.................................... 17
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ARTICLE V COVENANTS OF INVESTOR..................................................................... 17
Section 5.1 Compliance with Law................................................ 17
Section 5.2 Limitation on Short Sales.......................................... 17
ARTICLE VI COVENANTS OF THE COMPANY.................................................................. 17
Section 6.1 Registration Rights................................................ 17
Section 6.2 Reservation of Common Stock........................................ 17
Section 6.3 Listing of Common Stock............................................ 18
Section 6.4 Exchange Act Registration.......................................... 18
Section 6.5 Legends............................................................ 18
Section 6.6 Corporate Existence................................................ 18
Section 6.7 Additional SEC Documents........................................... 18
Section 6.8 Notice of Certain Events Affecting
Registration; Suspension of Right to Make a Put.................... 18
Section 6.9 Expectations Regarding Put Notices................................. 19
Section 6.10 Consolidation; Merger.............................................. 19
Section 6.11 Issuance of Put Shares and Blackout Shares......................... 19
Section 6.12 Legal Opinion on Subscription Date................................. 20
ARTICLE VII CONDITIONS TO DELIVERY OF PUT NOTICES AND TO CLOSING..................................... 20
Section 7.1 Conditions Precedent to the Obligation of the
Company to Issue and Sell Common Stock............................. 20
Section 7.2 Conditions Precedent to the Right of the
Company to Deliver a Put Notice and the
Obligation of Investor to Purchase Put Shares...................... 20
Section 7.3 Due Diligence Review; Non-Disclosure of
Non-Public Information............................................. 23
ARTICLE VIII LEGENDS................................................................................... 24
Section 8.1 Legends............................................................ 24
Section 8.2 No Other Legend or Stock Transfer
Restrictions....................................................... 25
Section 8.3 Investor's Compliance.............................................. 25
ARTICLE IX NOTICES; INDEMNIFICATION.................................................................. 25
Section 9.1 Notices............................................................ 25
Section 9.2 Indemnification.................................................... 27
Section 9.3 Method of Asserting Indemnification Claims......................... 27
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ARTICLE X MISCELLANEOUS...............................................................................30
Section 10.1 Governing Law; Jurisdiction........................................ 30
Section 10.2 Assignment......................................................... 30
Section 10.3 Third Party Beneficiaries.......................................... 31
Section 10.4 Termination........................................................ 31
Section 10.5 Entire Agreement, Amendment; No Waiver............................. 31
Section 10.6 Fees and Expenses.................................................. 31
Section 10.7 No Brokers......................................................... 31
Section 10.8 Counterparts....................................................... 31
Section 10.9 Survival; Severability............................................. 31
Section 10.10 Further Assurances................................................. 32
Section 10.11 No Strict Construction............................................. 32
Section 10.12 Equitable Relief................................................... 32
Section 10.13 Title and Subtitles................................................ 32
Section 10.14 Reporting Entity for the Common Stock.............................. 32
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PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 30th day of
June, 1999 (this "Agreement"), by and between JACKSON, LLC, an entity organized
and existing under the laws of the Cayman Islands ("Investor"), and BioShield
Technologies, Inc., a corporation organized and existing under the laws of the
State of Georgia (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to six million
two hundred and fifty thousand dollars ($6,250,000) of the Common Stock (as
defined below); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") of the Securities Act of 1933 and the rules
and regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to
be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings specified or indicated (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined)
"Adjustment Period" shall have the meaning specified in
Section 2.4(b).
"Adjustment Period Notice" shall have the meaning
specified in Section 2.4(a).
"Agreement" shall have the meaning specified in the
preamble hereof.
"Bid Price" shall mean the closing bid price of the Common
Stock on the Principal Market.
"Blackout Notice" shall have the meaning specified in the
Registration Rights Agreement.
"Blackout Shares" shall have the meaning specified in
Section 2.6.
"By-Laws" shall have the meaning specified in Section 4.8.
"Certificate" shall have the meaning specified in Section
4.8.
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"Claim Notice" shall have the meaning specified in Section
9.3(a).
"Closing" shall mean one of the closings of a purchase and
sale of shares of Common Stock pursuant to Section 2.1.
"Closing Date" shall mean, with respect to a Closing, the
twentieth (20th) Trading Day following the Put Date related to such
Closing, or such earlier date as the Company and Investor shall agree,
provided all conditions to such Closing have been satisfied on or
before such Trading Day.
"Commitment Period" shall mean the period commencing on
the earlier to occur of (a) the Effective Date or (b) such earlier
date as the Company and Investor shall agree, and expiring on the
earlier to occur of (i) the date on which Investor shall have
purchased Put Shares pursuant to this Agreement for an aggregate
Purchase Price of the Maximum Commitment Amount, (ii) the date this
Agreement is terminated pursuant to Section 2.5, or (iii) the date
occurring twenty-four (24) months from the date of commencement of the
Commitment Period.
"Common Stock" shall mean the Company's common stock, no
par value, and any shares of any other class of common stock whether
now or hereafter authorized, having the right to participate in the
distribution of dividends (as and when declared) and assets (upon
liquidation of the Company).
"Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants,
options or other rights to subscribe for or purchase Common Stock or
any such convertible or exchangeable securities.
"Company" shall have the meaning specified in the preamble
to this Agreement.
"Condition Satisfaction Date" shall have the meaning
specified in Section 7.2.
"Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements and costs and expenses of expert
witnesses and investigation).
"Discount" shall mean twenty percent (20%).
"Dispute Period" shall have the meaning specified in
Section 9.3(a).
"DTC" shall the meaning specified in Section 2.3.
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"DWAC" shall the meaning specified in Section 2.3.
"Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale
of the Registrable Securities as set forth in Section 7.2(a).
"Exchange Act" shall mean the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder.
"FAST" shall the meaning specified in Section 2.3.
"Indemnified Party" shall have the meaning specified in
Section 9.3(a).
"Indemnifying Party" shall have the meaning specified in
Section 9.3(a).
"Indemnity Notice" shall have the meaning specified in
Section 9.3(b).
"Initial Registrable Securities" shall have the meaning
specified in the Registration Rights Agreement.
"Initial Registration Statement" shall have the meaning
specified in the Registration Rights Agreement.
"Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by Investor to
purchase Put Shares with respect to any Put Date as notified by the
Company to Investor in accordance with Section 2.2.
"Investor" shall have the meaning specified in the
preamble to this Agreement.
"Legend" shall have the meaning specified in Section 8.1.
"Market Price" on any given date shall mean the average of
the Bid Prices for the twenty (20) Trading Days immediately following
the Put Date.
"Maximum Commitment Amount" shall mean six million two
hundred and fifty thousand dollars ($6,250,000), subject to increase
as agreed to by the Company and Investor.
"Minimum Commitment Amount" shall mean two hundred fifty
thousand dollars ($250,000).
"Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects or financial condition of
the Company that is material and
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adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and
perform its obligations under any of (a) this Agreement and (b) the
Registration Rights Agreement.
"Maximum Put Amount" shall mean, with respect to any Put,
one million five hundred thousand dollars ($1,500,000), subject to
increase as agreed to by the Company and Investor.
"Minimum Put Amount" shall mean, with respect to any Put,
two hundred fifty thousand dollars ($250,000), subject to decrease as
agreed to by the Company and Investor.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"New Bid Price" shall have the meaning specified in
Section 2.6.
"Old Bid Price" shall have the meaning specified in
Section 2.6.
"Outstanding" shall mean, with respect to the Common
Stock, at any date as of which the number of shares of Common Stock is
to be determined, all issued and outstanding shares of Common Stock,
including all shares of Common Stock issuable in respect of
outstanding scrip or any certificates representing fractional
interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly
or indirectly owned or held by or for the account of the Company.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Preferred Stock" shall mean the Company's preferred
stock, no par value.
"Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or the New
York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
"Purchase Price" shall mean, with respect to a Put, the
Market Price on the applicable Put Date (or such other date on which
the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement) less the product of the Discount and the
Market Price.
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"Put" shall mean each occasion that the Company elects to
exercise its right to tender a Put Notice requiring Investor to
purchase shares of Common Stock, subject to the terms and conditions
of this Agreement.
"Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice is deemed delivered pursuant to
Section 2.2(b).
"Put Notice" shall mean a written notice to Investor
setting forth the Investment Amount with respect to which the Company
intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
"Put Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Put that has been exercised or may be
exercised in accordance with the terms and conditions of this
Agreement.
"Registrable Securities" shall mean the (a) Put Shares,
(b) the Blackout Shares and (c) any securities issued or issuable with
respect to any of the foregoing by way of exchange, stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued
such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a
Registration Statement, (ii) such Registrable Securities have been
sold under circumstances under which all of the applicable conditions
of Rule 144 are met, (iii) such time as such Registrable Securities
have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) in the opinion of
counsel to the Company, which counsel shall be reasonably acceptable
to Investor, such Registrable Securities may be sold without
registration under the Securities Act or the need for an exemption
from any such registration requirements and without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
"Registration Rights Agreement" shall mean the
registration rights agreement in the form of Exhibit A hereto.
"Registration Statement" shall mean a registration
statement on Form SB-2 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other
form promulgated by the SEC for which the Company then qualifies and
which counsel for the Company shall deem appropriate and which form
shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement and in accordance with
the intended method of distribution of such securities), for the
registration of the resale by Investor of the Registrable Securities
under the Securities Act.
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"Regulation D" shall have the meaning specified in the
recitals of this Agreement.
"Remaining Put Shares" shall have the meaning specified in
Section 2.6.
"Rule 144" shall mean Rule 144 under the Securities Act or
any similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"Section 4(2)" shall have the meaning specified in the
recitals of this Agreement.
"Securities Act" shall have the meaning specified in the
recitals of this Agreement.
"SEC Documents" shall mean, as of a particular date, all
reports and other documents file by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since the beginning of the
Company's then most recently completed fiscal year as of the time in
question (provided that if the date in question is within ninety days
of the beginning of the Company's fiscal year, the term shall include
all documents filed since the beginning of the second preceding fiscal
year).
"Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the Company and Investor.
"Third Party Claim" shall have the meaning specified in
Section 9.3(a).
"Trading Cushion" shall mean a minimum of twenty (20)
Trading Days between Put Dates, unless a shorter period is agreed to
by the Company and Investor.
"Trading Day" shall mean any day during which the
Principal Market shall be open for business.
"Transfer Agent" shall mean the transfer agent for the
Common Stock (and to any substitute or replacement transfer agent for
the Common Stock upon the Company's appointment of any such substitute
or replacement transfer agent).
"Underwriter" shall mean any underwriter participating in
any disposition of the Registrable Securities on behalf of Investor
pursuant to a Registration Statement.
"Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following
actions:
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(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or
makes any other distribution of shares of Common Stock,
except for dividends paid with respect to the Preferred
Stock;
(c) issues any warrants, options or other rights to
subscribe for or purchase shares of Common Stock and the
price per share for which shares of Common Stock may at
any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Bid Price
in effect immediately prior to such issuance;
(d) issues any securities convertible into or
exchangeable for shares of Common Stock and the
consideration per share for which shares of Common Stock
may at any time thereafter be issuable pursuant to the
terms of such convertible or exchangeable securities shall
be less than the Bid Price in effect immediately prior to
such issuance;
(e) issues shares of Common Stock otherwise than as
provided in the foregoing subsections (a) through (d), at
a price per share less, or for other consideration lower,
than the Bid Price in effect immediately prior to such
issuance, or without consideration;
(f) makes a distribution of its assets or evidences
of indebtedness to the holders of Common Stock as a
dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable
law or any distribution to such holders made in respect of
the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of
Outstanding Common Stock, other than an action described
in any of the foregoing subsections (a) through (f)
hereof, inclusive, which in the opinion of the Company's
Board of Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor at
the time of a Put.
"Valuation Period" shall mean the period of twenty (20)
Trading Days immediately following the date on which the applicable
Put Notice is deemed to be delivered and during which the Purchase
Price of the Common Stock is valued; provided, however, that if a
Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately after the occurrence
of such Valuation Event and end on the twentieth Trading Day
thereafter.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any
Put Date the Company may exercise a Put by the delivery of a Put
Notice. The number of Put Shares that Investor shall receive pursuant
to such Put shall be determined by dividing the Investment Amount
specified in the Put Notice by the Purchase Price with respect to such
Put Date.
(b) Minimum Amount of Puts. The Company shall, in accordance
with Section 2.2(a), deliver to Investor during the Commitment Period,
Put Notices with an aggregate Investment Amount at least equal to the
Minimum Commitment Amount. If the Company for any reason fails to
issue and deliver such Put Shares during the Commitment Period, on the
first Trading Day after the expiration of the Commitment Period, the
Company shall wire to Investor a sum in immediately available funds
equal to the product of (i) the Minimum Commitment Amount minus the
aggregate Investment Amounts of the Put Notices delivered to Investor
hereunder and (ii) the Discount.
(c) Maximum Amount of Puts. Unless the Company obtains the
requisite approval of its shareholders in accordance with the
corporate laws of the State of Georgia and the applicable rules of the
Principal Market, no more than 1,263,831 shares of Common Stock
(representing approximately 19.99% of the Outstanding Common Stock on
the date hereof) may be issued and sold to Investor pursuant to this
Agreement.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period,
the Company may deliver a Put Notice to Investor, subject to the
conditions set forth in Section 7.2; provided, however, the Investment
Amount for each Put as designated by the Company in the applicable Put
Notice shall be neither less than the Minimum Put Amount nor more than
the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by Investor if such notice is received on or prior to 12:00
noon New York time, or (ii) the immediately succeeding Trading Day if
it is received by facsimile or otherwise after 12:00 noon New York
time on a Trading Day or at any time on a day which is not a Trading
Day.
Section 2.3 Closings. On each Closing Date for a Put, (a) the Company
shall deliver to Investor one or more certificates, at Investor's option,
representing the Put Shares to be purchased by Investor pursuant to Section 2.1
herein, registered in the name
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of Investor and (b) Investor shall deliver to the Company the Investment Amount
specified in the Put Notice by wire transfer of immediately available funds to
an account designated by the Company on or before the Closing Date. In lieu of
delivering physical certificates representing the Common Stock issuable in
accordance with clause (a) of this Section 2.3, and provided that the Transfer
Agent then is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of Investor, the
Company shall use its commercially reasonable efforts to cause the Transfer
Agent to electronically transmit the Put Shares by crediting the account of the
holder's prime brokerwith DTC through its Deposit Withdrawal Agent Commission
("DWAC") system. In addition, on or prior to such Closing Date, each of the
Company and Investor shall deliver to the other all documents, instruments and
writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein.
Section 2.4 Special Circumstances; Adjustment Period.
(a) Adjustment Period Notice. In the event that the Company
shall in good faith anticipate executing an agreement of acquisition,
merger or consolidation within ninety (90) days after giving Investor
Adjustment Period Notice (as defined below), the Company may, in its
sole discretion, give Investor at least twenty-one (21) days
irrevocable advance notice, in the form of Exhibit B hereto
("Adjustment Period Notice"), that the Company shall initiate an
Adjustment Period (as defined below). The Company shall not give such
Adjustment Period Notice if it constitutes the disclosure of material
non-public information to Investor.
(b) Actions During the Adjustment Period. During the
Adjustment Period:
(i) the Discount shall be increased to {twenty-one
percent (21%)};
(ii) the duration of the Trading Cushion shall be
shortened to ten (10) Trading Days until the expiration of
five (5) consecutive weeks after the date on which the
Adjustment Period Notice was given (the "Adjustment
Period"); and
(iii) the Company may not deliver a Put Notice such that
the number of Put Shares to be purchased by Investor upon
the applicable Closing, when aggregated with all other
shares of Common Stock then owned by Investor beneficially
or deemed beneficially owned by Investor, would result in
Investor owning more than 4.9% of all of such Common Stock
as would be outstanding on such Closing Date, as determined
in accordance with Section 13(d) of the Exchange Act and the
regulations promulgated thereunder. For purposes of this
Section 2.4(b)(iii), in the event that the amount of Common
Stock outstanding as determined in accordance with Section
13(d) of the Exchange Act is greater on a Closing Date than
on the date upon which the Put Notice associated with such
Closing Date is given, the amount of Common Stock
outstanding on
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such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common
Stock made pursuant to this Agreement would own more than
4.9% of the Common Stock following such Closing Date.
Section 2.5 Termination of Investment Obligation. The obligation of
Investor to purchase shares of Common Stock shall terminate permanently without
penalty (including with respect to a Closing Date that has not yet occurred) in
the event that (a) there shall occur any stop order or suspension of the
effectiveness of any Registration Statement for an aggregate of thirty (30)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspension during a Blackout Period in accordance with theRegistration
Rights Agreement, as a result of corporate developments subsequent to the
Subscription Date that would require such Registration Statement to be amended
to reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act, (b) the Company shall at any time fail to
comply with the requirements of Section 6.3, 6.4, 6.5 or 6.6 and such failure
shall continue for more than thirty (30) days, or (c) the Company shall provide
thirty (30) days notice of termination to Investor.
Section 2.6 Blackout Shares. In the event that, (a) within five
Trading Days following any Closing Date, the Company gives a Blackout Notice to
Investor of a Blackout Period in accordance with the Registration Rights
Agreement, and (b) the Bid Price on the Trading Day immediately preceding such
Blackout Period ("Old Bid Price") is greater than the Bid Price on the first
Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement ("New
Bid Price"), then the Company shall issue to Investor the number of additional
shares of Registrable Securities (the "Blackout Shares") equal to the
difference between (i) the product of the number of Put Shares held by Investor
immediately prior to the Blackout Period that were issued on the most recent
Closing Date (the "Remaining Put Shares") multiplied by the Old Bid Price,
divided by the New Bid Price, and (ii) the Remaining Put Shares.
Section 2.7 Liquidated Damages. Each of the Company and Investor
acknowledge and agree that the sum payable under Section 2.1(b) and the
requirement to issue Blackout Shares under Section 2.6 shall give rise to
liquidated damages and not penalties. Each of the Company and Investor further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by Investor in
connection with the failure by the Company to make Puts with aggregate Purchase
Prices totaling at least the Minimum Commitment Amount or in connection with a
Blackout Period under the Registration Rights Agreement, and (c) each of the
Company and Investor are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 Intent. Investor is entering into this Agreement for its
own account and Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, Investor
does not agree to hold the Common Stock for any minimum or other specific term
and reserves the right to dispose of the Common Stock at any time in accordance
with federal and state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investor. Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. Investor acknowledges
that an investment in the Common Stock is speculative and involves a high
degree of risk.
Section 3.3 Authority. (a) Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement and
the transactions contemplated hereby in accordance with its terms; (b) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action and no further consent or
authorization of Investor or its partners is required; and (c) this Agreement
has been duly authorized and validly executed and delivered by Investor and is
a valid and binding agreement of Investor enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a limited
partnership duly organized, validly existing and in good standing under the
laws of the Delaware and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Investor is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other
than those in which the failure so to qualify would not have a material adverse
effect on Investor.
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Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, and
compliance with the requirements hereof and thereof, will not (a) violate any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Investor, (b) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, or conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to
the terms of any such indenture, instrument or agreement, or constitute a
breach of any fiduciary duty owed by Investor to any third party, or (d)
require the approval of any third-party (that has not been obtained) pursuant
to any material contract, instrument, agreement, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 Manner of Sale. At no time was Investor presented with
or solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capability. Investor presently has the
financial capacity and the necessary capital to perform its obligations
hereunder and shall and has provided to the Company such financial and other
information that the Company has requested to demonstrate such capacity.
Section 3.10 No SEC or NASD Proceedings. To the knowledge of Investor,
there are no disciplinary proceedings involving Investor or any of its
employees pending before the NASD, the SEC or any other regulatory authority to
which Investor is subject.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that:
Section 4.1 Organization of the Company. The Company is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Georgia and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company does not own more than fifty percent (50%) of the outstanding capital
stock of or control any other business entity other than Allergy
Superstore.Com, Inc. ("ASC"). The Company is duly qualified as a foreign
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corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares and
the Blackout Shares, if any; (b) the execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization of
the Company or its Board of Directors or stockholders is required; and (c) each
of this Agreement and the Registration Rights Agreement has been duly executed
and delivered by the Company and constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 4.3 Capitalization. As of March 31, 1999, the authorized
capital stock of the Company consisted of 50,000,000 shares of Common Stock, of
which 6,144,125 shares were issued and outstanding, and no shares of preferred
stock were issued and outstanding. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and nonassessable.
Section 4.4 Common Stock. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act, and the Company
has maintained all requirements for the continued listing or quotation of the
Common Stock, and such Common Stock is currently listed or quoted on the
Principal Market. As of the date of this Agreement, the Principal Market is the
Nasdaq SmallCap Market.
Section 4.5 SEC Documents. The Company has delivered or made
available to Investor true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to Investor any information that, according to applicable law,
rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting
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requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except
(a) as may be otherwise indicated in such financial statements or the notes
thereto or (b) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the dates thereof and the results of operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
Section 4.6 Exemption from Registration; Valid Issuances. The sale
and issuance of the Put Shares and the Blackout Shares, if any in accordance
with the terms and on the bases of the representations and warranties set forth
in this Agreement, may and shall be properly issued by the Company to Investor
pursuant to Section 4(2), Regulation D and/or any applicable state law. When
issued and paid for as herein provided, the Put Shares, and the Blackout
Shares, if any, shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Put Shares or the Blackout Shares,if
any, pursuant to, nor the Company's performance of its obligations under, this
Agreement or the Registration Rights Agreement shall (a) result in the creation
or imposition of any liens, charges, claims or other encumbrances upon the Put
Shares or the Blackout Shares, if any, or any of the assets of the Company, or
(b) entitle the holders of Outstanding Common Stock to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of the
Company. The Put Shares and the Blackout Shares, if any, shall not subject
Investor to personal liability by reason of the ownership thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any person
acting on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Put Shares or the Blackout Shares, if
any, or (b) made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Put Shares and the Blackout Shares, if any, do not and will not (a) result
in a violation of the Certificate or By-Laws or (b) conflict with, or
constitute a material default (or an event that with notice or lapse of time or
both would become a material default) under, or give to others any rights
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of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (c)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any of
the foregoing; provided, however, that for purposes of the Company's
representations and warranties as to violations of foreign law, rule or
regulation referenced in clause (c), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected
by the status of Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate do not and will not
have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain anyconsent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock in accordance with the
terms hereof (other than any SEC, NASD or state securities filings that may be
required to be made by the Company subsequent to any Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Nasdaq National Market); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.
Section 4.10 No Material Adverse Change. Since January 1, 1999, no
event has occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
and that are not disclosed in the SEC Documents or otherwise publicly
announced, other than those incurred in the ordinary course of the Company's
businesses since March 1, 1998 and which, individually or in the aggregate, do
not or would not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. Since January 1,
1999, no event or circumstance has occurred or exists with respect to the or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the
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Company but which has not been so publicly announced or disclosed in the SEC
Documents.
Section 4.13 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit,
proceeding or investigation, which would have a Material Adverse Effect. Except
as set forth in the SEC Documents, no judgment, order, writ, injunction or
decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which would have a
Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company, any
Person representing the Company, and, to the knowledge of the Company, any
other Person selling or offering to sell the Put Shares or the Blackout Shares,
if any, in connection with the transactions contemplated by this Agreement,
have not made, at any time, any oral communication in connection with the offer
or sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to Investor, any
material non-public information that (a) if disclosed, would reasonably be
expected to have a materially adverse effect on the price of the Common Stock
or (b) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 Compliance with Law. Investor's trading activities with
respect to shares of the Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the NASD and the Principal Market on which the Common Stock is
listed.
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Section 5.2 Limitation on Short Sales. Investor and its Affiliates
shall not engage in short sales of the Common Stock; provided, however, that
Investor may enter into any short sale or other hedging or similar arrangement
it deems appropriate with respect to Put Shares after it receives a Put Notice
with respect to such Put Shares so long as such sales or arrangements do not
involve more than the number of such Put Shares (determined as of the date of
such Put Notice). Investor and its Affiliates agree to provide to the Company
upon written request from time to time its securities trading records in order
to demonstrate that it has complied with this Section 5.2.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares and the
Blackout Shares, if any. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered hereunder.
Section 6.3 Listing of Common Stock. The Company shall maintain the
listing of the Common Stock on a Principal Market, and will cause the Put
Shares and the Blackout Shares, if any, to be listed on the Principal Market.
The Company further shall, if the Company applies to have the Common Stock
traded on any other Principal Market, include in such application the Put
Shares and the Blackout Shares, if any, and shall take such other action as is
necessary or desirable in the reasonable opinion of Investor to cause the
Common Stock to be listed on such other Principal Market as promptly as
possible. The Company shall use its commercially reasonable efforts to continue
the listing and trading of the Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the NASD and the Principal Market.
Section 6.4 Exchange Act Registration. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action
or file any document (whether or not permitted by said Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act.
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Section 6.5 Legends. The certificates evidencing the Put Shares and
the Blackout Shares, if any, shall be free of legends, except as provided for
in Article VIII.
Section 6.6 Corporate Existence. The Company shall take all
commercially reasonable steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.7 Additional SEC Documents. The Company shall deliver to
Investor, promptly after the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put. The Company shall promptly notify Investor
upon the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities: (a) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (b) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of any Registration Statement or the initiation of
any proceedings for that purpose; (c) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (d) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of a Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (e) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available
to Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to Investor any Put Notice during the continuation of
any of the foregoing events.
Section 6.9 Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify
Investor as to its reasonable expectations as to the dollar amount it intends
to raise during such calendar quarter, if any, through the issuance of Put
Notices. Such notification shall constitute only the Company's good faith
estimate with respect to such calendar quarter and shall in no way obligate the
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Company to raise such amount during such calendar quarter or otherwise limit
its ability to deliver Put Notices during such calendar quarter. The failure by
the Company to comply with this provision can be cured by the Company's
notifying Investor at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.10 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with
or into, or a transfer of all or substantially all of the assets of the Company
to, another entity unless the resulting successor or acquiring entity (if not
the Company) assumes by written instrument the obligation to deliver to
Investor such shares of stock and/or securities as Investor is entitled to
receive pursuant to this Agreement.
Section 6.11 Issuance of Put Shares and Blackout Shares. The sale of
the Put Shares, the issuance of the Blackout Shares, if any, shall be made in
accordance with the provisions and requirements of Regulation D and any
applicable state law.
Section 6.12 Legal Opinion on Subscription Date. The Company's legal
counsel shall deliver to Investor upon execution of this Agreement an opinion
in the form of Exhibit C, except for paragraph 7 thereof.
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ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of Investor's Representation and Warranties.
The representations and warranties of Investor shall be true and
correct in all material respects as of the date of this Agreement and
as of the date of each such Closing as though made at each such time,
except for changes which have not had a Material Adverse Effect.
(b) Performance by Investor. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied
or complied with by Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to
Deliver a Put Notice and the Obligation of Investor to Purchase Put Shares. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is
subject to the satisfaction, on (a) the date of delivery of such Put Notice and
(b) the applicable Closing Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
(a) Registration of Registrable Securities with the SEC. As
set forth in the Registration Rights Agreement, the Company shall have
filed with the SEC the Initial Registration Statement with respect to
the resale of the Initial Registrable Securities by Investor and such
Registration Statement shall have been declared effective by the SEC
prior to the first Put Date, and in any event no later than ninety
(90) days after filing of the Initial Registration Statement. For the
purposes of any Put Notice with respect to the Registrable Securities
other than the Initial Registrable Securities, the Company shall have
filed with the SEC a Registration Statement with respect to the resale
of such Registrable Securities by Investor which shall have been
declared effective by the SEC prior to the Put Date therefor.
(b) Effective Registration Statement. As set forth in the
Registration Rights Agreement, a Registration Statement shall have
previously become effective for the resale by Investor of the
Registrable Securities subject to such Put Notice and such
Registration Statement shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor Investor shall have
received notice that the SEC has issued or intends to issue a stop
order with respect to such Registration Statement or that the SEC
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otherwise has suspended or withdrawn the effectiveness of such
Registration Statement, either temporarily or permanently, or intends
or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer
is considering or intends to take such action), and (ii) no other
suspension of the use or withdrawal of the effectiveness of such
Registration Statement or related prospectus shall exist.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company shall be
true and correct in all material respects as of each Condition
Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular
date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition
Satisfaction Date, except for any conditions which have temporarily
caused any representations or warranties herein to be incorrect and
which have been corrected with no continuing impairment to the Company
or Investor.
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and
the Registration Rights Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition
Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits or directly and materially
adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have
the effect of prohibiting or materially adversely affecting any of the
transactions contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the
Company's most recent SEC Document, no event that had or is reasonably
likely to have a Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common
Stock. The trading of the Common Stock shall not have been suspended
by the SEC, the Principal Market or the NASD and the Common Stock
shall have been approved for listing or quotation on and shall not
have been delisted from the Principal Market.
(h) Legal Opinion. The Company shall have caused to be
delivered to Investor, within five (5) Trading Days of the effective
date of the Initial Registration Statement and each subsequent
Registration Statement, an opinion of the Company's legal counsel in
the form of Exhibit C hereto, addressed to Investor.
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(i) Due Diligence. No dispute between the Company and
Investor shall exist pursuant to Section 7.3 as to the adequacy of the
disclosure contained in any Registration Statement.
(j) Ten Percent Limitation. On each Closing Date, the number
of Put Shares then to be purchased by Investor shall not exceed the
number of such shares that, when aggregated with all other shares of
Registrable Securities then owned by Investor beneficially or deemed
beneficially owned by Investor, would result in Investor owning no
more than 9.9% of all of such Common Stock as would be outstanding on
such Closing Date, as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder. For purposes
of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the
Exchange Act and the regulations promulgated thereunder is greater on
a Closing Date than on the date upon which the Put Notice associated
with such Closing Date is given, the amount of Common Stock
outstanding on such Closing Date shall govern for purposes of
determining whether Investor, when aggregating all purchases of Common
Stock made pursuant to this Agreement and Blackout Shares, if any,
would own more than 9.9% of the Common Stock following such Closing
Date.
(k) Minimum Bid Price. The average of the Bid Prices for the
twenty (20) Trading Days immediately preceding the Put Notice shall
have equaled or exceeded $1.00 (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(l) No Knowledge. The Company shall have no knowledge of any
event more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which
event is more likely than not to occur within the fifteen Trading Days
following the Trading Day on which such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed
since the immediately preceding Put Date.
(n) Shareholder Vote. The issuance of shares of Common Stock
with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) Other. On each Condition Satisfaction Date, Investor
shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by
Investor in order for Investor to confirm the Company's satisfaction
of the conditions set forth in this Section 7.2., including, without
limitation, a certificate in substantially the form and substance of
Exhibit D hereto, executed by an executive officer of the Company and
to the effect that all the conditions to such Closing shall have been
satisfied as at the date of each such certificate.
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Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public
Information.
(a) The Company shall make available for inspection and
review by Investor, advisors to and representatives of Investor (who
may or may not be affiliated with Investor and who are reasonably
acceptable to the Company), any Underwriter, any Registration
Statement or amendment or supplement thereto or any blue sky, NASD or
other filing, all financial and other records, all SEC Documents and
other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors
and employees to supply all such information reasonably requested by
Investor or any such representative, advisor or Underwriter in
connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of such Registration
Statement for the sole purpose of enabling Investor and such
representatives, advisors and Underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence
with respect to the Company and the accuracy of such Registration
Statement.
(b) Each of the Company, its officers, directors, employees
and agents shall in no event disclose non-public information to
Investor, advisors to or representatives of Investor (including,
without limitation, in connection with the giving of the Adjustment
Period Notice pursuant to Section 2.4) unless prior to disclosure of
such information the Company identifies such information as being
non-public information and provides Investor, such advisors and
representatives with the opportunity to accept or refuse to accept
such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require
Investor's advisors and representatives to enter into a
confidentiality agreement in form and substance reasonably
satisfactory to the Company and Investor.
(c) Nothing herein shall require the Company to disclose
non-public information to Investor or its advisors or representatives,
and the Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the
contrary, the Company shall, as hereinabove provided, immediately
notify the advisors and representatives of Investor and any
Underwriters of any event or the existence of any circumstance
(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in a
Registration Statement would cause such prospectus to include a
material misstatement or to omit a material fact required to be stated
therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing
contained in this Section 7.3 shall be construed to mean that such
persons or entities other than Investor (without the written consent
of Investor
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prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance
with the terms and conditions of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company
of their opinion that based on such due diligence by such persons or
entities, any Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in such
Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
LEGENDS
Section 8.1 Legends. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the "Legend"):
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Securities
Act") or qualified under applicable state securities laws.
These securities may not be offered, sold, pledged,
hypothecated, transferred or otherwise disposed of except
pursuant to (i) an effective registration statement and
qualification in effect with respect thereto under the
Securities Act and under any applicable state securities
law, (ii) to the extent applicable, Rule 144 under the
Securities Act, or (iii) an opinion of counsel reasonably
acceptable to BioShield Technologies, Inc. that such
registration and qualification is not required under
applicable federal and state securities laws.
As soon as practicable after the execution and delivery hereof, the
Company shall issue to the Transfer Agent instructions in substantially the
form of Exhibit E hereto. Such instructions shall be irrevocable by the Company
from and after the date thereof or from and after the issuance thereof except
as otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
Transfer Agent to issue to Investor certificates evidencing shares of Common
Stock incident to a Closing, free of the Legend, without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the Transfer Agent by or from
the Company or its counsel or Investor; provided that (a) a Registration
Statement shall then be effective, (b) Investor confirms to the Transfer Agent
and the Company that it has or intends to sell such Common Stock to a third
party which is not an affiliate of Investor or the Company and Investor agrees
to redeliver the certificate representing such shares of Common Stock to the
Transfer Agent to add the Legend in the event the Common Stock is not sold, and
(c) if reasonably
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requested by the transfer agent or the Company, Investor confirms to the
transfer agent and the Company that Investor has complied with the prospectus
delivery requirement under the Securities Act. At any time after the Effective
Date, upon surrender of one or more certificates evidencing Common Stock that
bear the Legend, to the extent accompanied by a notice requesting the issuance
of new certificates free of the Legend to replace those surrendered.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 Investor's Compliance. Nothing in this Article VIII shall
affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
BioShield Technologies, Inc.
Suite B109
4405 International Blvd.
Norcross, Georgia 30093
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Attention: Timothy C. Moses
Telephone: (770) 925-3432
Facsimile: (770) 921-1065
with a copy (which shall not constitute notice) to:
Sims Moss Kline & Davis LLP
1000 Abernathy Road
Atlanta, Georgia 30328
Attention: Raymond L. Moss, Esq.
Telephone: (770) 481-7201
Facsimile: (770) 481-7210
if to Investor:
Jackson, LLC
Executive Pavilion
90 Grove Street
Ridgefield, Connecticut 06877
Attn: Steve Hicks
Telephone: (203) 431-8300
Facsimile: (203) 431-8301
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 9.1 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 9.2 Indemnification.
(a) The Company agrees to indemnify and hold harmless
Investor and its officers, directors, employees, and agents, and each
Person or entity, if any, who controls Investor within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Controlling Persons (as defined in the Registration
Rights Agreement) from and against any Damages, joint or several, and
any action in respect thereof to which Investor, its partners,
affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting
from, arising out of or relating to any misrepresentation, breach of
warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such
Damages are incurred, except to the extent such Damages result
primarily from Investor's failure to perform any covenant or agreement
contained in this Agreement or Investor's or its officers, directors,
employees, agents or Controlling Persons negligence, recklessness or
bad faith in performing its obligations under this Agreement.
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(b) Investor agrees to indemnify and hold harmless the
Company and its officers, directors, employees, and agents, and each
Person or entity, if any, who controls Investor within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Controlling Persons from and against any Damages,
joint or several, and any action in respect thereof to which Investor,
its partners, affiliates, officers, directors, employees, and duly
authorized agents, and any such Controlling Person becomes subject to,
resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of Company contained in this
Agreement, as such Damages are incurred, except to the extent such
Damages result primarily from the Company's failure to perform any
covenant or agreement contained in this Agreement or the Company's or
its officers, directors, employees, agents or Controlling Persons
negligence, recklessness or bad faith in performing its obligations
under this Agreement.
Section 9.3 Method of Asserting Indemnification Claims. All claims
for indemnification by any Indemnified Party (as defined below) under Section
9.2 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 9.2 (an
"Indemnified Party") might seek indemnity under Section 9.2 is
asserted against or sought to be collected from such Indemnified Party
by a person other than a party hereto or an affiliate thereof (a
"Third Party Claim"), the Indemnified Party shall deliver a written
notification, enclosing a copy of all papers served, if any, and
specifying the nature of and basis for such Third Party Claim and for
the Indemnified Party's claim for indemnification that is being
asserted under any provision of Section 9.2 against any person (the
"Indemnifying Party"), together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such
failure of the Indemnified Party. The Indemnifying Party shall notify
the Indemnified Party as soon as practicable within the period ending
thirty (30) calendar days following receipt by the Indemnifying Party
of either a Claim Notice or an Indemnity Notice (as defined below)
(the "Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party
under Section 9.2 and whether the Indemnifying Party desires, at its
sole cost and expense, to defend the Indemnified Party against such
Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the
Third Party Claim pursuant to this Section 9.3(a), then the
Indemnifying Party shall have the right to defend, with
counsel reasonably satisfactory to the Indemnified
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Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and
diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that
provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages
as to which the Indemnified Party shall not be indemnified
in full pursuant to Section 9.2). The Indemnifying Party
shall have full control of such defense and proceedings,
including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost
and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to
in the first sentence of this clause (i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified
Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party
may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and except
as provided in the preceding sentence, the Indemnified Party
shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense
or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 9.2
with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever
within the Dispute Period, then the Indemnified Party shall
have the right to defend, at the sole cost and expense of
the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of
the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party
is contesting. Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of
its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner
provided in clause (iii) below, the Indemnifying Party will
not be required to bear the costs and expenses of the
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Indemnified Party's defense pursuant to this clause (ii) or
of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable
costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this clause
(ii), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability or the amount
of its liability to the Indemnified Party with respect to
the Third Party Claim under Section 9.2 or fails to notify
the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party with respect to such
Third Party Claim, the amount of Damages specified in the
Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying
Party shall pay the amount of such Damages to the
Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability or the amount of its liability
with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a
resolution of such dispute; provided, however, that it the
dispute is not resolved within thirty (30) days after the
Claim Notice, the Indemnifying Party shall be enlisted to
institute such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim
under Section 9.2 against the Indemnifying Party that does not involve
a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under Section 9.2 specifying the
nature of and basis for such claim, together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in
good faith, of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim or the amount of the claim described in such
Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount
of Damages specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 9.2 and the
Indemnifying Party shall pay the amount of such Damages to the
Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty
(30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Governing Law; Jurisdiction. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Georgia
without regard to the principles of conflicts of law. Each of the Company and
Investor hereby submit to the exclusive jurisdiction of the United States
Federal and state courts located in Atlanta, Georgia with respect to any
dispute arising under this Agreement, the agreements entered into in connection
herewith or the transactions contemplated hereby or thereby.
Section 10.2 Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and Investor and their respective
successors and permitted assigns. Neither this Agreement nor any rights of
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by Investor hereunder with respect to
the Common Stock held by such person, and (b) Investor's interest in this
Agreement may be assigned at any time, in whole but not in part, to any
affiliate of Investor.
Section 10.3 Third Party Beneficiaries. This Agreement is intended for
the benefit of the Company and Investor and their respective successors and
permitted assigns, and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
Section 10.4 Termination. This Agreement shall terminate twelve (12)
months after the commencement of the Commitment Period (unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of Article VI, VIII, and Sections 10.1, 10.2, and 10.4 shall survive the
termination of this Agreement.
Section 10.5 Entire Agreement, Amendment; No Waiver. This Agreement
and the instruments referenced herein contain the entire understanding of the
Company and Investor with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the Company
nor Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be
charged with enforcement.
Section 10.6 Fees and Expenses. Each of the Company and Investor
agrees to pay its own expenses in connection with the preparation of this
Agreement and performance of its obligations hereunder.
Section 10.7 No Brokers. Each of the Company and Investor represents
that other than J.P. Carey Securities, Inc. and Greenfield Capital Partners,
LLC (for which the Company shall be responsible for the fees of such entities)
it has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any
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fee or commission from the other party. The Company on the one hand, and
Investor, on the other hand, agree to indemnify the other against and hold the
other harmless from any and all liabilities to any persons claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 10.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the Company and
Investor and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. This Agreement,
once executed by a party, may be delivered to the other parties hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the
parties so delivering this Agreement.
Section 10.9 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder for a period of one year. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
Section 10.11 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
Section 10.12 Equitable Relief. The Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to Investor. The Company therefore agrees that Investor shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
Section 10.13 Title and Subtitles. The titles and subtitles used in
this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
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Section 10.14 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg L.P. or any successor thereto. The written mutual consent of Investor
and the Company shall be required to employ any other reporting entity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
BIOSHIELD TECHNOLOGIES, INC.
By: _____________________________________
Name:
Title:
JACKSON, LLC
BY: SOUTHRIDGE CAPITAL MANAGEMENT LLC,
GENERAL PARTNER
By: _____________________________________
Name:
Title:
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<PAGE> 161
EXHIBIT A
[FORM OF REGISTRATION RIGHTS AGREEMENT]
<PAGE> 162
EXHIBIT B
ADJUSTMENT PERIOD NOTICE
Notice is hereby granted that the Board of Directors of BioShield
Technologies, Inc. (the "Company") anticipates executing a merger or
acquisition agreement within ninety (90) days of the date hereof.
The following five-week period is hereby designated as an Adjustment
Period pursuant to Section 2.4 of the Private Equity Credit Agreement, dated
June__, 1999, by and between the Company and Jackson, LLC.
Beginning: ________________________________
(no sooner that twenty-one (21) days from the date
this notice is deemed to be delivered)
Expiring: _________________________________
The undersigned has executed this Certificate this ____ day of
________, 19__.
By: ___________________________________
Name: _________________________________
Title: ________________________________
<PAGE> 163
EXHIBIT C
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
<PAGE> 164
EXHIBIT D
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of BioShield
Technologies, Inc. (the "Company") pursuant to the Put Notice, dated
_____________ delivered by the Company to Jackson, LLC, ("Investor") pursuant
to Article II of the Private Equity Credit Agreement (the "Agreement"), dated
June__, 1999, by and between the Company and Investor (the "Agreement"), the
undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief [Executive] [Financial]
Officer of the Company.
2. The representations and warranties of the Company set forth in
Article V of the Agreement are true and correct in all material respects as
though made on and as of the date hereof (other than representations and
warranties made as of a specific date), except for changes which have not had a
Material Adverse Effect.
3. The Company has performed in all material respects all covenants
and agreements to be performed by the Company on or prior to the Closing Date
related to the Put Notice and has complied in all material respects with all
obligations and conditions contained in Article VII of the Agreement.
The terms used herein but not defined herein shall have the meanings
specified in the Agreement.
The undersigned has executed this Certificate this ___ day of ________,
199___.
By: ___________________________________
Name: _________________________________
Title: ________________________________
<PAGE> 165
EXHIBIT E
INSTRUCTIONS TO TRANSFER AGENT
<PAGE> 166
Appendix G
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 30,
1999, is made and entered into by and between BIOSHIELD TECHNOLOGIES, INC., a
Georgia corporation (the "Company"), and JACKSON, LLC, a Cayman Island limited
liability company (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Credit Agreement dated as of the date hereof (the "Investment
Agreement"), pursuant to which the Company may issue and sell, from time to
time, to the Investor up to $6,250,000 worth of shares of its common stock, no
par value per share (the "Common Stock"); and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Investment Agreement, the Company
has agreed to provide the Investor with certain registration rights with
respect to the Registrable Securities;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Investment
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the respective meanings ascribed to them in the
Investment Agreement):
ARTICLE I
REGISTRATION RIGHTS
1.1 Form SB-2 Registration Statements.
(a) Filing of Form SB-2 Registration Statement. Subject to the terms
and conditions of this Agreement, the Company shall (i) prepare and, within one
hundred forty (140) days following the Subscription Date, deliver to the
Investor a draft of a registration statement on Form SB-2 under the Securities
Act (the "Initial Registration Statement") for the registration for the resale
by the Investor of at least one million (1,000,000) Registrable Securities (the
"Initial Registrable Securities") and accompanied or preceded by a
questionnaire (a "Selling Shareholder Questionnaire") and of the type commonly
used for offerings of this kind and (ii) within ten (10) days after the Company
has received comments, if any, and a properly completed Selling Shareholder
Questionnaire from the Investor, file the Initial Registration Statement with
the SEC. Thereafter, if the
<PAGE> 167
Company desires to issue and sell to the Investor any Registrable Securities in
addition to the Initial Registrable Securities, the Company shall first file
with the SEC a registration statement on Form SB-2 under the Securities Act
(the Initial Registration Statement and any subsequent registration statement,
each a "Registration Statement").
(b) Effectiveness of the Initial Registration Statement. The Company
shall use its commercially reasonable efforts (i) to have the Initial
Registration Statement declared effective by the SEC by no later than one
hundred and twenty (120) days after the filing of the Initial Registration
Statement, and (ii) to ensure that the Initial Registration Statement and any
subsequent Registration Statement remains in effect throughout the term of this
Agreement as set forth in Section 4.2, subject to the terms and conditions of
this Agreement.
(c) [Failure to Maintain Effectiveness of a Registration Statement. In
the event the Company fails to maintain the effectiveness of any Registration
Statement (or the underlying prospectus) throughout the term of this Agreement,
other than temporary suspensions permitted by Section 1.1(e), and the Investor
holds any Registrable Securities at any time during the period of such
ineffectiveness (an "Ineffective Period"), the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to one percent (1%) of the aggregate Purchase Price of
all of the Registrable Securities then held by the Investor for each thirty
(30) calendar day period (prorated for partial periods) of such Ineffective
Period; provided, that the Company shall be entitled to credit against any such
payment the value of the Blackout Shares (based on the applicable New Bid
Price) issued to the Investor pursuant to Section 2.6 of the Investment
Agreement. The payments required by this Section 1.1(d) shall be made on the
first Trading Day after the earliest to occur of (i) the expiration of the
Commitment Period, and (ii) the expiration of an Ineffective Period (or if an
Ineffective Period shall last more than thirty (30) calendar days, the
expiration of each thirty (30) calendar days of an Ineffective Period).]
(d) Deferral or Suspension During a Blackout Period. Notwithstanding
the provisions of Section 1.1 (c), if the Company shall furnish to the Investor
notice (a "Blackout Notice") signed by the Chief Executive Officer or Chief
Financial Officer of the Company stating that he has determined in good faith
that it would be seriously detrimental to the Company and its shareholders for
the Initial Registration Statement to be filed (or for any Registration
Statement to remain in effect) and it is therefore desirable to defer the
filing of such Initial Registration Statement (or temporarily suspend the
effectiveness of any Registration Statement or use of the related prospectus),
the Company shall have the right (i) immediately to defer such filing for a
period of not more than thirty (30) days beyond the date by which such Initial
Registration Statement was otherwise required hereunder to be filed or (ii)
suspend the effectiveness of any Registration Statement for a period of not
more than thirty (30) days (any such deferral or suspension period of up to
thirty days, a "Blackout Period"). The Investor acknowledges that it would be
seriously detrimental to the Company and its shareholders for such initial
Registration Statement to be filed (or for any
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Registration Statement to remain in effect) during a Blackout Period and
therefore essential to defer such filing (or suspend such effectiveness) during
such Blackout Period, and agrees to cease any disposition of Registrable
Securities during such Blackout Period. The Company may not utilize any of its
rights under this Section 1.1(d) to defer the filing of a Registration
Statement (or suspend its effectiveness) more than twice in any twelve (12)
month period. Following such deferral or suspension, the Investor shall be
entitled to such additional number of shares of Common Stock as set forth in
Section 2.7 of the Investment Agreement.
(e) Liquidated Damages. The Company and the Investor hereto
acknowledge and agree that the sums payable under subsection 1(c) above shall
constitute liquidated damages and not penalties. The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (ii) the amounts specified in
such subsections bear a reasonable relationship to, and are not plainly or
grossly disproportionate to, the probable loss likely to be incurred in
connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons for the
Company and the Investor reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages,
and (iv) the Company and the Investor are sophisticated business parties and
have been represented by sophisticated and able legal counsel and negotiated
this Agreement at arm's length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1 Filings; Information. The Company will effect the
registration and sale of the Registrable Securities in accordance with the
intended methods of disposition thereof. Without limiting the foregoing, the
Company in each such case will do the following as expeditiously as possible,
but in no event later than the deadline, if any, prescribed therefor in this
Agreement:
(a) The Company shall (i) prepare and file with the SEC a
Registration Statement on Form SB-2 (if use of such form is then available to
the Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies, that counsel for
the Company shall deem appropriate and which form shall be available for the
sale of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement and in accordance with the intended
method of distribution of such Registrable Securities); (ii) use commercially
reasonable efforts to cause such filed Registration Statement to become and
remain effective (pursuant to Rule 415 under the Securities Act or otherwise);
(iii) prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for the time period
prescribed by Section 1.1(b); and (iv) comply with
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the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the Investor set forth
in such Registration Statement.
(b) The Company shall file all necessary amendments to any
Registration Statement in order to effectuate the purpose of this Agreement and
the Investment Agreement.
(c) No later than five (5) days prior to filing any amendment or
supplement to the Initial Registration Statement or any subsequent Registration
Statement or prospectus, or any amendment or supplement thereto (excluding, in
each case, amendments deemed to result from the filing of documents
incorporated by reference therein), or such shorter period as is reasonable
under the circumstances, the Company shall deliver to the Investor and one firm
of counsel representing the Investor, in accordance with the notice provisions
of Section 4.8, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
the Investor and such counsel, and thereafter deliver to the Investor and such
counsel, in accordance with the notice provisions of Section 4.8, such number
of copies of the Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and such other
documents or information as the Investor or counsel may reasonably request in
order to facilitate the disposition of the Registrable Securities.
(d) The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each seller of Registrable Securities covered by
a Registration Statement, such number of conformed copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in any Registration Statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable Securities.
(e) After the filing of a Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by
the SEC in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(f) The Company shall use its commercially reasonable efforts to
(i) register or qualify the Registrable Securities under such other securities
or blue sky laws of such jurisdictions in the United States as the Investor may
reasonably request in light of its intended plan of distribution and (ii) cause
the Registrable Securities to be registered
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with or approved by such other governmental agencies or authorities in the
United States as may be necessary by virtue of the business and operations of
the Company, and do any and all other acts and things that may be reasonably
necessary or advisable to enable the Investor to consummate the disposition of
the Registrable Securities in light of its intended plan of distribution;
provided, however, that the Company will not be required to qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (f), subject itself to taxation in any such
jurisdiction, or consent or subject itself to general service of process in any
such jurisdiction.
(g) The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request by the SEC or any other federal or state
governmental authority for additional information, amendments or supplements to
such Registration Statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of such Registration Statement or notification of
the initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement,
related prospectus or documents so that, in the case of such Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, in the light of the circumstances under
which they were made, and that in the case of the related prospectus it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be appropriate,
and the Company will promptly make available to the Investor any such
supplement or amendment to the related prospectus.
(h) The Company shall enter into customary agreements and take
such other customary actions as are reasonably required in order to expedite or
facilitate the disposition by the Investor of such Registrable Securities
(whereupon the Investor may, at its option, require that any or all of the
representations, warranties and covenants of the Company also be made to and
for the benefit of the Investor).
(i) The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or its auditors
and will also make available
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for inspection by the Investor and any attorney, accountant or other
professional retained by the Investor (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers and employees to supply all information reasonably requested
by any Inspectors in connection with a Registration Statement. Records that the
Company determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement or (ii) the disclosure or release of
such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other legal process; provided,
however, that prior to any disclosure or release pursuant to clause (ii), the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records that counsel has advised the
Inspectors that the Inspectors are compelled to disclose. The Investor agrees
that information obtained by it as a result of such inspections (not including
any information obtained from a third party who, insofar as is known to the
Investor after reasonable inquiry, is not prohibited from providing such
information by a contractual, legal or fiduciary obligation to the Company)
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company unless and until such
information has been made generally available to the public. The Investor
further agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(j) The Company shall otherwise comply with all applicable rules
and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
(k) The Company may require the Investor to promptly furnish in
writing to the Company such information as may be legally required in
connection with such registration including, without limitation, all such
information as may be requested by the SEC or the NASD. The Investor agrees to
provide such information requested in connection with such registration within
five (5) calendar days after receiving such written request, or such shorter
period as is reasonable under the circumstances, and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness of any
Registration Statement caused by the Investor's failure to timely provide such
information.
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Section 2.2 Registration Expenses. In connection with each
Registration Statement, the Company shall pay all registration expenses
incurred in connection with the registration thereunder (the "Registration
Expenses"), including, without limitation: (a) all registration, filing,
securities exchange listing and fees required by the NASD, (b) all
registration, filing, qualification and other fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel for the Company), (c) all word-processing, duplicating, printing,
messenger and delivery expenses, (d) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), and (e) reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1 Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and each Person or entity, if
any, who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, together with the partners,
Affiliates, officers, directors, employees and duly authorized agents of such
controlling Person or entity (collectively, the " Controlling Persons"), from
and against any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements and costs and
expenses of investigating and defending any such claim) (collectively,
"Damages"), joint or several, and any action or proceeding in respect thereof
to which the Investor, its partners, Affiliates, officers, directors, employees
and duly authorized agents, and any Controlling Person, may become subject
under the Securities Act or otherwise, as incurred, insofar as such Damages (or
actions or proceedings in respect thereof) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, preliminary prospectus or prospectus relating to
the Registrable Securities or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, except insofar as any such untrue
statement, alleged untrue statement, omission or alleged omission is made in
reliance upon and in conformity with written information furnished to the
Company by the Investor which is specifically intended by the Investor for use
in the preparation of any such Registration Statement, preliminary prospectus
or prospectus, and shall reimburse the Investor, its partners, Affiliates,
officers, directors, employees and duly authorized agents, and each such
Controlling Person, for any legal and other expenses reasonably incurred by the
Investor, its partners, Affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person, as incurred, in
investigating
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or defending or preparing to defend against any such Damages or actions or
proceedings; provided, however, that the Company shall not be liable to the
Investor to the extent that any such Damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Investor failed to send or deliver a copy of the final prospectus delivered by
the Company to the Investor with or prior to the delivery of written
confirmation of the sale by the Investor to the Person asserting the claim from
which such Damages arise, and (ii) the final prospectus would have corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission.
(b) Indemnification by the Investor. The Investor agrees to
indemnify and hold harmless the Company, its Affiliates, officers, directors,
employees and duly authorized agents, and each Controlling Persons of the
Company, from and against any and all Damages, joint or several, and any action
or proceeding in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees and duly authorized agents, and any
such Controlling Person, may become subject under the Securities Act or
otherwise, as incurred, insofar as such Damages (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or prospectus relating to the Registrable
Securities or arises out of, or are based upon, any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, but only to the extent that any such
untrue statement, alleged untrue statement, omission or alleged omission is
made in reliance upon and in conformity with written information furnished to
the Company by the Investor which is specifically intended for by the Investor
for use in the preparation of any such Registration Statement, preliminary
prospectus or prospectus, and shall reimburse the Company, its partners,
Affiliates, officers, directors, employees and duly authorized agents, and each
such Controlling Person, for any legal and other expenses reasonably incurred
by the Investor, its partners, Affiliates, officers, directors, employees and
duly authorized agents, or any such Controlling Person, as incurred, in
investigating or defending or preparing to defend against any such Damages or
actions or proceedings.
Section 3.2 Conduct of Indemnification Proceedings. Promptly after
receipt by any person or entity in respect of which indemnity may be sought
pursuant to Section 3.1 (an "Indemnified Party") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the person or entity against whom such indemnity
may be sought (the "Indemnifying Party"), notify the Indemnifying Party in
writing of the claim or the commencement of such action. In the event an
Indemnified Party shall fail to give such notice as provided in this Section
3.2 and the Indemnifying Party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, however, that the
failure to notify the Indemnifying Party shall not relieve the Indemnifying
Party from
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any liability that it may have to an Indemnified Party otherwise than under
Section 3.1. If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party thereof, the
Indemnifying Party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified Indemnifying Party,
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation;
provided, however, that the Indemnified Party shall have the right to employ
separate counsel to represent the Indemnified Party and its Controlling Persons
who may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the Indemnified Party against the Indemnifying
Party, but the fees and expenses of such counsel shall be for the account of
such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in
the reasonable judgment of the Indemnifying Party and the Indemnified Party,
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest between them, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties, or for fees and expenses that are not reasonable. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any claim or pending or threatened proceeding
in respect of which the Indemnified Party is or could have been a party and
indemnity is sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability
arising out of such claim or proceeding. Whether or not the defense of any
claim or action is assumed by the Indemnifying Party, such Indemnifying Party
will not be subject to any liability for any settlement made without its
consent, which consent will not be unreasonably withheld.
Section 3.3 Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Article III (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state
law or regulation of any governmental authority other than the Securities Act.
The provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.4 Contribution. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the
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amount paid or payable by such Indemnified Party as a result of such Damages as
between the Company on the one hand and the Investor on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and
of the Investor in connection with such statements or omissions, as well as
other equitable considerations. The relative fault of the Company on the one
hand and of the Investor on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the Damages referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1 No Outstanding Registration Rights. The Company represents
and warrants to the Investor that there is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register or qualify such
securities under the Securities Act or any securities or blue sky laws of any
jurisdiction, except for those warrants issued to investors in February and
March 1998 to purchase shares of Common Stock and warrants to purchase shares
of Common Stock issued to the Company's underwriters in connection with the
Company's initial public offering in September of 1998.
Section 4.2 Term. The obligations of the Company and the rights
provided to the holders of Registrable Securities hereunder shall terminate at
such time as all the Commitment Period has expired and any Registrable
Securities theretofore issued have ceased to be Registrable Securities in
accordance with the definition thereof contained in the Investment Agreement.
Notwithstanding the foregoing, Section 1.1(c) and (d), Article III, Section
4.8, and Section 4.9, shall survive the termination of this Agreement.
Section 4.3 Rule 144. The Company will use its commercially reasonable
efforts to file in a timely manner information, documents and reports in
compliance with the
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Securities Act and the Exchange Act and will, at its expense, promptly take
such further action as holders of Registrable Securities may reasonably request
to enable such holders of Registrable Securities to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act ("Rule 144"), as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. If at any time the Company is not
required to file such reports, it will, at its expense, forthwith upon the
written request of any holder of Registrable Securities, make available
adequate current public information with respect to the Company within the
meaning of paragraph (c)(2) of Rule 144 or such other information as necessary
to permit sales pursuant to Rule 144. Upon the request of the Investor, the
Company will deliver to the Investor a written statement, signed by the
Company's principal executive or financial officer, as to whether it has
complied with such requirements.
Section 4.4 Certificate. The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such
holder a certificate, signed by the Company's principal financial officer,
stating (a) the Company's name, address and telephone number (including area
code), (b) the Company's Internal Revenue Service identification number, (c)
the Company's SEC file number, (d) the number of shares of each class of Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual
report required to be filed thereunder.
Section 4.5 Amendment and Modification. No provision of this Agreement
may be waived, unless such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a
majority of the then outstanding Registrable Securities. Notwithstanding the
foregoing, the waiver of any provision hereof with respect to a matter that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and does not
directly or indirectly affect the rights of other holders of Registrable
Securities may be given by holders of at least a majority of the Registrable
Securities being sold by such holders; provided that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. No course of dealing
between or among any Person having any interest in this Agreement will be
deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any person under or by reason of this Agreement.
Section 4.6 Successors and Assigns; Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto
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and their respective successors and permitted assigns. The Investor may assign
its rights under this Agreement to any subsequent holder of the Registrable
Securities, provided that the Company shall have the right to require any
holder of Registrable Securities to execute a counterpart of this Agreement as
a condition to such holder's claim to any rights hereunder. This Agreement,
together with the Investment Agreement, sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
Section 4.7 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 4.8 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
BioShield Technologies, Inc.
Suite B109
4405 International Blvd.
Norcross, Georgia 30093
Telephone: (770) 925-3432
Facsimile: (770) 921-1065
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with a copy (which shall not constitute notice) to:
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road
Atlanta, Georgia 30328
Attention: Raymond L. Moss, Esq.
Telephone: (770) 481-7201
Facsimile: (770) 481-7210
if to Investor: Jackson, LLC
Executive Pavilion
90 Grove Street
Ridgefield, Connecticut 06877
Attn: Steve Hicks
Telephone: (203) 431-8300
Facsimile: (203) 431-8301
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 4.8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 4.9 Governing Law, Jurisdiction. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Georgia
without regard to the principles of conflicts of law. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal and state
courts located in Atlanta, Georgia, with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 4.10 Title and Subtitles. The titles and subtitles used in
this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
Section 4.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together
shall constitute one and the same instrument. This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the parties so delivering
this Agreement.
Section 4.12 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
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Section 4.13 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
BIOSHIELD TECHNOLOGIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
JACKSON, LLC
BY: SOUTHRIDGE CAPITAL MANAGEMENT LLC,
GENERAL PARTNER
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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APPENDIX H
BIOSHIELD TECHNOLOGIES, INC.
AMENDED AND RESTATED
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
<PAGE> 182
(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. If an Over 10% Owner is granted
incentive stock options hereunder, Fair Market Value shall be not less than
110% 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).
(l) "Participant" means an individual who receives a Stock
Incentive hereunder.
(m) "Plan" means the BioShield Technologies, Inc. 1997 Stock
Incentive Plan.
(n) "Stock" means the Company's common stock.
(o) "Stock Award" means a stock award described in Section 3.4.
(p) "Stock Incentive Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(q) "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.
(r) "Stock Incentives" means, collectively, incentive stock
options, non-qualified stock options and Stock Awards.
(s) "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.
<PAGE> 183
(t) "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, 1,200,000 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 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. 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
<PAGE> 184
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.
(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.
(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 or for estate planning purposes
(in the case only of non-qualified options upon prior Board approval) 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 or 110%
of Fair Market Value in the case of an Over 10% Owner. 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.
For an Over 10% Owner, the option is only exercisable for a period of five
years from the date of grant. The term of any non-qualified Stock Option must
be as specified in the applicable Stock Incentive Agreement.
<PAGE> 185
(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:
(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 be canceled,
<PAGE> 186
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 holds 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
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.
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
<PAGE> 187
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.
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.
<PAGE> 188
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 months after an
amendment to the Plan which would increase the total number of shares of Stock
eligible for issuance under the Plan. If stockholder approval is not obtained
within such period, such Stock Issuance will be treated as a non qualified
option.
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, as amended and restated
hereby, shall become effective December ___, 1998, the date of its adoption by
the Board of Directors.
BIOSHIELD TECHNOLOGIES, INC.
By: /s/ Timothy C. Moses
-------------------------------------
Name: Timothy C. Moses
Title: President
ATTEST:
By:
Title:
[CORPORATE SEAL]
<PAGE> 189
BIOSHIELD TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
________________, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of BioShield Technologies, Inc. (the "Company")
hereby appoints Timothy C. Moses and Jacques Elfersy, or either of them, with
full power of substitution, as proxies to cast all votes, as designated below,
which the undersigned stockholder is entitled to cast at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on , , 1999 at
9:00 a.m. Eastern Standard Time at ,
Atlanta, Georgia, upon the following matters and any other matter as may
properly come before the Annual Meeting or any adjournments thereof:
1. Election of two Directors to serve on the Board of Directors:
Class I Director: Michel M. Azran Class II Director: Carl T. Garner
[ ] FOR all the nominees listed above (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
2. Proposal to amend the Company's Articles of Incorporation and Bylaws to
provide that holders of 10 percent or more of the Company's capital stock may
call a special meeting of shareholders and to eliminate certain "fair price"
requirements enacted by the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the issuance of common stock of a subsidiary of the
Company (which common stock, under certain circumstances, may be exchanged for
Common Stock of the Company) and certain related warrants, and to approve the
issuance of shares of Common Stock of the Company in excess of 19.99 percent of
the outstanding shares, if required in connection with the exchange of the
common stock for Common Stock of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify an amendment to the Company's Stock Incentive Plan to
increase the number of shares reserved for issuance thereunder from 400,000
shares to 1,200,000 shares, and to allow holders of more than 10% of the
Company's stock to participate in the Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side)
<PAGE> 190
5. Proposal to ratify the appointment of Grant Thornton LLP as the independent
auditors of the Company for the fiscal year ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy, when properly executed, will be voted as directed by the
undersigned stockholder and in accordance with the best judgment of the proxies
as to other matters. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
PROPOSALS ONE, TWO, THREE, FOUR AND FIVE AND IN ACCORDANCE WITH THE BEST
JUDGMENT OF THE PROXIES AS TO OTHER MATTERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS ONE, TWO, THREE, FOUR
AND FIVE.
The undersigned hereby acknowledges prior receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement dated ________________, 1999, and
hereby revokes any proxy or proxies heretofore given. This Proxy may be revoked
at any time before it is voted by delivering to the Secretary of the Company
either a written revocation of proxy or a duly executed proxy bearing a later
date, or by appearing at the Annual Meeting and voting in person.
If you receive more than one proxy card, please sign and return all cards in
the accompanying envelope.
[ ] I PLAN TO ATTEND THE _________________, 1999, ANNUAL STOCKHOLDERS MEETING
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A
QUORUM AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
Dated: _________________, 1999
Signature of Stockholder or
Authorized Representative
Please date and sign exactly
as name appears hereon. Each
executor, administrator,
trustee, guardian,
attorney-in-fact and other
fiduciary should sign and
indicate his or her full
title. In the case of stock
ownership in the name of two
or more persons, all persons
should sign.
