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IRREVOCABLE COLLATERAL ASSIGNMENT OF STOCK & LOAN AGREEMENT
Effective Date: Sept. 22, 2000
Place: Palm Springs, CA
Collateral Shares: Company Name: BioShield Technologies/Electronic Medical
Distribution, Inc.
Symbol: BSTI
Stock Certificate No.#: 0424, 0425, 0426, and 0427
Date Cut: August 25, 2000
AS SECURITY for payment of and on that certain Promissory Note (the "Note")
of even date herewith, an original copy of which is attached hereto
incorporated herein by this reference, in the aggregate gross principal sum of:
$14,000,000.00 (fourteen million US Dollars). To be paid in 1-3 (one to three)
traunches: 1) $2,000,000.00 within 24 hours of execution of this agreement and
receipt of the collateral described herein; 2) $6,000,000.00 72 hours from
first traunch; 3) $6,000,000.00 45-business day after second traunch.
Made by the undersigned: Name: Electronic Medical Distribution, Inc.,
Address: 5655 Peachtree Parkway, Norcross, GA., 30092
Whether made by one or more payable to the order of: COREY-CHANNING TRUST (the
"Lender") at 611 South Palm Canyon Drive, Suite 7-158, Palm Springs, CA 92264,
with ANTHONY CIOCCHETTI, JR., TRUSTEE/POA, whether one or more, the Borrower
hereby assigns as Collateral: 3,000,000 (three million) shares (the "Collateral
Shares") 144 stock of (the "Borrower"), held on the books and records of such
company, represented by certificates for such Collateral Shares which Borrower
has currently herewith delivered to the Lender, together with an assignment of
such Collateral Shares endorsed in blank. The Borrower herewith irrevocably
appoints the Lender as attorney in fact for the Borrower to arrange for
transfer of the Collateral Shares, to the Custodial Safekeeping Account solely
for the purposes as indicated herein. The Borrower warrants that the Collateral
Shares referred to herein are valid and authentic and are not subject to any
further pledge, restriction or encumbrance when they are delivered into the
Custodial Safekeeping Account, as defined in Section #14, of the attached.
The assignment of such stock is also made upon the following terms:
1) During the term of this Agreement, all dividends and other amounts received
by the Borrower as a result of the Borrowers record of ownership of the
Collateral Shares shall be applied by the Borrower or Borrowers and applied
to the payment of the Note or be deemed assigned to the Lender.
2) Default Provision: During the term of this Agreement, The Borrower shall be
assigned and retain the right to vote the Collateral Shares or to take
action required by the share holders of the subject stock in order to
continue the viability of the stock.
3) Default Provision: During the term of this Agreement, it is expressly
understood and agreed by the Borrower that the Lender shall retain the
right in the event of said default to further assign all the Collateral
Shares or to offer for sale, transfer, or pledge Collateral Shares in order
to regain the funds Lender loaned to the Borrower. This includes all
interest and expenses incurred during the default to liquidate the
Collateral Shares.
IRREVOCABLE COLLATERAL ASSIGNMENT. LENDER'S INITIALS: ______ BORROWER'S
INITIALS: /S/_____ PAGE 1 OF 5
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4) If, during the term of this Collateral Assignment, any shares, dividends,
re-classification, re-adjustment or other change is declared or made in
the capital Structure of the corporation(s), whose stock in hereby
collaterally assigned, all new, Substituted and additional shares or other
securities, issued by reason of any change, shall be held by the Lender
under the terms of this Collateral Assignment Agreement in the same manner
the shares originally assigned hereunder.
5) If, during the term of this Collateral Assignment subscription warrants or
any other right or options shall be issued in connection with the
Collateral Shares, such warrants, rights and options, shall be immediately
collaterally assigned by the Borrower to the Lender, the Payee of the above
referenced Note.
6) Upon payment, in full, at maturity of the above referenced Note, the Lender
shall re-deliver immediately the Collateral Shares and Assignments thereof
to the Borrower. In the event of "Default" that such shares must be offered
for sale, transfer or pledged by the Lender such that, ultimately, all the
Collateral shares mush be liquidated, the Lender's only duty shall be to
notify the Borrower, in writing, that loan is in default and that the
Lender shall deliver written notice to Borrower of said Default after which
Borrower shall have ten (10) days to cure said default in full. If Borrower
does not cure said default with that time, then the loan will be in default
and Collateral Shares are being set into either a sale, transfer or pledge
account to be disposed for the repayment of loan. It is further understood
and agreed to by the Lender and Borrower that Lender will not be held
responsible for any financial risks to him in the event that the Collateral
Shares must be liquidated. Lender agrees to not hold Borrower responsible
for any other financial responsibility of the liquidation of same.
7) In the event that the Borrower should "Default" with respect to the Note,
over the Lender or the then-payee of such Note shall have all rights and
remedies provided by the Uniform Commercial Code of the State of
California. Lender retains the right to sell, or bid on, or buy the all
Collateral shares in the account in such a manner and for such a price as
to cure the "Default" of Note and the liquidated damages thereto.
8) In the event of any dispute between Lender and Borrower, the assigned
escrow agent (The "CUSTODIAN") shall not deliver the stock nor the
assignments thereof absent a written mutual agreement to such effect from
the Lender and from the Borrower. Absent a settlement of any such
controversy by a final judgement of a court of competent jurisdiction,
Borrower and Lender shall pay any and all attorneys' fees, court costs and
damages as they may be agreed upon, or as the court may apportion between
the Borrower and Lender. Borrower agrees to hold harmless Lender and escrow
agent from any expense(s) arising out of acting as "Custodian".
9) The parties hereby acknowledge that the Collateral shares have no liens,
encumbrances or other loan pledges placed against the Collateral Shares.
All 144-restricted shares accepted by Lender shall be accompanied with the
STOCK MEDALLION SIGNATURE, MERRILL LYNCH, PIERCE, FENNER & SMITH FORM 116,
LEGAL LETTER OF OPINION AND ASSIGNMENT LETTER AUTHORIZED BY AUTHORITY
SIGNATORY FOR BORROWER NOTARIZED, PLEDGED TO THE COREY-CHANNING TRUST, AND
ANY OTHER SUPERFICIAL FORMS THAT MAY COME INTO PLAY. The shares represented
by the assigned certificate(s) have been registered under the Securities
Act of 1933 (the "Act") and are not treasury stocks of the company that
have no pledge value.
IRREVOCABLE COLLATERAL ASSIGNMENT. LENDER'S INITIALS: _______
BORROWER'S INITIALS: /S/_______ PAGE 2 OF 5
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10) Borrower hereby certifies that he/she is an "ACCREDITED INVESTOR" within
the meaning of Rule 501(a) promulgated under the US Securities Act of 1933,
as amended. The Lender and the Borrower hereby agree that the Collateral
Shares acknowledged are to be held as security for the express purposes
stated, as security to the promissory note attached hereto and made part of
this agreement. COLLATERAL SHARES ARE NOT TO BE BORROWED FURTHER AGAINST,
SOLD, NOR TO BE MARGINED, NOR SOLD SHORT. The Collateral Shares are being
held for the sole purpose of collateral for the loan as per Promissory
Note, attached hereto as Exhibit A. Lender has only the right to place for
sale, transfer or pledge Collateral Shares under the conditions of the
"Default Provisions" as outlined in the Agreement. In the event that Lender
finds inadequacy in the Collateral Shares to complete said loan against
Collateral Shares; the parties hereby agree to execute any and all
documents or other instruments deemed reasonably necessary to effectuate
such rescission to the parties pursuant to their respective interests
herein.
11) The gross amount of the loan shall be $14,000,000.00 (fourteen million US
Dollars). Borrower hereby recognizes and accepts that a five percent (5%)
Loan Origination fee will be charged. The interest and Origination fee
shall be deducted from loan amount and Borrower will then receive the net
amount of proceeds.
12) The term of the loan shall be for twelve (12) months, with an extension of
two (2) months at Lender's option and approval.
13) There shall be no margin call against loan. This shall be a non-recourse
loan secured by the stock and the Promissory Note of even date, attached
hereto and made part hereof, as exhibit A.
14) The Collateral Shares to be pledged shall be placed into an account for the
benefit of the COREY-CHANNING TRUST. However Collateral Shares can be
delivered in Certificate form whether free trading or 144-restricted to the
following Custodial Safekeeping Account, including all formal documents
accompanying as outlined in #9, of this Agreement. The "Custodial
Safekeeping Account:
MERRILL LYNCH
74-800 HIGHWAY 111
INDIAN WELLS, CA 92210
ATTN: PERRY ZEIGLER, CFM
1-800-324-5572
ACCOUNT # 56J-10805
DTC # 5198
ACAT # 0161
ASSIGNED TO:
COREY-CHANNING TRUST
15) At the time of delivery into the Custodial Safekeeping Account(s), said
Collateral Shares shall be free and clear of any liens and encumbrances and
any third party claims, and are to be of non-criminal origin.
IRREVOCABLE COLLATERAL ASSIGNMENT. LENDER'S INITIALS: ______ BORROWER'S
INITIALS: /S/_____ PAGE 3 OF 5
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16) Loan interest rate shall be set @ ___% (_______ percent). This is a balloon
loan, with first year interest and origination fees pre-paid. Yearly
interest and principal all due upon maturity date.
17) The following additional restrictions shall apply to the Custodial
Safekeeping Account, and the Collateral Shares during the term of the loan
and any extensions thereof: Including but not limited the "Default
Provisions" as described in the Agreement:
18.1) The Collateral Shares shall remain in the Custodial Safekeeping
Account or Accounts.
18.2) The Custodial Shares shall not be moved into another account or
removed from the Custodial Account unless under Default
Provision.
18.3) The Collateral Shares and the account shall not be
re-hypothecated, re-assigned, or encumbered for more than
$16,000,000.00 (sixteen million US Dollars) in principal amount
plus interest, and late fees or loan fees and money reserve
account.
18.4) The Collateral Shares and holding account shall not be used for
hedging, margining, selling, buying, or trading in any option,
derivatives or speculative financial instruments.
18.5) Lender hereby agrees to immediately return Collateral Shares
balance held in the Custodial Account to Borrower upon repayment
in full of the loan, at anytime within three (3) business days
from the date of payoff. Lender further agrees to return all the
Collateral Shares to the borrower if for any reason(s)
whatsoever, the contemplated loan transaction does not close in
a timely fashion, without any recourse to anyone, without any
deductions and offsets.
18.6) Upon Custodian Account receiving Collateral Shares via DTC or by
Certificate form, having time to verify, authenticate and place
into the Custodial Safekeeping Account, Borrower will receive
from Lender Principal amount of loan with 72 hours. Monies to
Borrower can be wire transferred or a Cashier's Check.
(Borrower's Option.)
18) This is a private and confidential transaction, under the rule of
non-circumvention and non-disclosure of Confidential Information in a
business like manner, for a mutual benefit, with Confidential Information
being defined as Lender's Banking, Lender's Stock Accounts, as have been
disclosed in this agreement.
19) This agreement shall be construed under the laws of the United States of
America and the State of California.
20) The Borrowers and Lender have placed their Signature upon this document
agreeing to the terms and conditions as they have been numbered and spelled
out in this agreement. These terms and conditions apply and shall further
extend to their heirs, representatives, succession, and assigns of the
Borrower and Lender.
IRREVOCABLE COLLATERAL ASSIGNMENT. LENDER'S INITIALS: ______ BORROWER'S
INITIALS: /S/_____ PAGE 4 OF 5
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ACCEPTED AND AGREED TO AS REPRESENTED BY SIGNATURES BELOW
<TABLE>
<CAPTION>
<S> <C>
BY: /s/ Date: 9-21-00
------------------------------------------- ---------------------------------------------
Name: Scott Parliament Title: Chief Financial Officer
----------------------------------------- ---------------------------------------------
Address: 5655 Peachtree Pkwy City: Norcross
-------------------------------------- ---------------------------------------------
State: GA Zip 30092 Phone 770-246-2000 Fax: 770-246-2196
--- ----- ------------ --------------------------------------------
BY: Date:
------------------------------------------- --------------------------------------------
COREY-CHANNING TRUST/ANTHONY GIOCCHETTI JR.
TRUSTEE/POWER OF ATTORNEY
611 SOUTH CANYON DRIVE, SUITE 7-15B
PALM SPRINGS, CA 92264
Date Signed Is , 2000
-------------- -------------------------------------------
Witness
Please print name below
-------------------------------------------
-------------------------------------------- -------------------------------------------
Accommodator Witness
Date Signed Is , 2000 Please print name below
--------------
-------------------------------------------
/s/ /s/
-------------------------------------------- -------------------------------------------
Borrower Witness
Date Signed Is 9-21 , 2000 Please print name below
--------------
/s/
-------------------------------------------
</TABLE>
Irrevocable Collateral Assignment. Lender's Initials: ______
Borrower's Initials: /s/______ Page 5 of 5 _____
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EXHIBIT A
PROMISSORY NOTE
PRINCIPAL AMOUNT: $14,000,000.00 ISSUE DATE: SEPTEMBER 22, 2000
MATURITY DATE: ONE YEAR AND ONE DAY LOAN NO.:
For Value received, Electronic Medical Distribution, Inc., a Delaware
corporation with an address at 5655 Peachtree Parkway, Norcross, GA., 30092,
(the "Maker") promises to pay Corey-Channing Trust, (together with all
subsequent holders in due course) at 611 South Palm Canyon Drive, Suite 7-158,
Palm Springs, CA 92264 (the "Holder"), the principal sum of $14,000,000.00
(fourteen million US Dollars and No/cents) lawful money of the United States of
America, with Interest from the date hereof at the rate of ___% (________
percent) simple interest per annum on the terms hereinafter set forth.
This Promissory Note (the "Note") is issued under the terms of an Irrevocable
Collateral Assignment of Stock & Loan Agreement (the "Agreement"), and all
other exhibits to same are made part of the note, dated as of September 18,
2000 between Maker and Holder.
1. PAYMENT TERMS
Principal. If the Loan Period, i.e., the time between the date of this Note
and the Maturity Date, is one year, and one month then no Principal Amount
must be repaid until the Maturity Date. However, if the Loan Period is more
than one year and one day, then 20% of the Principal Amount must be repaid
on each anniversary of this Note prior to the Maturity Date. All remaining
unpaid Principal Amount is due on the Maturity Date.
Interest. Interest is due each quarter in arrears. Interest is calculated
on a "simple" basis, i.e. one-fourth of the Interest Rate is due at the end
of each quarter.
All amounts are stated and payable in US Dollars.
2. NO DEDUCTION OR SET-OFF
The principal and interest shall be payable without set-off or deduction,
unless specifically added by addendum to the Note, at the address of the
Holder set forth in the heading hereof, or at such other place as Holder
may designate in writing.
3. PREPAYMENT; PREPAYMENT LIMITATION
The Maker may prepay any and all principal at any time after the first
ninety (90) days. If only a portion of the Principal Amount is repaid, no
interest needs to be concurrently repaid (unless due). However, if the
entire principal amount is repaid, or that portion of principal which
extinguishes the balance of the principal, then all accrued interest must
also be paid to effect cancellation of the entire obligation.
EXHIBIT A PROMISSORY NOTE PAGE 1 OF 4
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4. DEFAULT INTEREST
Any principal or Interest not paid when due, in addition to being an Event
of Default, shall bear interest thereafter at the aforesaid rate plus 15%
(fifteen percent) per annum simple Interest.
5. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute
an "Event of Default" hereunder:
(a) Maker shall have made an assignment for the benefit of creditors
of composition with creditors: or is unable or admits in writing
its inability to pay its debts as they mature; or any proceeding
relating to Maker under any bankruptcy, bankruptcy reorganization,
arrangement, readjustment of debt, receivership, dissolution
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect is commenced by or against Maker.
(b) Any representation or warranty make by Maker in the Agreement
shall be false or misleading in material respect; or
(c) Maker shall breach or fail to take any actions required,
obligated, or necessary to maintain or fulfill the Agreement; or
(d) Maker shall fail to make a timely interest payment or principal
repayment. "Timely" shall mean with ten (10) business days of when
it was due.
6. ACCELERATION; REMEDIES
Should any Event of Default occur hereunder, then Holder with written
notice given Maker, Maker then has (10) ten business days to cure said
default, at its option, unless expressly required elsewhere, may declare
immediately due and payable the entire unpaid balance of principal and all
other sums due by Maker hereunder with interest accrued thereon at the
Default Rate as set forth herein; and, payment thereof may be enforced by
liquidating the collateral. "Liquidation" shall mean the Holder may dispose
of the Stock by any means to satisfy the Maker's obligation. "Dispose of
the Stock by any means" includes: sale, assignment, hypothecation,
transfer, or other any method Holder employs, provided however, that Maker
should be entitled to any monies derived through the remedies hereunder
only in the amount of unpaid principal and interest then due by default. If
Holder retains counsel to enforce this Note to ensure title and liquidation
of the collateral, such cost shall be at Makers expense. "Monies" shall be
interpreted strictly as cash receipts realized by the Holder. The
definition shall not include non-monetary benefits, credit lines, or other
benefits which the Holder may enjoy from deployment and any remedies given
against the collateral.
Any and all collateral held under the Irrevocable Collateral Assignment of
Stock & Loan Agreement, with all other exhibits to same made part of this
note, may be used against the Collateral in furtherance, sold, assigned,
hypothecated, or otherwise disposed of to recover amounts enumerated above.
EXHIBIT A PROMISSORY NOTE PAGE 2 OF 4
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The Holder accepts no liability as to price, purchaser, or other
considerations in the disposition of such collateral and the Maker waives
any right through arbitration or legal remedy to seek to make Holder
accountable for such.
7. NON-RECOURSE OF NOTE
The Holder acknowledges the sufficiency of the collateral, i.e., the Stock,
as adequate and sufficient for the principal amount advanced and any
deficiencies that may arise to the Maker and that the Holder is precluded
and estopped from making any and all claims against the Maker for other
assets, guarantees, or actions against any individual, Trust, corporation
or entity for recovery of any amount owned to the Holder, except in the
fraudulent inducement, incomplete conveyance of the Stock such that the
Holder, after an Event of Default, is unable to liquidate such Stock; or,
material misrepresentations and invalid warranties of the Maker which
caused the Holder to enter into the transition.
8. CONSENT TO WAIVERS
Maker and all endorsers, sureties, and guarantors consent to any and all
extensions of time, renewals, waivers or modifications that may be granted
by Holder with respect to the payment of other provisions of this Note, and
to release of collateral or any part thereof, with or without substitution.
9. PARTIAL INVALIDITY
If any provision of this Note is held to be invalid or unenforceable by a
court of competent jurisdiction, the other provisions of this Note shall
remain in full force and effect and shall be liberally construed in favor
of Holder in order to effect the provisions of this Note. In addition, in
no event shall the rate of interest exceed the maximum rate of interest
permitted to be charged by applicable law (including the choice of law
rules) and any interest paid in excess of the permitted rate shall be
refunded to Maker. Such refund shall be made by application of the
excessive amount of interest paid against any sums outstanding and shall be
applied in such order as Holder may determine. If the excessive amount of
interest paid exceeds the sums outstanding, Holder shall refund the portion
exceeding the said sums outstanding in cash. Maker agrees, however, that in
determining whether or not any interest payable under this Note exceeds the
highest rate permitted by law, any non-principal payment, including without
limitation prepayment fees and late charges, shall be deemed to the extent
permitted by law to be an expense, fee, premium or penalty rather than
interest.
10. WAIVERS BY HOLDER
Holder shall not be deemed, by any act of omission or commission to have
waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Holder, and then only to the extent specifically set
forth in the writing. A waiver on one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy to a subsequent
event.
11. GOVERNING LAW
This instrument shall be governed by and construed according to the laws of
the state of California.
EXHIBIT A PROMISSORY NOTE PAGE 3 of 4
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12. PARTIES
Whenever used, the singular number shall include the plural, the plural the
singular, the use of any gender shall be applicable to all genders, and the
word "Holder" and "Maker" shall be deemed to include the respective
successors and assigns of Holder and Maker.
IN WITNESS WHEREOF, Maker without duress hereby executed this Note on the day
and year first above written.
Electronic Medical Distribution, Inc. (MAKER) ATTEST:
-------------------------------------
/s/ /s/
------------------------------------- --------------------------
Printed Name:
---------------------
Its: Chief Financial Officer
------------------------------
(CORPORATE SEAL) (If Corporate Signer)
Exhibit A Promissory Note Page 4 of 4
