BIOSHIELD TECHNOLOGIES, INC.
4405 International Blvd. - Suite B-109
Norcross, Georgia 30093
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2001
To the Stockholders of BioShield Technologies, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
BioShield Technologies, Inc. (the "Company") will be held on June 11, 2001, at
9:30 a.m., Atlanta time, at __________________________________________________
_______________________________________________________________, for the
following purposes:
1. To elect five directors to serve on the Board of Directors;
2. To amend the Company's Articles of Incorporation and Bylaws to
provide that holders of 10 percent or more of the Company's capital stock may
call a special meeting of shareholders and to eliminate certain "fair price"
requirements enacted by the Company pursuant to Georgia law;
3. To ratify the issuance of common stock of Electronic Medical
Distribution, Inc. ("eMD"), a subsidiary of the Company (which common stock,
under certain circumstances, may be exchanged for common stock of the Company)
and certain related warrants to purchase shares of common stock of the Company,
and to approve the issuance of shares of common stock of the Company in excess
of 19.99 percent of the then outstanding shares, if required in connection with
the exchange of the eMD common stock for common stock of the Company and the
exercise of such warrants in accordance with agreements as amended to date;
4. To ratify, as separate matters, two equity credit agreements, under
which shares of common stock of the Company may be issued from time to time, and
to approve the issuance of shares of common stock of the Company in excess of
19.99 percent of the then outstanding shares, if required in connection with
either of the equity credit agreements in accordance with agreements as amended
to date;
5. To ratify the issuance of shares of a series of convertible
preferred stock, and to approve the issuance of shares of common stock of the
Company in excess of 19.99 percent of the then outstanding shares, if required
in connection with the conversion of the preferred stock in accordance with
agreements as amended to date;
6. To ratify the proposal to adopt the Company's 2001 Stock
Option Plan;
7. To ratify the appointment of Feldman Sherb & Co., P.C. as
the Company's independent accountants for the fiscal years ending June 30,
1999, 2000 and 2001; and
8. To transact such other business as may properly come before
the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on May 7, 2001
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof. A list of such stockholders
will be open for examination by any stockholder at the Company's offices at 4405
International Blvd. - Suite B-109, Norcross, Georgia 30092 during normal
business hours, for a period of at least ten days prior to the meeting. All
stockholders are cordially invited to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Angela B. Howell
Secretary
Norcross, Georgia
May 14, 2001
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY.
BIOSHIELD TECHNOLOGIES, INC.
PROXY STATEMENT
TABLE OF CONTENTS
INCORPORATION OF DOCUMENTS BY REFERENCE.....................
PROPOSAL ONE -- ELECTION OF DIRECTORS.......................
MANAGEMENT
Directors, Executive Officers and Significant Employees...
Board Committees..........................................
Meetings and Attendance...................................
Executive Compensation....................................
Employment Agreements.....................................
Indemnification of Officer and Directors...............
Stock Option Plans........................................
CERTAIN TRANSACTIONS........................................
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.....
PROPOSAL TWO --AMENDMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION AND BY-LAWS.................................
PROPOSAL THREE -- TO RATIFY THE ISSUANCE OF SHARES OF COMMON
STOCK OF EMD AND RELATED WARRANTS, AND TO APPROVE THE
ISSUANCE OF COMMON STOCK IN EXCESS OF 19.99 PERCENT OF THE
OUTSTANDING SHARES........................................
PROPOSAL FOUR -- TO RATIFY TWO EQUITY CREDIT AGREEMENTS, AND
TO APPROVE THE ISSUANCE OF COMMON STOCK IN EXCESS OF 19.99
PERCENT OF THE OUTSTANDING SHARES.........................
PROPOSAL FIVE -- TO RATIFY THE ISSUANCE OF SHARES OF A
SERIES OF CONVERTIBLE PREFERRED STOCK, AND TO APPROVE
THE ISSUANCE OF COMMON STOCK IN EXCESS OF 19.99 PERCENT
OF THE OUTSTANDING SHARES.................................
PROPOSAL SIX -- TO RATIFY ADOPTION OF 2001 STOCK OPTION PLAN
PROPOSAL SEVEN -- TO RATIFY THE APPOINTMENT OF ACCOUNTANTS .
BENEFICIAL OWNERSHIP OF COMMON STOCK........................
OTHER BUSINESS TO BE TRANSACTED.............................
BIOSHIELD TECHNOLOGIES, INC.
4405 International Blvd. - Suite B-109
Norcross, Georgia 30093
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2001
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being furnished, on or about May 14, 2001, to the stockholders of
BioShield Technologies, Inc. (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company to be used at
the Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be
held on June 11, 2001 at 9:30 a.m. Eastern Standard Time at
- ----------------------------------------------------------------------------
_________________________, and any adjournment thereof.
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions thereon. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED: (i) "FOR" PROPOSAL ONE TO ELECT FIVE NOMINEES TO
SERVE ON THE BOARD OF DIRECTORS FOR THE TERMS SPECIFIED HEREIN AND UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED; (ii) "FOR" PROPOSAL TWO TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS TO PROVIDE THAT HOLDERS OF 10
PERCENT OR MORE OF THE COMPANY'S CAPITAL STOCK MAY CALL A SPECIAL MEETING OF
SHAREHOLDERS AND TO ELIMINATE CERTAIN "FAIR PRICE" REQUIREMENTS ENACTED BY THE
COMPANY PURSUANT TO GEORGIA LAW; (iii) "FOR" PROPOSAL THREE TO RATIFY THE
ISSUANCE OF COMMON STOCK OF OUR EMD SUBSIDIARY (WHICH COMMON STOCK, UNDER
CERTAIN CIRCUMSTANCES, MAY BE EXCHANGED FOR COMMON STOCK OF THE COMPANY) AND
RELATED WARRANTS, AND TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK OF THE
COMPANY IN EXCESS OF 19.99 PERCENT OF THE THEN OUTSTANDING SHARES, IF REQUIRED
IN CONNECTION WITH THE EXCHANGE OF THE EMD COMMON STOCK AND THE EXERCISE OF THE
WARRANTS; (iv) "FOR" PROPOSAL FOUR TO RATIFY, AS SEPARATE MATTERS, TWO EQUITY
CREDIT AGREEMENTS, UNDER WHICH SHARES OF COMMON STOCK OF THE COMPANY MAY BE
ISSUED FROM TIME TO TIME, AND TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK
OF THE COMPANY IN EXCESS OF 19.99 PERCENT OF THE THEN-OUTSTANDING SHARES, IF
REQUIRED IN CONNECTION WITH EITHER OF THE EQUITY CREDIT AGREEMENTS; (v) "FOR"
PROPOSAL FIVE TO RATIFY THE ISSUANCE OF SHARES OF A SERIES OF CONVERTIBLE
PREFERRED STOCK, AND TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK OF THE
COMPANY IN EXCESS OF 19.99 PERCENT OF THE THEN OUTSTANDING SHARES, IF REQUIRED
IN CONNECTION WITH THE CONVERSION OF THE PREFERRED STOCK; (vi) "FOR" PROPOSAL
SIX TO RATIFY THE PROPOSAL TO ADOPT THE COMPANY'S 2001 STOCK OPTION PLAN, AND
(vii) "FOR" PROPOSAL SEVEN TO RATIFY THE APPOINTMENT OF FELDMAN SHERB & CO.,
P.C. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEARS ENDING JUNE
30, 1999, 2000 AND 2001. If any other matters are properly brought before the
Annual Meeting, proxies will be voted in the discretion of the proxy holders.
The Company is not aware of any such matters that are proposed to be presented
at the Annual Meeting.
The cost of soliciting proxies in the form enclosed herewith will be
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borne entirely by the Company. In addition to the solicitation of proxies by
mail, proxies may be solicited by directors, officers and regular employees of
the Company, without extra remuneration, by personal interviews, telephone, fax,
email or otherwise. The Company will request persons, firms and corporations
holding shares in their name or in the names of their nominees, which are
beneficially owned by others, to send proxy materials to and obtain proxies from
the beneficial owners and will reimburse the holders for their reasonable
expenses in doing so.
The Annual Meeting for fiscal year ended June 30, 2000 was originally
scheduled to be held on November 20, 2000 with Notice thereof (accompanied by
Proxy Statement and related material) having been given on or about November 6,
2000 to shareholders of record as of the close of business on November 2, 2000.
As heretofore reported by the Company in a Form 8-K with date of report of
December 6, 2000, the Company failed to obtain the necessary quorum of voted
shares for such meeting and same was rescheduled for December 15, 2000. The
Company was unable to hold the rescheduled Annual Meeting on such date due to
(i) resignation of directors slated for election and (ii) failure to obtain a
quorum of voted shares. Nasdaq Marketplace Rules 4350(e) and(g) require (in
part) that issuers hold Annual Meetings of Shareholders, solicit proxies and
provide Proxy Statements to both shareholders and Nasdaq. Companies who fail to
hold Annual Meetings would therefore not be in compliance with the aforesaid
Marketplace Rules. Accordingly, in order for the Company to be in compliance
with the Nasdaq Marketplace Rules cited as relate to Annual Meetings it is
ESSENTIAL that a quorum be obtained for such meetings and management urges all
Company shareholders to exercise their voting rights by Proxy or in person.
The securities that may be voted at the Annual Meeting consist of
shares of Common Stock, no par value, of the Company (the "Common Stock"). Each
outstanding share of Common Stock entitles its owner to one vote on each matter
as to which a vote is taken at the Annual Meeting. The close of business on May
, 2001, has been fixed by the Board of Directors as the record date (the "Record
Date") for determination of stockholders entitled to vote at the Annual Meeting.
On the Record Date of May 7, 2001, __________ shares of Common Stock were
outstanding and entitled to vote. The presence, in person or by proxy, of at
least a majority of the shares of Common Stock issued and outstanding and
entitled to vote on the Record Date is necessary to constitute a quorum at the
Annual Meeting.
Assuming the presence of a quorum at the Annual Meeting: (a) a
plurality of the votes present in person or represented by proxy and entitled to
vote is required for approval of Proposal One, to elect five directors; (b) the
affirmative vote of a majority of the outstanding shares of Common Stock is
required to approve Proposal Two, to amend the Company's Articles of
Incorporation and Bylaws to provide that holders of 10 percent or more of the
Company's capital stock may call a special meeting of shareholders, and to
eliminate certain "fair price" requirements enacted by the Company pursuant to
Georgia law; (c) a majority of the total votes cast on the proposal is required
for approval of Proposals Three, Four and Five, to ratify the issuance of common
stock of our eMD subsidiary (which common stock, under certain circumstances,
may be exchanged for Common Stock) and related warrants, and to approve the
issuance of shares of Common Stock in excess of 19.99 percent of the then
outstanding shares, if required in connection with the exchange of the eMD
common stock for Common Stock; to ratify, as separate
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matters, two equity credit agreements, under which shares of Common Stock may be
issued from time to time, and to approve the issuance of shares of Common Stock
in excess of 19.99 percent of the then outstanding shares, if required in
connection with either of the equity credit agreements; and to ratify the
issuance of shares of a series of convertible preferred stock, and to approve
the issuance of shares of Common Stock in excess of 19.99 percent of the then-
outstanding shares, if required in connection with the conversion of the
preferred stock; and (d) the affirmative vote of a majority of the votes present
in person or represented by proxy and entitled to vote is required to approve
Proposals Six and Seven, to ratify the proposal to adopt the Company's 2001
Stock Option Plan; and to ratify the appointment of the Company's independent
accountants. Unless otherwise required by law or the Company's Articles of
Incorporation or Bylaws, any other matter put to a stockholder vote will be
decided by the affirmative vote of a majority of the votes present in person or
represented by proxy at the Annual Meeting and entitled to vote on the matter.
Abstentions and broker non-votes will be treated as shares that are
present, in person or by proxy, and entitled to vote for purposes of determining
the presence of a quorum at the Annual Meeting. As a result, abstentions and
broker non-votes will have the same effect as a vote "for" Proposals Two, Six
and Seven. Abstentions and broker non-votes on other Proposals will not have any
effect on the approval of those Proposals.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. Stockholders may, however, revoke
a proxy at any time prior to its exercise by filing with the Secretary of the
Company a written notice of revocation, by delivering to the Company a duly
executed proxy bearing a later date or by attending the Annual Meeting and
voting in person.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
INCORPORATION OF DOCUMENTS BY REFERENCE
A copy of the Company's most recent Annual Report to Security Holders
for the fiscal year ended June 30, 2000 accompanied the Proxy Statement mailed
for purposes of holding the Annual Meeting on the originally scheduled date of
November 20, 2000. Copies of such Annual Report will be available to security
holders at the Annual Meeting to be held on June 11, 2001. The Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2000 filed by the
Company with the Securities and Exchange Commission (the "Commission") pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act") is hereby
incorporated by reference in this Proxy Statement.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14, or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the date of the Annual Meeting to which this Proxy Statement
relates shall be deemed to be incorporated by reference in this Proxy Statement
and to be a part hereof from the date of filing of such documents.
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Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Proxy Statement except as so modified or superseded.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN REQUEST OF
SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN
BY REFERENCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE) SOLELY IF SAME HAVE NOT BEEN FILED UNDER THE
EDGAR SYSTEM AND, ACCORDINGLY, ARE NOT AVAILABLE TO THE PUBLIC FROM COMMERICAL
DOCUMENT RETRIEVAL SERVICES AT THE COMMISSION AT "http:www.sec.gov." WRITTEN
REQUESTS FOR SUCH DOCUMENTS RELATING TO THE COMPANY SHOULD BE DIRECTED TO
CORPORATE COMMUNICATIONS AND INVESTOR RELATIONS, BIOSHIELD TECHNOLOGIES, INC.,
4405 INTERNATIONAL BLVD. - SUITE B-109, NORCROSS, GEORGIA 30093.
You may read and copy any reports, statements, or other information
that the Company files at the Commission's public reference rooms in Washington,
D.C.; New York, New York; and Chicago, Illinois. Please call the Commission at
1-800-Commission-0330 for further information on the public reference rooms. As
aforesaid, the Company's public filings are also available to the public from
commercial document retrieval services and at the Commission at
"http:\www.sec.gov."
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the Board of
Directors will consist of no less than three, or more than twenty-one,
directors. The Board of Directors currently consists of five directors. The
current directors are Timothy C. Moses, Dr. Rodothea Milatou, Alan Lingo,
Angela B. Howell and Dr. Kevin Smith. The Board of Directors has nominated the
current directors for re-election.
Unless otherwise instructed on the proxy, properly executed proxies
will be voted for the election of the Board's nominees as directors. The Board
of Directors believes that these nominees will stand for reelection and will
serve if elected. However, if any of the nominees fails to stand for reelection
or is unable to accept election, proxies will be voted by the proxy holders for
the election of other people nominated by the Board of Directors.
The following table sets forth information regarding the BioShield
board of director's nominees for election as director:
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Name and age as of the annual meeting Present position with
BioShield
- ------------------------------------- ------------------------------
Timothy C. Moses.................... 43 Chairman of the Board,
President, Chief Executive
Officer and Director
Dr. Rodothea Milatou................ 43 Director, member of the
Independent Audit and
Compensation Committees
Alan Lingo.......................... 43 Director, member of the
Independent Audit and
Compensation Committees
Angela B. Howell.................... 53 Secretary, Treasurer and
Director
Dr. Kevin Smith....................... 44 Director, member of the
Independent Audit and
Compensation Committees
Biographical information with respect to each of the nominees appears
hereinafter under the heading "Management".
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
ITS NOMINEES FOR DIRECTOR.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information regarding the
directors, executive officers, and significant employees of the Company as well
as the current nominees to the Company's Board of Directors:
NAME AGE POSITION
---- --- --------
*Timothy C. Moses...................... 43 Chairman of the Board,
President, Chief
Executive Officer and
Director
*Dr. Rodothea Milatou.................. 43 Director, member of
the Independent Audit
and Compensation
Committees
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*Alan Lingo............................ 43 Director, member of
the Independent Audit
and Compensation
Committees
*Angela B. Howell...................... 53 Secretary, Treasurer
and Director
*Dr. Kevin Smith......................... 44 Director, member of
the Independent Audit
and Compensation
Committees
Carl T. Garner........................ 51 Former Director,
Member of the Audit
and Compensation
Committees
Edward U. Miller...................... 36 Former Director and
Chief Operating
Officer of BioShield
Martin Savarick....................... 61 Former Director,
Member of the Audit
and Compensation
Committees
Geoffrey L. Faux...................... 44 Former President of
eMD.com
Scott Parliament...................... 43 Former Chief Financial
Officer, Treasurer and
Secretary
John Adams............................ 43 Former Vice President
* Denotes nominee to Company's Board of Directors.
Timothy C. Moses, a Director and Founder, is the Company's
Chairman, President, and Chief Executive Officer, and Director of Marketing and
Sales. For over a decade, Mr. Moses has been an independent businessman and
entrepreneur. His career has spanned from sales and marketing to Director of
Securities and Investment. He has developed knowledge in the chemical and
chemical siloxane industry and business since leaving his former employer, Dow
Corning Corporation in 1986, where he acted as liaison between management and
technical sales in the role of new product planning and launches. As President
of his former company, DCI, Inc. a silicone and siloxane based Technology
Company; Mr. Moses was instrumental in seeking and raising of investment capital
as well as Director of Marketing and Sales to clients on a direct basis. Mr.
Moses co-developed a new antimicrobial silicone based coating system for textile
applications and coordinated sales from the (EEC) European Economic Community
countries to the United States. Mr. Moses is also a co-inventor of three
inventions for which patent applications have been filed by the Company on its
core antimicrobial technologies. Mr. Moses is a
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graduate of a division of Georgia Institute of Technology where he received
his B.S. degree in 1980.
Dr. Rodothea Milatou, MD, MPH became a member of the Board of
Directors in December 2000 and is a nominee to the Company's Board. She is the
Medical Director for HealthSouth in the Atlanta area. Dr. Milatou graduated from
Spartan Health Sciences University in 1986 and completed her Residency Program
in Occupational Medicine at the University of Utah, Rocky Mountain Center for
Occupational and Environmental Health and her Masters program in Public Health
at the Medical College of Wisconsin. Dr. Milatou served as a Researcher in
Occupational Medicine and Toxicology at the National Institute for working life
in Stockholm, Sweden (1995-1997) and has published extensively. Dr. Milatou has
been practicing Occupational Medicine since 1991.
Alan Lingo started with Bioshield Technologies at its inception and was
the first employee outside the founders. Mr. Lingo, a director since December
2000 and a nominee to the Company's Board. Alan helped institute the demand for
the product throughout the country in the early years. He first served as the
Recreational Specialty Business Manager. He sold to the Marine, Recreational
Vehicle Industry, and Specialty marketplace. He was instrumental in developing
the market place for the product prior to the new EPA registrations and present
day patents. His expertise on the Bioshield technology is only surpassed by the
founders themselves. Mr. Lingo was employed with the company through the time of
its becoming a Public entity. At that time he returned to a Computer technology
Sales related business which he owns and operates in Georgia. Mr. Lingo is glad
to be directly involved with the business, and looks forward to taking it to the
next level of success He attended Troy State University and studied government
and computer technology.
Angela B. Howell, a Director (since December 2000 and a nominee to the
Company's Board) is Corporate Secretary, Treasurer and Director of Human
Resources. Previously, Mrs. Howell was very active in the Human Resources area,
for both the Ivex Corporation and Saab Cars USA, Inc. Mrs. Howell also worked in
the customer service area of Atlanta Gas Light Company for many years dealing
with customers and the Public Service Commission. She is a graduate of
Springfield College where she received her bachelor's in Business
Administration, and in 2000 received her Certification in Human Resources. Early
in her career, Mrs. Howell was in partnership in their family restaurant in the
financial area.
Dr. Kevin Smith has been a Director since March 2001 and is a nominee
to the Company's Board. He is a practicing physician, and has held a number of
positions in the field of occupational health and safety. Dr. Smith grew his
practice to become the largest provider of occupational health in the state of
Iowa and eventually merged that practice into Concentra. In addition, Dr. Smith
started and acquired several occupational health practices, which he eventually
sold to HealthSouth. Dr. Smith is Board Certified in the field of occupational
health. Dr. Smith has also served on the faculty of Yale, Drake and Emory
University. Dr. Smith received his M.D. from the Universidad Central del Este
School of Medicine in San Pedro de Marcoris, Dominican Republic.
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Carl T. Garner was a director of the Company from 1996 until his
resignation in December 2000. Since 1995, Mr. Garner has been a partner in
Garner and Nevins (a division of Nevins Marketing Group, Inc.), a promotional
and advertising agency based in Atlanta, Georgia. Mr. Garner received a B.S. in
Business/Accounting from Jacksonville State University in 1969, a masters degree
in Management from Georgia College in 1977, and a masters degree in Business
Administration from Jacksonville State University in 1978.
Edward U. Miller joined the Board of Directors in January 2000,
became Chief Operating Officer of the Company in September 2000 and subsequently
resigned and/or was terminated from such positions in November 2000 and December
2000 respectively. Mr. Miller was the chief operating officer of Summit
Marketing Services, a fully integrated marketing company serving many Fortune
500 clients. Prior to Summit, Mr. Miller was an investment banker with First
Union Securities and Merrill Lynch focusing on mergers and acquisitions. Before
Mr. Miller's career in investment banking, he was a tactical jet pilot in the
U.S. Navy, where he served in the Persian Gulf. Mr. Miller has a B.S. degree in
mathematics from the U.S. Naval Academy and a masters degree in business
administration from Harvard Business School.
Martin Savarick was a member of the Board of Directors during 2000
and until his resignation in December 2000. He is currently president of
Savarick Consulting Group, Inc., a marketing and management consulting firm. He
has been the chairman of the board, president, and chief executive officer of
two publicly traded companies -- Beacon Photo Service, Inc. and Imprint
Products, Inc. Both companies dealt with retail customers throughout the United
States exclusively on a mail-order basis. The companies employed various
innovative marketing techniques to advertise and sell its products. Mr. Savarick
also served as president of a fund raising organization and of a direct mail
marketing consulting firm. He graduated from Rider University in 1960 with a
degree in marketing.
Geoffrey Faux was hired as the President of eMD in 2000 and his
services were terminated on December 1, 2000. In that role, he was responsible
for all eMD day-to-day operations, as well as implementation of eMD's business
plans and strategy. eMD is currently in Chapter 11 proceedings in bankruptcy
court for the Northern District of Georgia. Prior to joining eMD, Mr. Faux was
the president of Orthodontic Centers of America, a New York stock exchange
listed company. Mr. Faux also brings several years of investment banking
experience to his post, including responsibility as a director of Prudential
Securities southeast investment banking group. Mr. Faux received his masters
degree in business administration from the University of Chicago.
Scott Parliament joined the Company as its chief financial officer
in 2000 and his services were terminated on November 17, 2000. Mr. Parliament
has a 20-year track record of working with development stage public companies,
including internet start-ups. Mr. Parliament has been the president of Internet
Affinity Groups, Inc., which facilitates web-based marketing solutions for
affinity groups, and interim chief financial officer of Consumer Financial
Network, an internet financial products integrator and subsidiary of iXL. Mr.
Parliament has also held senior positions with Parlon Ventures, Ltd., National
Steel Service Center Inc. and BDO Seidman. He received his bachelor of science
degree in accounting from Ferris State University in 1980 and became a certified
public accountant in 1984.
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The Company currently pays directors of the Company a fee of (i)
$250 per regularly scheduled Board meeting attended (or $100 for participation
in a regularly scheduled Board meeting by conference telephone) and (ii) $12,000
annually. The Company also reimburses all directors for their expenses in
connection with their attendance at such meetings.
Officers are elected at the first meeting of the Board of Directors
following the stockholders meeting at which directors are elected, and officers
serve at the discretion of the Board of Directors. Each executive officer of the
Company was chosen by the Board of Directors and serves at the pleasure of the
Board of Directors until his or her successor is appointed or until his or her
earlier resignation or removal. There are no family relationships between any of
the directors or executive officers of the Company.
BOARD COMMITTEES
The Board of Directors has two standing committees. The Independent
Audit Committee recommends the Company's independent auditors and reviews the
results and scope of audit and other accounting related services provided by
the auditors. Currently, Drs. Milatou, Smith and Mr. Lingo are members of
the Independent Audit Committee. Drs. Milatou, Smith and Mr. Lingo are also
members of the board's Compensation Committee, which administers the stock
option and incentive plans as well as other executive compensation matters.
MEETINGS AND ATTENDANCE
The full Board of Directors met five times, the Audit Committee met
twice and the Compensation Committee met three times during the fiscal year
ending June 30, 2000. All of the directors attended at least 75% of the meetings
of the full Board of Directors and, as to the members of committees of the
Board, at least 75% of the meetings of such committees, during the fiscal year
ending June 30, 2000.
EXECUTIVE COMPENSATION
The following table sets forth for the three years ended June 30, 2000,
compensation paid by the Company to its Chairman of the Board, Chief Executive
Officer, and Director, and its former Co-Chairman of the Board, Senior Vice
President, and Director. None of the Company's other executive officers had
annual compensation in excess of $100,000 for services rendered during any of
the three years ended June 30, 2000, 1999 or 1998.
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS
--------------------------- ---------------------------------------
PAYOUT
NAME AND OTHER RESTRICTED SECURITIES ____
PRINCIPAL ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
- --------- ---- ------ ----- ------------ --------- ------------ -------- ------------
Timothy C. Moses. 2000 250,000 -- 18,600 -- 232,850 -- --
Chairman of 1999 140,000 -- 10,000 -- 150,000 -- --
Board, President 1998 120,000 -- -- -- -- -- --
Chief Executive
Officer and Director
Jacques Elfersy. 2000 250,000 -- 18,600 -- -- --
Former Co-Chair- 1999 140,000 -- 10,200 -- 150,000 -- --
man of the Board, 1998 120,000 -- -- -- -- -- --
Executive Vice
President and
Director
Angela B. Howell 2000 55,000 -- -- -- -- -- --
Secretary, Trea-
surer and
Director
EMPLOYMENT AGREEMENTS
The Company has entered into an Employment Agreement, dated December
28, 2000, with Mr. Moses. The agreement has an initial term commencing December
28, 2000, and expires December 31, 2005. However, the remaining term of the
agreement will be extended automatically for one year on each December
12,beginning December 12, 2001, so that the agreement expires five (5) years
from such date, unless either party notifies the other party in writing of an
intent not to renew at least ninety (90) days prior to the applicable December
12th. Under the agreement, Mr. Moses is required to devote his full business
time to the affairs of the Company. The agreement also contains certain non-
compete provisions, which provisions a state court may determine not to enforce
or only to partially enforce.
The agreement currently provides for a base salary at the rate of
$250,000. The base salary is then subject to increase, but not decrease, as of
January 1 of each year during the term of the agreement as determined by the
Company's Board of Directors. The agreement also provides for an annual
performance bonus based upon a matrix of dollar sales levels and dollar
before-tax profitability. Cells within the matrix represent specific
combinations of sales and profits, with performance falling within a particular
cell resulting in a bonus expressed as a percent of base salary. This matrix,
which allows for bonuses running from 30% to 100% of base salary, is constructed
to reward the executive for reaching specific combinations of sales and profit
levels with higher sales and profit resulting in a larger bonus. The maximum
amount paid pursuant to the matrix cannot exceed 100% of base salary or
$2,000,000 in stock incentive plan per year.
In addition, Mr. Moses is entitled to a minimum of 10% commission on
all fund raising amounts that he closes and was granted fully vested options in
the amount of 2,000,000 at an exercise price of $0.05 per share which
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options expire 5 years from date of grant.
In addition, the agreement provides a severance package in the event
the executive is terminated other than for cause (as defined) or the executive
terminates his agreement for good reason (as defined) in an amount equal to the
sum of (A) five (5) years of the base salary applicable to the executive on the
date of termination plus (B) two (2) times the average of the annual bonuses and
salary paid or payable to the executive during the term of his agreement,
payable in twelve (12) equal, consecutive monthly installments commencing no
later than thirty (30) days after the date of termination. In addition, all
outstanding options, stock grants, shares of restricted stock or any other
equity, incentive compensation shall be and become fully vested and
nonforfeitable and the executive and the executive's family will be entitled to
receive welfare plan benefits (other than continued group long-term disability
coverage) generally available to executives with comparable responsibilities or
positions for a period of five (5) years from the date of termination at the
same cost to the executive as is charged to such executives from time to time
for comparable coverage.
On December 28, 2000 the Company entered into an employment agreement
with Ms. Angela B. Howell, Secretary, Treasurer and a Director of the Company
pursuant to which Ms. Howell is to receive annual compensation of $60,000. Ms.
Howell is also entitled to receive an aggregate of 75,000 options in accordance
with the Company's 2001 Non-Statutory Stock Option Plan with 50,000 options to
be issued in May 2001 and the balance of 25,000 options to be issued on the
first anniversary of the aforesaid employment agreement.
eMD, as heretofore indicated, is currently in Chapter 11 proceedings in
bankruptcy court for the Northern District of Georgia.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's bylaws provide for the Company to indemnify each director
and officer of the Company against liabilities imposed upon him (including
reasonable amounts paid in settlement) and expenses incurred by him in
connection with any claim made against him or any action, suit or proceeding to
which he may be a party by reason of his being or having been a director or
officer of the Company. The Company has also entered into indemnification
agreements with each officer and director pursuant to which the Company will, in
general, indemnify such persons to the maximum extent permitted by the Company's
bylaws and the laws of the State of Georgia against any expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection with any actual or threatened action or proceeding to which such
director or officer is made or threatened to be made a party by reason of the
fact that such person is or was a director or officer of the Company. The
foregoing provisions may reduce the likelihood of derivative litigation against
directors and may discourage or deter shareholders or management from suing
directors for breaches of their duty of care, even though such an action, if
successful, might otherwise benefit the Company and its shareholders.
Insofar as indemnification of liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in
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the Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer, or controlling person of
the Company in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person, the Company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
STOCK OPTION PLANS
In December 1997, the Board of Directors adopted and the shareholders
of the Company approved the 1997 Stock Incentive Plan (the "Incentive Plan").
The Incentive Plan was amended by the Board of Directors in December 1998 to
increase the number of shares which could be issued thereunder to 1,200,000. In
May 1999, the Company registered the shares subject to the Incentive Plan with
the Commission on Form S-8. The Board of Directors and shareholders approved the
1996 Directors Stock Option Plan (the "Director Plan") in 1996 and amended the
Director Plan in December 1998. These options have all been issued.
Terms of Incentive Plan. The Incentive Plan provides the Company with
increased flexibility to grant equity-based compensation to key employees,
officers and consultants of the Company. The purpose of the Incentive Plan is
to: (i) provide incentives to stimulate individual efforts toward the Company's
long-term growth and profitability; (ii) encourage stock ownership by officers,
key employees and consultants by enabling them to acquire a proprietary interest
in the Company in the form of shares of Common Stock or to receive compensation
based on appreciation in the value of the Common Stock; and (iii) provide a
means of obtaining, rewarding and retaining key personnel. The Company has
reserved 1,200,000 shares of Common Stock for issuance pursuant to awards that
may be made under the Incentive Plan. These options have all been issued.
Employee stock option transactions for the year ended June 30, 2000 are
summarized as follows:
Year ended
June 30, 2000
---------------------------
Shares Weighted Average
price
Outstanding, beginning of year 820,000 $ 5.87
Granted 173,500 10.56
Exercised (153,000) 4.15
Forfeited (200,000) 6.30
-------- --------
Outstanding, end of year 640,500 $ 7.41
======== ========
The nature, terms and conditions of awards under the Incentive Plan
will be determined by the Compensation Committee of the Board of Directors. The
members of the Compensation Committee are selected by the Board of
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Directors. The current members of the Compensation Committee are Drs. Milatou
and Smith and Mr. Lingo. The Incentive Plan permits the Compensation Committee
to make awards of Common Stock, incentive or non-qualified stock options with
the following terms and conditions:
Terms and Conditions of all Stock Incentives. The number of shares of
Common Stock as to which a stock incentive may be granted will be determined by
the Compensation Committee in its sole discretion. Each stock incentive will
either be evidenced by a stock incentive agreement or stock incentive program,
in each case containing such terms, conditions and restrictions as the
Compensation Committee may deem appropriate. Stock incentives are not
transferable or assignable except by will or by the laws of descent and
distribution and are exercisable only by the recipient during his or her
lifetime or by the recipient's legal representative in the event of the
recipient's death or disability.
Stock Awards. The number of shares of Common Stock subject to a stock
award and restrictions or conditions on such shares, if any, will be determined
by the Compensation Committee. The Compensation Committee may require a cash
payment from the recipient in an amount no greater than the aggregate fair
market value of the shares of Common Stock awarded, as determined at the date of
grant.
Options. Options may be either incentive stock options, as described in
Section 422 of the Code, or non-qualified stock options. The exercise price of
each option will be determined by the Compensation Committee and set forth in a
stock incentive agreement but may not be less than the fair market value of the
Common Stock on the date the option is granted. The exercise price for an
incentive stock option may not be less than 110% of the fair market value of the
Common Stock on the date the option is granted. The exercise price may not be
changed after the option is granted, and options may not be surrendered in
consideration of, or exchanged for, a grant of a new option with a lower
exercise price. Incentive stock options will expire 5 years after the date of
grant. Non-qualified stock options will expire on the date set forth in the
respective stock incentive agreement. Payment for shares of Common Stock
purchased upon exercise of a option may be made in any form or manner authorized
by the Compensation Committee in the stock incentive agreement or by amendment
thereto. In the event of a recipient's termination of employment, the option or
unexercised portion thereof will expire no later than three months after the
date of termination, except that in the case of the recipient's death or
disability, such period will be extended to one year. The Compensation Committee
may set forth longer time limits in the stock incentive agreement, although in
such cases incentive stock option treatment will not be available under the
Code.
Termination and Amendment of the Incentive Plan. The Board of Directors
may amend or terminate the Incentive Plan without stockholder approval at any
time; provided, however, that the Board may condition any amendment on the
approval of the stockholders if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a stock incentive may adversely
affect the rights of a holder under the terms of that stock incentive. The
Incentive Plan was amended by the board in December of 1998 to increase the
total number of shares that may be issued to 1,200,000 and to permit 5% or more
shareholders/officers to participate in the plan, and
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subsequently amended by the board in June 2000 to increase the total number of
shares that may be issued to 2,000,000.
Director Plan. The purpose of the Director Plan is to provide an
incentive to outside directors and members of the Company's advisory board, if
any, for continuous association with the Company and to reinforce the
relationship between participants' rewards and shareholder gains. The Company
has reserved 1,000,000 shares of Common Stock pursuant to awards that may be
made under the Director Plan. Awards of options for 10,000 shares of Common
Stock have been issued by the Company in fiscal 1999; options for 120,000 shares
of Common Stock were issued by the Company in fiscal 1998; and options for
120,000 shares of Common Stock were issued by the Company in 1996. Pursuant to
the Director Plan, options vest in three stages, 20,000 shares at date of grant
and 20,000 shares on the first and second anniversary of the date of the stock
option agreement. 210,000 of such options are currently exercisable pursuant to
the director plan.
See also Proposal 6 herein as relates to separate and distinct Company
2001 Stock Option Plan.
CERTAIN TRANSACTIONS
In June 1998, Timothy C. Moses and Jacques Elfersy contributed
approximately $50,000 of capital to the Company. Subsequent to June 30, 1998,
Messrs. Moses and Elfersy contributed an additional $325,000 of capital to the
Company. Such contributions were funded by the private sale to accredited
investors of 124,995 shares of Common Stock owned by such persons since 1995 at
a purchase price of $3.00 per share.
In January, March, and June 1998, Judith B. Turner, the mother-in-law
of Timothy C. Moses, lent the Company $30,000, $25,000,and $25,000,
respectively. The Company agreed to repay such sums to Mrs. Turner pursuant to
three promissory notes, dated January 16, 1998, February 27, 1998, and June 5,
1998 (the "Notes"). The Notes were repaid by the Company from the proceeds of
the Company's initial public offering.
Upon consummation of the Company's initial public offering, Messrs.
Moses and Elfersy received $307,133 in the aggregate from the Company
representing repayment of accrued and unpaid salary due and payable by the
Company to such persons for their employment for the period June 1995 through
June 30, 1998.
In December 2000 the Company awarded options to Tim Moses in the amount
of 2,000,000 exercisable at $0.05 per share and expiring 5 years from date of
grant.
In May of 1999, the Board of Directors granted to each of Messrs. Moses
and Elfersy five year fully vested options to purchase 2,250,000 shares of eMD
at a price of $2.00 per share.
Although the Company believes that the foregoing transactions were on
terms no less favorable to the Company than would have been available from
unaffiliated third parties in arm's length transactions, there can be no
assurance that this is the case. The Company will comply with Sections VII A and
B of the NASAA Statement of Policy Regarding Loans and Other Material Affiliated
Transactions as amended to date, regarding future material
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affiliated transactions. Pursuant to these Sections, the Company represents that
(i) all future material affiliated transactions and loans will be made or
entered into on terms that are no less favorable to the Company than those that
could be obtained from unaffiliated third parties and (ii) all future material
affiliated transactions and loans, and any forgiveness of loans, will be
approved by a majority of the Company's independent directors who do not have an
interest in the transactions and who will have access, at the Company's expense,
to the Company's counsel or to independent legal counsel. There can be no
assurance, however, that future transactions or arrangements between the Company
and its affiliates will be advantageous, that conflicts of interest will not
arise with respect thereto or that if conflicts do arise, that they will be
resolved in favor of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equities securities, to file reports of ownership and changes in
ownership with the Commission and the NASD. Officers, directors and greater than
10% stockholders are also required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of the forms received by it, the
Company believes that, during the period July 1, 1999, to June 30, 2000 all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with; except that in the case of the appointment
of each of Mr. Edward U. Miller and Mr. Martin Savarick to the Board of
Directors in January, 2000, required forms were not timely filed, and in Mr.
Savarick's case, two acquisitions of shares were not timely reported by the
filing of a required form. In addition, a required form was not timely filed in
connection with the appointment of Scott Parliament as Chief Financial Officer.
PROPOSAL TWO
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
AND BY-LAWS
In connection with the Company's initial public offering of stock, and
specifically the qualification of the sale of the Company's securities under the
securities laws of California, the Company agreed to submit to its stockholders
the following proposals to amend its articles and by-laws:
- - - to allow the holders of 10% or more of the outstanding shares of the
Company's capital stock to call a special stockholders' meeting; and
- - - to eliminate the fair price requirements enacted by the Company
pursuant to Georgia law. These fair price requirements encourage any
person, before acquiring 15% or more of the outstanding Common Stock,
to seek approval of the Company's Board of Directors for the terms of
any contemplated business combination. One of the effects of these
provisions is to prohibit any business combination with an interested
stockholder for five years without obtaining the approval of the
Board of Directors or the Company's stockholders.
Tim Moses and Jacques Elfersy, substantial stockholders of the
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Company, have agreed to vote their shares in favor of this proposal. Approval of
this proposal will require a majority vote of the Company's stockholders. In the
event that this proposal is adopted, the Company may be more vulnerable to,
among other things, a hostile takeover or other business combination or
transaction that is not approved by the Company's Board of Directors.
THE BOARD OF DIRECTORS UANANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL TWO
IN ORDER TO REMAIN IN COMPLIANCE WITH CALIFORNIA BLUE SKY LAWS.
GENERAL INFORMATION RELATING TO PROPOSALS 3 THROUGH 5 INCLUSIVE
With respect to Proposals 3, 4 and 5, reference is made to Company
press release of March 15, 2001 which indicates each of those Nasdaq Marketplace
Rules where shareholder approval is required. The specific deficiencies referred
to in the aforesaid press release as relates to Proposals 3 through 5 inclusive
relate to Nasdaq's Staff belief that certain transactions may have violated
corporate governance rules pertaining to shareholder approval as set forth in
Marketplace Rules 4350(i)(B) and 4350(i)(D)(ii) - the former of which requires
shareholder approval when the issuance or potential issuance of securities will
result in a change of control of an issuer and the latter of which requires
shareholder approval with respect to (amongst other matters) the sale, issuance
or potential issuance by the Company of securities equal to 20% or more of its
common stock. Management of the Company was of the firm belief that at the time
that each of the respective transactions referred to in Proposals 3, 4 and 5
were entered into that there was no foreseeable likelihood that consummation of
such transactions would have resulted in either change of control of the Company
or issuance of a significant number of Company shares which would have required
shareholder approval. This belief was principally based upon the then bid price
of the Company's common stock and the unlikelihood that same would fall from
$14.50 (on June 14, 2000) to under $1.00 in a relatively short period of time
(by November 3, 2000 and continuing to date), thereby necessitating the
potential issuance of substantially more Company common stock (i.e., creating
potential change of control and/or issuance in excess of 20% of common stock)
than was foreseeable under normal circumstances.
PROPOSAL THREE
TO RATIFY THE ISSUANCE OF SHARES OF COMMON STOCK OF eMD AND
RELATED WARRANTS, AND TO APPROVE THE ISSUANCE OF COMMON
STOCK IN EXCESS OF 19.99 PERCENT OF THE OUTSTANDING SHARES
In June 1999, the Company entered into a private placement agreement
providing for the sale of up to $15,000,000 of common stock and warrants of eMD.
As of the date of this proxy statement, the Company sold $6,000,000 of eMD
common stock and warrants under the private placement agreement. These shares of
stock and warrants are claimed to be exempt from registration under Regulation D
of the Securities Act.
Under the terms of the private placement agreements, the eMD stock is
exchangeable for Common Stock, at the option of the holder, at a conversion
price of $5.825 per share of eMD common stock of the Company. This amount
represents 125% of the initial purchase price of $4.66 per share of eMD common
stock. The number of shares of Common Stock into which the eMD stock is
convertible is calculated based upon the average closing bid prices of the
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Common Stock for the twenty trading days immediately prior to notice of exercise
of the conversion right. No holder of eMD stock is entitled to exchange an
amount of that stock which would cause the total number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed 4.9% of the
outstanding shares of Common Stock following the conversion. In addition, any
holder of eMD stock is not entitled to exchange more than 10% of the total
number of shares of eMD stock issued to the holder, or any successor or assignee
of the holder, in any thirty day period. The Company has the option to pay cash
to the holders of eMD stock seeking to effect a conversion at a rate of $5.825
per share instead of issuing shares of Common Stock. The Company has the right,
at any time, to redeem any or all of the eMD stock at a price of $5.825 per
share, subject to specified conditions, including having cash, credit facilities
or standby underwriting arrangements in place that are sufficient to pay the
redemption price. Under the terms of the private placement agreements, the
Company filed a registration statement (SEC File No.. 333-35660) on April 26,
2000 with the Commission registering up to one million shares of Common Stock
that would be issuable upon the exchange of the eMD stock. The registration
statement was declared effective on May 5, 2000.
The Company has the right to suspend the exchange of the eMD stock for
Common Stock if eMD becomes and remains a reporting company under the Exchange
Act and the shares of eMD stock have a trading price of $6.19 or more per share.
$6,000,000 of eMD common stock and warrants have been sold. The
exchange into shares of Company Common Stock (at holder's option) is at a
conversion price of $5.825 per share.
In certain cases, the NASD requires its members, including the Company,
to get the approval of a majority of the total votes cast before the Company can
issue Common Stock, or securities convertible into or exercisable for Common
Stock, if the Common Stock issued would be more than 20% of the Common Stock
outstanding, or would have more than 20% of the voting power outstanding before
the issuance (the "NASD Rule"). If the holders of the eMD stock want to convert
their stock into shares of Common Stock, and the Company is unable to issue all
of the Common Stock as a result of the NASD Rule, the holders of the eMD stock
have the option to rescind their election to convert the eMD stock, or to cause
the Company to redeem the eMD stock for cash at a price of $5.825 per share.
Under the terms of the agreements governing the issuance of the eMD stock, the
Company agreed to submit for stockholder approval a proposal to ratify the
issuance of the eMD stock and the shares of Common Stock issuable upon
conversion of the eMD stock. If this proposal is not approved, the eMD stock
will remain outstanding, but the holders of the eMD stock will not be able to
convert the eMD stock into a number of shares representing more than 19.99% of
the Company Common Stock outstanding before the execution of the private
placement agreement unless the stockholders of the Company subsequently approve
the issuance.
eMD is currently in Chapter 11 proceedings in bankruptcy court for the
Northern District of Georgia.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL THREE.
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PROPOSAL FOUR
TO RATIFY TWO EQUITY CREDIT AGREEMENTS, AND TO APPROVE THE
ISSUANCE OF COMMON STOCK IN EXCESS OF 19.99 PERCENT
OF THE OUTSTANDING SHARES
on June 30, 1999, the Company entered into a private equity credit
agreement with an investor. On such date the closing bid price of the Company's
Common Stock was $18.375. Under the terms of the agreement, the investor has
agreed to purchase shares of Common Stock during a 24-month period. During the
term of the agreement, but no more frequently than once every 20 trading days,
the Company may require the investor to purchase between $250,000 and $1.5
million of Common Stock until all the purchases total $10 million, subject to
some conditions, one of which was that an investor was not required to make any
purchases if the bid price of the Company's common stock fell below $1.00. To
date, the Company has sold $2 million under the original terms of the agreement,
which allowed the investor to purchase shares of Common Stock for 80% of the
then market price for Company Common Stock. Any additional purchases of Common
Stock by the investor will be at a purchase price equal to 90% of the average of
the three lowest average closing bid and ask prices for the 10 trading days
prior to the purchase. Under a related registration rights agreement, the
Company has filed and agreed to maintain the effectiveness of a registration
statement for the resale by the investor of the shares of any Common Stock it
purchases under the agreement. Such registration statement as filed January 11,
2000 (SEC File No. 333-94395) was declared effective January 25, 2000. If the
Company fails to maintain the effectiveness of the registration statement, it
may be required to pay penalties.
On June 14, 2000, the Company entered into a similar private equity
credit agreement with an investor. On such date the closing bid price for the
Company's common stock was $14.50. Under this agreement, the investor has agreed
to purchase shares of Common Stock during a 24-month period. During the term of
the agreement, but no more frequently than once every 20 trading days, the
Company may require the investor to purchase between $250,000 and $5 million of
Common Stock until all the purchases total $50 million. The purchase price for
each share will equal 90% of the average of the closing bid and ask prices for
the 10 trading days prior to each draw. A pre-condition to the investor's
requirements to purchase was that the investor was not required to make any
purchases if the bid price of the Company's common stock fell below $7.50. Under
a related registration rights agreement, the Company has agreed to file and
maintain the effectiveness of a registration statement for the resale by the
investor of the shares it purchases under the agreement. If, after the
registration statement becomes effective, the Company fails to maintain its
effectiveness, the Company may be required to pay penalties. The Company has not
filed any registration statement for this private equity agreement. In
connection with the private equity credit agreement, the Company issued warrants
to the investor to purchase up to 250,000 shares of Common Stock until June 14,
2005, at an exercise price of $18.92 per share, subject to adjustment under some
circumstances. To date, the Company has not sold any shares of its Common Stock
under this agreement.
Under the NASD Rule, the Company is required to secure the approval
of a majority of the total votes cast before it can issue Common Stock, or
securities convertible into or exercisable for Common Stock, if the Common Stock
issued would be more than 20% of the Common Stock outstanding, or would have
more than 20% of the voting power outstanding before the issuance. If
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this proposal is not approved, the Company may issue shares under each of the
equity credit agreements, but it may not issue shares under either equity credit
agreement representing more than 19.99% of the outstanding Common Stock unless
the stockholders of the Company subsequently approve the issuance.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL FOUR.
PROPOSAL FIVE
TO RATIFY THE ISSUANCE OF SHARES OF A SERIES
OF CONVERTIBLE PREFERRED STOCK, AND TO APPROVE THE ISSUANCE OF COMMON
STOCK IN EXCESS OF 19.99 PERCENT OF THE OUTSTANDING SHARES
On June 14, 2000, the Company completed a private placement for cash of
$10 million principal amount of Series B Convertible Preferred Stock and
warrants to purchase Common Stock. The closing bid price for the Company's
common stock on June 14, 2000 was $14.50. The preferred stock and warrants are
claimed to be exempt from registration under Regulation D of the Securities Act.
Under the terms of the private placement agreements governing the issuance of
the preferred stock and the warrants, the Company was required to file a
registration statement with the Commission to register for resale up to
1,500,000 shares of Common Stock issuable upon conversion of the preferred stock
and exercise of the warrants. Such registration statement was filed October 20,
2000 (SEC File No. 333-48284) and was declared effective November 21, 2000.
The preferred stock is convertible into Common Stock until June 14,
2003, at the option of the holder, at a conversion price equal to a market
conversion price that may not exceed $19.70. The market conversion price is 90%
of the average of the closing bid and ask prices of the Common Stock during any
3 trading days during the 10 consecutive trading days immediately prior to the
conversion date. The preferred stock is redeemable at the Company's option, at a
price of 125% of its principal amount. The warrants entitle the investor to
purchase a total of 79,281 shares of the Common Stock at the option of the
holder until June 14, 2005, at an exercise price of $18.92 per share, subject to
adjustment under some circumstances.
Under the NASD Rule, the Company is required to secure the approval of
a majority of the total votes cast before it can issue Common Stock, or
securities convertible into or exercisable for Common Stock, if the Common Stock
issued would be more than 20% of the Common Stock outstanding, or would have
more than 20% of the voting power outstanding before the issuance. The shares of
preferred stock are not convertible into Common Stock to the extent the number
of shares of Common Stock issuable upon the conversion would exceed 19.99% of
the shares of Common Stock outstanding as of the time of issuance of the
preferred stock, unless the stockholders of the Company subsequently approve the
issuance of the Common Stock. Under the terms of the agreements governing the
issuance of the preferred stock and the warrants, the Company agreed to submit
for stockholder approval a proposal to ratify the issuance of the preferred
stock and the shares of Common Stock issuable upon conversion of the preferred
stock.
If all the shares of preferred stock were converted, and all the
warrants exercised, as of April 4, 2001 closing price of $0.313, the Company
would be required to issue approximately 32,028,163 shares of Common Stock, or
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approximately __% of the number of shares of Common Stock that would then be
outstanding immediately after such issuance. The total number of shares of
Common Stock issuable upon the conversion and exercise will vary, based upon the
closing bid and ask prices of the Common Stock. If this proposal is not
approved, the preferred stock will remain outstanding, but the holders of the
preferred stock will not be able to convert the preferred stock into a number of
shares representing more than 19.99% of the shares outstanding as of the time of
issuance of the preferred stock, unless the stockholders of the Company
subsequently approve the issuance.
NOTE: The bid price on the closing dates for the two above referenced equity
lines of credit were $18.375 (June 30, 1999) and $14.50 (June 14, 2000)
respectively. Accordingly, management of the Company did not foresee
any potential possibility of exceeding Nasdaq guidelines so as to
require stockholder approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL FIVE.
PROPOSAL SIX
TO RATIFY THE ADOPTION OF THE COMPANY'S 2001 STOCK OPTION PLAN
The Board of Directors in February 2001 adopted the Company's 2001
Non-Statutory Stock Option Plan so as to provide a critical long-term incentive
for employees, non-employee directors, consultants, attorneys and advisors of
the Company and its subsidiaries. The Board of Directors believes that the
Company's policy of granting stock options to such persons will continue to
provide it with a critical advantage in attracting and retaining qualified
candidates. In addition, the Stock Option Plan is intended to provide the
Company with maximum flexibility to compensate plan participants. It is expected
that such flexibility will be an integral part of the Company's policy to
encourage employees, non-employee directors, consultants, attorneys and advisors
to focus on the long-term growth of stockholder value. The Board of Directors
believes that important advantages to the Company are gained by an option
program such as the 2001 Non-Statutory Stock Option Plan which includes
incentives for motivating employees of the Company, while at the same time
promoting a closer identity of interest between employees, non-employee
directors, consultants, attorneys and advisors on the one hand, and the
stockholders on the other.
The principal terms of the Stock Option Plan are summarized below.
The summary of the Stock Option Plan set forth below is not intended to be a
complete description thereof and such summary is qualified in its entirety by
the actual text of the Stock Option Plan, copies of which will be available for
inspection at the Annual Meeting.
Summary Description of the BioShield Technologies Inc. 2001 Non-Statutory
Stock Option Plan
The purpose of the Non-Statutory Stock Option Plan ("Plan") is to
provide directors, officers and employees of, consultants, attorneys and
advisors to the Company and its subsidiaries, if any, with additional incentives
by increasing their ownership interest in the Company. Directors, officers and
other employees of the Company and its subsidiaries are eligible
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to participate in the Plan. Options in the form of Non-Statutory Stock Options
("NSO") may also be granted to directors who are not employed by the Company and
consultants, attorneys and advisors to the Company providing valuable services
to the Company and its subsidiaries. In addition, individuals who have agreed to
become an employee of, director of or an attorney, consultant or advisor to the
Company and/or its subsidiaries, if any, are eligible for option grants,
conditional in each case on actual employment, directorship or attorney, advisor
and/or consultant status. The Plan provides for the issuance of NSO's only,
which are not intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, as amended.
The maximum number of options that may be granted under this Plan
shall be options to purchase 6,250,000 shares of Common Stock.
The Board of Directors of the Company or a Compensation Committee
will administer the Stock Option Plan with the discretion generally to determine
the terms of any option grant, including the number of option shares, exercise
price, term, vesting schedule and the post-termination exercise period.
Notwithstanding this discretion (i) the term of any option may not exceed 10
years and (ii) an option will terminate as follows: (a) if such termination is
on account of termination of employment for any reason other than death, without
cause, such options shall terminate one year thereafter; (b) if such termination
is on account of death, such options shall terminate 15 months thereafter; and
(c) if such termination is for cause (as determined by the Board of Directors
and/or Compensation Committee), such options shall terminate immediately. Unless
otherwise determined by the Board of Directors or Compensation Committee, the
exercise price per share of Common Stock subject to an option shall be equal to
no less than 10% of the fair market value of the Common Stock on the date such
option is granted. No NSO shall be assignable or otherwise transferable except
by will or the laws of descent and distribution or except as permitted in
accordance with SEC Release No.33-7646 as effective April 7, 1999 and in
particular that portion thereof which expands upon transferability as is
contained in Article III entitled "Transferable Options and Proxy Reporting" as
indicated in Section A 1 through 4 inclusive and Section B thereof.
The Stock Option Plan may be amended, altered, suspended,
discontinued or terminated by the Board of Directors without stockholder
approval, unless such approval is required by law or regulation or under the
rules of the stock exchange or automated quotation system on which the Common
Stock is then listed or quoted. Thus, stockholder approval will not necessarily
be required for amendments which might increase the cost of the Stock Option
Plan or broaden eligibility. Unless otherwise indicated the Stock Option Plan
will remain in effect until terminated by the Board of Directors.
Federal Tax Consequences
The following summary is a brief description of the federal income
tax consequences generally arising with respect to the issuance and exercise of
options under the Stock Option Plan. This discussion is general in nature and is
not intended to cover all tax consequences that may apply to a particular
participant or the Company. The provisions of the Code and the regulations
thereunder relating to these matters are complex and their impact in any one
case may depend upon the particular circumstances.
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The grant of an incentive stock option will create no tax
consequences for the grantee or the Company. The difference between the exercise
price of an ISO and the fair market value of the shares subject to the option at
the time of exercise is an item of tax preference which may result in the
employee being subject to alternative minimum tax. If the participant holds the
shares acquired under an ISO for less than two years from the date the option is
granted and less than the one year from the date of exercise of the option, the
participant must generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the freely transferable and
non-forfeitable stock received. In such case, the Company will be entitled to a
deduction equal to the amount recognized as ordinary income by the participant.
The participant's disposition of shares acquired upon the exercise
of an option that is greater than the requirements duscussed above generally
will result in capital gain or loss measured by the difference between the sale
price and the participant's tax basis in such shares.
Additionally, the following tax effects on Stock Option Plan
participation may be considered:
Tax Treatment to the Participants. The Stock Option Plan provides
for the grant of nonqualified stock options. A description of these options and
certain federal income tax aspects associated therewith is set forth below.
Because tax results may vary due to individual circumstances, each participant
in the Stock Option Plan is urged to consult his personal tax adviser with
respect to the tax consequences of the exercise of an option or the sale of
stock received upon the exercise thereof, especially with respect to the effect
of state tax laws.
Federal Income Tax Treatment of Nonqualified Stock Options. No income
is recognized by an optioned when a non-qualified stock option is granted.
Except as described below, upon exercise of a nonqualified stock option, an
optioned is treated as having received ordinary income at the time of exercise
in an amount equal to the difference between the option price paid and the then
fair market value of the Common Stock acquired. The Company is entitled to a
deduction at the same time and in a corresponding amount. The optioned's basis
in the Common Stock acquired upon exercise of a nonqualified stock option is
equal to the option price plus the amount of ordinary income recognized, and any
gain or loss thereafter recognized upon disposition of the Common Stock is
treated as capital gain or loss.
Stock acquired by "insiders' (i.e., officers, directors or persons
holding 10% or more of the stock of the Company who are subject to the
restrictions on short-swing trading imposed by Section 16(b) of the Securities
Exchange Act of 1934) upon exercise of nonqualified stock options constitutes
"restricted property" and, unless the optioned elects otherwise, the recognition
of income upon exercise is deferred to the date upon which the stock acquired
upon exercise may first be sold without incurring Section 16(b) liability
(generally six months after exercise). If such an optioned does not elect to
recognize income upon exercise, the insider will realize ordinary income in an
amount equal to the difference between the option price and the fair market
value on the date the stock may first be sold without incurring Section 16(b)
liability.
The above referenced Plan was approved by the Board of Directors
without stockholder approval and the Company seeks ratification of same although
stockholder approval is not required due to the fact that the Plan is a "broadly
based" plan which does not require stockholder approval insofar as applicable
Nasdaq Marketplace Rules are concerned. A "broadly based" plan is one in which
less than 50% of all options are issued to officers and directors
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as such terms are defined in Section 16 of the Securities Exchange Act of 1934.
"Broadly based" by definition means that at the end of three years
from the date of the plan at least 51% of all options granted have been granted
to "rank and file" with such percentage being maintained for each succeeding
year.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL SIX.
PROPOSAL SEVEN
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Feldman Sherb & Co., P.C. as
independent accountants to audit the consolidated financial statements of the
Company for the fiscal years ending June 30, 1999, 2000 and 2001. Stockholders
are being asked to ratify this appointment. Representatives of Feldman Sherb &
Co., P.C. are expected to be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
On January 16, 2001 the Company filed a Form 8-K indicating that its
prior auditors, Grant Thornton, LLP, had resigned. On February 6, 2001 the
Company filed a Form 8-K indicating that it had retained the services of Feldman
Sherb and Co., P.C. as independent auditors. Grant Thornton, LLP, the Company's
former auditors, subsequently advised the Company that it would not issue
necessary consents for the Company to be able to utilize the financial
statements for the fiscal years ended June 30, 1999 and 2000 as audited by Grant
Thornton, LLP with respect to any documents filed by the Company in accordance
with the Securities Act of 1933 or the Securities Exchange Act of 1934. Reasons
cited by Grant Thornton, LLP principally related to their "office policy" of
refusing to consent to utilization of financial statements audited by them for
what subsequently became a former client. In effect, such refusal, absent new
arrangements with new auditors, placed the Company in a position whereby not
only would it be unable to file any registration statements under the Securities
Act of 1933 but it would also not be able to meet its reporting requirements
under the Securities Exchange Act of 1934 since such audited financial
statements (with necessary consent) would have to accompany Form 10-KSB filings.
The Company is in the process of resolving such situation by virtue of its
current auditors having agreed to not only audit the Company's financial
statements for fiscal year ended June 30, 2001 but to also audit the Company's
financial statements for the prior two fiscal years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL SEVEN.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of June 30, 2000 based upon
information obtained from the persons named below, relating to the beneficial
ownership of shares of Common Stock by (i) each person known to the Company to
own five percent or more of the outstanding Common Stock, (ii) each director of
the Company, and (iii) all officers and directors of the Company as a group.
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PERCENT
OWNED
NAME AND ADDRESS OF
OF BENEFICIAL OWNER(1), (3) SHARES CLASS
- ---------------------------- --------- -------
Timothy C. Moses(2)...................... 1,662,930 19.8%
Jacques Elfersy(2)....................... 1,407,013 16.75%
Carl T. Garner(5)........................ 80,000 *
Martin Savarick(6)....................... 233,291 2.8%
Edward U. Miller(7)...................... 10,000 *
Hugh R. Lamle(4)......................... 10,000 *
All officers and directors as a group
(6 persons)............................ 3,403,234 40.51%
- - ----------
* Less than 1% of the 8,354,073 shares outstanding as of June 30, 2000.
(1) A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the date of this proxy
statement upon the exercise of options or warrants. Each beneficial
owner's percentage ownership is determined by assuming that options
held by such person (but not those held by any other person) and that
are exercisable within 60 days from the date of this proxy statement
have been exercised as of June 30, 2000.
(2) Does not include 138,834 shares of Common Stock owned by each of the
wives of Messrs. Moses and Elfersy for which each of them disclaim
beneficial ownership.
(3) All Directors of the Company can receive mail and notifications at
the Company's corporate headquarters address: 4405 International Blvd.
- Suite B-109, Norcross, Georgia 30093.
(4) Hugh R. Lamle resigned as a director of the Company effective October
23, 2000.
(5) Carl T. Garner resigned as a director of the Company effective December
11, 2000.
(6) Martin Savarick resigned as a director of the Company effective
December 5, 2000.
(7) Edward U Miller resigned as a director of the Company effective
November 27, 2000.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows
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of no other business that may come before the Annual Meeting. If any other
business is properly brought before the Annual Meeting, it is the intention of
the proxy holders to vote or act in accordance with their best judgment with
respect to such matters.
By Order of the Board of Directors
Secretary
Atlanta, Georgia
May 14, 2001
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