<PAGE> 1
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-24913
BIOSHIELD TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 58-2181628
(State or Other Jurisdiction (I.R.S. Employer of Identification No.)
Incorporation or Organization)
5655 PEACHTREE PARKWAY
NORCROSS, GEORGIA 30092
(Address of principal executive offices and zip code)
(770) 246-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) and has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 15, 2000, there were 7,981,714 outstanding shares of the
Registrant's Common Stock, no par value per share.
<PAGE> 2
BIOSHIELD TECHNOLOGIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets as of March 31, 2000 (unaudited) and June 30,
1999. 1
2. Statements of Operations for the three month periods ended
March 31, 2000 and 1999 (unaudited) 2
3. Statements of Operations for nine months periods ended
March 31, 2000 and 1999 (unaudited) 3
4. Statement of Changes in Stockholders' Equity (Deficit) for
the period ended March 31, 2000 (unaudited) 4
5. Statements of Cash Flows for the nine month periods ended March
31, 2000 and 1999 (unaudited) and from June 1, 1995 (inception)
thru March 31, 2000 and 1999 (unaudited) 7
6. Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-KSB 13
</TABLE>
SIGNATURES
EXHIBIT INDEX
<PAGE> 3
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
2000 1999
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,015,138 $ 2,500,561
Marketable securities 62,132 103,250
Accounts receivable 364,083 102,013
Stockholders' subscription receivable -- 4,798,750
Inventories 230,571 151,403
Prepaid expenses and other current assets 222,995 171,073
------------ ------------
Total current assets 5,894,919 7,827,050
PROPERTY AND EQUIPMENT, NET 6,333,025 202,400
DEPOSITS AND OTHER LONG-TERM ASSETS 174,775 194,293
------------ ------------
$ 12,402,719 $ 8,223,743
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 2,326,266 $ --
Accounts payable 653,938 597,877
Accrued liabilities 582,031 195,044
Accrued payroll 361,583 58,085
Accrued interest payable 839 839
------------ ------------
Total current liabilities 3,924,657 851,845
MINORITY INTEREST 6,191,917 4,798,750
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - no par value; 10,000,000
shares authorized and 200 issued and
outstanding at March 31, 2000 4,000,000 --
Common stock - no par value; 40,000,000
shares authorized; 7,934,047 and 6,406,578
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 14,689,137 7,336,318
Additional paid-in capital 2,560,987 870,900
Accumulated other comprehensive earnings (loss) (42,868) (1,750)
Deficit accumulated during the development stage (18,921,111) (5,632,320)
------------- ------------
2,286,145 2,573,148
$ 12,402,719 $ 8,223,743
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended June 1, 1995 (inception)
March 31, to March 31,
------------------------------- --------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 323,783 $ 53,486 $ 2,280,304 $ 1,523,968
Cost of sales 162,665 24,654 1,071,050 591,207
----------- ----------- ----------- -----------
Gross profit 161,118 28,832 1,209,254 932,761
Operating expenses
Marketing and selling 1,459,034 196,442 5,542,955 1,302,376
General and administrative 2,442,410 348,401 11,529,370 2,967,269
Research and development 955,688 98,561 3,598,159 627,473
----------- ----------- ----------- -----------
4,857,132 643,404 20,670,484 4,897,118
----------- ----------- ----------- -----------
Loss from operations (4,696,014) (614,572) (19,461,230) (3,964,357)
Other income (expense)
Royalty fees -- -- 75,000 --
Consulting income, net of
consulting expenses of
$19,474 for the period
ended June 30, 1999 -- -- 39,908 39,908
Interest and dividend income 21,606 36,870 217,714 81,061
Interest expense -- (308) (35,336) (35,336)
----------- ----------- ----------- -----------
Net loss before income taxes
and minority interest (4,674,408) (578,010) (19,163,944) (3,878,724)
Income tax (expense) benefit -- -- -- --
Minority interest in loss of 52,107 -- 242,833 --
subsidiary ----------- ----------- ----------- -----------
NET LOSS (4,622,301) (578,010) (18,921,111) (3,878,724)
Other comprehensive earnings (loss)
Unrealized holding loss on (9,618) 21,000 (42,686) (14,000)
securities ----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $(4,631,919) $ (557,010) $(18,963,797) $(3,892,724)
=========== =========== ============ ===========
Net loss per common share
Basic $ (0.66) $ (0.09) $ (3.73) $ (0.86)
=========== =========== ============ ===========
Weighted average common
shares outstanding 7,034,085 6,144,125 5,075,832 4,512,746
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
(Unaudited)
Nine months ended
March 31,
-----------------------------
2000 1999
------------ -----------
<S> <C> <C>
Net sales $ 737,182 $ 286,182
Cost of sales 411,657 120,726
----------- -----------
Gross profit 325,525 165,456
Operating expenses
Marketing and selling 4,065,681 610,436
General and administrative 7,542,966 936,858
Research and development 2,357,145 211,345
----------- -----------
13,965,792 1,758,639
----------- -----------
Loss from operations (13,640,267) (1,593,183)
Other income (expense)
Interest and dividend income 108,642 74,123
Interest expense -- (16,960)
----------- -----------
Net loss before income taxes and
minority interest (13,531,625) (1,536,020)
Income tax (expense) benefit -- --
Minority interest in loss of subsidiary 242,833 --
----------- -----------
NET LOSS (13,288,792) (1,536,020)
Other comprehensive earnings (loss)
Unrealized holding loss on securities (25,368) (14,000)
----------- -----------
COMPREHENSIVE LOSS $(13,314,160) $(1,550,020)
=========== ===========
Net loss per common share
Basic $ (1.93) $ (0.27)
----------- -----------
Weighted average common shares outstanding 6,885,046 5,675,024
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred stock Common stock
no par value no par value Additional
--------------------- --------------------------- paid-in
Shares Amount Shares Amount capital
---------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1995 $ -- -- $ -- $ -- $ --
Proceeds from original issuance of shares -- -- 3,907,086 500 --
Proceeds from issuance of shares under
private placement offering -- -- 62,612 115,000 60,000
Stock warrants issued for services rendered -- -- -- --
Net loss - June 1, 1995 (inception)
through June 30, 1996 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1996 -- -- 3,969,698 115,500 60,000
Proceeds from issuance of shares
under private placement offering -- -- 149,723 275,001 --
Proceeds from issuance of shares
under private placement offering -- -- 245,000 600,000 --
Stock issuance costs related to
private placement offerings -- -- -- (25,000) --
Stock warrants issued for services rendered -- -- -- -- 62,400
Net loss for the year ended June 30, 1997 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1997 -- -- 4,364,421 965,501 122,400
Proceeds from issuance of shares
under private placement offering -- -- 30,619 187,500 --
Stock options issued for services rendered -- -- -- 156,650
Contribution to capital -- -- -- -- 50,000
Net loss for the year ended June 30, 1998 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1998 -- -- 4,395,040 1,153,001 329,050
<CAPTION>
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
----------------- ------------ -----------
<S> <C> <C> <C>
Balance at June 1, 1995 $ -- $ -- $ --
Proceeds from original issuance of shares -- -- 500
Proceeds from issuance of shares under
private placement offering -- -- 115,000
Stock warrants issued for services rendered -- -- 60,000
Net loss - June 1, 1995 (inception)
through June 30, 1996 -- (356,316) (356,316)
---------------- ----------- -----------
Balance at June 30, 1996 -- (356,316) (180,816)
Proceeds from issuance of shares
under private placement offering -- -- 275,001
Proceeds from issuance of shares
under private placement offering -- -- 600,000
Stock issuance costs related to
private placement offerings -- -- (25,000)
Stock warrants issued for services rendered -- -- 62,400
Net loss for the year ended June 30, 1997 -- (514,459) (514,459)
---------------- ----------- -----------
Balance at June 30, 1997 -- (870,775) 217,126
Proceeds from issuance of shares
under private placement offering -- -- 187,500
Stock options issued for services rendered -- -- 156,650
Contribution to capital -- -- 50,000
Net loss for the year ended June 30, 1998 -- (1,471,929) (1,471,929)
---------------- ----------- -----------
Balance at June 30, 1998 -- (2,342,704) (860,653)
</TABLE>
4
<PAGE> 7
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred stock Common stock
no par value no par value Additional
--------------- ------------------------ paid-in
Shares Amount Shares Amount capital
------ ------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Proceeds from issuance of shares
under initial public offering -- -- 1,300,000 5,102,794 --
Proceeds from exercise of stock warrants -- -- 612,275 1,065,523 --
Proceeds from exercise of stock options -- -- 15,000 15,000 --
Stock options issued for services rendered -- -- -- -- 95,250
Compensation related to previously issued
options -- -- -- -- 121,600
Contribution to capital -- -- -- -- 325,000
Unrealized loss on securities -- -- -- -- --
Net loss for the year ended June 30, 1999 -- -- -- -- --
------ ------ --------- --------- ---------
Balance at June 30, 1999 -- -- 6,322,315 7,336,318 870,900
Proceeds from exercise of warrants
(unaudited) -- -- 3,600 21,570 --
Stock warrants issued for services
rendered (unaudited) -- -- -- -- 1,106,400
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
September 30, 1999 (unaudited) -- -- -- -- --
------ ------ --------- --------- ---------
Balance at September 30, 1999 (unaudited) -- -- 6,325,915 7,357,888 1,977,300
<CAPTION>
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
--------------- -------------- ----------
<S> <C> <C> <C>
Proceeds from issuance of shares
under initial public offering -- -- 5,102,794
Proceeds from exercise of stock warrants -- -- 1,065,523
Proceeds from exercise of stock options -- -- 15,000
Stock options issued for services rendered -- -- 95,250
Compensation related to previously issued
options -- -- 121,600
Contribution to capital -- -- 325,000
Unrealized loss on securities (1,750) -- (1,750)
Net loss for the year ended June 30, 1999 -- (3,289,616) (3,289,616)
------- ---------- ----------
Balance at June 30, 1999 (1,750) (5,632,320) 2,573,148
Proceeds from exercise of warrants
(unaudited) -- -- 21,570
Stock warrants issued for services
rendered (unaudited) -- -- 1,106,400
Unrealized loss on securities (unaudited) (15,750) -- (15,750)
Net loss for the quarter ended
September 30, 1999 (unaudited) -- (4,347,177) (4,347,177)
------- ---------- ----------
Balance at September 30, 1999 (unaudited) (17,500) (9,979,497) (661,809)
</TABLE>
5
<PAGE> 8
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred stock Common stock Additional
no par value no par value paid-in
----------------------- -------------------------
Shares Amount Shares Amount capital
------------ ------ ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Proceeds from exercise of
warrants (unaudited) -- -- 10,000 5,000 --
Stock warrants issued for
services rendered (unaudited) -- -- -- -- 257,000
Proceeds from exercise of stock
options (unaudited) -- -- 70,663 15,000 326,687
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
December 31, 1999 (unaudited) -- -- -- -- --
--- ---------- --------- ----------- ----------
Balance at December 31, 1999 (unaudited) -- -- 6,406,578 7,377,888 2,560,987
Proceeds from issuance of preferred
stock (unaudited) 200 4,000,000 -- -- --
Proceeds from exercise of stock
warrants (unaudited) -- -- 1,527,469 7,311,249 --
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
March 31, 2000 (unaudited) -- -- -- -- --
--- ---------- --------- ----------- ----------
Balance at March 31, 2000 (unaudited) 200 $4,000,000 7,934,047 $14,689,137 $2,560,987
=== ========== ========= =========== ==========
<CAPTION>
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
----------------- ------------ ------------
<S> <C> <C> <C>
Proceeds from exercise of
warrants (unaudited) -- -- 5,000
Stock warrants issued for
services rendered (unaudited) -- -- 257,000
Proceeds from exercise of stock
options (unaudited) -- -- 341,687
Unrealized loss on securities (unaudited) (15,750) -- (15,750)
Net loss for the quarter ended
December 31, 1999 (unaudited) (4,319,313) (4,319,313)
----------- ------------ ----------
Balance at December 31, 1999 (unaudited) (33,250) (14,298,810) (4,393,185)
Proceeds from issuance of preferred
stock (unaudited) -- -- 4,000,000
Proceeds from exercise of stock
warrants (unaudited) -- -- 7,311,249
Unrealized loss on securities (unaudited) (9,618) -- (9,618)
Net loss for the quarter ended
March 31, 2000 (unaudited) -- (4,622,301) (4,622,301)
----------- ------------ -----------
Balance at March 31, 2000 (unaudited) $ (42,868) $(18,921,111) $ 2,286,145
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE> 9
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine months ended June 1, 1995 (inception)
March 31, to March 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(13,288,791) $(1,536,020) $(18,921,111) $(3,878,724)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 458,565 16,762 519,246 49,228
Minority interest in loss (242,833) -- (242,833) --
Issuance of stock and stock
warrants for services rendered 2,029,400 61,250 2,525,300 340,300
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable (262,070) (17,173) (364,083) (127,254)
Inventory (79,168) 57,434 (230,571) (100,350)
Prepaid expenses and
other current assets (51,922) -- (237,237) --
Deposits and other assets 14,829 (105,613) (180,328) (184,129)
Increase in:
Accounts payable 56,061 (238,072) 653,938 71,466
Accrued liabilities and payroll 690,485 (244,506) 944,453 89,232
------------ ----------- ------------ -----------
Net cash used in operating (10,675,445) (2,005,938) (15,533,226) (3,740,231)
activities
Cash flows from investing activities:
Capital expenditures (4,258,234) (32,392) (4,506,210) (154,464)
Accumulated other income/loss -- -- -- --
Purchase of marketable securities -- (105,000) (105,000) (105,000)
------------ ----------- ------------ -----------
Net cash used in investing activities (4,258,234) (137,392) (4,611,210) (259,464)
Cash flows from financing activities:
Proceeds from debt -- -- 655,000 655,000
Repayment of debt -- (642,500) (655,000) (642,500)
Contribution to capital 326,687 325,000 701,687 375,000
Proceeds from stock warrants exercised 7,337,819 224,542 8,403,342 224,542
Stock issued under stock option plan 15,000 -- 30,000 --
Proceeds from common stock issuances, net 5,768,750 5,103,195 12,024,545
Proceeds from preferred stock issuances, net 4,000,000 -- 4,000,000 6,256,196
------------ ----------- ------------ -----------
Net cash provided by
financing activities 17,448,256 5,010,237 25,159,574 6,868,238
------------ ----------- ------------ -----------
Net increase in cash 2,514,577 2,866,907 5,015,138 2,868,543
Cash at beginning of period 2,500,561 1,636 -- --
------------ ----------- ------------ -----------
Cash at end of period $ 5,015,138 $ 2,868,543 $ 5,015,138 $ 2,868,543
============ =========== ============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest -- -- $34,498 --
The fair value of common stock, options, and
warrants issued for services rendered are
increased in the cash flows from operating
activities.
</TABLE>
7
<PAGE> 10
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
NOTE A - BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by the
Company without audit. These statements reflect all adjustments, which are,
in the opinion of management, necessary to present fairly the financial
position as of March 31, 2000 and the results of operations and cash flows
for the period then ended. All such adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these financial statements be read in conjunction with the financial
statements and notes for the fiscal year ended June 30, 1999.
NOTE B - INVENTORIES
Inventories consist primarily of raw materials, work in progress and
finished goods, which are stated at the lower of cost or market. Cost is
determined under the first-in, first-out (FIFO) valuation method.
NOTE C - LOSS PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), Earnings Per Share. Basic loss per common share is based upon
the weighted average number of common shares outstanding during the period.
Diluted loss per common share is not disclosed because the effect of the
exchange or exercise of common stock equivalents would be antidilutive.
NOTE D - STOCK OPTIONS AND WARRANTS
During the three months ended March 31, 2000, the following changes occurred
in outstanding stock options and warrants.
<TABLE>
<S> <C>
Options outstanding at December 31, 1999 768,000
Options granted 186,000
Options cancelled (60,000)
Options exercised --
---------
Options outstanding at March 31, 2000 894,000
=========
Warrants outstanding at December 31, 1999 2,189,222
Warrants granted --
Warrants cancelled --
Warrants exercised (1,318,705)
---------
Warrants outstanding at March 31, 2000 870,517
=========
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENCIES
Through March 31, 2000, the Company had paid approximately $1,000,000 and
$220,000 to iXL and Oracle, respectively, for the development of portions of the
eMD.com website. Required additional payments under each contract through fiscal
2000 are approximately $1,300,000 and 980,000, respectively. These liabilities
are classified as notes payable in the accompanying Financial Statements.
On July 6, 1999, the Company entered into a lease agreement with an
unrelated party to lease an office building for a term of ten years. Required
minimum lease payments under this lease are approximately $45,000 per month for
the year ending June 30, 2000.
8
<PAGE> 11
NOTE F - SEGMENT INFORMATION
Beginning in April 1999, eMD.com began research and development on a
medication management and consumer web site. The site was launched in January
2000 and subsequently updated in March 2000. There have been significant
allocations of resources to eMD.com and, accordingly, the following table shows
key financial results of the individual segments of BioShield and eMD.com.
SEGMENT INFORMATION
KEY FINANCIAL DATA
BALANCE SHEET
As of March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
BioShield eMD.com
------------ -----------
<S> <C> <C>
Current assets $ 11,843,492 1,346,559
Property and equipment, net 248,212 6,084,813
Deposits and other long term assets 56,111 118,664
------------ -----------
Total assets $ 12,147,815 $ 7,550,036
============ ===========
Total liabilities 1,435,251 9,284,536
Total minority interest and equity 10,712,564 (1,734,500)
------------ -----------
Total liabilities & equity $ 12,147,815 $ 7,550,036
============ ===========
</TABLE>
STATEMENT OF OPERATIONS
Three Months Ended March 31, 2000
<TABLE>
<CAPTION>
BioShield eMD.com
------------ -----------
<S> <C> <C>
Sales $ 319,019 4,764
Cost of goods sold 161,266 1,399
------------ -----------
Gross margin 157,753 3,365
Cost of goods sold
Marketing and selling 333,307 1,125,727
General and administrative 552,909 1,889,501
Research and development 643,981 311,707
------------ -----------
Total expenses 1,530,197 3,326,935
Loss from operations $ (1,372,444) $(3,323,570)
============ ===========
</TABLE>
9
<PAGE> 12
NOTE G - SUBSEQUENT EVENTS
On May 5, 2000, Electronic Medical Distribution, ("eMD.com") acquired the
assets of LabAmerica, Inc., a specialty Internet company positioned to
facilitate confidential medical lab testing at more than 1,400 locations across
the United States. The purchase price includes 60,000 shares of eMD.com, Inc.
common stock of the company, $200,000 in cash and certain Convertible Warrants
to purchase shares of eMD.
On April 17, 2000 BioShield Technologies, Inc. Board of Directors approved
the repurchase of up to 250,000 shares of the company's common stock in the
market. Of the 250,000 shares approved by the Board of Directors, the Company
repurchased 35,000 shares of its own common stock for $537,000. The Board
authorized BioShield to repurchase the shares, from time to time, at prices the
company deems appropriate.
On April 20, 2000, the Company redeemed 50% of the outstanding Series A
Convertible Preferred Stock for $2.3 million.
NOTE H - CONTINUED OPERATIONS
The Company's continued existence as a going concern is ultimately dependent
upon the success of future operations and its ability to obtain additional
financing. As shown in the financial statements, the Company has incurred
cumulative comprehensive losses of $(18,948,000) from June 1, 1995 (inception)
to March 31, 2000. The Company is a development stage company primarily engaged
in research and development, patent filings, regulatory approvals and related
activities. Through March 31, 2000, the Company had raised $25,160,000 of
capital, plus an additional $6,192,000 classified as minority interest, through
its initial public offering and other private offerings of its securities. Of
the $25 million noted above, the Company successfully raised approximately $8
million in capital during the third quarter of fiscal 2000 and will continue to
actively seek additional funds through public and private equity, debt funding,
strategic collaborative agreements, or from other sources. The failure to raise
the necessary additional capital in the future may cause substantial delays or
reduction of the scope of the Company's business plan. The Company's
continuation as a going concern is dependent upon its ability to generate or
raise sufficient cash flow to meet its obligations on a timely basis, and
ultimately to attain profitability.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BioShield Technologies, Inc. ("the Company"), a Georgia Corporation
organized in June, 1995 has, since inception, been a development stage company
engaged primarily in research and development, patent filings, regulatory
approvals and related activities geared towards the sale of its retail,
industrial and institutional products. Most of the products which have been
commercialized are in the cleaning and deodorizing segment. Some of these
products provide long-term killing action of microorganisms responsible for
cross contamination and viral contamination. Many of these products inhibit and
control the growth of over 100 viral, bacteria, fungi and yeast organisms.
Revenues generated from operations to date have primarily been limited to test
marketing and private labeling of the Company's antimicrobial products in all
division areas. The Company has continued to successfully build brand
recognition and market penetration of its new "OdorFree" product line. This
brand is competing in the multi-million dollar odor elimination packaged goods
category. The national rollout is proceeding on a strategic basis by
establishing its market presence within each individual market. Currently
OdorFree is sold through several major super market chains throughout the united
states.
On April 7, 1999, the company created eMD.com to develop electronic commerce
via the internet. eMD.com seeks to integrate four product offerings for
providers (point of care medication management, electronic medical records,
pharmaceutical fulfillment and pharmaceutical care services) with a
comprehensive healthcare website. eMD.com launched its consumer and physician
web site in early January 2000. Prior to launch, the Company had been in the
development stage, which means its primary focus has been organizational
activities, raising capital, gaining regulatory approvals, research and
development and further investigation into new markets.
10
<PAGE> 13
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the three month period ended March 31, 2000 were $324,000, an
increase of $270,000 or 505% over the same period last year. The increase was a
result of increased distribution of the OdorFree(TM) product, primarily in the
mid and south-western United States, along with the introduction of two sizes of
Hypoallergenic OdorFree(TM). During late third quarter, the company also gained
new market penetration in the southeastern United States. As of March 31, 2000,
the company had distribution in over 6,000 retail outlets with its product.
Gross profit of $161,000 for the quarter ended March 31, 2000 represents 50% of
net sales as compared to $29,000, or 54% of net sales, for the quarter ended
March 31, 1999. The decrease in gross margin is a result of the change in
product mix and packaging year over year. The Company is gaining momentum as it
enters new retail markets. The Company settled its outstanding claim with the
EPA related to product labeling and, in fact gained EPA approval of its core
products in February 2000. BioShield has continued to make progress in product
development and testing. These events have prompted a significant increase in
sales that the Company believe will continue throughout fiscal 2001.
Total marketing and selling expenses in the quarter ending March 31, 2000
were $1,459,000. Marketing and selling expenses related to BioShield were
$333,000 for the quarter ended March 31, 2000, an increase of $137,000 from
$196,000 incurred during the quarter ended March 31, 1999. This increase relates
principally to the rollout of the OdorFree product line, repackaging efforts and
other one-time setup charges for certain retail accounts related to slotting
charges. Marketing and selling expenses related to eMD.com totaled $1,126,000
for the quarter ended March 31, 2000 as compared to zero for the same period in
prior year (eMD.com began operation in April 1999). The increase is a result of
pre-selling activities targeting physicians and physician groups in support of
the new website. Significant costs include initial development of marketing
materials and costs related to continuous technological improvement and testing
of the web site.
Total research and development expenses in the quarter ending March 31, 2000
were $956,000. Research and development expenses related to BioShield for the
quarter ended March 31, 2000 were $644,000, compared to $99,000 for the quarter
ended March 31, 1999. This represents an increase of $545,000. The increase is a
result of the continuous improvement and technological advancement in the
antimicrobial products. Research and development expenses related to eMD.com
were $312,000 primarily related to internal staff salaries and external business
partner development activities related to the web site. All third party costs
not directly related to the development of the web site were expensed as
incurred. Third party programming, software and hardware purchases have been
captured and capitalized as of March 31, 2000 with amortization of costs over a
five year period.
Total general and administrative expenses for the quarter ending March 31,
2000 were $2,442,000. General and administration expenses for BioShield were
$553,000, an increase of $205,000 over the same period ending March 31, 1999.
These higher costs related primarily to an increase in personnel cost. There
were no borrowings or interest expense incurred for the quarter ending March 31,
2000. General and administrative expenses related to eMD.com totaled $1,890,000.
These higher costs related primarily to an increase in personnel cost, legal and
regulatory fees, consulting services and facility costs. A significant portion
of the expenses incurred in the quarter will not be recurring in future periods
as staff levels have increased to eliminate expensive consultant activity.
As a result of the reasons set forth above, the Company's operations
generated a net loss of $4,622,000 or $.66 per common share for the quarter
ending March 31, 2000 compared to a net loss of $558,000 or $.09 per common
share for the quarter ended March 31, 1999. Cumulative losses from the inception
of the Company to March 31, 2000 totaled $18,921,000 or $3.73 per common share.
LIQUIDITY
The Company's cash and cash equivalents totaled $5,015,000 at March 31, 2000
and $378,655 at December 31, 1999. The higher cash position is due to a
successful warrant call of outstanding warrants issued in connection with its
initial Public Offering ("IPO"). During January 2000, the Company issued public
notice of redemption of outstanding warrants related to the IPO, which expired
February 22, 2000. Approximately 99.9% of the cash proceeds were received by
March 31, 2000 and the company raised over $7 million. The Company also
completed negotiations in early January with Jackson, LLC to increase the equity
credit facility from $6.25 to $10 million. Additionally, on January 13, 2000 the
Company completed a private placement for cash of $4 million for Series A
Convertible Preferred Stock and warrants to purchase 200,000 shares of common
stock of eMD.com.
11
<PAGE> 14
The impact of BioShield warrant redemption notice, the equity line of credit
and the private placement preferred stock has to date raised an additional $21
million in the calendar year 2000 to fund operations into calendar year 2001.
The Company however, expects to continue to have a substantial need to fund
operating losses and the purchases of additional capital equipment for an
indefinite period. Accordingly, the Company will be required to obtain
additional capital in the near future. The development of eMD.com, as well as
commercialization of the parent companies products will require additional
capital in order to successfully launch the site and related business. The
Company is actively seeking to obtain additional funds through public or private
equity or debt funding, strategic collaborative agreements, or from other
sources. The failure to raise the necessary additional capital in the near
future could cause substantial delay or reduction of the scope of business. No
assurance can be given that either the Company or eMD.com will be successful in
its efforts to obtain additional capital, that capital will be available on
terms acceptable to the Company or eMD.com or on terms that will not
significantly dilute the interests of existing shareholders.
FORWARD LOOKING STATEMENTS
When used in this form 10-QSB, the words or phrases "will likely result",
"are expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as to the date made. The
Company wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements. The Company does not
undertake, and specifically disclaims any obligation, to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
YEAR 2000 ISSUES
The Company experienced no adverse effect from the Year 2000 millennium bug.
All operations have proceeded without incident.
MANAGEMENT CHANGES
During the quarter ended March, 31, 2000 the company completed termination
negotiations with Timothy Hyerdal, former Chief Financial Officer for BioShield
Technologies. Also, subsequent to March 31, 2000, the company accepted the
resignation of Wayne Roberts, former V.P. of Corporate Communications for
BioShield.
SUBSEQUENT EVENTS
On May 5, 2000 eMD.com, acquired the assets of LabAmerica, Inc., a specialty
Internet company positioned to facilitate confidential medical lab testing at
more than 1,400 locations across the United States. The purchase price includes
60,000 shares of eMD.com, Inc., common stock and $200,000 in cash.
On April 17, 2000 BioShield Technologies, Inc. Board of Directors approved
the repurchase of up to 250,000 shares of the company's common stock in the
market. Of the 250,000 shares approved by the Board of Directors, the Company
repurchased 35,000 shares of its own common stock for $537,000. The Board
authorized BioShield to repurchase the shares, from time to time, at prices the
company deems appropriate.
12
<PAGE> 15
On April 20, 2000, the Company redeems 50% of the outstanding Series A
Convertible Preferred Stock for $2.3 million. The Series A Convertible Preferred
Stock were registered by the Company on Form SB-2 with the SEC for the
registration of common stock issuable pursuant to the conversion of the Series A
Preferred Stock during the third quarter of fiscal 2000.
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, and 5. Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.10 -- Employment agreement between the Company and Scott Parliament
and Electronic Medical Distribution, Inc. dated February 14, 2000.
10.11 -- Employment agreement between the Company and John Codilis and
Bioshield Technologies, Inc. dated February 7, 2000.
10.12 -- Employment agreement between the Company and Geoffrey Faux and
Electronic Medical Distribution, Inc. dated April 25, 2000.
10.13 -- Asset Purchase agreement by and among LabAmerica, Inc., Gregory
Smith, David Nelson, Gordon Schuchardt, Bryon M.G. Sanford,
Richard Fisher and eMD Acquisition Corp., dated as of April 17, 2000.
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K
None.
13
<PAGE> 16
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOSHIELD TECHNOLOGIES, INC.
Date: May 12, 2000 /s/ TIMOTHY C. MOSES
-------------------------------------------------
TIMOTHY C. MOSES
President and Chief Executive Officer
Date: May 12, 2000 /s/ SCOTT PARLIAMENT
-------------------------------------------------
SCOTT PARLIAMENT
Chief Financial Officer
14
<PAGE> 17
BIOSHIELD TECHNOLOGIES, INC
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.10 -- Employment agreement between the Company and Scott Parliament
and Electronic Medical Distribution, Inc. dated February 14, 2000.
10.11 -- Employment agreement between the Company and John Codilis and Bioshield
Technologies, Inc. dated February 7,
2000.
10.12 -- Employment agreement between the Company and Geoffrey Faux and
Electronic Medical Distribution, Inc. dated April 25, 2000.
10.13 -- Asset Purchase agreement by and among LabAmerica, Inc., Gregory
Smith, David Nelson, Gordon Schuchardt, Bryon M.G. Sanford,
Richard Fisher and eMD Acquisition Corp., dated as of April 17, 2000.
27 -- Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
SCOTT B. PARLIAMENT
The following are the terms and conditions of employment of Scott B.
Parliament (the "Executive") by Electronic Medical Distribution, Inc. d/b/a
eMD.com/BioShield Technologies, Inc. (the "Company"):
1. Position: The Executive shall be employed as the Company's
Chief Financial Officer. The Executive shall report to the Company's Chief
Executive Officer (the "CEO").
2. Salary: The Executive shall be paid an annual salary of one
hundred and twenty-five thousand dollars ($125,000.00).
3. Sign on Bonus: A sign on bonus of $7,500 will be paid on the
first paycheck of the Executive.
4. Benefits: The Executive shall generally be entitled to
participate in or receive such benefits as the Company provides from time to
time to its executives. The Executive shall be included in any Executive Bonus
Program as deemed by the Board of Directors.
5. Vacation: The Executive shall be entitled to twenty (20) days
of vacation during each calendar year, but such vacation shall not be
cumulative. At no time shall Executive be entitled to receive more than twenty
(20) days of vacation during any calendar year.
6. Payment of Compensation and Benefits: All salary, and any
other bonuses, stock option exercises, benefit payments and any other
compensation paid to Executive shall be paid in a manner consistent with the
standard payroll practices of the Company. The Company may withhold from any
payment any required taxes or other governmental withholdings, insurance or
benefit premiums or payments and similar items.
7. Business Expenses: The Company will reimburse the Executive
for reasonable bona fide business expenses incurred on behalf of the Company in
the ordinary course of business, provided, however, that the expense is
otherwise deductible by the Company as an ordinary and necessary business
expense for federal income tax purposes.
8. Three Months Review: On or about May 15, 2000, the Executive
and the CEO shall review Executive's performance and such other factors, as the
CEO deems appropriate. Based upon this review the CEO will determine if
Executive's employment should be continued and, if so, the terms of the
continuation of such employment including, but not limited to, any salary
increase and the targeted amount of Executive's bonus.
9. Stock Option Grant: Executive shall be entitled to receive a
stock option granted in accordance with the terms and conditions set forth in
the Company's stock option plan and stock option agreement. The amount of shares
to be granted under the stock option shall be one hundred twenty-five thousand
(125,000), the exercise price for each share shall be $4.67 and the option shall
vest in one third increments on the first, second and third anniversaries of the
date of the grant.
10. Employment at Will: Nothing in this Agreement should be
construed to confer any right of the Executive to be employed by the Company for
a fixed or definite term. The Executive acknowledges and agrees that he is an
employee at will and that his employment may be terminated by the Employee or by
the Company at any time with or without cause. If the Executive is terminated
without cause after the initial three months, he will be entitled to three-month
severance.
11. Termination Obligations: At the time of the termination of
employment of the Executive, Executive shall return to the
Company all personal property of the Company, including, but not limited to, all
computers, cellular phones, company credit cards, access keys, books, manuals,
records, reports, notes, contracts, lists and other documents or materials or
copies thereof (including all computer files) and all Confidential Information
(as defined in paragraph 12(a)) and other proprietary information relating to
the Company. Also at the time of the termination of employment of the Executive,
Executive shall tender his resignation from all offices and directorships then
held with the Company. Finally, Executive agrees not to disparage the Company,
its affiliates and
<PAGE> 2
any officer, director or employee of the Company or its affiliates while an
employee or after the termination of his employment.
12. Confidentiality and Non-Solicitation Agreement: As an express
condition of employment under this Agreement, Executive acknowledges and agrees
that:
(a) Executive will not, during the time he is employed by the
Company, or at any time thereafter, directly or indirectly disclose or
make available to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, any Confidential
Information (as defined below). The Executive, however, shall no be
obligated to treat as confidential any Confidential Information that
(i) was publicly known at the time of disclosure to the Executive, (ii)
becomes publicly known or available thereafter other than through the
disclosure directly or indirectly of Executive, or (iii) is disclosed
to Executive by a third party who is not known by Executive to be under
a duty of confidentiality. As used in the Agreement the term
"Confidential Information" means information disclosed to the Executive
or known by the Executive as a consequence of or through his
relationship with the Company, about the directors, officers,
shareholders, customers, employees, investors, business methods,
business plans and strategies, public relations methods, organization,
procedures or finances, including, without limitation, information of
or relating to shareholder, customer or investor lists of the Company
and any affiliate of the Company; and
(b) For a period of one (1) year thereafter, Executive will not,
either on his own account or jointly with or as a manager, agent,
officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, corporation or
other entity, (i) carry on or be engaged or interested directly or
indirectly in, or solicit the sale or provision of services or the
development or marketing of services similar to those offered by the
Company, (ii) endeavor directly or indirectly to canvas or solicit
customers in competition with the Company or to interfere with the
supply of orders for goods or services from or by any person,
corporation or other entity that while Executive was employed by the
Company supplied goods or services to the Company, or (iii) directly or
indirectly solicit or attempt to solicit away from the Company any of
this officers or employees or offer employment to any person who is an
officer or employee of the Company.
13. Injunctive Relief and Enforcement: The Executive acknowledges
and agrees that if he breaches his obligations under paragraph 12 of this
Agreement, there may be no adequate remedy at law. Therefore in such an event
the Executive agrees that the Company may apply for an injunction to prevent
further violations of this Agreement and such relief shall be in addition to any
other remedy, legal or equitable, that may be available to the Company. In
addition, in the event any provision of this Agreement, including, but not
limited to, paragraph 12, shall be determined by any court of competent
jurisdiction to be unenforceable for any reason, then each such provision shall
be interpreted to the maximum extent as to which it may be enforceable and
enforced as so interpreted, all as determined by such court in such action.
14. Choice of Law: This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Georgia without reference to the choice of law provisions of Georgia.
15. Dispute Resolution: Absent any irreparable injury being
suffered by the Company entitling the Company to seek injunctive relief against
the Executive pursuant to paragraph 13 of this Agreement, in the event there
shall be a dispute among the parties arising out of or relating to this
Agreement, or the breach thereof, the parties agree to the following procedures:
(a) Within thirty days after notice from a party of any dispute,
the parties shall meet and attempt to resolve such dispute informally
with or without a mediator as the parties mutually agree; and
(b) If the parties are unable to resolve the dispute informally,
then either party may institute a lawsuit in the federal or state
courts of Gwinnett County, Georgia. The parties agree that the federal
and state courts of Gwinnett County, Georgia, shall have sole
jurisdiction over such disputes and each party expressly consents to
the personal jurisdiction of such courts and expressly waives all
defenses of lack of personal jurisdiction and inconvenient forum.
<PAGE> 3
16. Entire Agreement: This Agreement contains the entire agreement
and understanding between the Company and the Executive with respect to the
employment of the Executive by the Company and no representations, promises,
agreements or understandings, written or oral, not contained in this Agreement
shall be of any force or effect. This Agreement may not be changed unless in
writing signed by both the Executive and the CEO.
This Agreement is dated the 15th day of February 2000.
<TABLE>
<CAPTION>
EXECUTIVE ELECTRONIC MEDICAL
DISTRIBUTION, INC. d/b/a
<S> <C>
eMD.com/Bioshield Technologies, Inc.
/s/ Scott B. Parliament By: /s/ TIMOTHY C. MOSES
- ----------------------- --------------------------------
SCOTT B. PARLIAMENT Title: Chief Executive Officer
</TABLE>
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
JOHN M. CODILIS
THIS EMPLOYMENT AGREEMENT ("Agreement"), which for identification
purposes only is dated the 7th day of February 2000, is entered into by and
between BIOSHIELD TECHNOLOGIES, INC., a Georgia corporation (the "Employer") and
JOHN M. CODILIS, an individual residing in Glen Ellyn, Illinois (the
"Employee").
WHEREAS, the Employer is in the antimicrobial and biostatic products
development business (the "Business"); and
WHEREAS, Employer desires to hire Employee and Employee desires to be
employed by the Employer in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and promises contained herein, it is agreed by the parties as
follows:
SECTION 1. Term. This Agreement commences effective on February 7,
2000, and shall continue until terminated by either party. Termination may be
with or without any reason whatsoever, upon giving thirty (30) days written
notice by one party to another. Notwithstanding the foregoing to the contrary,
termination shall be immediate upon any of the following events:
(A) Upon the death of Employee.
(B) By the Employer notifying the Employee in writing that the
Agreement is being terminated for cause. A termination for cause is
hereby defined as a termination as a result of theft or
misappropriation of Employer's assets by Employee, or gross negligence
of Employee pertaining to the conduct of business on behalf of
Employer. The disability of Employee shall not be considered cause.
(C) This Agreement will automatically terminate on August 31, 2003, if
not previously terminated pursuant to other provisions hereof.
<PAGE> 2
SECTION 2. Duties of Employee. As a full-time employee of Employer,
Employee's primary responsibilities shall be to direct the distribution, sales
and marketing of Employer's products (the "Products") through retail trade
channels primarily in North America.
SECTION 3. Base Salary. Employee shall be paid a "Base Salary" of One
Hundred Seventy-Five Thousand Dollars ($175,000.00) per year, payable on the
same periodic basis as other full-time employees of Employer, as they may be
paid by Employer from time to time; provided, however, that said Base Salary
shall be paid at least on a monthly basis in arrears. In the event that this
Agreement is terminated, then Employee's Base Salary even though stated in
annual terms, shall be prorated through the date of termination. The Employee's
Base Salary shall be increased on an annual basis in an amount at least equal to
the Consumer Price Index cost of living increase for all wage earners in the
Chicago Metropolitan Area.
SECTION 4. Cash Bonus. In the event that Employee remains an employee
of the Employer beyond August 31, 2000, then the Employer shall promptly adopt a
reasonable bonus program which will provide Employee the opportunity to earn
cash bonuses of up to one-half (1/2) of his Base Salary in any one (1) year
period.
SECTION 5. Stock Options and Departure Fee. As an inducement to
Employee accepting employment with Employer, Employer agrees to grant to
Employee the option to purchase common stock of Employer; and in the event that
certain objectives are met, then Employer agrees to grant to Employee additional
options to purchase common stock of Employer. Additionally, the parties have
agreed that if the Employee's employment with Employer terminates prior to
September 1, 2000, then Employer shall be obligated to pay to Employee a fee
(the "Departure Fee").(1) Sections 5.01 through 5.05 hereof detail the
understanding of Employer and Employee as to the granting of stock options and
the payment of the Departure Fee.
- -----------------
(1) The term Departure Fee is defined and discussed at Section 5.05 hereof.
<PAGE> 3
SECTION 5.01. Definitions. For purposes of this Agreement, the
following terms are defined:
(A) "Stock" - The common stock of Employer.
(B) "Option" - The right to purchase Stock of the Employer.
(C) "Strike Price" - The price which Employee shall pay for each share
of Stock if Employee exercises any Option. The parties agree that the
Strike Price shall be the price at which the Stock closes at for public
trading, as measured on February 7, 2000, which the parties acknowledge
is $8.75 per share.
(D) "Exercise Date" - January 31, 2005.
(E) "Expired Option" - An Option which is not exercised on or before
the Exercise Date.
(F) "Primary Objective" - The primary objective shall be satisfied, if
during the term of this Agreement; (1) A National Sales Organization
for the Employer is formed which includes six (6) contract Regional
Sales Managers or such lesser amount as Employer may decide; and (2)
The Employee establishes on behalf of Employer a National Broker
Organization which reports to the various Regional Sales Managers.
<PAGE> 4
(G) "Secondary Objective" - The Secondary Objective shall be satisfied
if during the term of this Agreement; (1) Employee develops and
executes a retail distribution strategy, which includes shelf and
pricing objectives; (2) Employee makes Product presentations to at
least twenty (20) accounts which shall include Product presentations to
Kmart, Target, Kroger-Cincinnati, Albertson's-Boise, and
Safeway-Corporate; (3) Employee establishes a fact-based sales
presentation supporting Employer's technology which will formulate a
rationale for customers to consider another brand and/or private label
items in the category; (4) On the condition that Employer consents,
Employee shall assist Employer in hiring a marketing consultant so that
Employer can begin formulating the foundation for the division's
business plan; and (5) The Employee will provide to the Employer by
market and by account the amount of slotting dollars required for
branded product distribution and the Employee will use reasonable
efforts to negotiate down the amount of slotting dollars required for
branded product distribution.
(H) "Sixth Month Review" - A meeting between Employer and Employee
wherein the parties shall review the Employee's performance and such
other factors as the parties deem appropriate. The Sixth Month Review
shall take place on or about August 1, 2000.
<PAGE> 5
SECTION 5.02. Initial Stock Option. Employer hereby grants to Employee
an Option to purchase up to One Hundred Fifty Thousand (150,000) shares of Stock
(the "Initial Stock Option") upon the following terms and conditions:
(A) The Employee shall become vested in the Initial Stock
Option according to the following schedule:
(I) Subject to the provisions of Section 5.02 (a)(iv)
below, if Employee is employed by Employer on August
1, 2001, then Employee shall become vested in
one-third (1/3) of the Initial Stock Option, thereby
giving him the right to acquire Fifty Thousand
(50,000) shares of Stock.
(II) Subject to the provisions of Section 5.02
(a)(iv) below, if Employee is employed by Employer on
August 1, 2002, then Employee shall become vested in
an additional one-third (1/3) of the Initial Stock
Option, thereby giving him the right to acquire an
additional Fifty Thousand (50,000) shares of Stock.
(III) Subject to the provisions of Section
5.02(a)(iv) below, if Employee is employed by
Employer on August 1, 2003, then Employee shall
become vested in the final one-third (1/3) of the
Initial Stock Option, thereby giving Employee the
right to acquire an additional Fifty Thousand
(50,000) shares of Stock.
<PAGE> 6
(IV) If either (1) Employee dies prior to September
1, 2000, (2) Employer terminates Employee's
employment with or without cause prior to September
1, 2000, or, (3) Employee's employment is terminated
effective as of the Early Termination Date as
provided for in Section 5.05 hereof; then Employee
shall not be vested in any of the Initial Stock
Option, and the entire Initial Stock Option shall
lapse. If after August 31, 2000 either, (1) Employee
voluntarily terminates his employment with Employer,
or (2) Employer terminates Employee's employment for
cause, then to the extent that any of the Initial
Stock Option shares are not vested, then Employee's
Option to purchase the non-vested shares shall lapse.
However, if at any time after August 31, 2000, but
prior to Employee becoming vested in the entire
Initial Stock Option, either Employee dies or
Employer terminates Employee's employment without
cause, then Employee shall become immediately vested
in the entire Initial Stock Option.
(B) Whenever Employee is vested pertaining to any portion of
the Initial Stock Option, then Employee may exercise his
Option to purchase such shares, regardless of Employee's
employment status
<PAGE> 7
as of the date that the Option is exercised. The Option must
be exercised on or before the Exercise Date. If the Option is
not exercised on or before the Exercise Date, then the Option
shall become an Expired Option and the Option shall lapse. If
an Option is timely exercised, then the price per share shall
be the Strike Price.
SECTION 5.03. Primary Objective Stock Option. If the Primary Objective
is satisfied, then the Employee shall automatically be granted an Option to
purchase Twenty-Five Thousand (25,000) shares of Stock (the "Primary Objective
Stock Option") at the Strike Price, regardless of Employee's employment status
as of the date that the Option is exercised. The Primary Objective Stock Option
shall be exercised by Employee on or before the Exercise Date. If the Primary
Objective Stock Option is not exercised by Employee on or before the Exercise
Date, then it shall be considered an Expired Option and it shall lapse.
SECTION 5.04. Secondary Objective Stock Option. If the Secondary
Objective is satisfied, then the Employee shall automatically be granted an
Option to purchase Twenty-Five Thousand shares of Stock (the "Secondary
Objective Stock Option") at the Strike Price, regardless of Employee's
employment status as of the date that the Option is exercised. The Secondary
Objective Stock Option shall be exercised by Employee on or before the Exercise
Date. If the Secondary Objective Stock Option is not exercised by Employee on or
before the Exercise Date, then the Secondary Objective Stock Option shall be
considered an Expired Option and it shall lapse.
SECTION 5.05. The Departure Fee. The parties contemplate that on
approximately August 1, 2000, Employer and Employee shall hold the Six Month
Review. At that time, the parties shall decide whether or not to continue this
Agreement. If the parties cannot mutually agree to continue this Agreement, then
this Agreement shall automatically terminate effective August 31,
<PAGE> 8
2000 (the "Early Termination Date"), without the requirement of thirty (30) days
written notice as required in Section 1 hereof. If this Agreement is terminated
(A) as of the Early Termination Date, or (B) by Employer without cause on or
before the Early Termination Date, then Employer shall owe to Employee the
"Departure Fee" which shall be Eighty-Seven Thousand Five Hundred Dollars
($87,500.00). The Departure Fee shall be payable to Employee thirty (30) days
after employment termination. If Employee is paid the Departure Fee, then both
the Primary Objective Stock Option (to the extent earned) and the Secondary
Objective Stock Option (to the extent earned) shall be rescinded and may not be
exercised by Employee. Alternatively, Employee can elect within fifteen (15)
days after employment termination to waive the Departure Fee. If Employee elects
to waive the Departure Fee, then Employee's rights in and to the Primary
Objective Stock Option and the Secondary Objective Stock Option shall not be
rescinded and any such rights, pursuant to such Options, shall remain in full
force and effect.
SECTION 6. Severance Pay. The parties agree that in the event that
Employee's employment is terminated for any reason after the Early Termination
Date,(2) except in the event of (A) a termination of Employee for cause, (B)
Employee's death, or (C) Employee's voluntary termination; then Employee shall
be paid "Severance Pay". The Severance Pay shall be an amount equal to one (1)
year of Employee's Base Salary, as Base Salary is measured as of the date of
termination. If Employee's employment is terminated on or before the Early
Termination Date, then there shall not be any Severance Pay. Severance Pay may
be payable by Employer to Employee in twelve (12) equal consecutive monthly
installments commencing no later than thirty (30) days after the date of
termination. In the event that Employee breaches the provisions of Section 8(a)
hereof, Employer may discontinue paying Severance Pay to Employee as liquidated
damages.
- -----------------
(2) The term Early Termination Date is defined at Section 5.05 hereof as
August 31, 2000.
<PAGE> 9
SECTION 7. Fringe Benefits. As additional consideration for the
services to be rendered by Employee to Employer, during the term hereof Employer
shall provide those fringe benefits which are detailed as follows:
(A) Expenses. Employer agrees to pay for all ordinary and necessary
business related expenses (in accordance with Employer's policies)
incurred by Employee in the performance of his duties as an employee of
Employer. Employer and Employee agree that ordinary and necessary
business related expenses shall include, but are not limited to, all
reasonable business expenses for each office, Employee's travel
(including but not limited to travel between Chicago and Georgia) and
parking, Employee's hotel and meals while outside of the Chicago
Metropolitan Area and telephone expense. Whenever Employee is outside
of the Chicago Metropolitan area, Employer shall provide Employee with
a per diem for meals which shall be Ten Dollars ($10.00) for breakfast,
Twelve Dollars ($12.00) for lunch and Twenty-Five Dollars ($25.00) for
dinner, plus the full amount of meals incurred while entertaining
customers and/or prospects.
(B) During the term of this Agreement, Employee shall be entitled to
three (3) weeks of vacation during each calendar year, on a
non-cumulative basis.
(C) The Employee shall generally be entitled to participate in or
receive health, long-term disability insurance, and similar benefits as
the Employer provides from time to time to its executives.
<PAGE> 10
SECTION 8. Restrictive Covenants. To induce Employer to execute,
deliver and perform this Agreement, Employee agrees as follows:
(A) Interference with Business. During the term of this
Agreement, and for a period of one (1) year after the
termination of this Agreement, neither Employee, nor anyone
operating at Employee's direction or for Employee's benefit,
shall, on their own account, or as an employee, consultant,
partner, member, manager, owner, officer, director or
shareholder of any other person, firm, partnership, limited
liability company or corporation, or in any other capacity, in
any way, directly or indirectly, solicit, divert, take away or
interfere with the Business of Employer.
(B) Non-Disclosure. During the entire term of this Agreement,
and for a period of one (1) year after the termination of this
Agreement, Employee shall not disclose to others nor shall
Employee use for Employee's financial gain any confidential
information pertaining to Employer's Business concepts,
pricing, designs, plans, know-how, trade secrets, software,
data or other technical items, marketing or other business
information which is the property of Employer, pertaining to
the operation of Employer's Business.
(C) Relief and Remedy. Employee acknowledges and agrees that:
(I) The restrictive covenants contained in
Subsections (a) and (b) of this Section are
<PAGE> 11
reasonable and necessary to protect Employer's
legitimate business interests;
(II) The restrictive covenants contained in
Subsections (a) and (b) of this Section are
reasonable and necessary to protect Employer's trade
secrets and confidential information;
(III) The periods of time provided herein are the
minimum periods of time necessary to protect Employer
and its successors and assigns, from unauthorized use
or disclosure of confidential information and
unauthorized use of any goodwill associated with
Employer's business. Employee acknowledges and agrees
that money damages alone cannot compensate Employer,
its successors or assigns, in the event of a breach
or violation of the noninterference or nondisclosure
covenants contained in this Section, and that
injunctive relief is essential for the protection of
Employer and its successors and assigns. Accordingly,
Employee agrees and consents that in the case of any
breach or violation of this Section, Employer may
have such injunctive relief, without bond but upon
due notice. No waiver of any breach or violation of
any of the provisions of this Section shall be
implied from
<PAGE> 12
forbearance or failure by Employer to take action
thereon. To the extent that any provision of this
Section is deemed unenforceable by virtue of its
scope in terms of length of time or nature of
restriction, or as to any one (1) or more of the
parties, but may be made enforceable by limitation
thereof, the parties agree that the same shall,
nevertheless, be enforceable to the fullest extent
permissible under the laws and public policies
applied in such jurisdiction in which enforcement is
sought.
(D) Rights Cumulative. The rights and remedies granted to
Employer in this Agreement in the event of default are
cumulative, and the exercise of any right or remedy, including
the right to money damages, shall be without prejudice to the
enforcement of any other right or remedy authorized by law or
this Agreement.
(E) Costs. In the event of any violation by Employee of the
restrictive covenants contained herein, and on the condition
that Employer prevails in its claim against Employee for
relief, then Employee agrees to pay Employer, an amount equal
to the aggregate of its reasonable attorneys' fees and court
costs.
SECTION 9. Place of Employment. During the term of this
Agreement, the Employer's headquarters shall be located in the Atlanta Georgia
area. However, Employee shall maintain a satellite office in his home in Glen
Ellyn, Illinois.
<PAGE> 13
SECTION 10. Termination Obligations. At the time of his resignation or
termination from the Employer, the Employee shall promptly return to the
Employer all personal property, both tangible and intangible, furnished to or
prepared by the Employee in the course of or incident to his employment, the
Employee hereby acknowledging and agreeing that such property belongs to the
Employer, such that following termination the Employee will not retain any
written or other tangible material containing any proprietary information of the
Employer. Personal property includes, without limitation, all computers,
cellular phones, credit cards of Employer, access keys, books, manuals, records,
reports, notes, contracts, lists and other documents or materials, or copies
thereof (including computer files) and all other proprietary information
relating to the Business of the Employer.
SECTION 11. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties, their heirs, legatees, executors,
administrators, successors, or assigns.
SECTION 12. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter of Employee's
employment. There are no restrictions, agreements, promises, warranties,
covenants or undertakings other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof including the
provisions of any employee handbook or manual.
SECTION 13. Assignment. Employee shall not have the right to assign,
delegate or subcontract any or all of his rights and/or responsibilities under
this Agreement, without the prior written consent of Employer.
SECTION 14. Amendments. This Agreement may be amended only by a written
instrument duly executed by all of the parties hereto, or their permitted
successors and assigns.
SECTION 15. Waiver. No waiver of any breach or default hereunder shall
be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
<PAGE> 14
SECTION 16. Headings. The headings contained herein are for the
convenience of the parties only and are not intended to define or limit the
contents of said paragraphs.
SECTION 17. Governing Law. This Agreement and all amendments hereto
shall be governed by and construed in accordance with the laws of the State of
Georgia applicable to contracts made and to be performed therein.
SECTION 18. Notices. All Notices, claims, certificates, requests,
demands and other communications pursuant to this Agreement shall be in writing.
All Notices shall be given by either (A) personal delivery; (B) certified or
registered mail, postage prepaid, return receipt requested; or (C) for overnight
delivery by a nationally recognized overnight mail service, as follows:
<TABLE>
<S> <C>
if to Employer, to: BioShield Technologies, Inc.
4405 International Boulevard
Suite B-109
Norcross, Georgia 30093
Attention: President
with a copy to: Schreeder, Wheeler & Flint, LLP
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, Georgia 30303-1845
Attention: Edwin H. Brown
if to Employee, to: Mr. John M. Codilis
563 North Main Street
Glen Ellyn, Illinois 60137
with a copy to: Lurie & Unterberger, Ltd.
30 North LaSalle Street
Suite 2040
Chicago, Illinois 60602
</TABLE>
<PAGE> 15
or to such other address as the party to whom Notice is to be given previously
may have furnished to the other party by Notice in the manner set forth in this
Section. If the Notice is served by personal delivery or by overnight delivery,
then the Notice shall be deemed served upon delivery. If the Notice is served by
certified mail, then the Notice shall be deemed served on the calendar day
following the deposit of the Notice by certified mail.
SECTION 19. Severability. If any term, condition or provision of this
Agreement shall be declared invalid or unenforceable, the remainder of the
Agreement, other than such term, condition or provision, shall not be affected
thereby and shall remain in full force and effect and shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 20. Jurisdiction and Venue. The parties agree that the Federal
or State courts located in the State of Georgia have personal jurisdiction over
the parties to this Agreement. Furthermore, the parties stipulate that the State
of Georgia shall be the appropriate venue and proper location for the
determination of all disputes arising under this Agreement.
SECTION 21. Arbitration. Absent any irreparable injury being suffered
by the Employer entitling the Employer to seek injunctive relief against
Employee pursuant to this Agreement, in the event there shall be a dispute among
the parties arising out of or relating to this Agreement, or the breach thereof,
the parties agree that such dispute shall be resolved by final and binding
arbitration in Atlanta, Georgia under the Rules of the American Arbitration
Association. Any award issued as a result of such arbitration shall be final and
binding between the parties thereto, and shall be enforceable by any court
having jurisdiction over the party against whom enforcement is sought. The fees
and expenses relating to such arbitration (with the exception of the Employer's
attorneys' fees and the Employee's attorneys' fees, if any) shall be shared
equally by the Employer and the Employee.
<PAGE> 16
SECTION 22. Referrals. If a future employer of Employee inquires into
this relationship between Employer and Employee, the response of Employer must
be that Employee was a consultant and completed his assignment successfully.
SECTION 23. Release. As a condition of Employer paying to Employee the
Departure Fee or Severance Pay, the Employer may require that the Employee
execute a release acceptable to the Employer of all liability of the Employer,
and its directors, officers, shareholders, employees, agents and attorneys, to
the Employee in connection with or arising out of his employment with the
Employer. Such release shall not include any release of Employer's obligations
to pay Base Salary, Severance Pay, or the Departure Fee; nor shall the release
alter any of Employer's obligations to Employee pertaining to the Initial Stock
Option, the Primary Objective Stock Option or the Secondary Objective Stock
Option.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the dates appearing below their signatures.
<TABLE>
<S> <C>
BIOSHIELD TECHNOLOGIES, INC.
a Georgia corporation /s/ John M. Codilis
------------------------------
JOHN M. CODILIS
By /s/ TIMOTHY C. MOSES
-------------------------------------
Its Date Signed:
----------------------------------- -----------------
Date Signed
-----------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is dated as of April 11,
2000, between ELECTRONIC MEDICAL DISTRIBUTION, INC. d/b/a EMD.COM, a Delaware
corporation (the "Company"), and GEOFFREY L. FAUX (the "Executive").
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term.
(a) The "Initial Term" of the employment of the Executive
by the Company as provided in Section 1 will commence on April 11, 2000
(the "Effective Date") and will terminate at 11:59 p.m. on April 11,
2003 (the "Expiration Date") unless extended or sooner terminated as
hereinafter provided (such period, the "Employment Period").
(b) The "Employment Period" may be extended beyond the
Initial Term by the mutual agreement of the parties in writing at least
ninety (90) days prior to the end of the Initial Term (the "Extended
Term").
(c ) The "Business" of the Company shall be medical
e-commerce online and provide physicians with internet medication
management solutions.
3. Position, Duties and Responsibilities.
(a) Position. The Executive hereby agrees to serve as
President of eMD.com reporting to the Board of Directors of the Company
("Board") and to the Chief Executive Officer of the Company ("CEO").
The Executive will observe on the Board for six (6) months and then
Executive will be reviewed at the end of said period by the Board of
Directors to become a member.
Duties/Goals/Objectives:
- Review current company structure and
design/form/develop new infrastructure structure to
meet the company business plan needs for the next 24
months.
- Review and complete for years 1, 2 and 3 Business
Plans and financial projections/forecasts.
- Review and implement reporting procedures and
accountability.
- Provide broader coverage of the company on Wall
Street.
- Assist in raising capital for eMD and make
preparations for taking the company public.
- Set financial and performance goals and revenue
objectives including timetables.
- Provide weekly report to Tim Moses.
(b) Place of Employment. During the term of this
Agreement, the Company's headquarters shall be located in the greater
Atlanta, Georgia area.
(c) Other Activities. Except with the prior written
approval of the Board (which the Board may grant or withhold in its
sole and absolute discretion), the Executive, during the Employment
Period, will not (i) accept any other employment, or (ii) engage,
directly or indirectly, in any other business activity (whether or not
pursued for pecuniary advantage) that is or may be competitive with or
that might place him in a competing position to, that of the Company or
any of its affiliates. Notwithstanding the foregoing, the Company
agrees that the Executive (or affiliates of the Executive) shall be
permitted: (i) to make any passive personal investments that are not in
a business activity that is directly or indirectly competitive with the
Company (ii) to participate in industry organizations, (iii) with the
consent of the Board of Directors of the Company, to be a member of
Boards of Directors of other entities which do not directly compete
with the Company, and (iv) to participate in charitable or educational
activities.
(d) Present Outside Activities. Executive shall disclose
to the Board and to the CEO all outside activities in which he is
involved and any apparent conflict of interest prior to the execution
of this Agreement.
<PAGE> 2
4. Compensation and Related Matters.
(a) Salary and Bonus. During the Employment Period, the
Company shall pay the Executive a salary of two hundred fifty thousand
dollars ($250,000.00) annually (the "Salary"). The Executive shall also
be eligible for bonuses of 50% of the Executive's salary as may be
determined in the sole discretion of the Board of Directors and/or the
CEO. All Salary and bonuses to be paid consistent with the standard
payroll practices of the Company (e.g., timing of payments and standard
employee deductions, such as income tax withholdings, social security,
etc.).
(b) Stock Options.
(1) In addition to the Salary, the Executive
shall be entitled to receive a stock option
granted in accordance with the terms and
conditions set forth in the Company's stock
option plan and the stock option agreement.
The amount of shares granted under the stock
option shall be 900,000 vested over three
years in equal annual amounts at a strike
price of $4.67.
(2) Stock option break-up fee. If both parties
agree that the Executive's employment with
Company terminates prior to April 11, 2001,
then Company will give 50,000 options at a
strike price of $4.67.
(c) Vacation. During the Employment Period Executive
shall be entitled to 20 days of vacation during each calendar year and
shall not be cumulative, unless and until the Company changes its
policy toward accumulation of vacation days for other employees of the
Company in which case Executive's vacation days shall follow such
policy of the Company. Unless and until such policy change at no time
shall Executive be entitled to receive more than 20 days of vacation.
(d) Business Expenses. The Company will reimburse the
Executive for reasonable bona fide business expenses incurred on behalf
of the Company in the ordinary course of business, provided, however,
that the expense is otherwise deductible by the Company as an ordinary
and necessary business expense for federal income tax purposes.
(e) Relocation Expenses: Total estimate cost for
relocation $50,000 +/- 10% either way. This amount includes
compensation of relocation from current property to the Atlanta,
Georgia area home. Reimbursement of real estate commissions resulting
from sale of current home and closing costs pursuant to the purchase of
the Atlanta area home. Costs that are not included would be the Brokers
costs. Reimbursable costs include moving of personal items, mover and
travel expenses. The Executive will also receive temporary living
expenses of $8,000.
(f) Other Benefits. The Executive shall generally be
entitled to participate in or receive health, long-term disability
insurance, and similar benefits as the Company provides from time to
time to its executives. The Executive shall cooperate with the issuance
of a key man term life insurance policy for the benefit of the Company,
if so requested by the Company.
(g) Withholding. All salary, bonus payments, stock option
exercises, benefit payments and other payments due to Executive under
this Agreement shall be paid in a manner consistent with the standard
payroll practices of the Company. The Company may withhold from any
payment any required taxes or other governmental withholdings,
insurance or benefit payments and similar items.
(h) CHANGE OF CONTROL. IN THE EVENT THERE IS A CHANGE OF
CONTROL OF THE COMPANY, THEN THIS OPTION SHALL NOT TERMINATE BUT RATHER OPTIONEE
SHALL HAVE THE IMMEDIATE RIGHT TO EXERCISE THIS OPTION WITH RESPECT TO ALL
SHARES GRANTED PURSUANT TO THIS OPTION AT ANY TIME, NOTWITHSTANDING THE
PROVISION OF SECTION 6 HEREOF, PROVIDED, HOWEVER, THAT SHOULD THE CHANGE OF
CONTROL RESULT IN THE TERMINATION OF THIS OPTION WITHOUT THE SIMULTANEOUS
CONVERSION OF THIS OPTION INTO OPTIONS TO PURCHASE LIKE STOCK OF THE COMPANY, OR
A CORPORATION ACQUIRING OR SUCCEEDING TO THE RIGHTS OF THE COMPANY IN SUCH
CHANGE OF CONTROL, UPON TERMS SUBSTANTIALLY SIMILAR TO THOSE DESCRIBED HEREIN,
THEN OPTIONEE SHALL HAVE THE IMMEDIATE RIGHT UPON SUCH CHANGE OF CONTROL TO
EXERCISE THIS OPTION WITH RESPECT TO ALL SHARES GRANTED PURSUANT TO THIS OPTION
AT ANY TIME, REGARDLESS OF WHETHER OPTIONEE'S EMPLOYMENT WITH THE COMPANY HAS
TERMINATED.
FOR PURPOSES OF THIS SECTION, "CHANGE OF CONTROL" OF THE COMPANY SHALL
BE DEEMED TO HAVE OCCURRED IF (I) A TENDER OFFER SHALL BE MADE AND CONSUMMATED
FOR THE OWNERSHIP OF 50% OR MORE OF THE OUTSTANDING VOTING SECURITIES OF THE
COMPANY, (II) THE COMPANY SHALL SELL SUBSTANTIALLY ALL OF ITS ASSETS TO ANOTHER
CORPORATION THAT IS NOT A WHOLLY OWNED SUBSIDIARY, (III) A PERSON, WITHIN THE
MEANING OF SECTION 3 (A) 9 OR OF SECTION 13 (A) (3) (AS IN EFFECT ON THE DATE
HEREOF) OF THE SECURITIES EXCHANGE ACT OF 1934, SHALL ACQUIRE 50% OR MORE OF THE
OUTSTANDING VOTING SECURITIES OF THE COMPANY (WHETHER DIRECTLY, INDIRECTLY,
BENEFICIALLY OR OF RECORD), OR (IV) THERE SHALL BE A CHANGE WITHIN THE PERIOD
BEGINNING WITH THE FIRST DAY AFTER ANY ANNUAL MEETING OF STOCKHOLDERS OF THE
COMPANY, OF MORE THAN TWO-THIRDS OF ITS MEMBERS OF THE BOARD OF DIRECTORS OF THE
COMPANY. FOR
<PAGE> 3
PURPOSES HEREOF, OWNERSHIP OF VOTING SECURITIES SHALL TAKE INTO ACCOUNT AND
SHALL INCLUDE OWNERSHIP AS DETERMINED BY APPLYING THE PROVISIONS OF RULE
13D-3(1)(I) (AS IN EFFECT ON THE DATE HEREOF) PURSUANT TO THE SECURITIES
EXCHANGE ACT OF 1934.
5. Termination or Resignation.
(a) Termination. The Executive's employment hereunder
shall be, or may be, as the case may be, terminated and shall
constitute a "Termination" under the following circumstances:
(i) Death. The Executive's employment hereunder
shall terminate upon his death.
(ii) Disability. The Executive's employment
hereunder shall terminate on the Executive's physical or mental
disability or infirmity which, in the opinion of a competent physician
selected by the Board, renders the Executive unable to perform his
duties under this Agreement for more than 30 days during any 120-day
period.
(iii) With Cause. The Company may terminate the
Executive's employment hereunder for Cause. "Cause" shall mean (a)
Executive's material breach of any of the terms of this Agreement, (b)
Executive's conviction of a crime involving moral turpitude or
constituting a felony under the laws of any state, the District of
Columbia or of the United States, (c) Executive's repeated failure or
refusal to follow the directives of the Board or the CEO; (d)
Executive's inappropriate business conduct that is directly related to
Executive's activities on behalf of the Company that may cause material
harm to the business interests of the Company; or (e) Executive's
inability to practice medicine for any reason, including, but not
limited to, the loss of Executive's professional license to practice
medicine.
(iv) By the Company for Any Other Reason. The
Company may terminate the Executive's employment hereunder at any time
for any reason other than the Executive's Death or Disability or for
Cause.
(v) Resignation of Executive. The Executive may
voluntarily resign his position and terminate his employment and Salary
with the Company at any time, with or without cause, by delivery of a
written notice of resignation to the Company (the "Notice of
Resignation"). The Notice of Resignation shall set forth the date such
resignation shall become effective (the "Date of Resignation"), which
date shall, in any event, be at least thirty (30) days and no more than
sixty (60) days from the date the Notice of Resignation is delivered to
the Company. At its option, the Company may reduce such notice period
to any length, upon written notice to the Executive.
(b) Notice of Termination by Company. Any termination of
the Executive's employment by the Company shall be communicated by
written Notice of Termination to the Executive. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied
upon and shall set forth, if applicable, in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. "Date of
Termination" shall mean (i) if the Executive's employment is terminated
by his death, the date of his death, (ii) if the Executive's employment
is terminated by reason of his disability, the date of the opinion of
the physician referred to in Section 5(a)(ii), above, (iii) if the
Executive's employment is terminated by the Company for Cause pursuant
to subsection 5(a)(iii) above or without Cause pursuant to subsection
5(a)(iv) above, the date specified in the Notice of Termination and
(iv) if the Executive voluntarily resigns pursuant to subsection
5(a)(v) above, the date of the Notice of Resignation.
<PAGE> 4
(c) Terminability of Employment. Notwithstanding the Term
of this Agreement and the annual salary to be paid to the Executive
during his employment with the Company, nothing in this Agreement
should be construed as to confer any right of the Executive to be
employed by the Company for a fixed or definite term. Subject to
Section 6 hereof, the Executive hereby agrees that the Company may
dismiss him under subsection 5(a) hereof. The Executive's employment
with the Company may be terminated by the Company at any time by
delivery of a Notice of Termination to the Executive, for any reason,
with or without cause, without liability except with respect to the
payments provided for by Section 6.
(d) Termination Obligations. In exchange for the Company
entering into the Agreement and payment of the Severance Payments
provided for in Sections 6(b) and 6(e) herein, the Executive agrees
that, at the time of his resignation or termination from the Company:
(i) The Executive will promptly return to the
Company all personal property, both tangible
and intangible, furnished to or prepared by
the Executive in the course of or incident
to his employment, the Executive hereby
acknowledging and agreeing that such
property belongs to the Company, such that
following termination the Executive will not
retain any written or other tangible
material containing any proprietary
information of the Company. "Personal
property" includes, without limitation, all
computers, cellular phones, company credit
cards, access keys, books, manuals, records,
reports, notes, contracts, lists and other
documents or materials, or copies thereof
(including computer files), and all other
proprietary information relating to the
business of the Company.
(ii) The Executive will tender his resignation
from all offices and directorships then
held with the Company; Executive, however,
shall not be required to tender his
resignation from the Board of Directors of
the Company.
(iii) The Executive will execute a release
acceptable to the Company of all liability
of the Company, and its directors,
officers, shareholders, employees, agents
and attorneys, to the Executive in
connection with or arising out of his
employment with the Company, except with
respect to any Severance Payments under
Sections 6(b) or 6(d) which may be payable
to him under the terms of the Agreement.
(iv) The representations and warranties
contained herein and the Executive's
obligations under Sections 5(d), 7, 8, 9
and 15 through 18 shall survive termination
of the Employment Period and the expiration
of this Agreement.
6. Compensation Upon Termination. Upon the occurrence of any of
the events described Section 5(a)(i) through 5(a)(v) of this Agreement, the
Executive shall be entitled, unless otherwise provided herein, to the following
remuneration in respect of such Termination (the "Severance Payments") for the
period of time specified therein (the "Severance Period"):
(a) Death. If the Executive's employment shall be
terminated pursuant to Section 5(a)(i), the Company shall pay the
Executive's personal representative his Salary payable pursuant to
Section 4(a) through the Date of Termination. At the
<PAGE> 5
Executive's own expense, the Executive's dependents shall also be entitled to
any continuation of health insurance coverage rights under any applicable law.
(b) Disability. If the Executive's employment shall be terminated
by reason of disability pursuant to Section 5(a)(ii), the Executive shall
receive his Salary payable pursuant to Section 4(a) up to the Date of
Termination and for 30 days thereafter; provided that payments so made to the
Executive during the disability shall be reduced by the sum of the amounts, if
any, payable to the Executive at or prior to the time of any such payment under
any disability benefit plan of the Company. At the Executive's own expense, the
Executive and his dependents shall also be entitled to any continuation of
health insurance coverage rights under any applicable law.
(c) Cause. If the Executive's employment shall be terminated for
Cause pursuant to Section 5(a)(iii) hereof, the Company shall pay the Executive
his Salary then payable pursuant to Section 4(a) through the Date of
Termination. At the Executive's own expense, the Executive and his dependents
shall also be entitled to any continuation of health insurance coverage rights
under any applicable law.
(d) Voluntary Resignation. If the Executive terminates his
employment with the Company pursuant to Section 5(a)(v) hereof, the Company
shall have no obligation to compensate the Executive following the Date of
Resignation, except for the payment of accrued and unpaid salary pursuant to
Section 4(a) through the Date of Resignation. In any event, at the Executive's
own expense, the Executive and his dependents shall be entitled to any
continuation of health insurance coverage rights under any applicable law.
(e) Termination Without Cause by Company. If the Company
terminates Executive's employment with the Company pursuant to Section 5(a)(iv),
the Company shall continue to pay to Executive all Salary payable pursuant to
Section 4(a), as Severance Payments through a period ending twelve (12) months
following the Date of Termination provided the Executive was employed for twelve
(12) months previous to termination. In addition for the period that the
Severance Payments are being paid to the Executive, the Executive and the
Executive's family shall be entitled to receive welfare plan benefits (other
than continued group long-term disability coverage) generally available to
executives of the Company with comparable responsibilities or positions at the
same cost to the Executive as is charged to such similar executives from time to
time for comparable coverage. The Company shall have no other obligation to
compensate the Executive following the Date of Termination except as provided
herein.
(f) Any Severance Payments made pursuant to this Section 6 shall
be payable in accordance with the Company's regular payroll practices. The
obligation of the Company to make the Severance Payments to the Executive is
expressly conditioned upon the Executive complying and continuing to comply with
his obligations and covenants under Sections 5(d), 7 and 8 of this Agreement
following termination of his employment with the Company.
(g) Any Severance payments will be effective after the Executive
has completed one year of service to the Company. If the Executive does not
complete one year of service he is not entitled to any Severance.
7. Confidentiality and Non-Solicitation Covenants.
(a) Confidentiality. In addition to the agreements set forth in
Section 5(e), the Executive hereby agrees that the Executive will not, during
the Employment Period or at any time thereafter directly or indirectly disclose
or make available to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, any Confidential Information (as defined
below). The Executive agrees that, upon Termination of his employment with the
Company, all Confidential Information in his possession that is in written or
other tangible form (together with all copies or duplicates thereof, including
computer files) shall be returned to the Company and shall not be retained by
the Executive or furnished to any third party, in any form except as provided
herein; provided, however, that the Executive shall not be obligated to treat as
confidential, or return to the Company copies of any Confidential Information
that (i) was publicly known at the time of disclosure to the Executive, (ii)
becomes publicly known or available thereafter, but prior to the Date of
Termination, other than by any means in violation of this Agreement or any other
duty owed to the Company by any person or entity or (iii) is lawfully disclosed
to the Executive by a third party. As used in this Agreement the term
"Confidential Information" means: information disclosed to the Executive or
known by the Executive as a consequence of or through his relationship with the
Company, about the
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<PAGE> 6
directors, officers, shareholders, customers, employees, investors,
business methods, public relations methods, organization, procedures or
finances, including, without limitation, information of or relating to
shareholder, customer or investor lists of the Company and any
affiliate.
(b) Non-Solicitation. In addition, the Executive hereby
agrees that during the Employment Period, and for a period of one (1)
year thereafter, regardless of the reason or circumstances of
Termination of employment with the Company, the Executive will not,
either on his own account or jointly with or as a manager, agent,
officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or
corporation, (i) carry on or be engaged or interested directly or
indirectly in, or solicit, the sale or provision of services or the
development or marketing of services as offered by the Company to its
customers at the Date of Termination, (ii) endeavor directly or
indirectly to canvas or solicit in competition with Company or to
interfere with the supply of orders for goods or services from or by
any person, firm or corporation which during the Employment Period has
been or is a supplier of goods or services to Company or become an
investor in the Company or (iii) directly or indirectly solicit or
attempt to solicit away from Company any of its officers or employees
or offer employment to any person who, at any time during the six (6)
months immediately preceding the Date of Termination, is or was an
officer or employee of Company.
8. Covenant Not to Compete. The Executive agrees that during the
Employment Period he will devote full-time to the business of the Company and
not engage in any type of business which engages in the medical internet, online
pharmacy and information services or any other related businesses, including but
not limited to all aspects of the Business. Subject to such full-time
requirement and the restrictions set forth below in this Section 8 and Section
3(c) above, the Executive shall be permitted to continue his existing business
investments and activities and may pursue additional business investments;
provided that the Executive may not serve as a director or officer of any public
company resulting from such business investments if such public company is in
competition with the Company. The Executive agrees that, from the end of the
Employment Period through a one (1) year period thereafter, he shall not, within
the Protected Territory (as defined hereinafter), (i) invest in, manage, consult
or participate in any way in any other business in competition with the Business
(in either an active or passive manner), (ii) participate in or advise any
business which has business activities similar to the Business are a relevant
business segment, or (iii) act for or on behalf of any business that intends to
enter or participate in any business which has any business activities similar
to the Business, in each case unless the independent members of the Company's
Board determines that such action is in the best interests of the Company.
Notwithstanding the foregoing, the Executive may purchase stock as a stockholder
in any publicly traded company, including any company which is involved in the
development or operation of a medical internet site in the Protected Territory;
provided that the Executive does not own (together or separately or through his
affiliates) more than five percent (5%) of any company (other than the Company)
engaged in a business which is competitive with the Business of the Company
within the Protected Territory. In addition, the Executive shall not invest
(directly or indirectly) in any competitive business operating within the
Protected Territory unless the independent members of the Company's Board
determines that such an investment is in the best interests of the Company. For
purposes of this Agreement, the "Protected Territory" shall mean that area
within a one hundred (100) mile radius of the principal offices of the Company
at the Date of Termination.
Indemnity on Non-Compete. Executive hereby indemnifies the Company for any and
all liabilities that should arise from Executive's prior employments and
consulting, including necessary legal costs for Company to defend such matters.
9. Injunctive Relief and Enforcement. In the event of breach by
either party of the terms of Sections 5, 6, 7 or 8, if the non-breaching party
believes it is suffering irreparable injury, then the non-breaching party shall
be entitled to institute legal proceedings to enforce the specific performance
of this Agreement by the breaching party and to enjoin the breaching party from
any further violation of the Agreement and to exercise such remedies
cumulatively or in conjunction with all other rights and remedies provided by
law and not otherwise limited by this Agreement. The parties acknowledge,
however, that the remedies at law for any breach of the provisions of Sections
5, 6, 7 or 8 may be inadequate. In addition, in the event the covenants set
forth in Sections 5(e), 7 or 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of extending for too great a period
of time or over too great a geographical area, by reason of being too
restrictive or expansive, or by constituting an unlawful restraint of trade in
any other respect, each such covenant shall be interpreted to extend over the
maximum period of time and over a maximum geographical area for which it may be
enforceable, and to the maximum extent in all other respects as to which it may
be enforceable, and enforced as so interpreted, all as determined by such court
in such action.
10. Notice. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when personally delivered when
transmitted by telecopy with
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<PAGE> 7
written confirmation of transmission and receipt, three (3) days after deposit
in the U.S. mail, first class, with adequate postage thereon, or one (1) day
after delivery to an overnight air courier guaranteeing next day delivery,
addressed as follows:
<TABLE>
<S> <C>
If to the Executive: Geoffrey L. Faux
If to the Company: eMD.com
5655 Peachtree Parkway
Norcross, Georgia 30092
Attention: Chief Executive Officer
With a copy to: Schreeder, Wheeler & Flint, LLP
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, Georgia 30303-1845
Attention: Edward H. Brown, Esq.
</TABLE>
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt as provided above.
11. Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect; provided, however, that if any one or more of the terms
contained in Sections 5(e), 7 or 8 hereto shall for any reason be held by any
court of competent jurisdiction to be unenforceable by reason of extending for
too great a period of time or over too great a geographical area, by reason of
being too restrictive or expansive, or by constituting an unlawful restraint of
trade in any other respect, then such covenant shall not be deleted but shall be
reformed and constructed in a manner to enable it to be enforced to the extent
compatible with applicable law.
12. Assignment. This Agreement may not be assigned by the
Executive, but may be assigned by the Company to any successor to its business
and will inure to the benefit and be binding upon any such successor.
13 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Headings. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
15. Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Georgia (without reference to the choice of law provisions of Georgia),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
16. Dispute Resolution. Absent any irreparable injury being
suffered by the Company entitling the Company to seek injunctive relief against
the Executive pursuant to Section 9 hereof, in the event there shall be a
dispute among the parties arising out of or relating to this Agreement, or the
breach thereof, the parties agree to the following procedures:
(a) Within thirty days after notice from a party of any
dispute, the parties shall meet and attempt to resolve such dispute
informally with or without a mediator as the parties mutually agree;
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<PAGE> 8
(b) If the parties are unable to resolve the dispute
informally, then either party may institute a lawsuit in the federal or
state courts in Gwinnett County, Georgia. The parties agree that the
federal and state courts of Gwinnett County, Georgia shall have sole
jurisdiction over such disputes and each parties expressly consents to
the personal jurisdiction of such courts and expressly waives all
defenses of lack of personal jurisdiction and inconvenient forum.
17. Entire Agreement. This Agreement contains the entire agreement
and understanding between the Company and the Executive with respect to the
employment of the Executive by the Company as contemplated hereby, and no
representations, promises, agreements or understandings, written or oral, not
herein contained shall be of any force or effect. This Agreement shall not be
changed unless in writing and signed by both the Executive and the Board of the
Company.
18. Board Approval. In any case in which this Agreement provides
for the approval, review or determination of the Board in connection with the
Executive's compensation, benefits, termination or compliance with restrictive
covenants herein expressed, then such approval, review or determination shall be
deemed a "Director's conflicting interest transaction", subject to the
procedures required by O.C.G.A. ss. 14-2-860 et seq.
19. The Executive's Acknowledgment. The Executive acknowledges he
has had the opportunity to consult with independent counsel of his own choice
concerning this Agreement, and he has read and understands the Agreement, is
fully aware of its legal effect, and has entered into it freely based on his own
judgment.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date and year first above written.
<TABLE>
<CAPTION>
EMD.COM
<S> <C>
By: /s/ Timothy C. Moses
---------------------------------
Title: Date:
------------------------------ ----------------------
EXECUTIVE
/s/ Geoffrey L. Faux
- -------------------------------------
Geoffrey L. Faux Date:
-----------------------
- ------------------------------------- Date:
Witness -----------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.13
ASSET PURCHASE AGREEMENT
AGREEMENT made as of this 25th day of April, 2000, by and
among LABAMERICA, INC., a Georgia corporation with a principal place of business
at 5579 Chamblee-Dunwoody Road, Suite 143, Dunwoody, Georgia 30338 (the
"Company"),GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT, BYRON M.G. SANFORD,
AND RICHARD FISHER (collectively, the "Shareholders") and EMD ACQUISITION CORP.,
a Delaware corporation having an office at 5655 Peachtree Parkway, Norcross,
Georgia 30092("Buyer").
W I T N E S S E T H:
WHEREAS, Shareholders directly own 100% of the capital stock of the
Company;
WHEREAS, the Company desires to sell and the Buyer desires to purchase
substantially all of the assets of the Company as a going concern which is
presently doing business under the trade names of "LabAmerica" and
"LabAmerica.com."
NOW THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE; REPRESENTATIONS AND WARRANTIES
SECTION 1. PURCHASE AND SALE. Subject to the terms and
conditions of this Agreement, the Company hereby sells, assigns and transfers to
the Buyer and the Buyer hereby purchases and acquires from the Company, all of
the right, title and interest of the Company in and to the Purchased Assets (as
hereinafter defined) for a purchase price, which includes (i) $200,000 (the
"Cash Purchase Price"), (ii) 60,000 shares of the common stock of Electronic
Medical Distribution, Inc. ("Parent"), par value $0.0001 per share (the "Buyer
Shares"), and (iii) certain revenue earn out warrants (the "Warrants") as set
forth in Exhibit A (the "Purchase Price") and for the Assumption of the Assumed
Liabilities (herein defined). The parties hereto agree to allocate the Purchase
Price (and all other capital costs) among the Purchased Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Exhibit A. For purposes of this
Agreement, "Business" shall mean the lab testing business conducted by the
Company under the trade names of "LabAmerica," "LabAmerica.com" and "LabAnon."
SECTION 2. REPRESENTATIONS OF THE COMPANY AND SHAREHOLDERS. The
following agreements, representations and warranties are made by the Company and
the Shareholders to the Buyer.
<PAGE> 2
(A) Corporate Matters; No Conflict. The Company is duly
organized and validly existing under the laws of the State of Georgia.
The Company maintains offices only at the site(s) listed on Exhibit A
and has no operations other than from those site(s). The Company does
not transact business related to the Business in any other
jurisdiction. The Company has the corporate power to enter into this
Agreement, to perform its obligations hereunder and to conduct its
business as currently conducted. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby
by the Company will not (i) conflict with or violate the provisions of
any applicable law (including, without limitation, any bulk sales
laws), rule or order, Articles or Certificate of Incorporation, by-laws
or any other organizational or governing documents of the Company, (ii)
conflict with or constitute a default under any agreement or contract
by which the Company is bound or (iii) require the consent or approval
of, or filing with, any governmental body or third party except as set
forth on Exhibit C-5. The execution, delivery and performance by the
Company of this Agreement has been duly authorized and approved by all
requisite corporate action on the part of the Company and the
Shareholders. Set forth on Exhibit B is a list of officers, directors,
and shareholders of the Company, all trade names used by the Business
and all jurisdictions in is which the Business conducted. This
Agreement and the consummation of the transactions contemplated hereby
have been approved by the board of directors of the Company, and the
authorized officers of the Company named on Exhibit A are authorized
and empowered by the Company to execute and deliver this Agreement in
the name and on behalf of the Company.
(B) Purchased Assets.
(i) All vendor and customer contracts,
confidentiality agreements, purchase and sales orders and
other agreements to which the Company is a party and which
relate in any manner to the Business and/or the relationship
between the Company and the Customers (hereinafter defined),
whether written or oral, shall be referred to herein
collectively as the "Business Agreements". The Company has
delivered to Buyer, on or before the Closing Date, true and
correct copies of all Business Agreements Attached hereto as
Exhibit C-1 are true and correct copies of the agreements
which have been entered into between the Company and its
Customers concerning the Business. Also attached as part of
Exhibit C-1 is a schedule stating the identity of the Customer
to each of those agreements which are in force and effect as
of the Closing Date, together with a designation of which form
of agreement each such Customer has entered into. Annexed as
Exhibit C-2 is a copy of all Business Agreements between the
Company and vendors or service providers, or which relate to
any strategic partnerships, reselling arrangements or joint
ventures between the Company and others, concerning the
Business. Listed on Exhibit C-3 is a description of each
equipment and personal property lease (collectively, the
"Leases") to which the Company is a party and which relates to
the Business. The Leases are also included within the
definition of Business Agreements as said term is used herein.
The Company does not own, lease or use any real estate in
connection with the Business except the office and data
facilities located at the Sites. Neither the Company nor, to
the knowledge of the Company or the Shareholders, any other
party, is in default under any Business Agreement and no other
party to any
2
<PAGE> 3
Business Agreement has made any claim or given the Company
notice of any dispute under any Business Agreement, except as
set forth on Exhibit C-4. Each Business Agreement is in full
force and effect and the Company has the right to assign the
Business Agreements to the Buyer and its affiliates and the
Company has obtained all required consents to the assignment
and transfer thereof, except as set forth on Exhibit C-5. The
Company is not the owner or lessee of any motor vehicles which
are used in the Business. The Company does not own or lease
any interest in any property or any equipment used in the
Business, except as expressly stated on Exhibit C-3.
(ii) All of the tangible assets of the Company used
in the Business, including, without limitation, all machinery,
office and other equipment, furniture, computers and related
equipment, business machines, telephone systems, parts and
accessories, e-mail addresses and Internet domain addresses
presently utilized by the Company in the Business, shall be
referred to herein collectively as the "Tangible Assets".
Attached hereto as Exhibit E is a true and correct list or
description of the Tangible Assets. As of the Closing Date,
each of the Tangible Assets is in good and operable condition,
reasonable wear and tear excepted.
(iii) All patents, trademarks, trade names, service
marks, service names, logos, designs, formulations, copyrights
and other trade rights and all registrations and applications
therefor, all know-how, trade secrets, technology or
processes, and all computer programs, data bases and software
documentation owned or used by the Company in the Business,
other than off-the-shelf software licensed by the Company,
shall be referred to herein collectively as the "Intellectual
Property". Attached hereto as Exhibit F is a true and correct
copy of all of the Intellectual Property. Such exhibit also
indicates which of such items have been patented or registered
or are in the process of application for same. The Company is
not infringing on the rights of any third parties to
Intellectual Property used, but not owned by, the Company. The
Company has valid and fully-paid licenses for all
off-the-shelf software used by the Company in its operation of
the Business. Included among the Intellectual Property, among
other things, are all trade names utilized by the Company in
the Business, including, but not limited to, those trade names
listed on Exhibit B. On the Closing Date, the Company will
deliver to Buyer written proof in form and substance
satisfactory to Buyer and its counsel that the Company will no
longer do business under any of the trade or domain names
listed on Exhibit B and further, within five (5) days of
Closing, Company will cause to be filed in all applicable
governmental or quasi-governmental offices, any required
instruments to terminate any previously filed assumed name or
similar certificates regarding such trade names. Promptly
after such filing, the Company will deliver proof of said
filing to Buyer.
(iv) The Company will deliver at the Closing a true
and complete copy of the Company's customer list as of the
Closing Date relating to the Business which includes, in the
case of each customer, the name of the customer, its billing
and domain addresses, identity and contact information of each
relevant contact person, a statement of the monthly or annual
(as indicated) service charges relating to such customer and
the Company's files regarding such Customer (the
3
<PAGE> 4
"Customer List"). All customers of the Company relating to the
Business, including without limitation, those customers
included on the Customer List, together with the good will and
business opportunities of the Company as it relates to the
Business shall be referred to herein as the "Customers."
(v) As used herein, the term "Purchased Assets" shall
be defined as all classes of assets of the Company as shown on
the Company's financial statement as of April 25, 2000
(annexed as Exhibit H) utilized by the Company to operate and
maintain the Business, including, without limitation, the
Business Agreements, the Tangible Assets, the Intellectual
Property, the Customer List, the Customers and all other
assets of the Company used in connection with the operation of
the Business, wherever located, tangible or intangible,
excluding, however, Excluded Assets (as defined below). The
Purchased Assets are not subject to (i) any lien or
encumbrance of any character whatsoever except as set forth on
Exhibit M or (ii) any adverse claims by any third parties. At
the Closing upon consummation of the transactions contemplated
by this Agreement, Buyer will receive good and marketable
title to the Purchased Assets, free and clear of all liens,
claims and encumbrances of any character whatsoever, except as
set forth on Exhibit M. The Purchased Assets include all
rights, properties, interests and assets used by Company
and/or necessary to permit Buyer to carry on the Business as
presently conducted by the Company except for Excluded Assets.
(vi) The Company and the Shareholders reasonably
expect that the business represented by the Business
Agreements will continue after the date hereof. Neither the
Company nor the Shareholders have no any knowledge that any
customers included on the Customer List, other than those
listed on Exhibit G-1, intend to terminate their relationship
with the Company or significantly reduce the amount of
business they presently do with the Company.
(vii) Excluded Assets. The Company is not selling and
Purchaser is not buying or acquiring hereunder the following
items ("Excluded Assets") which are not included in the
defined term "Purchased Assets" which assets are listed on
Exhibit L hereto.
(C) Financial Statements. The Company has delivered to the
Buyer copies of the Company's financial statements for the fiscal year
of the Company ended December 31, 1999. Attached hereto as Exhibit H
are unaudited financial statements for the quarter ending March 31,
2000 which reflect the assets, liabilities, net worth, profit and loss,
and cash flow of the Company with respect to the Business. All
financial statements referred to herein are complete and correct in all
material respects, present fairly the financial condition and results
of operations of the Company as at the dates of such statements and
have been prepared in accordance with generally accepted accounting
principles. The books of account and records of the Company have been
maintained in accordance with good business practice and reflect fairly
all properties, assets, liabilities and transactions of the Company.
The Company has no material liabilities or obligations of any kind
(whether accrued, absolute, direct, indirect, contingent or otherwise)
which are not fully accrued or reserved against in the Company's
financial statements in accordance with generally accepted accounting
principles. Except as set forth on Exhibit I the Company
4
<PAGE> 5
has no bad debts as of the Closing Date. Since the last day of the
Company's last fiscal year, the Company has conducted the Business only
in the ordinary and usual course and has not experienced any material
adverse change in the Business or the financial condition of the
Company. Since March 31, 2000, the Company has had no loss in net
monthly recurring revenue from the Business. Between April 30, 2000 and
the Closing Date, the Company has not withdraw, expend or applied any
cash or other assets of the Company, except in the ordinary course of
operations of the Business of the Company in accordance with past
practices of the Company, and that during such period no amounts have
been paid to any officer, director or shareholder except for salaries.
The books and records of the Company with respect to the Business
relating to the fiscal year of the Business ending December 31, 1999,
are adequate to permit an audit of the Business at and for the fiscal
years then ended.
(D) Assumed Liabilities. The Buyer shall not be liable for and
is not assuming any liabilities of the Company whatsoever, whether
related or unrelated to the Purchased Assets, or whether arising under
the Business Agreement or otherwise except as specifically listed on
Exhibit J hereto (the "Assumed Liabilities"). The Company has no
outstanding loans, borrowings, guarantees, or debt of any kind with
respect to the Business and none of the Company's obligations have been
guaranteed by any other person or entity.
(E) Existing Employment Arrangements. Except as set forth on
Exhibit K the Company has no employment agreements, labor or collective
bargaining agreements or employee benefit or welfare plans or
retirement plans. All vacation pay, if any, due to employees of the
Company who are employed in the Business has been fully paid by the
Company, except as set forth on Exhibit K. No employees of the Company
who are employed in the Business are entitled to any sick pay, except
as set forth on Exhibit K. All vacation pay and sick pay due to
employees of the Company who are employed in the Business and
terminated by the Company in connection with the transactions
contemplated by this Agreement shall be paid in full prior to the
Closing Date. There are no pending or, to the knowledge of the Company,
threatened strikes, job actions or other labor disputes affecting the
Company or its employees and there have been no such disputes for the
past three years. Also set forth on Exhibit K is a true and complete
list of all employees of the Company employed in connection with the
Business, which list provides, among other things, the name, residence
address, title, job description and salary information concerning each
employee.
(F) Claims, Litigation, Disclosure. There is no claim,
litigation, tax audit, proceeding or investigation pending or, to the
Company's knowledge, threatened against the Company, with respect to
the Business or any of the Purchased Assets of the Company (including,
any claims of infringement or actions of opposition with respect to
Intellectual Property), nor does the Company know of any facts which
would provide a basis for any such claim, litigation, audit, proceeding
or investigation.
(G) Taxes. Except as specifically set forth on Exhibit I (the
"Tax Liabilities"), the Company has correctly prepared and timely filed
all Federal, state and local tax returns, estimates and reports, and
paid all such taxes as and when due. For purposes of this paragraph,
taxes shall mean all taxes, charges, fees, levies or other assessments
of
5
<PAGE> 6
any kind whatsoever (including, without limitation, income, franchise,
sales, use and withholding taxes). The Company is not a party to any
tax sharing agreement.
(H) No Other Agreements to Sell Assets or Business. The
Company is not a party to any existing agreement which obligates the
Company to sell to any other person or firm the Purchased Assets (other
than sales in the ordinary course of business), to issue or sell any
capital stock or any security convertible into or exchangeable for
capital stock of the Company or to effect any merger, consolidation or
other reorganization of the Company or to enter into any agreement with
respect thereto.
(I) No Brokers. The only broker, leasing agent, finder or
similar person or entity with whom the Company has made contact or had
any dealings with or entered into any agreement, arrangement or
understanding with concerning this Agreement and to whom the Company is
responsible to pay a finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated by this
Agreement is the party or parties listed in item 4 on Exhibit A, if
any, and the Company shall be solely responsible for the payment of any
such fee, commission or payment.
(J) Environmental Compliance.
(i) Neither the Company nor any operator of the
Company's properties is in violation, or alleged to be in
violation, of any federal, state or local judgment, decree,
order, consent agreement, law (including common law), license,
rule or regulation pertaining to environmental health or
safety matters, including without limitation those arising
under the Resource Conservation and Recovery Act, as amended,
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, as amended, Water
Act, as amended, the Federal Clean Air Act, as amended, the
Toxic Substances Control Act, or any state or local analogue
(hereinafter "Environmental Laws").
(ii) The Company has not received a notice,
complaint, order, directive, claim or citation from any third
party, including without limitation any federal, state or
local governmental authority, indicating or alleging that the
Company or any predecessor may have any liability or
obligation under any Environmental Law.
(iii) (A) No portion of the property of the Company
has been used by any person for the generation, handling,
processing, treatment, storage or disposal of Hazardous
Materials except in accordance with applicable Environmental
Laws; (B) no underground tank or other underground storage
receptacle for Hazardous Materials, asbestos-containing
materials or polychlorinated biphenyls are located on any
portion of any location occupied by the Company each of which
is listed as a Site on Exhibit A; (C) in the course of any
activities conducted by the Company or its invitees, agents,
contractors, licensees or employees in connection with the
Business of the Company, no Hazardous Materials have been
generated or are being used except in accordance with
applicable Environmental Laws; and (D) there have been no
releases (i.e., any past or present releasing,
6
<PAGE> 7
spilling, leaking, leaching, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Materials on,
upon, into or from the property currently or formerly owned,
operated or leased by the Company, which releases would have a
material adverse effect on the value of any of the property or
adjacent properties or the environment.
(iv) The execution, delivery and performance of this
Agreement is not subject to any Environmental Laws which
condition, restrict or prohibit the sale, lease or other
transfer of property or operations, including, without
limitation, any so-called "environmental cleanup
responsibility acts" or requirements for the transfer of
permits, approvals, or licenses. There have been no
environmentally related audits, studies, reports, analyses
(including soil and groundwater analyses), or investigations
of any kind performed with respect to the currently or
previously owned, leased, or operated properties of the
Company.
For purposes of this Section, "Hazardous Material"
shall mean any hazardous waste, as defined by 42 U.S.C. ss.
6903(5), any hazardous substances or wastes as defined by 42
U.S.C. ss. 9601(14), any pollutant or contaminant as defined
by 42 U.S.C. ss. 9601(33) or any toxic substances or wastes,
oil or hazardous materials or other chemicals or substances
regulated by any public or governmental authority.
(K) Year 2000. All information technology included in the
Purchased Assets including, without limitation, in all products and
services (i) provided by the Business, whether to third parties or for
internal use or (ii) to the best of the Company's knowledge after
reasonable investigation, used in combination with any information
technology of its clients, customers, suppliers or vendors, accurately
processes or will process date and time data (including, but not
limited to, calculating, comparing, and sequencing) from, into and
between the years 1999 and 2000 and the twentieth century and the
twenty-first century, including leap year calculations and neither
performance nor functionality of such technology will be affected by
dates prior to, during and after the year 2000. The Purchased Assets do
not include any obligations under warranty agreements, service
agreements or otherwise to remedy any information technology defect
relating to the year 2000.
(L) Licenses and Compliance with Laws. The Company and the
Shareholders hold governmental or regulatory licenses, permits,
consents or approvals in connection with the Business as described on
Exhibit B. The Company is not in violation of any applicable law or
regulation, or of any judgment, order, decree or other requirement of
any court, tribunal or governmental body, or any agency or official
acting in an official capacity, the violation of which, individually or
in the aggregate, has or might reasonably be expected to have an
adverse effect on the condition (financial or otherwise), results of
operations, properties, assets, liabilities, business, or prospects of
the Company. Without limiting the generality of the foregoing, the
Company has always been and is currently in compliance with (i) all
applicable rules and regulations (state or federal) governing
reimbursement of health care costs under the federal Medicare system
and all applicable similar state, local or other health care
reimbursement systems including, without limitation, Medicaid and
Champus programs, including, without limitation, the Stark
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Law, the Medicare and Medicaid anti-kickback rules (42 U.S.C. "1320-7a
and 1320-7b and all regulations pertaining thereto), the Medicare and
Medicaid charge limitations and anti-discrimination rules (42 C.F.R.
405.501-405.515, and 42 C.F.R. 447.300 et seq.), and regulations
governing Medicaid and Medicare participation by clinical laboratories
(42 C.F.R. 493.1 et seq.), and (ii) all applicable laws and regulations
pertaining to the operation of clinical laboratories, including without
limitation the federal Clinical Laboratories Improvements Act and
regulations pertaining thereto (42 U.S.C. 263a and 42 C.F.R. "1701 et
seq.), the Georgia clinical laboratory laws and the Occupational Health
and Safety Administration=s rules regarding blood borne pathogens (29
C.F.R. "1910.1030 et seq.), except to the extent that any such
violations referred to in clauses (i) and (ii) above, individually or
in the aggregate, has not had and would not reasonably be expected to
have an adverse effect on the condition (financial or otherwise),
results of operations, properties, assets, liabilities, business, or
prospects of the Company.
(M) Investment. The Shareholders (i) understand that none of
the Buyer Shares, the Warrants nor the common stock of Parent issuable
pursuant to exercise thereto (collectively the "Securities") have not
been, and will not be, registered under the Securities Act of 1933, or
under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering, (ii) is acquiring the Securities solely
for its own account for investment purposes, and not with a view to the
distribution thereof, (iii) is a sophisticated investor with knowledge
and experience in business and financial matters, (iv) has received
certain information concerning the Buyer, Parent, and BioShield
Technologies, Inc. and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding the Securities, and (v) is able to bear the
economic risk and lack of liquidity inherent in holding the Securities.
(O) True and Complete. No representation or warranty made by
Company or the Shareholders in this Agreement, nor any statement,
certificate or exhibit furnished by or on behalf of Company or the
Shareholders pursuant to this Agreement, nor any document or
certificate delivered to Buyer pursuant to this Agreement, or in
connection with the transactions contemplated hereby, contains any
untrue statement of a material fact, or omits or shall omit to state a
material fact necessary to make the statements contained therein not
misleading. The Company and the Shareholders have not failed to
disclose to Buyer any pending developments or circumstances of which it
is aware which are reasonably likely to have a material adverse effect
on the Business.
SECTION 3. REPRESENTATIONS OF THE BUYER. Buyer represents and warrants
to the Company as follows.
(A) Corporate Matters; No Conflict. Buyer is a wholly owned
subsidiary of Parent. Each of the Buyer and Parent is duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, is in
good standing in each other jurisdiction in which it is doing business, except
where failure to be in good standing would not have a material adverse effect on
the business of Buyer or Parent, and has the corporate power to enter into this
Agreement, to perform its obligations hereunder and to conduct its business as
currently conducted. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby (and thereby) by the Buyer and Parent,
respectively, will not (a) conflict
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with or violate the provisions of any applicable law, rule or order or the
Buyer's or the Parent's respective Certificate of Incorporation or by-laws, (b)
conflict with or constitute a default under any agreement or contract by which
the Buyer or Parent is bound or (c) require the consent or approval of, or
filing with, any governmental body or third party. The execution, delivery and
performance by the Buyer of this Agreement has been authorized and approved by
all requisite corporate action on the part of the Buyer.
(B) No Brokers. The only broker, leasing agent, finder or similar
person or entity with whom the Buyer or Parent has made contact or had any
dealings with or entered into any agreement, arrangement or understanding with
concerning this Agreement and to whom the Buyer and/or the Parent is responsible
to pay a finder's fee, brokerage commission or similar payment to is the party
listed in item 5 on Exhibit A, if any, and Buyer shall be responsible for the
payment of any such fee, commission or payment.
ARTICLE II
PRECLOSING CONDITIONS
SECTION 1. GENERAL. Each of the parties will use their best
efforts to take all action and to do all things necessary, proper and advisable
in order to consummate and make effective the transactions contemplated by this
Agreement.
SECTION 2. NOTICES AND CONSENTS. The Company and the
Shareholders will give all notices to third parties, and the Shareholders and
the Company will use their best efforts to obtain all third party consents or
approvals necessary to consummate the transactions contemplated by this
Agreement. The Company and the Shareholders will give any notices to, make any
filings with, and use its reasonable best efforts to obtain any necessary
authorizations, consents, and approvals of governments and governmental
agencies.
SECTION 3. OPERATION OF BUSINESS. The Company will not engage in
any practice, take any action, or enter into any transaction outside the
ordinary and usual course of business through the Closing or the termination of
this Agreement in substantially the same manner as such business has been
conducted prior to the Closing. Without limiting the generality of the
foregoing, the Company will not (i) except in connection with the consummation
of the transactions contemplated hereby, declare, set aside, or pay any dividend
or make any distribution with respect to its capital stock or redeem, purchase,
or otherwise acquire any of its capital stock, (ii) create or incur any
obligation or liability which would constitute one of the Assumed Liabilities if
in existence as of the Closing except in the ordinary course of business, or
(iii) issue any capital stock or securities, options warrants or other
instruments convertible into the Company's securities, (iv) incur any
indebtedness or make any capital expenditure or guarantee any indebtedness in
excess of $20,000.
SECTION 4. PRESERVATION OF BUSINESS. Through the earlier of the
termination of this Agreement of the Closing, the Company will preserve its
business and assets substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
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SECTION 5. FULL ACCESS. The Company will permit representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to the Company.
SECTION 6. NOTICE OF DEVELOPMENTS. Each party will give prompt
written notice to the other party of any material adverse development causing a
breach of any of its own representations and warranties set forth herein. No
disclosure by any Party pursuant to this Section 6, however, shall be deemed to
amend or supplement the Exhibits or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant. If any event, condition, fact or
circumstance that is required to be disclosed under this Section 6 requires any
change in the Exhibits or such event, condition, fact, or circumstance would
require a change in the Exhibits assuming the Exhibits were dated as of such
change, then the Company and the Shareholders shall promptly deliver an update
to the Exhibits specifying such change.
SECTION 7. EXCLUSIVITY. So long as this Agreement remains in
effect, neither the Company nor the Shareholders will (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person or entity
relating to the acquisition of any capital stock or other voting securities, or
all or any portion of the assets of the Company whether such acquisition is
structured as a merger, consolidation, or share exchange or asset purchase or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person or entity to do or seek any of
the foregoing.
SECTION 8. BUYER'S LICENSE TO TARGET'S INTELLECTUAL PROPERTY. So
long as this Agreement remains in effect Buyer shall have a nonexclusive license
to use and an exclusive license to market, sell and license the use of any and
all of the Intellectual Property of Company. The sale or licensing of the
Company=s Intellectual Property may be conducted by Buyer in its own name or in
the name of the Company, but all contracts, licenses and revenue from the sale
or licensing of such Intellectual Property by Buyer shall be and remain the
property of the Company prior to the Closing.
SECTION 9. PAYMENT OF INDEBTEDNESS BY RELATED PARTIES. The
Company and the Shareholders shall cause all indebtedness and other liability of
each Shareholder, officer, director, and employee and each of their affiliates
("Related Parties") to be discharged and paid in full to the Closing.
SECTION 10. ACCRUED PAY. All vacation pay and sick pay due to
employees of the Company who are employed in the Business and terminated by the
Company in connection with the transactions contemplated by this Agreement shall
be paid in full prior to the Closing Date.
SECTION 11. TAX LIABILITY. On or before the Closing Date, the
Company shall pay off and satisfy any of the Tax Liabilities which are then due
and payable or payable with respect to the Purchased Assets for the period
ending on the Closing Date whether or not then due, and provide Buyer with
evidence thereof in form satisfactory to Buyer and its counsel.
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ARTICLE III
INDEMNIFICATION
SECTION 1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(A) The representations and warranties of the parties herein
contained shall survive the closing of the purchase contemplated by
this Agreement, notwithstanding any investigation at any time made by
or on behalf of the other party, provided that any claims for
indemnification in accordance with Article II, Section 2 below with
respect to any representation or warranty must be made (and will be
null and void unless made) on or before April 28, 2002 (except in the
case of representations contained in Paragraphs (B)(v), (G), (I), (J),
and (L) of Article I, Section 2 hereof, which must be made within six
(6) months following the expiration of the applicable statute of
limitations).
(B) The Shareholders and the Company jointly and severally
hereby agree to indemnify and hold Buyer, Parent, and their respective
officers, directors, stockholders, affiliates, employees,
representatives and other agents harmless from and against any and all
claims, liabilities, losses, damages or injuries, together with costs
and expenses, including reasonable legal fees, arising out of or
resulting from (i) any breach, misrepresentation or material omission
of the representations and warranties made by the Company in this
Agreement or in any Exhibit hereto or other documents delivered in
connection herewith, (ii) any breach in any material respect by the
Company, unless waived in writing by the Buyer, of any covenant or
agreement contained in or arising out of this Agreement, or any other
agreement delivered in connection herewith on the Closing Date, (iii)
the Business conducted by the Company prior to the Closing Date and any
actions or events associated therewith, (iv) any and all liabilities of
the Company, other than the Assumed Liabilities, and (v) any failure by
the Company to comply with any provisions of the bulk sales or similar
laws of any jurisdiction which are applicable to this Agreement or the
transactions contemplated hereby.
(C) Buyer hereby agrees to indemnify and hold the Company and
the Shareholders harmless from and against any and all claims,
liabilities, losses, damages or injuries, together with costs and
expenses, including reasonable legal fees, arising out of or resulting
from (i) any breach, misrepresentation or material omission in the
representations and warranties made by the Buyer in this Agreement,
(ii) any breach in any material respect by Buyer, unless waived in
writing by the Company, of any covenant or agreement of Buyer contained
in or arising out of this Agreement, or (iii) the Business as conducted
by Buyer, after the Closing Date.
(D) Any party claiming a right to indemnification hereunder
(the "Indemnified Party") shall give the other party from whom
indemnification is sought (the "Indemnifying Party") prompt written
notice of any claim, demand, action, suit, proceeding or discovery of
fact (any of which shall be a "Claim") upon which the Indemnified Party
intends to base a claim for indemnification under this Article III,
Section 2, provided, however, that no failure to give such notice shall
excuse any
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Indemnifying Party from any obligation hereunder except to the extent
the Indemnifying Party is materially prejudiced by such failure. The
Indemnified Party shall not settle or compromise any Claim by a third
party without the prior written consent of the Indemnifying Party,
which will not be unreasonably withheld or delayed, unless suit in
respect of such Claim shall have been instituted against the
Indemnified Party and the Indemnifying Party shall not have chosen to
participate in the defense of such suit after notification thereof if
the Indemnifying Party is entitled to participate under paragraph (E)
of this Section.
(E) In connection with any Claim resulting from or arising out
of any claim or legal proceeding by a third party, the Indemnifying
Party, may, upon written notice to the Indemnified Party within 15 days
following the Indemnified Party's notice of the Claim, assume the
defense of any such action with its own counsel and its own expense if
the Indemnifying Party acknowledges to the Indemnified Party in writing
its obligation to indemnify the Indemnified Party pursuant to this
Article III, Section 2 in respect of such Claim; provided, however,
that such counsel is reasonably acceptable to the Indemnified Party and
provided, further, that if, in the reasonable opinion of the
Indemnified Party, for any conflict of interest that may arise between
the Indemnifying Party and the Indemnified Party, the Indemnified Party
may retain independent counsel at the expense of the Indemnifying
Party. If the Indemnifying Party assumes the defense or prosecution of
any such action or proceeding, it shall take all steps reasonably
necessary in the defense, prosecution and settlement of such action or
proceeding. The Indemnifying Party shall not, in the defense or
prosecution of any such action or proceeding except with the written
consent of the Indemnified Party, consent to the entry of any judgment
or enter into any settlement which does not include as an unconditional
term thereof, a release by the third party of the Indemnified Party
from all liability in respect of the matter which is the subject of
such action or proceeding. The Indemnified Party shall cooperate in the
defense or prosecution of any such action or proceeding; provided that
the Indemnifying Party shall pay or reimburse the Indemnified Party for
any actual costs or expenses attributable to such cooperation.
(F) The obligations of the Company pursuant to paragraph (B)
of this Section and the obligations of the Buyer pursuant to paragraph
(C) of this Section shall, in each case be limited to an aggregate
amount not in excess of the Purchase Price. Neither the Company nor the
Buyer shall make any Claim hereunder unless and until the aggregate
amount of such Claim exceeds $25,000; provided, however, that if the
aggregate amount of Claims by the Buyer or the Company, respectively,
exceeds $25,000, the obligations of the Company or the Buyer,
respectively, hereunder shall be with respect to the entire amount of
such Claims.
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ARTICLE IV
CONDITIONS TO OBLIGATION TO CLOSE
SECTION 1. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing shall be absolute and unconditional, provided:
(i) the representations and warranties of Shareholders and the
Company set forth herein shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Company and the Shareholders shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(iii) the Company and Shareholders shall have given all
notices and procured all of the material third Person consents and
approvals specified herein;
(iv) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein,
by reason of any action or failure to act of the Company or the
Shareholders, an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Buyer to own the
Purchased Assets or to operate the any business included as part of the
Purchased Assets;
(v) the Shareholders and the Company shall have delivered to
the Buyer a certificate to the effect that each of the conditions
specified above in this ARTICLE IV, Section 1 (i)-(iv) have been
satisfied in all respects;
(vi) the Board of Directors of Parent shall have approved the
transactions described in this Agreement; and
(vii) all actions to be taken by the Shareholders in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby, including, but
not limited to, those matters identified in Article V, Section 2 are
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ARTICLE IV, Section 1 if it
executes a writing so stating at or prior to the Closing.
SECTION 2. CONDITIONS TO OBLIGATION OF THE SELLERS. The
obligation of the Sellers to consummate the transactions to be performed by it
in connection with the Closing shall be absolute and unconditional, provided:
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(i) the representations and warranties of the Buyer set forth
herein shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants and agreements hereunder in all material respects through
the Closing Date;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
by reason of any action or failure to act of Buyer, an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(iv) the Buyer shall have delivered to the Shareholders a
certificate to the effect that each of the conditions specified above
in this ARTICLE IV, Section 2 (i)-(iii) have been satisfied in all
respects;
The Shareholders may waive any condition specified in this ARTICLE IV, Section 2
if it executes a writing so stating at or prior to the Closing.
ARTICLE V
CLOSING AND DELIVERIES AT CLOSING
SECTION 1. CLOSING. The closing of the purchase and sale of the
transaction contemplated herein shall take place on or about May 3,, 2000 (the
"Closing"), at the offices of Sims Moss Kline & Davis LLP, located at 400
Northpark Town Center, Suite 310, 1000 Abernathy Road, NE, Atlanta, Georgia
30328 at 10:00 a.m. The deliveries described in Section 2 and 3 of this Article
V shall be made at the Closing.
SECTION 2. DELIVERIES BY THE COMPANY. On the Closing Date, the
Shareholders and the Company will deliver, or cause to be delivered, to the
Buyer the following:
(A) Such instruments of transfer or conveyance executed by the
Company, as Buyer may reasonably request in order to convey and
transfer to Buyer good and marketable title to all of the Purchased
Assets, free and clear of all liens, claims, encumbrances and other
charges, including, without limitation, an Assignment Agreement and a
Bill of Sale.
(B) Physical delivery of all Tangible Assets by making them
available at the Sites listed on Exhibit A, together with any and all
warranties, manuals, instructions, and other literature in the
possession of the Company relating to the ownership or operation of the
Tangible Assets. In addition, such notices to telephone companies and
others required to transfer the Company's e-mail addresses and domain
addresses, used in the Business to Buyer.
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(C) Physical delivery of all original or certified copies of
documentation concerning the Intellectual Property, including, without
limitation, registrations and applications of any patents, trademarks
or service marks, original artwork, data bases, computer programs and
software.
(D) The following corporate documentation:
(i) The Company's Articles or Certificate of
Incorporation certified as of a date within five (5) days
prior to the Closing Date by the Secretary of State of the
state of the Company's organization;
(ii) The Company's By-Laws certified as of the
Closing Date by the President or Secretary of the Company as
being in full force and effect and unmodified; and
(iii) Corporate Resolutions of the Board of Directors
and Shareholders of the Company, approving this Agreement and
all the transactions contemplated hereby, certified by the
President or Secretary of the Company as being in full force
and effect and unmodified.
(E) The opinion of counsel to the Company and Shareholders, in
a form acceptable to Buyer and its counsel.
(F) Evidence in form satisfactory to Buyer and its counsel
that the Tax Liabilities, if any, have been paid off and satisfied.
(G) The Noncompetition Agreements for each of the Company and
the Shareholders, in substantially the form as Exhibit N attached
hereto.
(H) Copies of written proof in form and substance satisfactory
to Buyer and its counsel that the Company will no longer do business
under any of the trade and domain names listed on Exhibit B as required
pursuant to Article I, Section 2, Paragraph (B) (iii) hereof.
(I) The Company shall use its best efforts to deliver a
Non-Disclosure and Intellectual Property Agreement in a form to be provided by
Buyer prior to the Closing, executed by each employee of the Company who will be
employed by Buyer or its affiliate immediately following the Closing.
(K) Notices of termination of all employees of the Company
employed in connection with Business satisfactory to Buyer, which
notices will be delivered to the employees concurrently with the
Closing.
(L) The Employment/Consultant Agreements of David Nelson and
Gregory Smith, M.D., in substantially the form as Exhibit O attached
hereto.
(M) Such notice or notices as Buyer may reasonably request in
order to notify the customers included on the Customer List that the
Business has been sold to Buyer.
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SECTION 3. DELIVERIES BY THE BUYER.
On the Closing Date, the Buyer will deliver, or cause to be delivered,
to the Company the following:
(A) The Cash Purchase Price by cash, or certified or official
bank check payable to the order of the Company, or by wire transfer of
federal funds to the account of the Company, as the Company shall
direct in writing on or before the Closing Date; provided, however,
Buyer may, upon written agreement of all parties hereto, deduct from
the Purchase Price and pay directly amounts due any creditor of the
Company, including, without limitation, the Tax Liabilities (but
excluding any amounts due for any of the Assumed Liabilities), in which
event, evidence of such payment shall be presented at the Closing.
(B) The Buyer Shares;
(D) Such instruments of assignment and assumption executed by
the Buyer, as the parties hereto reasonably may determine necessary to
effectuate the assignment to the Buyer of the Business Agreements and
the assumption by Buyer of the Assumed Liabilities.
(E) Resolution of the Board of Directors of Buyer, authorizing
the execution of this Agreement and the transactions contemplated hereby.
(F) The opinion of Sims Moss Kline & Davis LLP, outside
counsel to the Buyer, in a form acceptable to the Company and its counsel.
ARTICLE VI
OBLIGATIONS FOLLOWING CLOSING
SECTION 1. FURTHER COOPERATION. The Company will, at any time and from
time to time after the Closing Date, execute and deliver such further
instruments of conveyance, transfer and license, and take such additional
actions as Buyer, Parent or its successor and/or assigns, may reasonably
request, to effect, consummate, confirm or evidence the transfer to Buyer of the
Purchased Assets pursuant to this Agreement.
SECTION 2. TRANSITION ASSISTANCE AND ADJUSTMENTS.
(A) The Company shall cooperate and provide assistance to the
Buyer as shall be reasonably necessary during the transition of the
Business and the Purchased Assets from the Company to the Buyer, or its
successors and/or assigns, after the Closing Date.
(B) Buyer and its successors and/or assigns shall have the
right at any time and from time to time upon reasonable notice and
during normal business hours to
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examine and make copies of all corporate books, records and other
documents of the Company and generated prior to the Closing Date, which
documents will be maintained by the Company for a period of five (5)
years after the Closing Date.
(C) The Company will reasonably cooperate with Buyer in
notifying the customers included on the Customer List that the Business
has been sold to Buyer, including, without limitation, executing any
additional notices which Buyer may reasonably request. The Company will
not, directly or indirectly, take any action which is designed or
intended to have the effect of discouraging customers, suppliers or
vendors and other business associates of the Business, from maintaining
the same business relationships with Buyer or its successors and/or
assigns after the Closing Date as were maintained with the Company with
respect to the Business prior to the Closing Date.
(D) The Buyer shall collect all Closing Accounts Receivable
following the Closing Date Receivable of the Company. If payment of any
Closing Account Receivable is received by the Company, it shall
promptly forward to Buyer the full amount so received for the Buyers
benefit. The Company will cooperate with Buyer in establishing a bank
account of Buyer in the name of ["LabAmerica"] in order to facilitate
the negotiation of checks received from customers of the Company after
the Closing.
(E) All of the Company's right, title and interest in and to
the name "LabAmerica" constitutes a Purchased Asset and has been
transferred to the Buyer in accordance with this Agreement. Following
the Closing, neither the Company nor any affiliate of the Company (as
defined under federal securities laws), shall not use the name
"LabAmerica" or any confusingly similar name to said trade name in any
trade or business. The Company expressly acknowledges, understands and
agrees (i) that remedies at law for any breach of this Article VI,
Section 2((E) will be inadequate, (ii) that the damages resulting from
such breach are not readily susceptible to measurement in monetary
terms and (iii) that the Buyer shall be entitled to immediate
injunctive relief and may obtain temporary and permanent orders
restraining any threatened or further breach of this Article VI,
Section 2(E) by the Company. The Company has been advised by its
counsel with respect to the meaning and effect of this Article VI,
Section 2(E).
ARTICLE VII
TERMINATION
SECTION 1. TERMINATION EVENTS. This Agreement may be terminated
prior to the Closing:
(i) By the Buyer if (i) there is a material breach of any
covenant or obligation of the Company or any of the Shareholders, or
(ii) the Buyer reasonably determines that the timely satisfaction of
any condition set forth in this Agreement has become impossible or
impractical (other than as a result of any failure on the part of Buyer
to comply with or perform its covenants and obligations under this
Agreement);
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(ii) by the Company if (i) there is a material breach of any
covenant or obligation of the Buyer or (ii) the Company reasonably
determines that the timely satisfaction of any condition set forth in
this Agreement has become impossible or impractical (other than as a
result of any failure on the part of the Company or any of the
Shareholders to comply with or perform any covenant or obligation set
forth in this Agreement);
(iii) by the Buyer if the Closing has not taken place on or
before May31, 2000 (other than as a result of any failure on the part
of Buyer to comply with or perform its covenants and obligations under
this Agreement);
(iv) by the Company if the Closing has not taken place on or
May 31, 2000 (other than as a result of the failure on the part of the
Company or any of the Shareholders to comply with or perform any
covenant or obligation set forth in this Agreement);
(v) by the Buyer if the Company, Shareholders or any of its
representatives has given Buyer materially false or misleading
information or representations in writing or failed to disclose in
writing material information regarding Company;
(vi) The Company files a bankruptcy petition or a bankruptcy
petition is filed against the Company or the Company makes a general
assignment for the benefit of creditors, and such petition or
assignment is not removed or terminated within a period of 45 days
after such filing or assignment;
(vii) A receiver or similar official is appointed for the
Company's business and such appointment is not terminated within a
period of 45 days after such appointment, or the business is
terminated; and
(viii) Any judgments or arbitration awards are entered against
Seller, or Seller enters into any settlement agreements with respect to
any litigation or arbitration, in an aggregate amount of $50,000 or
more in excess of any insurance coverage therefor; or
(ix) by the mutual consent of the Company, Shareholders and
the Buyer.
SECTION 2. TERMINATION PROCEDURES. If Purchaser wishes to
terminate this Agreement pursuant to this ARTICLE VII, Purchaser shall deliver
to Seller a written notice stating that Purchaser is terminating this Agreement
and setting forth a brief description of the basis on which Purchaser is
terminating this Agreement. If Seller wishes to terminate this Agreement
pursuant to ARTICLE VII, Seller shall deliver to Purchaser a written notice
stating that the Agent is terminating this Agreement and setting forth a brief
description of the basis on which Seller is terminating this Agreement. In the
event that the alleged breach is curable, the alleged breaching party shall have
a thirty (30) day period from the date of such written notice to cure any such
breach.
SECTION 3. NONEXCLUSIVITY OF TERMINATION RIGHTS. The termination
rights provided in Article VII shall not be deemed to be exclusive. Accordingly,
the exercise by any party of its
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<PAGE> 19
right to terminate this Agreement pursuant to ARTICLE VII shall not be deemed to
be an election of remedies and shall not be deemed to prejudice, or to
constitute or operate as a waiver of, any other right or remedy that such party
may be entitled to exercise (whether under this Agreement, under any other
agreement, under any statute, rule or other legal requirement, at common law, in
equity or otherwise).
ARTICLE VIII
MISCELLANEOUS
SECTION 1. GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by the laws of the Georgia.. The parties hereto submit and consent to
the exclusive jurisdiction of the state courts of the State of Georgia in Fulton
County and the federal courts located therein with respect to any legal actions
relating to this Agreement, or any other agreements delivered in connection
herewith, between the Company, on the one hand, and the Buyer , on the other
hand, and any transactions contemplated thereby.
SECTION 2. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
SECTION 3. CONFIDENTIALITY. The Company, on the one hand, and the
Buyer, on the other hand, each agree not to disclose or use any information
acquired by it about the other party during the course of the negotiations of
this Agreement and the transactions to which it relates which is confidential in
nature or not otherwise generally available to the public without the prior
written consent of such other party unless required to do so by applicable law
or regulation or by order of a court of competent jurisdiction or an
administrative agency. Each party shall be liable for any breach by its
respective employees, officers, directives, shareholders, agents and/or
contractors of the provisions of this Section.
SECTION 4. AMENDMENTS. This Agreement supersedes any prior contracts
relating to the subject matter hereof between the Buyer, Parent, the
Shareholders and the Company. This Agreement cannot be changed, modified or
amended and no provision or requirement hereof may be waived without the consent
in writing of the parties hereto.
SECTION 5. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Each provision of this Agreement shall be deemed to be the agreement of
the parties hereto to the full extent that the power to enter into such
provisions shall have been conferred on the parties by law.
SECTION 6. BENEFIT; ASSIGNMENT. This Agreement is binding upon and
inures to the benefit of the parties, their successors and permitted assigns.
This Agreement may not be assigned or the duties of the parties hereunder
delegated to others without the prior written consent of all parties hereto,
except that Buyer may assign its rights, duties and obligations hereunder to
Parent or an affiliate of Buyer or Parent without the Shareholders' and
Company's consent.
19
<PAGE> 20
SECTION 7. CONSTRUCTION. All exhibits annexed hereto are hereby
incorporated herein by reference and made a part of this Agreement. Whenever
used in this Agreement and the context so requires, the singular shall include
the plural and the plural shall include the singular.
SECTION 8. IMPUTED KNOWLEDGE. Any reference in this Agreement to the
"knowledge of" the Company, or words of similar import, the knowledge of any and
all of the officers or directors of the Company (including, without limitation,
its President, Gregory Smith; its executive Vice President, David Nelson; and
Webmaster, Gordon Schuchardt) shall be imputed to be the knowledge of the
Company. Any reference in this Agreement to the "knowledge of" the Buyer, or
words of similar import, the knowledge of its officers and directors (including,
without limitation, Buyer's President, Timothy C. Moses) shall be imputed to be
the knowledge of the Buyer.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
20
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
EMD ACQUISITION CORP.
By:
---------------------------------------
Timothy C. Moses, President
LABAMERICA, INC.
By:
---------------------------------------
Gregory Smith, President
SHAREHOLDERS:
-----------------------------------------
David Nelson
-----------------------------------------
Gordon Schuchardt
-----------------------------------------
Gregory Smith, M.D.
-----------------------------------------
Byron M.G. Sanford
-----------------------------------------
Richard Fisher
21
<PAGE> 22
DESCRIPTION OF EXHIBITS:
<TABLE>
<S> <C> <C>
Exhibit A - Basic Provisions
Exhibit B - Officers; Directors; Trade Names; Jurisdictions, Licenses; Permits
Exhibit C-1 - Forms of Business Agreements with Customers
Exhibit C-2 - Copy of all Business Agreements
Exhibit C-3 - Leases
Exhibit C-4 - Claims of Disputes Under Business Agreements
Exhibit C-5 - Consents to Transfer or Assign Not Obtained
Exhibit D - Litigation
Exhibit E - Tangible Assets
Exhibit F - Intellectual Property
Exhibit G - Customer List and Related Information
Exhibit G-1 - Customer Terminations
Exhibit H - Financial Statements
Exhibit I - Bad Debts and Tax Liabilities of the Company
Exhibit J - Assumed Liabilities
Exhibit K - Existing Employment Agreements, Labor or Collective Bargaining Agreements,
Employee Benefit or Welfare Plans, Retirement Plans, Description of Employees
Exhibit L - Excluded Assets
Exhibit M - Liens; Encumbrances
Exhibit N - Noncompetition Agreements for the Company and the Shareholders
Exhibit O - Employment/Consulting Agreements for each of David Nelson and Gregory Smith, M.D._
Exhibit P - Warrant Agreement for each of Shareholders
</TABLE>
22
<PAGE> 23
EXHIBIT A
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
BASIC PROVISIONS
1. Name of Buyer: EMD ACQUISITION CORP.
2. Name of Company: LABAMERICA, INC.
(a) State of Incorporation of Company: Georgia
(b) Authorized Officers of the Company:
Gregory Smith, M.D., President
David Nelson, Secretary
Gordon Schuchardt, Treasurer
(c) Address of each Site from which the Company conducts the Business:
5579 Chamblee Dunwoody Road, Suite 143; Dunwoody, Georgia 30338
3. Purchase Price: $200,000 in cash
60,000 shares of EMD
Performance Warrants attached as Exhibit P
4. Company's Broker: None
5. Buyer's Broker: None
6. Allocation of Purchase Price among Purchase of Assets:
As determined by Buyer
<PAGE> 24
EXHIBIT B
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
OFFICERS: Gregory Luke Smith, MD., President; David Nelson, Secretary; Gordon
Schuchardt, Treasurer
DIRECTORS: Gregory Luke Smith, MD., David Nelson, Gordon Schuchardt
SHAREHOLDERS: Gregory Luke Smith, M.D. (353 shares or 35.3 %), David Nelson (303
shares or 30.3%), Gordon Schuchardt (303 shares or 30.3 %), Byron M. G. Sanford,
Esq. (20.5 shares or 2.05%), Richard Fisher, CPA (20.5 shares or 2.05%)
TRADE NAMES: LabAmerica.com (non-registered); LabAmerica (registered with
Network solutions); LabAnon (registered network solutions)
JURISDICTIONS IN WHICH COMPANY IS DOING BUSINESS: Georgia
GOVERNMENT OR REGULATORY LICENSES, PERMITS, CONSENTS, OR APPROVALS HELD BY THE
COMPANY AND THE SHAREHOLDERS
None
<PAGE> 25
EXHIBIT C-1
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
FORMS OF BUSINESS AGREEMENTS WITH CUSTOMERS
NONE
PERSONAL PROPERTY LEASES: None
EQUIPMENT LEASES: None
<PAGE> 26
EXHIBIT C-2
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
COPIES OF ALL BUSINESS AGREEMENTS AND VENDOR/SERVICE PROVIDER AND OTHER
AGREEMENTS:
1. "Flash Cash" Agreement between LabAmerica and Western Union is annexed
hereto.
2. Pricing Agreement between LabAmerica and Quest is annexed hereto.
<PAGE> 27
EXHIBIT C-3
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
LEASES None
<PAGE> 28
EXHIBIT C-4
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
CLAIMS OF DISPUTES UNDER BUSINESS AGREEMENTS
None
<PAGE> 29
EXHIBIT C-5
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
CONSENTS TO TRANSFER AND ASSIGNMENT NOT OBTAINED
NONE
<PAGE> 30
EXHIBIT E
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
TANGIBLE ASSETS
ALL TANGIBLE AND INTANGIBLE PROPERTY OWNED OR LEASED BY THE COMPANY , INCLUDING,
BUT NOT LIMITED TO, ALL FURNITURE, FIXTURES AND EQUIPMENT, ACCOUNTS RECEIVABLE,
NOTES RECEIVABLE, CONTRACTS, INTELLECTUAL PROPERTY AND THE LIKE.
TELEPHONE NUMBERS:
770-662-5325
- --------------------------
FACSIMILE NUMBERS:
1-800-590-9741
- --------------------------
INTERNET DOMAIN ADDRESSES:
WWW.LABAMERICA.COM
WWW. LABANON.COM__________________________
<PAGE> 31
EXHIBIT F
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
INTELLECTUAL PROPERTY
WWW.LABAMERICA.COM
www.labanon.com
<PAGE> 32
EXHIBIT G
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
CUSTOMER LIST AND RELATED INFORMATION
This list will be provided at closing, but is not attached due to the
confidential nature of the Customer list and related information.
<PAGE> 33
EXHIBIT G-1
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
CUSTOMER TERMINATIONS
None terminated
<PAGE> 34
EXHIBIT H
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
FINANCIAL STATEMENTS
ATTACHED HEREWITH
<PAGE> 35
EXHIBIT I
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
BAD DEBTS AND TAX LIABILITIES OF THE COMPANY:
None - see accountants letters attached
<PAGE> 36
EXHIBIT J
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
ASSUMED LIABILITIES: None
<PAGE> 37
EXHIBIT K
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
EXISTING EMPLOYMENT AGREEMENTS, LABOR OR COLLECTIVE BARGAINING AGREEMENTS AND
EMPLOYEE BENEFIT OR WELFARE PLANS AND RETIREMENT PLANS
None
DESCRIPTION OF EMPLOYEES
Gregory Smith, M.D. - Medical Director
David Nelson - Director of Operations
Gordon Schuchardt - Web Master
<PAGE> 38
EXHIBIT L
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
EXCLUDED ASSETS - None, except accounts or notes payable and all other
indebtedness by or obligations by the Company of any kind or any claims, damages
or liabilities incurred by the Company of any kind prior to the Closing
including, but not limited to taxes of any kind.
<PAGE> 39
EXHIBIT M
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
LIENS; ENCUMBRANCES - None
<PAGE> 40
EXHIBIT N
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
NONCOMPETITION AGREEMENTS
None
<PAGE> 41
EXHIBIT O
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
EMPLOYMENT/CONSULTANT AGREEMENTS FOR EACH OF DAVID NELSON AND GREGORY SMITH, MD
SEE ANNEXED
<PAGE> 42
EXHIBIT P
TO
ASSET PURCHASE AGREEMENT
BY AND AMONG
GREGORY SMITH, DAVID NELSON, GORDON SCHUCHARDT,
BYRON M.G. SANFORD, AND RICHARD FISCHER
AND
EMD ACQUISITION CORP.
AND
LABAMERICA, INC.
WARRANT AGREEMENT FOR EACH OF SHAREHOLDERS:
LABAMERICA SHAREHOLDERS, IN AGGREGATE BASED ON THEIR PRO-RATA RESPECTIVE
OWNERSHIP INTERESTS IN THE COMPANY AS DESCRIBED IN THESE EXHIBITS, ARE ENTITLED
TO RECEIVE WARRANTS TO PURCHASE COMMON STOCK OF PARENT, COMPUTED IN THE
FOLLOWING MANNER:
FIFTEEN PERCENT WARRANT COVERAGE (15%) BASED UPON THE TWELVE (12) MONTHS RETAIL
REVENUES OF LABAMERICA ACTUALLY RECEIVED BY THE COMPANY, BEGINNING MAY 1, 2000.
SUCH WARRANT COVERAGE IS COMPUTED BY MULTIPLYING SUCH DEFINED PERIOD REVENUES BY
15% (.15) AND DIVIDING THE WARRANT COVERAGE AMOUNT BY THE TRADING PRICE OF THE
PARENT'S COMMON STOCK ON APRIL 30, 2001.
TRADING PRICE IS DEFINED AS THE FIVE DAY AVERAGE OF THE CLOSING ASK PRICE OF THE
PARENT'S COMMON STOCK AS TRADED ON A NATIONAL SECURITIES EXCHANGE. IF THE
COMPANY IS NOT SO TRADED PUBLICLY, TRADING PRICE IS DEFINED AS THE MOST RECENT
PRICE THE COMPANY SOLD ITS COMMON STOCK, IN A PRIVATE TRANSACTION, PRIOR TO
APRIL 30, 2001.
THE EXERCISE PRICE FOR SUCH WARRANTS WILL BE THE TRADING PRICE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BIOSHIELD TECHNOLOGIES, INC. FOR THE NINE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 5,015,138
<SECURITIES> 62,132
<RECEIVABLES> 364,083
<ALLOWANCES> 200,000
<INVENTORY> 230,571
<CURRENT-ASSETS> 5,894,919
<PP&E> 6,333,025
<DEPRECIATION> 453,874
<TOTAL-ASSETS> 12,402,719
<CURRENT-LIABILITIES> 3,924,657
<BONDS> 0
0
4,000,000
<COMMON> 14,689,137
<OTHER-SE> (16,402,992)
<TOTAL-LIABILITY-AND-EQUITY> 12,402,719
<SALES> 737,182
<TOTAL-REVENUES> 737,182
<CGS> 411,657
<TOTAL-COSTS> 411,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,531,625)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,288,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,314,160)
<EPS-BASIC> (1.93)
<EPS-DILUTED> 0<F1>
<FN>
<F1>DILUTED LOSS PER COMMON SHARE IS NOT DISCLOSED BECAUSE THE EFFECT OF THE
EXCHANGE OR EXERCISE OF COMMON STOCK EQUIVALENTS WOULD BE ANTIDILUTIVE.
</FN>
</TABLE>
