<PAGE> 1
================================================================================
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- - --- Exchange Act of 1934 For the quarterly period ended March 31, 1996.
Transition report pursuant to Section 13 or 15(d) of the Securities
- - --- Exchange Act of 1934 For the transition period from _________ to
___________
Commission File number 0-27082
FUISZ TECHNOLOGIES LTD.
(Exact name of registrant as specified in charter)
Delaware 52-1579474
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3810 Concorde Parkway, Suite 100
Chantilly, Virginia 22021
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (703) 803-3260
Indicate by check mark whether the registrant (1) has filed all reports 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) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of April 29, 1996, the Registrant had outstanding 19,604,741 shares of
Common Stock, par value $.01.
================================================================================
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
FUISZ TECHNOLOGIES LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,554 $ 6,003
Marketable securities 10,167 26,643
Accounts receivable and other 197 340
------------ ------------
Total current assets 32,918 32,986
Property and equipment, net 1,200 1,645
Patents, net 128 125
Other assets 148 196
------------ ------------
Total assets $ 34,394 $ 34,952
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 58 $ 38
Accounts payable 1,177 842
Accrued liabilities and other 718 385
Deferred revenue 527 1,006
------------ ------------
Total current liabilities 2,480 2,271
------------ ------------
Long-term debt:
Capital lease obligations 12 10
------------ ------------
Total long-term debt 12 10
------------ ------------
Total liabilities 2,492 2,281
------------ ------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 1,000,000
shares; none issued or outstanding - -
Common stock, par value $.01 per share; authorized 50,000,000
shares; issued and outstanding 18,038,987 and 18,078,191
shares at December 31, 1995 and March 31, 1996, respectively 180 181
Additional paid-in capital 54,452 54,495
Deficit accumulated during the development stage (22,629) (21,969)
Deferred compensation on stock options granted (101) (36)
------------ ------------
Total stockholders' equity 31,902 32,671
------------ ------------
Total liabilities and stockholders' equity $ 34,394 $ 34,952
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
FUISZ TECHNOLOGIES LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS - UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
Cumulative
for the period
Three Months Ended June 9, 1988
March 31, (inception) to
------------------------ March 31,
1995 1996 1996
--------- --------- --------------
<S> <C> <C> <C>
Operating revenues:
Research and development $ 592 $ 436 $ 4,272
Licensing fees 400 2,225 7,251
Royalties 200 - 200
Other, net 7 - 237
---------- ---------- ------------
Total operating revenues 1,199 2,661 11,960
---------- ---------- ------------
Operating expenses:
Research and development 952 1,334 14,745
General and administrative 770 957 17,493
Depreciation and amortization 89 116 1,429
---------- ---------- ------------
Total operating expenses 1,811 2,407 33,667
---------- ---------- ------------
Net operating income (loss) (612) 254 (21,707)
---------- ---------- ------------
Other income (expense):
Interest income 57 409 1,106
Interest expense (72) (3) (660)
---------- ---------- ------------
Total other income (expense) (15) 406 446
---------- ---------- ------------
Net income (loss), before cumulative effect of a change
in accounting (627) 660 (21,261)
Cumulative effect of change in accounting for patent
application costs - - (708)
---------- ---------- ------------
Net income (loss) $ (627) $ 660 $ (21,969)
========== ========== ============
Net income (loss) per common share $ (0.07) $ 0.03 $ (2.38)
========== ========== ============
Weighted average common shares and common
share equivalents outstanding 9,624 20,289 9,239
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
FUISZ TECHNOLOGIES LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
Cumulative
for the period
Three Months Ended June 9, 1988
March 31, (inception) to
------------------------- March 31,
1995 1996 1996
---------- ---------- ---------------
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ (627) $ 660 $ (21,969)
Adjustments to reconcile net income (loss) to net
cash provided by (used by) operating activities:
Cumulative effect of change in accounting principle - - 708
Depreciation and amortization 89 116 1,429
Noncash compensation expense 57 32 965
Loss on disposal of leasehold improvements - - 99
Noncash interest expense - - 314
Changes in working capital items:
Decrease (increase) in accounts receivable
and other assets (335) (143) (481)
Increase (decrease) in accounts payable
and other current liabilities (291) (242) 1,669
---------- ---------- ---------------
Net cash provided by (used by) operating activities (1,107) 423 (17,266)
---------- ---------- ---------------
Investing activities:
Purchases of marketable securities - (16,476) (28,794)
Sales and maturities of marketable securities - - 2,151
Additions to property and equipment, net (50) (513) (2,539)
Additions to patents - - (765)
---------- ---------- ---------------
Net cash used by investing activities (50) (16,989) (29,947)
---------- ---------- ---------------
Financing activities:
Net proceeds from sale of Preferred Stock - - 17,253
Proceeds from issuance of debt - - 4,660
Net proceeds from sale of Common Stock - - 32,261
Proceeds from exercise of stock options - - 49
Proceeds from exercise of stock warrants - 130 130
Principal payments under long-term debt (40) (67) (1,082)
Increase in deposits and escrow funds (5) (48) (55)
---------- ---------- ---------------
Net cash provided by (used by) financing activities (45) 15 53,216
---------- ---------- ---------------
Net increase (decrease) in cash and cash equivalents (1,202) (16,551) 6,003
Cash and cash equivalents, beginning of period 4,288 22,554 -
---------- ---------- ---------------
Cash and cash equivalents, end of period $ 3,086 $ 6,003 $ 6,003
========== ========== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The Company's activities to date principally have been the planning and
organization of the Company, initiation and execution of research and
development programs, and securing capital for growth and operations.
Accordingly, the Company is complying with Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage Enterprises,"
which prescribes requirements in reporting for development stage enterprises.
The information at March 31, 1996 and for the three months ended March
31, 1996 and 1995 is unaudited, but includes all normal recurring adjustments
which the management of the Company believes necessary for fair presentation of
the results for the periods presented. Interim results are not necessarily
indicative of results for a full year. The financial statements should be read
in conjunction with the audited financial statements for the year ended
December 31, 1995, included in the Company's 1995 Form 10-K.
On March 22, 1996, the Board of Directors authorized a three-for-two
split of the outstanding shares of the Company's common stock, effected in the
form of a stock dividend, effective as of April 16, 1996 to all holders of
record as of April 2, 1996. These financial statements and related notes have
been adjusted to reflect this split.
Earnings per common and common equivalent share as presented on the
face of the statements of operations represent primary earnings per share. Dual
presentation of primary and fully diluted earnings per share has not been made
because the differences are insignificant.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Since its inception in June 1988, the Company has been in the
development stage, engaged in the development and commercialization
of its proprietary Shearform Matrix technology for oral drug
delivery and food applications. Substantially all revenues to date
have been research and development fees and license fees. The
Company has not been profitable to date, on a full fiscal year
basis, and expects to incur additional losses in the foreseeable
future, primarily due to the continuation of its research and
development activities and the start-up of its manufacturing
operations. From its inception in 1988 through December 31, 1995,
the Company has incurred net losses in each year, including net
losses of approximately $3.3 million during the year ended December
31, 1995. These losses have resulted in an accumulated deficit of
approximately $22.0 million at March 31, 1996.
RESULTS OF OPERATIONS
Operating revenues were $2,661,000 for the three months ended
March 31, 1996 compared to $1,199,000 for the three months ended
March 31, 1995, an increase of $1,462,000, or 122%. The increase
was primarily due to licensing fees attributable to additional
licensing agreements entered into by the Company.
Research and development expenses were $1,334,000 for the
three months ended March 31, 1996 compared to $952,000 for the three
months ended March 31, 1995, an increase of $382,000, or 40%. The
increase was primarily due to increases in research personnel and
facility expansion to support the Company's additional development
and license agreements and the Company's continued emphasis on
developing its technologies.
General and administrative expenses were $957,000 for the
three months ended March 31, 1996 compared to $770,000 for the three
months ended March 31, 1995, an increase of $187,000, or 24%. The
increase was primarily due to expanded administrative activities.
Net interest income was $406,000 for the three months ended
March 31, 1996 compared to net interest expense of $15,000 for the
three months ended March 31, 1995, an increase in net interest
income of $421,000. The increase in net interest income was
primarily due to funds generated from the initial public offering of
the Company's Common Stock in December 1995 which were available for
investment in 1996.
As a result of the foregoing, net income was $660,000 for the
three months ended March 31, 1996, an increase of $1,287,000 from
the net loss of $267,000 for the three months ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
On December 20, 1995, the Company completed its initial public
offering (the "IPO") of 4,125,000 shares of Common Stock at a price
of $8.00 per share.
Prior to the IPO, the Company financed its operations
primarily through private sales of its equity securities, issuances
of convertible debt, and license and development fees. Through
March 31, 1996, the Company had received net offering proceeds from
private sales of equity securities and issuance of convertible notes
of approximately $24.0 million and had generated license and
development fees of approximately $11.5 million. The Company
received net proceeds of approximately $30 million as a result of
the IPO. In
5
<PAGE> 7
January 1996, the Company received approximately $130,000 upon the
exercise of outstanding warrants.
On May 3, 1996, the Company completed a secondary offering
(the "Secondary Offering"), of 3,900,000 shares of Common Stock at a
price of $25.00 per share. Of the 3,900,000 shares of Common Stock
offered in the Secondary Offering, 1,125,000 shares were sold by the
Company and 2,775,000 shares were sold by certain selling
stockholders. Pursuant to the underwriters' over-allotment option
for the Secondary Offering, on May 9, 1996, the Company sold an
additional 368,000 shares of Common Stock and certain selling
stockholders sold an additional 217,000 shares of Common Stock at a
price of $25.00 per share. The Company did not receive any proceeds
from the sale of shares by the selling stockholders, except for
$1,119,897 relating to the exercise of 401,550 stock options. The
Company received proceeds from the Secondary Offering (including the
sale of the additional shares pursuant to the underwriters'
over-allotment option) of approximately $35.3 million, net of
underwriting discounts and commissions, before deducting expenses of
the offering.
As of March 31, 1996, the Company's portfolio of cash and
marketable securities totaled $32.6 million, essentially unchanged
from December 31, 1995. Major uses of cash during the quarter ended
March 31, 1996 included capital expenditures of $513,000 for
property and equipment. The Company funded most of these investment
needs with cash provided by operating activities, which totaled
$423,000 for the quarter ended March 31, 1996.
The Company expects to incur additional losses in the
foreseeable future. The Company expects that, at least for the
foreseeable future, its revenues will be derived principally from
development fees, license fees and royalties from collaborative
partners. The Company believes that the net proceeds of the
Secondary Offering, together with currently available funds and
internally generated cash flow, will be sufficient to meet the
Company's liquidity needs through 1997. The Company's capital
needs, however, will depend on many factors, including continued
progress in the research and development of the Company's
technologies, the ability of the Company to establish and maintain
additional collaborative arrangements with others and the terms
thereof, payments received from collaborative partners under
research and development agreements, the cost involved in filing and
enforcing patent claims, the status of competitive products and
other factors. If the proceeds of the Secondary Offering together
with the Company's currently available funds and internally
generated cash flow are not sufficient to satisfy its financing
needs, the Company would be required to seek additional funding
through other arrangements with collaborative partners, through bank
borrowings and through public or private sales of its securities,
including equity securities. There can be no assurance that
additional funds, if required, will be available to the Company on
favorable terms.
6
<PAGE> 8
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is currently not a party to any legal proceedings,
and does not know of any threatened legal proceeding, that the
Company believes will have a material adverse effect on the
Company's financial position or results of operations. On April 26,
1996, Mr. Gerald E. Battist, a former officer of the Company, filed an
action in the Circuit Court of Fairfax County, Virginia, alleging
among other things breach of contract under various stock option and
employment agreements and claiming monetary damages and reinstatement
of, or payment for, stock options that previously had been granted to
him. See Exhibit 99.1 to this Form 10-Q. The Company has reviewed
this matter with legal counsel. The Company believes these claims are
without merit and intends vigorously to defend against the claims.
ITEM 2. CHANGES IN SECURITIES
On March 22, 1996, the Board of Directors authorized a
three-for-two split of the outstanding shares of the Company's
common stock, effected in the form of a stock dividend,
effective as of April 16, 1996 to all holders of record as of April
2, 1996. The financial statements and related notes contained in
this report have been adjusted to reflect this split.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Retirement of the Registrant
10.1 Employment Agreement between Adrian Gerber
and the Company, dated December 7, 1995
11.1 Statement Regarding Weighted Average Common
and Common Equivalent Shares Used in
Computation of Earnings (Loss) Per Share
27.0 Financial Data Schedule
99.1 Complaint filed by Mr. Battist against the
Company on April 26, 1996
(b) Reports on Form 8-K
Current Report on Form 8-K, dated February 8, 1996,
regarding Agreement between the Company and McNeil
Consumer Products Company
7
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FUISZ TECHNOLOGIES LTD.
Date: By: /S/
-------------- -----------------------------------
Patrick D. Scrivens
Executive Vice President and
Chief Financial Officer
Date: /S/
-------------- ---------------------------------------
Lars G. Okeson
Controller
(Principal Accounting Officer)
8
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Numbered Page
- - ------ -------------
<S> <C> <C>
3.1 Certificate of Retirement of the Registrant
10.1 Employment Agreement between Adrian Gerber and the Company,
dated December 7, 1995
11.1 Statement Regarding Weighted Average Common
and Common Equivalent Shares Used in Computation
of Earnings (Loss) Per Share
27.0 Financial Data Schedule
99.1 Complaint filed by Mr. Battist against the Company
on April 26, 1996
</TABLE>
9
c
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF RETIREMENT
OF
SERIES A CONVERTIBLE PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK
SERIES C CONVERTIBLE PREFERRED STOCK
AND
SERIES D CONVERTIBLE PREFERRED STOCK
OF
FUISZ TECHNOLOGIES LTD
----------------------------------------------------------------------
Pursuant to Section 243 of the General
Corporation Law of the State of Delaware
----------------------------------------------------------------------
Fuisz Technologies Ltd., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify as follows:
FIRST: Article FOURTH of the Corporation's Fourth Amended and
Restated Certificate of Incorporation, as amended by that certain Certificate
of Amendment of the Fourth Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") authorizes the issuance of 127,500 shares
of Series A Convertible Preferred Stock, 200,000 shares of Series B Convertible
Preferred Stock, 612,106 shares of Series C Convertible Preferred Stock and
383,750 shares of Series D Convertible Preferred Stock (the "Convertible
Preferred Stock").
SECOND: On December 20, 1995 all of the shares of the Convertible
Preferred Stock were converted into shares of Common Stock of the Corporation,
and pursuant to the terms of Article FOURTH of the Certificate of
Incorporation, all of the Convertible Preferred Stock of the Corporation was
retired.
THIRD: Article FOURTH of the Corporation's Certificate of
Incorporation prohibits the reissuance of such shares.
FOURTH: Pursuant to the provisions of Section 243(b) of the General
Corporation Law of Delaware, all references to Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock and Series D Convertible Preferred Stock in the Certificate of
Incorporation of the Corporation are hereby eliminated, including, without
limitation, those references set forth in Article FOURTH thereof.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its duly authorized officer this ____ day of March, 1996.
FUISZ TECHNOLOGIES LTD.
By:
--------------------------------
Richard C. Fuisz, M.D.
Secretary
2
<PAGE> 1
EXHIBIT 10.1
[FUISZ TECHNOLOGIES LTD. LETTERHEAD]
December 7, 1995
Via Facsimile & Federal Express
Adrian Gerber
25 Rockport Lane
Los Altos, CA 94024
Dear Mr. Gerber:
We are pleased to offer you the position of Executive Vice President,
Business Development - Licensing with Fuisz Technologies Ltd., (herein
"Company") this offer of employment being effective as of the date of this
letter and valid, pending your acceptance, through February 29, 1996. In this
position you will report directly to Dr. Richard C. Fuisz.
The salary for the position is $270,000 per year to be paid at months end
in twelve (12) equal installments throughout the year, with a guaranteed annual
bonus of $30,000 per year. You will be eligible for salary review after twelve
(12) months of employment and salary increases will be predicated on individual
performance and contributions and overall Company performance.
It will be recommended to the Board of Directors that you participate in
the Stock Option Program and receive an option for 150,000 shares of the
Company's common shares as a Non-statutory Option at the IPO price. Options for
50,000 shares shall vest within thirty (30) days after the IPO. Your option
program for the remaining 100,000 Options will be of three (3) years duration,
whereby options will be vested over three (3) years vesting annually in
one-third increments. In addition you will be eligible for additional options
from time to time as determined by Company's Compensation Committee.
You will be eligible for three (3) weeks vacation annually. Vacation
duration will be modified periodically in accordance with the Company Vacation
Policy.
The Company will pay your relocation costs including actual expenses
incurred associated with selling your current home, moving furniture and
personal possessions. In addition we will reimburse you for the closing cost
expenses associated with purchasing a home within the commuting distance of our
offices in Chantilly.
The current medical and life insurance carrier for the Company is
Principle Mutual Life Insurance Company. You will be eligible to apply for
inclusion in the plan ninety (90) days after you begin work and have completed
and submitted all of the necessary paperwork for inclusion in the program. You
will participate in the executive portion of the Company's insurance program
and the cost associated with this coverage will be fully paid by the Company.
In the event you choose to continue your current medical coverage until you
qualify for coverage by Company's insurance carrier, Company will pay an
allowance to you for such coverage equivalent to that paid to other employees
in a comparable position.
You will have a monthly automobile allowance of $450.00 per month
available to you during your employment with the Company. This allowance may be
applied to a purchased or leased vehicle, and any purchase or lease agreement
involved should be in your name.
<PAGE> 2
Adrian Gerber
December 7, 1995
Page Two
Your place of work will be at the Company headquarters located at 3810
Concorde Parkway, Suite 100, Chantilly, Virginia. Your position will require
domestic and international travel.
Your employment at Company is conditioned on your signing of our standard
Employment Confidentiality Agreement which is enclosed herewith and receipt
of such signed Agreement by Company.
We are looking forward to having you join us as a key member of the Fuisz
Technologies team, let me know if you have any questions. If this offer is
acceptable, please indicate your agreement to the terms and conditions of this
letter as indicated below, and return a copy to my attention.
Sincerely,
/s/ RICHARD C. FUISZ
--------------------------
Richard C. Fuisz, M.D.
President and CEO
AGREED AND ACCEPTED:
/s/ ADRIAN GERBER
- - ---------------------------
Name
Feb. 2 1996
- - -----------
Date
Enclosures (2)
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES USED IN COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Primary
-----------------------------------------------------
Cumulative
for the Period
Quarter Ended March, 31 June 9, 1988
------------------------------- (inception)
1995 1996 to March 31, 1996
------------- ----------- -------------------
<S> <C> <C> <C>
Net Income (loss) $ (627) $ 660 $ (21,969)
============= =========== ===========
Weighted average common shares
outstanding 8,794 18,069 8,463
Add shares issuable from assumed
exercise of options and warrants - 2,220 -
Add shares issuable upon the exercise
of outstanding options and warrants
issued within one year of initial
public offering 830 - 776
------------- ----------- -----------
Total weighted average shares 9,624 20,289 9,239
============= =========== ===========
Net income (loss) per common share $ (0.07) $ 0.03 $ (2.38)
============= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Fully Diluted(1)
------------------------------------------------------
Cumulative
for the Period
Quarter Ended March 31, June 9, 1988
------------------------------- (inception)
1995 1996 to March 31, 1996
------------- ----------- -------------------
<S> <C> <C> <C>
Net Income (loss) $ (627) $ 660 $ (21,969)
============= =========== ===========
Weighted average common shares
outstanding 8,794 18,069 8,463
Add shares issuable from assumed
exercise of options and warrants - 2,421 -
Add shares issuable upon the exercise
of outstanding options and warrants
issued within one year of initial
public offering 830 - 776
------------- ----------- -----------
Total weighted average shares 9,624 20,490 9,239
============= =========== ===========
Net income (loss) per common share $ (0.07) $ 0.03 $ (2.38)
============= =========== ===========
</TABLE>
(1) Earnings per common and common equivalent share as presented on the
face of the statements of operations represent primary earnings per
share. Dual presentation of primary and fully diluted earnings per
share has not been made on the face of the statements of operations
because the differences are insignificant.
All share and per share amounts have been restated to reflect the effects of a
three-for-two split of the outstanding shares of the Company's common stock,
effected in the form of a stock dividend, effective as of April 16, 1996
to all holders of record as of April 2, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000873064
<NAME> FUISZ TECHNOLOGIES, LTD.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,003,000
<SECURITIES> 26,643,000
<RECEIVABLES> 340,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,986,000
<PP&E> 2,921,000
<DEPRECIATION> (1,276,000)
<TOTAL-ASSETS> 34,952,000
<CURRENT-LIABILITIES> 2,271,000
<BONDS> 0
0
0
<COMMON> 181,000
<OTHER-SE> 32,490,000
<TOTAL-LIABILITY-AND-EQUITY> 34,952,000
<SALES> 0
<TOTAL-REVENUES> 2,661,000
<CGS> 0
<TOTAL-COSTS> 2,407,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 660,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 660,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 660,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
<PAGE> 1
V I R G I N I A:
IN THE CIRCUIT COURT OF FAIRFAX COUNTY
<TABLE>
<S> <C>
GERALD E. BATTIST )
1588 North Village Road )
Reston, Virginia 22094, )
)
Plaintiff, )
)
v. )
) Chancery No. C144115
FUISZ TECHNOLOGIES, LTD., )
)
Serve: Edward R. Parker, Esq. )
Registered Agent )
5511 Staples Mill Road )
Richmond, Virginia 23228, )
)
and )
)
RICHARD FUISZ )
9320 Cornwell Farm Road )
Great Falls, Virginia 22066, )
)
Defendants. )
)
</TABLE>
BILL OF COMPLAINT
Plaintiff, Gerald E. Battist, brings this bill of complaint for
specific performance, declaratory and injunctive relief, breach of stock option
and employment agreements, conversion, and defamation against Defendants, Fuisz
Technologies, Ltd., and Richard Fuisz, and states the following in support
thereof:
<PAGE> 2
THE PARTIES
1. Plaintiff, Gerald E. Battist ("Battist"), is a resident of
Fairfax County, Virginia. Until recently, he was a director, corporate
secretary, and employee of Fuisz Technologies, Ltd.
2. Defendant Fuisz Technologies Ltd. ("FTL" or the "Company") is
a Delaware corporation with its headquarters and principal place of business in
Fairfax County, Virginia.
3. Defendant Richard Fuisz ("Fuisz") is a resident of Fairfax
County, Virginia. He is the Chief Executive Officer and controlling
shareholder of FTL.
FACTS
4. Battist is a successful business manager and patent attorney
with over 30 years experience in developing businesses and in developing and
managing businesses' patent and technology portfolios.
5. In 1991, while still employed by Eastman Kodak Company as
Director of Licensing and Technology, Battist met Fuisz as part of negotiations
between Eastman Kodak and FTL for licensing of a developmental colloidal
dispersion technology. Fuisz was impressed by Battist's knowledge and
negotiating skills. When Battist was able to obtain an enhanced early
retirement package from Eastman Kodak, Fuisz and Battist discussed the
possibility of Battist joining FTL. Fuisz asked Battist to meet with him at
the Twenty-One Club in New York City to negotiate Battist's employment by FTL.
6. On or about November 25, 1991, at the Twenty-One Club, Fuisz,
acting on behalf of FTL, and Battist signed an agreement, called a term sheet,
a true copy of which is attached as Exhibit A. Although Battist had originally
intended the term sheet to provide the outline for a later, more detailed
agreement, Fuisz insisted that the term sheet was sufficient to serve as the
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agreement. Battist agreed. The term sheet memorialized the terms of an
employment agreement between Battist and FTL (the "1991 Employment Agreement")
whereby Battist was hired as FTL's Senior Vice President and General Counsel,
starting December 2, 1991. Among other things, the agreement granted Battist
vested options to purchase 10,000 shares of FTL's common stock (as constituted
on April 1, 1991) at a price of $5.34, and options that were to vest on a pro
rata monthly basis over a period of forty-eight months, beginning January 1,
1992, to purchase an additional 35,000 shares of FTL's common stock (as
constituted on January 1, 1992). The agreement also granted Battist six weeks
paid vacation each calendar year, with the right to accumulate unused vacation
to be taken (or be compensated for) in later years. Thereafter, the parties
performed under that agreement for nearly three years. No other written
employment agreement was entered into by Battist and FTL until October 1994.
7. During the approximately next four years following Battist's
employment by FTL, Battist contributed significant efforts and expertise to
help FTL build an extensive proprietary technology portfolio and several core
technology platforms that FTL was able to use to transform itself from a
struggling, new technology company with a history of losses, cash problems, and
no successful products, into one of the most promising technology companies to
offer its stock publicly in recent years. For example, FTL has a patented
technology now licensed to several major pharmaceutical companies that
eliminates the need to swallow pills when one takes them. In a recent Baron's
article, FTL stock was touted as one of the most promising new technology
company offerings.
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8. On January 1, 1992, FTL granted Battist a stock option to
purchase an aggregate of 45,000 shares of FTL common stock at $5.34 per share.
A true copy of this stock option is attached at Exhibit B and incorporated by
reference.
9. On or about March 1, 1992, FTL granted Battist a stock option
to purchase an aggregate of 30,000 shares of FTL common stock at $5.68 per
share. A true copy of this stock option is attached as Exhibit C and
incorporated by reference.
10. On or about November 4, 1993, FTL granted Battist a stock
option to purchase an aggregate of 30,000 shares of FTL common stock at $8.80
per share. A true copy of this stock option is attached as Exhibit D and
incorporated by reference.
11. On January 19, 1994, FTL granted Battist a stock option to
purchase an aggregate of 30,000 shares of FTL's common stock at $10.66 per
share. A true copy of this stock option is attached as Exhibit E and
incorporated by reference.
12. On August 10, 1994, FTL granted Battist a stock option to
purchase an aggregate of 7,000 shares of FTL's common stock at $10.66 per
share. A true copy of this stock option is attached as Exhibit F and
incorporated by reference.
13. On October 19, 1994, FTL entered into an employment agreement
with Battist, a true copy of which is attached as Exhibit G and incorporated by
reference (the "1994 Employment Agreement"). FTL did so in part because
Battist was critical to FTL's efforts to solve cash flow problems through a
merger or a public offering of its stock. The 1994 Employment Agreement was
for the period October 19, 1994, to October 18, 1997, with Battist to serve as
Executive Vice President and General Counsel. The 1994 Employment Agreement
provided, inter alia, that it would terminate at the election of FTL for cause,
immediately upon written notice of
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termination, or without cause, upon not less than 90 days' prior written notice
of termination. The 1994 Employment Agreement narrowly and specifically
defined cause to mean essentially (1) a willful (bad faith) and continued
failure by Battist to substantially perform his duties after a written demand
for substantial performance was delivered by FTL to Battist, (2) guilt of an
act or acts of dishonesty constituting a felony, or (3) violation of the 1994
Employment Agreement, or any other confidentiality, nondisclosure, assignment
of invention, or similar agreement.
14. The 1994 Employment Agreement also provided what the effect of
termination was, depending upon whether termination was "for Cause," "without
Cause," or at the election of the employee with "Good Reason". A "Cause"
termination eliminated Battist's right to severance pay following termination
through October 1997 and other rights and benefits that were available under
termination such as "without Cause" or with "Good Reason". The Employment
Agreement defined Good Reason to include, without limitation, "any purported
termination of the Employee's employment which is not effected pursuant to a
notice of termination satisfying the requirements of Sections 4.1 through 4.5
and Section 9 [sic] [actually intended to be Section 8]." Compensation and
benefits accrued before severance were to be paid to Battist regardless of the
reason for termination.
15. The 1994 Employment Agreement further was intended to modify
and did modify certain provisions of the stock options granted to Battist in
1992 through 1994. The 1994 Employment Agreement narrowed the definition of
"cause" that appeared in the stock option grants, removed determination of
cause from FTL's discretion, accelerated vesting and exercisability of the
options, and extended the period for purchase of shares under the options for
their entire term as if Battist continued to be employed by FTL through the
option term. These
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changes were made by FTL, after consultation with its outside counsel, as an
additional inducement to Battist's efforts to help FTL solve its cash flow
problems and become successful.
16. On October 19, 1994, FTL's Board of Directors met and voted to
authorize FTL to proceed with an Initial Public Offering ("IPO") of FTL's stock
in the $15-$20 million range. The FTL Board also voted to expand the total
number of shares available under its 1994 Employee Stock Option Plan, its 1994
Directors Stock Option Plan, its 1994 Stock Incentive Plan, and its 1991 Stock
Option Plan. Further the Board approved the following resolution (the "October
19, 1994, Resolution") by a unanimous vote:
Resolved: The period for exercise of vested non-statutory
Stock Options under the 1991 Stock Option Plan and the
1994 Stock Incentive Plan, including all awards issued
under the respective Plans, shall extend for all events and
purposes to the Expiration Date under such respective plan and
such period for exercise of such vested options shall not be
shortened as a result of the Optionee ceasing to be employed
by the Company or the lack of a continuous relationship with
the Company.
17. The October 19, 1994, Resolution, unanimously adopted by FTL's
board, had been requested by Battist to ensure that, if he left FTL's employ
for any reason, he would still have the same right and same period to exercise
the stock options as if his employ continued. The resolution was intended to
and did further modify the stock options granted by FTL to Battist from 1991
through 1994 to eliminate any divestiture despite leaving employment with FTL
for any reason. The resolution was made as a further inducement by FTL's Board
to Battist to ensure his most strenuous and skillful efforts during a time
crucial to FTL's success. The resolution was intended to and did induce
reliance by Battist, who often labored for 14 or more hours a day,
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without taking all of the vacation time to which he was entitled, and used all
his skills and contacts to ensure FTL's success.
18. Thereafter, while still pursuing an IPO of its stock, FTL
explored the possibility of its acquisition by larger companies in the
pharmaceutical industry. During exploration of FTL's potential acquisition by
Johnson & Johnson, Inc., Fuisz and Battist learned that Johnson & Johnson did
not have an interest in continuing to employ Fuisz if it acquired FTL but was
very interested in continuing to employ Battist, given his key role in
developing some of FTL's technology that, in effect, constituted FTL's "crown
jewels." This appeared to bother FTL's founder and controlling shareholder,
Fuisz, who has a sensitive ego and an obsession concerning control. Also,
Fuisz apparently began to realize that, as the then controlling stockholder, he
would see the value of his holdings diluted considerably by Battist's exercise
of his stock options.
19. On or about October 18, 1995, FTL's Board unanimously adopted
a resolution to grant Battist an option to purchase 30,000 shares of FTL common
stock at the then current valuation, which was determined to be $22.00 a share
on the presplit basis. FTL's Board also voted a two-for-one split in its
common stock in the form of a stock dividend. This caused all the options
granted to Battist to be exercisable for twice the number of shares and at
one-half the price indicated on the options originally.
20. Negotiations with Johnson & Johnson concerning FTL's
acquisition broke down, largely because of Fuisz. However, it was determined
that a licensing agreement with Johnson & Johnson would be extremely
advantageous to a successful initial public offering of FTL stock. Fuisz
negotiated the terms of the license, and Battist and Fuisz then worked with
Johnson & Johnson to complete a written document based on the agreed terms.
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21. However, just after Battist's help in completing the key
licensing agreement with Johnson & Johnson, and with FTL's future success now
virtually assured, Fuisz sent Battist a letter purporting to terminate
Battist's employment with FTL. A true copy of the faxed letter received by
Battist, dated November 5, 1995, is attached as Exhibit H and incorporated by
reference. The letter came as a complete surprise to Battist, especially given
his substantial contributions in making FTL a successful company. The letter
indicated that FTL (i.e., Fuisz) was recommending to its Board that a committee
be established to determine whether cause existed for Battist's termination.
The letter barred Battist from entering FTL's premises. The letter gave a point
of contact for Battist to arrange to pick up his personal belongings. The
letter did not conform to the notice or termination requirements of the 1994
Employment Agreement.
22. Thereafter, Battist repeatedly made requests for return of
personal belongings from his office. These belongings had considerable
professional and emotional value to Battist, and some reflected years of work
that could not be duplicated. FTL and Fuisz failed and refused to return many
of Battist's belongings despite these repeated requests. Other of Battist's
belongings were only returned after a prolonged and unwarranted delay. Upon
information and belief, Fuisz had Battist's personal belongings held out of
vindictiveness and in an effort to harass Battist.
23. By letter dated January 3, 1996, a true copy of which is
attached as Exhibit I and incorporated by reference, FTL advised Battist that
it had recently completed its IPO of 2,750,000 shares of common stock. The
letter to Battist further stated:
Prior to the offering, in October 1995 the Company
elected a two-for-one stock split of its Common Stock in the
form of a stock dividend. As a result of the stock dividend,
your options to purchase common stock of the Company are now
exercisable for twice the number of shares and at one-half the
exercise price shown in your option agreement.
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24. On about January 22, 1996, Battist sent a letter to FTL
exercising a portion of his options to purchase FTL common stock by delivery of
a letter and check for $10,000 to FTL. A true copy of the letter is attached
as Exhibit J and incorporated by reference. This entitled Battist to 1,600
shares of FTL common stock at $2.67 a share. ($3.58 per share was required for
withholding taxes.)
25. On or about January 23, 1996, Battist sent a letter to FTL
exercising a portion of his options to purchase FTL common stock by delivery of
a letter. A true copy of the letter is attached as Exhibit K and incorporated
by reference.
26. Fuisz retained for FTL a law firm, Crowell & Moring, that was
already representing him personally in litigation, and with whom he had
personal ties, to make an investigation of whether cause existed for Battist's
termination. Fuisz had a personal interest in seeing a determination made that
Battist's termination was for "cause", both because of the animosity that he
developed toward Battist as a result of the Johnson & Johnson negotiations, and
because, by cheating Battist out of his options, Fuisz stood to enrich the
value of his own stock holdings by several million dollars. The law firm had
an ethical conflict in purporting to do the investigation and advise FTL on the
"cause" issue because of the personal interest of Fuisz, whom the firm
simultaneously was representing individually, and because the cause allegations
came primarily from Fuisz himself. Upon information and belief, neither the law
firm nor Fuisz disclosed the conflict to FTL's Board.
27. The law firm made a sham investigation that did not even
afford Battist any reasonable opportunity to respond. Not surprisingly, given
its personal ties to Fuisz and its sham investigation, the law firm concluded
that cause existed for Battist's termination.
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28. Upon information and belief, the law firm's report of its
purported "investigation" was not furnished to FTL's Board, nor did the Board
meet and deliberate to consider if cause existed for Battist's termination.
29. By letter dated March 11, 1996, which was not personally
delivered to Battist or mailed by certified mail, Patrick Scrivens, FTL's
Assistant Secretary, indicated that the FTL Board, having been advised by
counsel (i.e., Fuisz's counsel), concluded that Battist's purported November 5,
1995, termination was for cause within the meaning of his Employment Agreement
and Stock Option Agreements. A true copy of the letter is attached as Exhibit
L and incorporated herein by reference. Upon information and belief, what the
letter stated was not true, the Board having only authorized Fuisz to negotiate
a termination deal with Battist. The letter also returned the check Battist
had sent to FTL on about January 22, 1996, to exercise some of his stock
options. The letter took the position that the "cause" determination, which
was announced in mid-March 1996, was, in effect, retroactive to November 5,
1995, and acted to divest Battist of his stock options retroactively. This was
inconsistent with FTL having paid Battist after November 5, 1995, through
February 1, 1996.
30. In fact, "cause" did not exist for termination of Battist's
employment with FTL. Moreover, the March 11, 1996, letter did not conform to
the requirements of the 1994 Employment Agreement and was ineffective.
31. By letter dated and sent April 11, 1996, a true copy of which
is attached as Exhibit M and incorporated by reference, Battist requested that
200,000 shares of FTL vested in him under the January 1, 1992, March 1, 1993,
November 4, 1993, January 19, 1994, and August 10, 1994, stock option
agreements be exercised and sold in an offering that FTL had proposed and
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filed with the Securities and Exchange Commission ("SEC") on or about April 3,
1996. The offering was primarily of shares of FTL principal and selling
stockholders. If Battist's options remained extant, FTL was legally obligated
to include Battist's 200,000 shares as part of the offering.
COUNT I
(Specific Performance - Sale of Stock - Battist's
January 22, 1996, and January 23, 1996, Exercise of Stock Options)
32. The allegations of paragraphs 1 through 31 are repeated and
incorporated by reference.
33. The stock option agreements, as modified by the 1994
Employment Agreement and October 19, 1994, Board Resolution, constituted a
contractual or other promissory obligation that ran from FTL to Battist whereby
FTL was obligated to sell to Battist 127,417 shares of FTL common stock, the
options for which had vested in Battist, at an average price of $7.34 a share
on a presplit basis.
34. Battist satisfied all conditions to the exercise of his rights
and was entitled on about January 22, 1996, and January 23, 1996, to transfer
of 1,600 shares and 16,615.36 shares of FTL common stock to him respectively,
and on or about April 11, 1996, to have 200,000 shares offered on his behalf in
the April 3, 1996, public offering.
35. FTL's refusals to transfer the FTL stock to Battist and to
offer the other FTL stock in the April public offering are breaches of FTL's
obligations and are without legal excuse.
36. Battist has no adequate remedy at law and will suffer
irreparable harm without specific performance because, among other things, (a)
recovery of money damages from FTL for its breach of its option obligations
would cause tax consequences to Battist that are far more
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adverse than his obtaining the stock to which he is entitled,(b) Battist would
not be able to have the same ownership interest in a unique corporation without
specific performance, and (c) Battist would not be able to market the 200,000
shares through a same-day purchase and sale in a public offering without
specific performance.
37. Under the circumstances, Battist is entitled to specific
performance of FTL's obligations to transfer and offer the shares of FTL common
stock to him pursuant to his options.
38. Under the 1994 Employment Agreement, Battist is also entitled
to his attorneys' fees and expenses in enforcing these rights.
WHEREFORE, Battist prays that this Court grant him specific
performance; order FTL to transfer to him forthwith the shares of FTL stock
that were the subject of the January 22, 1996, and January 23, 1996, option
exercises; order FTL to offer the 200,000 shares on Battist's behalf through
the April 3, 1996, public offering; enter judgment in his favor against FTL for
his attorneys' fees and expenses; award him his costs; and grant such further
relief as is just and proper.
COUNT II
(Negative Specific Performance and
Declaratory Judgment - Continuing Validity
of Battist's Remaining Options)
39. The allegations of paragraphs 1-31 are repeated and
incorporated by reference.
40. The stock options, as modified by the 1994 Employment
Agreement and the October 19, 1994, FTL Board resolution, constituted a
contractual and other promissory obligation that ran from FTL to Battist
whereby FTL is obligated to sell to Battist, at his option,
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shares of FTL common stock at the prices indicated in the options for the
periods indicated in the options, as modified.
41. FTL's March 11, 1996, letter to Battist takes the position
that Battist no longer has rights under the options, and FTL otherwise has
refused to recognize Battist's option rights.
42. In fact, under the circumstances, Battist's option rights are
still extant, and Battist is entitled to exercise them in the future, at his
election.
43. A present, justiciable controversy exists between Battist and
FTL concerning the continuing validity and enforceability of Battist's stock
option rights.
44. Battist has no adequate remedy at law and will suffer
irreparable harm without declaratory relief that the options are still extant
and enforceable and an injunction prohibiting FTL from taking any actions in
derogation of Battist's stock option rights. This is because (a) recovery of
money damages from FTL for its anticipatory breach of its option obligations
would cause tax consequences to Battist that are far more adverse than his
keeping the option rights and timing his exercises of options, and (b) Battist
would not be able to have the same opportunity to acquire the same ownership
interests in a unique corporation without availability of the options.
45. Under the circumstances, Battist is entitled to a declaration
that his stock option rights remain extant and enforceable and an injunction
prohibiting FTL from taking any actions in derogation of his rights.
46. Under the 1994 Employment Agreement, Battist is also entitled
to his attorneys' fees and expenses in enforcing these rights.
WHEREFORE, Battist prays that this Court declare that his rights under
the stock options remain extant and enforceable, enjoin FTL from taking any
actions in derogation of Battist's rights
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under the stock options, enter judgment in his favor against FTL for his
attorneys' fees and expenses, award him his costs, and grant such further
relief as is just and proper.
COUNT III
(Breach of Contract/Promissory Estoppel - Damages
Stock Options, As Modified)
47. The allegations of paragraphs 1 to 31 are repeated and
incorporated by reference.
48. This Count III is pled in the alternative to Counts I and II.
49. The stock option agreements, as modified by the 1994
Employment Agreement and October 19, 1994, Board Resolution, constituted a
contractual or other promissory obligation that ran from FTL to Battist whereby
FTL was obligated to sell Battist shares of FTL stock in the numbers and at the
prices indicated following the termination of Battist's employment by FTL.
50. Battist has satisfied all conditions for various of the option
rights to vest in him.
51. FTL has breached its contractual and other promissory
obligations by refusing to sell Battist stock pursuant to the options when he
attempted to exercise options as to some stock in January 1996. FTL
anticipatorily breached its obligations as to the remaining options when it
sent the March 11, 1996, letter and otherwise took the position that Battist's
options were no longer extant and enforceable. FTL's breaches are without
legal excuse.
52. FTL's breaches of these contractual and other promissory
obligations have directly caused Battist damages in the amount by which the
value of the stock exceeds the option price, which amount is believed to exceed
$11,428,880.00.
53. Under the 1994 Employment Agreement, Battist is also entitled
to his attorneys' fees and expenses in enforcing these rights.
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WHEREFORE, in the alternative to Counts I and II, Battist prays that
this Court enter a judgment against FTL in his favor in the amount of
$11,428,800.00, plus interest and his attorneys' fees and expenses, grant him
his costs, and grant him such further relief as is just and proper.
COUNT IV
(Breach of 1991 Employment Agreement)
54. The allegations of paragraphs 1 to 31 are repeated and
incorporated by reference.
55. Under the 1991 Employment Agreement, Battist had six weeks
paid vacation each calendar year, with the right to accumulate or be
compensated for unused vacation in later years.
56. Battist performed his obligations under the 1991 Employment
Agreement. Battist accumulated 11 weeks of unused vacation while performing
under the 1991 Employment Agreement. This entitled him to $47,070.84.
57. FTL has failed and refused to pay Battist for his accumulated
days of unused vacation without any legal excuse.
58. FTL's failure and refusal to pay Battist for his accumulated
days of unused vacation constitute a breach of contract.
59. FTL's breach of contract has directly caused Battist damages
in an amount of $47,070.84.
WHEREFORE, Battist prays that this Court award him a judgment against
FTL in the amount of $47,070.84, plus interest, award him his costs, and grant
such further relief as is just and proper.
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COUNT V
(Breach of 1994 Employment
Agreement - Post-Termination Severance Pay and Benefits)
60. The allegations of paragraphs 1 to 31 are repeated and
incorporated by reference.
61. Under paragraph 5.3 of the 1994 Employment Agreement, Battist
was entitled upon termination "without Cause" or termination at his election
with "Good Reason", to certain benefits, including without limitation, the
following: severance pay through October 18, 1997, as calculated under
Paragraph 5.3(a), and life, disability, accident, and health insurance benefits
for a 12-month period after the date of termination.
62. Battist's termination was not effected consistently with the
1994 Employment Agreement and was "without Cause" or alternatively for "Good
Reason". FTL has breached the 1994 Employment Agreement by its manner of
terminating Battist and by failing and refusing to provide Battist the benefits
to which he is entitled.
63. FTL's breaches of the 1994 Employment Agreement are without
legal justification. In fact, no cause existed for Battist's termination.
Alternatively, the bizarre termination procedure FTL used -- a termination
letter that did not specify cause but indicated cause would be investigated, a
sham investigation, and a later purported determination of cause with
retroactive effect -- violated the 1994 Employment Agreement and its notice
provisions and converted the termination into one for Good Reason.
64. FTL's breaches of the 1994 Employment Agreement have directly
caused Battist damages in the amount of approximately $615,122.00.
65. Under the 1994 Employment Agreement, Battist is also entitled
to attorneys' fees and expenses in enforcing his rights.
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WHEREFORE, Battist prays that this Court enter a judgment in his favor
against FTL in the amount of $615,122.00, plus interest and attorneys' fees and
expenses, award Battist his costs, and grant such further relief as is just and
proper.
COUNT VI
(Breach of 1994 Employment Agreement - Pretermination)
66. The allegations of paragraphs 1 to 29 are repeated and
incorporated by reference.
67. This Count VI is pled in the alternative to Count V.
68. Even if cause existed for termination of the 1994 Employment
Agreement, this did not divest Battist of pay and benefits accrued and payable
to him under paragraph 5.1 of the agreement.
69. In fact, pursuant to paragraph 5.1, even if Battist was
properly terminated for cause, he was due $17,116.00 for 4 weeks accrued
vacation and $80,000.00 for accrued bonuses.
70. FTL has breached the 1994 Employment Agreement by refusing and
failing to pay the vacation and bonuses accrued by Battist on the date of his
termination. FTL's breach is without legal excuse.
71. FTL's breach has directly caused Battist damages in an amount
of $97,116.00.
72. Under the 1994 Employment Agreement, Battist is also entitled
to his attorneys' fees and expenses in enforcing these rights.
WHEREFORE, in the alternative to Count V, Battist prays that this
Court enter a judgment in his favor against FTL for $97,116.00, plus interest
and his attorneys' fees and expenses, grant him his costs, and grant him such
further relief as is just and proper.
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COUNT VII
(Conversion - FTL)
73. The allegations of paragraphs 1 to 31 are repeated and
incorporated by reference.
74. FTL deprived Battist of possession his personal property,
including without limitation, professional papers detailing concepts and
techniques he developed over many years and that cannot be replaced, pictures,
personal cards, telephone lists, business cards, and other items of both
professional and personal value.
75. FTL's denial to Battist of the possession of his personal
property was wrongful.
76. Under the circumstances, FTL's conduct constitutes conversion
of Battist's property.
77. FTL's conversion of Battist's property was done out of ill
will, spite, and malice.
78. FTL's conversion of Battist's property has caused Battist
emotional distress and damages, the amounts of which cannot be determined yet
with certainty, but that are believed to exceed $200,000.00.
WHEREFORE, Battist prays that this Court enter a judgment in his favor
against FTL in the amount of $200,000.00 in compensatory damages, plus
interest, and $350,000 in punitive damages; award him his costs; and grant such
further relief as is just and proper.
COUNT VIII
(Conversion-Fuisz)
79. The allegations of paragraphs 1 to 31 and 74 to 78 are
repeated and incorporated by reference.
80. Upon information and belief, Fuisz caused Battist's personal
property to be converted.
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81. Upon information and belief, Fuisz acted out of spite, ill
will, and malice in causing the conversion of Battist' s property.
WHEREFORE, Battist prays that this Court enter a judgment in his favor
against Fuisz in the amount of $200,000.00 in compensatory damages, plus
interest, and $350,000 in punitive damages; award him his costs; and grant him
such further relief as is just and proper.
COUNT IX
(Defamation-Fuisz)
82. The allegations of paragraphs 1 to 31 are repeated and
incorporated by reference.
83. On information and belief, on about March, 1996, Fuisz, acting
as president of FTL, told Adrian Gerber, Patrick Scrivens, H. Kirk Merritt, S.
Rao Cherukuri, Gerry L. Myers, Andrew J. Bruns, Michael Myers, John R. Fuisz,
Antone J. Lazos, Donald E. O'Neill, John Pappajohn, and Frederick C. Schreuder,
among others, that "Battist had been terminated for cause as defined under his
employment agreement," or words to that effect. Cause under the employment
agreement essentially means guilt of a felony involving dishonesty, willful
(meaning not in good faith) and continued failure to substantially perform
duties, or violation of the Employment Agreement or similar agreements related
to Battist's employment.
84. Fuisz's statements were untrue in that, in fact, cause did not
exist under Battist's employment agreement for Battist's termination. Fuisz in
fact knew his statements were untrue and made them maliciously and
deliberately, knowing of their falsity, or alternatively, made the statements
with reckless or negligent disregard of their truth or falsity.
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85. Fuisz's statements were defamatory per se. In the
alternative, they were defamatory under the circumstances because, in the
context, they imputed to Battist dishonesty, lack of good faith, and
incompetence or unfitness to perform in his chosen profession.
86. Upon information and belief, Fuisz's defamatory statements
have been republished and have caused damage to Battist's reputation. They
have also caused him emotional distress. Fuisz's defamatory statements have
proximately caused Battist damages that cannot yet be estimated with certainty
but that are believed to exceed $1,000,000.00.
THEREFORE, Battist prays that this Court enter a judgment in his favor
against Fuisz in the amount of $1,000,000.00, in compensatory damages, plus
interest, and $350,000.00 in punitive damages; award Battist his costs; and
grant Battist such further relief as is just and proper.
COUNT X
(Defamation-FTL)
87. The allegations of paragraphs 1 to 31 and 82 to 86 are
repeated and incorporated by reference.
88. FTL is liable for the actions of Fuisz under the doctrine of
respondeat superior.
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WHEREFORE, Battist prays that this Court enter a judgment in his favor
against FTL in the amount of $1,000,000.00 in compensatory damages, plus
interest, and $350,000.00 punitive damages; award Battist his costs; and grant
such further relief as is just and proper.
GERALD E. BATTIST
By Counsel
HAZEL & THOMAS, P.C.
By /s/ THOMAS R. FOLK
------------------------------
Thomas R. Folk, VSB #18141
Michael S. Dingman, VSB #30031
Carla S. Blake, VSB #38499
3110 Fairview Park Drive
Suite 1400
Falls Church, VA 22042
(703) 641-4200
Dated: April 26, 1996
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