EX-10.86 2 ex10-86.txt SECURITIES PURCHASE AGREEMENT 1 Exhibit 10.86 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 14, 2000, by and among BioShield Technologies, Inc., a Georgia corporation, with headquarters located at 5655 Peachtree Parkway, Georgia 30092 (the "COMPANY"), and the investor listed on the Schedule of Buyers (the "SCHEDULE OF BUYERS") attached hereto (individually, a "BUYER" or collectively "BUYERS"). WHEREAS: A. The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration pursuant to Section 4(2) and/or Regulation D ("REGULATION D") at the sole election of Buyer in the event that a registration statement filed by the Company pursuant to Section 2(a) of the Registration Rights Agreement (described below) is not declared effective by the Registration Deadline (as defined therein) as promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 ACT"); B. The Company has authorized the following new series of its Preferred Stock, no par value per share (the "PREFERRED STOCK"): the Company's Series B Convertible Preferred Stock (the "SERIES B PREFERRED Shares"), which shall be convertible into shares of the Company's Common Stock, no par value per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with the terms of the Company's Amendments to its Articles of Incorporation, substantially in the form attached hereto as Exhibit "A" (the "AMENDMENT"); C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, an aggregate of 500 shares of Series B Preferred Shares in the respective amounts set forth opposite each Buyer's name on the Schedule of Buyers; D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto as Exhibit "B" (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws; and E. The holders of Series B Preferred Shares shall receive stock purchase warrants to acquire shares of Common Stock of the Company at an exercise price of $18.92 per share the form attached as Exhibit "C" (the "WARRANTS"). NOW THEREFORE, the Company and the Buyer hereby agree as follows: 1. PURCHASE AND SALE OF SERIES B PREFERRED STOCK. a. Purchase of Series B Preferred Stock. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to the 1 2 Buyers and the Buyers shall purchase from the Company an aggregate of 500 shares of Series B Preferred Stock, in the respective amounts set forth opposite each Buyer's name on the Schedule of Buyers (the "CLOSING"). b. Closing Date. The date and time of the Closing (the "CLOSING DATE") shall be at a time and place as is mutually agreed to by the Company and the Buyer. The Closing shall occur on the Closing Date at the offices of Sims Moss Kline & Davis LLP, 400 Northpark Town Center, Suite 310, 1000 Abernathy Road, N.E., Atlanta, Georgia 30328. c. Form of Payment. On the Closing Date, (i) each Buyer shall pay the purchase price to the Company for the Series B Preferred Shares to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds in accordance with the Escrow Agreement between the parties, dated as of June 7, 2000, and (ii) the Company shall deliver to each Buyer, certificates representing such Series B Preferred Shares which such Buyer is then purchasing (as indicated opposite such Buyer's name on the Schedule of Buyers), duly executed on behalf of the Company and registered in the name of such Buyer or its designee (the "CERTIFICATES") and the Warrants. 2. BUYER'S REPRESENTATIONS AND WARRANTEES. Each Buyer represents and warrants with respect to only itself that: a. Investment Purpose. Such Buyer (i) is acquiring the Series B Preferred Shares, (ii) upon conversion of the Series B Preferred Shares, will acquire the Conversion Shares then issuable, (iii) will acquire any Warrants issuable, and (iv) upon exercise of the Warrants, will acquire the shares of Common Stock upon exercise thereof (the "WARRANT SHARES") for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act; provided, however, that by making the representations herein, such Buyer does not agree to hold any Series B Preferred Shares, Conversion Shares, Warrants, or Warrant Shares for any minimum or other specific term and reserves the right to dispose of Series B Preferred Shares, Conversion Shares, Warrants, or Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. b. Accredited Investor Status. Such Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. c. Reliance on Exemptions. Such Buyer understands that the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order 2 3 to determine the availability of such exemptions and the eligibility of such Buyer to acquire such securities. d. Information. Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares, which have been requested by such Buyer. Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. Such Buyer understands that its investment in the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares. e. No Governmental Review. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares or the fairness or suitability of the investment in the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares nor have such authorities passed upon or endorsed the merits of the offering of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares. f. Transfer or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (a) subsequently registered thereunder, (b) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (c) such Buyer provides the Company with reasonable assurance that such securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, (ii) any sale of such securities made in reliance on Rule 144 (or a successor rule thereto) ("RULE 144") may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. 3 4 g. Legends. Such Buyer understands that the certificates or other instruments representing the Series B Preferred Shares, the Warrants and, until such time as the sale of the Conversion Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Conversion Shares, and the Warrant Shares shall bear a restrictive legend in substantially the following form (and a stop transfer order may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) the sale of the Conversion Shares or the Warrant Shares is registered under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares may be made without registration under the 1933 Act, or (iii) such holder provides the Company with reasonable assurances that the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. h. Authorization, Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable in accordance with its terms, subject as enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. i. Residency. Such Buyer is a resident of that country specified in its address on the Schedule of Buyers. 4 5 j. No Scheme to Evade Registration. Buyer represents and warrants to the Company that the acquisition of the Series B Preferred Shares and the Conversion Shares is not a transaction (or any element of a series of transactions) that is part of a plan or scheme by the Buyer to evade the registration provisions of the 1933 Act. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each of the Buyers that: a. Organization and Qualification. The Company is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power to own their properties and to carry on their business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company taken as a whole. b. Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement and any related agreements, and to issue the Series B Preferred Shares, the Conversion Shares, and cause to be issued the Warrants, and the Warrant Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the issuance of the Series B Preferred Shares and the Warrants and the reservation for issuance and the issuance of the Conversion Shares and the Warrant Shares issuable upon conversion or exercise thereof, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement and the Registration Rights Agreement and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement and any related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies, and (v) prior to the Closing Date, the Certificate of Designations has been filed with the Secretary of State of the State of Georgia and will be in full force and effect, enforceable against the Company in accordance with its terms. c. Capitalization. As of May 15, 2000, the authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, of which as of the date hereof 7,981,714 shares were issued and outstanding, and 10,000,000 shares of Preferred Stock of which 200 shares of Series A preferred stock were issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and non-assessable. Except 5 6 as disclosed in Schedule 3(c), no shares of Common Stock or preferred stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as disclosed in Schedule 3(c), as of the effective date of this Agreement (i) there are no outstanding debt securities and (ii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement). There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares as described in this Agreement. The Company has furnished to the Buyer true and correct copies of the Company's Articles of Incorporation, as amended and as in effect on the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto. d. Issuance of Securities. The Series B Preferred Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be (i) validly issued, fully paid and non-assessable, are free from all taxes, liens and charges with respect to the issue thereof and are entitled to the rights and preferences set forth in the Series B Preferred Shares. The Conversion Shares issuable upon conversion of the Series B Preferred Shares have been duly authorized and reserved for issuance. Upon conversion or exercise in accordance with the Series B Preferred Shares or the Warrants, the Conversion Shares and the Warrant Shares will be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. e. No Conflicts. Except as disclosed in Schedule 3(e), the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a material violation of the Articles of Incorporation, any preferences and rights of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the principal market or exchange on which the Common Stock is traded or listed) applicable to the Company or by which any property or asset of the Company bound or affected. Except as disclosed in Schedule 3(e), the Company is in violation of any term of or in default under its Articles of Incorporation or Bylaws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company. To the knowledge of the Company, the business of the Company are not being conducted, and shall not be conducted in violation of any law, ordinance, or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state 6 7 securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof except as disclosed in Schedule 3(e). All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. f. SEC Documents: Financial Statements. Since January 1, 1999, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the "SEC DOCUMENTS"). The Company has delivered to the Buyer or its representative true and complete copies of the SEC Documents. As of their respective dates, the financial statements of the Company attached as Schedule 3(f) hereto (the "FINANCIAL STATEMENTS") complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). g. Absence of Certain Changes. Except as disclosed in Schedule 3(g), since January 1, 1999, there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. h. Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company against or affecting the Company or the Common Stock , wherein an unfavorable decision, ruling or finding would (i) have a material adverse effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein or (iii), except as expressly set forth in Schedule 3(h), have a material adverse effect on the business, operations, properties, financial condition or results of operation of the Company taken as a whole. 7 8 i. Acknowledgment Regarding Buyer's Purchase of Series B Preferred Shares. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. j. No Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company's respective business, properties, prospects, operations or financial condition, which could be material but which has not been publicly announced or disclosed in writing to the Buyer. k. No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares. 1. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares under the 1933 Act or cause this offering of Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions. m. Employee Relations. The Company is involved in any labor dispute nor, to the knowledge of the Company in any such dispute threatened. The Company is not a member of a union and the Company believe that their relations with their employees are good. n. Title. The Company has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(n) or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company . Any real property and facilities held under lease by the Company are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company. o. Regulatory Permits. The Company possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor 8 9 any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. p. Tax Status. Except as set forth on Schedule 3(p), the Company has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. q. Fees and Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties. r. Shareholder Approval. The Company covenants to submit to its shareholders at its next shareholder meeting a proposal for ratification of the issuance of the Series B Preferred Shares and the Conversion Shares, if and as required by the rules of the National Association of Securities Dealers, Inc. (the "NASD") applicable to the transaction. s. Dilution. The Company acknowledges that issuance of the Conversion Shares upon conversion of the Series B Preferred Shares will result in dilution of the outstanding shares of Common Stock , which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue the Conversion Shares upon conversion of the Series B Preferred Shares in accordance with the terms of the Amendment is unconditional and absolute, subject to the limitations set forth herein and in the Amendment, regardless of the effect of any such dilution. 4. COVENANTS. a. Best Efforts. Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement. b. Form D. The Company agrees to file a Form D with respect to the Series B Preferred Shares and the Conversion Shares as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Series B Preferred Shares and the Conversion Shares for, or obtain exemption for the Series B Preferred Shares and the Conversion Shares for, sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the 9 10 states of the United States, and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. c. Reporting Status. Until the earlier of (i) the date as of which the Investors (as that term is defined in the Registration Rights Agreement) may sell all of the Conversion Shares without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date on which (A) the Investors shall have sold all the Conversion Shares and (B) none of the Series B Preferred Shares is outstanding (the "REGISTRATION PERIOD"), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination. d. Use of Proceeds. The Company will use the proceeds from the sale of the Series B Preferred Shares for substantially the same purposes and in substantially the same amounts as indicated in Schedule 4(d). e. Financial Information. The Company agrees to send the following to each Buyer during the Registration Period: (i) within five (5) days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-KSB and any registration statements or amendments filed pursuant to the 1933 Act; (ii) within one (1) day after release thereof, copies of all press releases issued by the Company or any of its subsidiaries and (ii) copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders. f. Reservation of Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than 100% of the number of shares of Common Stock needed to provide for the issuance of the Conversion Shares and Warrant Shares; provided that all shares of the Common Stock authorized and not otherwise reserved for other purposes as of the date hereof shall be reserved for the purpose of issuance of the Conversion Shares. g. Listings. The Company shall promptly secure the listing of all Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable under the terms of this Agreement and the Registration Rights Agreement. The Company shall maintain the Common Stock's authorization for quotation in the over-the counter market. The Company shall promptly provide to each Buyer copies of any notices it receives regarding the continued eligibility of the Common Stock for trading on the Nasdaq SmallCap Market. 10 11 h. Expenses. Each of the Company and the Buyer shall pay all costs and expenses incurred by such party in connection with the negotiation, investigation, preparation, execution and delivery of this Agreement and the Registration Rights Agreement. i. Warrant Issuances. [INTENTIONALLY LEFT BLANK] j. No Short Sales of the Common Stock. So long as (i) a Buyer or any of its affiliates beneficially owns any of Series B Preferred Shares, (ii) the Company has not issued any publicly traded convertible securities and (iii) the Issuer is not in material default under the terms of the Series B Preferred Shares, each Buyer and its affiliates shall not directly or indirectly engage in any short sales or third party short sales of the Company's Common Stock or hold a "put equivalent position" with respect to the Common Stock (as defined in Rule 16a-1 under the 1934 Act). A short sale "or put equivalent position" shall not be deemed to have occurred if there is an offsetting long position in the Common Stock by way of conversion of any convertible securities of the Company or any Put Notice pursuant to any private equity credit agreement with the Buyer. Notwithstanding the foregoing restrictions on short sales, the foregoing restrictions shall not apply in the event that there is a material adverse change with respect to the Company which is likely to lead to the liquidation or bankruptcy of the Company. k. Right of First Refusal. The Company agrees to provide the Buyer with a right of first refusal with respect to subsequent financings, as follows: The Company shall not, without the prior written consent of the Buyer (which consent shall not be unreasonably withheld) sell any of its equity securities in a transaction intended to be exempt or not subject to registration under the Securities Act (a "Subsequent Placement") until June ___, 2001 other than (v) the granting of options or warrants to employees, consultants, officers and directors, and the issuance of shares upon exercise of options granted, under any stock option plan heretofore or hereinafter duly adopted by the Company, (w) shares of Common Stock issuable upon exercise of currently outstanding options and warrants and upon conversion of any currently outstanding convertible securities of the Company, (x) shares of Common Stock issuable upon conversion of the Series A or B Preferred Shares or any warrants issued in connection therewith, (y) any transaction for the primary benefit of any person or entity other than the Company such as Electronic Medical Distribution, Inc. or any other subsidiary or affiliate of the Company and (z) shares of Common Stock and other securities issued (i) in connection with mergers and acquisitions and (ii) to strategic investors, unless (A) the Company delivers to the Buyer a written notice (the "Subsequent Placement Notice") of its intention to effect such Subsequent Placement, which Subsequent Placement Notice shall describe in reasonable detail the proposed terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder, the entity with which such Subsequent Placement shall be effected, and attached to which shall be a term sheet or similar document relating thereto and (B) the Buyer shall not have notified the Company by 5:30 p.m. (New York City time) on the third business day after the delivery of the Subsequent Placement Notice of its willingness to provide financing to the Company on the same terms set forth in the Subsequent Placement Notice. If the Buyer shall notify the Company of its 11 12 willingness to so provide financing on such terms, the Buyer shall provide such financing, but the Company shall not be required in any event to accept financing from the Buyer in an amount less than or in excess of the amount set forth in the Subsequent Placement Notice. If the Buyer shall fail to notify the Company of its intention to provide such financing, the Company may effect the Subsequent Placement substantially upon the terms and to the entity or entities (or affiliates thereof) set forth in the Subsequent Placement Notice; provided, that the Company shall provide the Buyer with a second Subsequent Placement Notice, and the Buyer shall again have the right of first refusal as herein set forth, if the Subsequent Placement subject to the initial Subsequent Placement Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Placement Notice within sixty business days after the date of the initial Subsequent Placement Notice]. 5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its respective nominee(s), for the Conversion Shares and Warrant Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Series B Preferred Shares or exercise of the Warrants (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant Shares under the 1933 Act, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(g) hereof (in the case of the Conversion Shares and Warrant Shares, prior to registration of such shares under the 1933 Act) will be given by the Company to its transfer agent and that the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall affect in any way the Buyer's obligations and agreement to comply with all applicable securities laws upon resale of the Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant Shares. If the Buyer provides the Company with an opinion of counsel, satisfactory in form and substance to the Company, that registration of a resale by the Buyer of any of the Series B Preferred Shares, the Conversion Shares, the Warrants, or the Warrant Shares is not required under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares or the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Buyer. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder to issue and sell the Series B Preferred Shares to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion: a. The Buyer shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company. 12 13 b. The Amendment shall have been filed with the Secretary of State of the State of Georgia. c. The Buyer shall have delivered to the Company the Purchase Price for the Series B Preferred Shares being purchased by the Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company. d. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. 7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Series B Preferred Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer's sole benefit and may be waived by the Buyer at any time in its sole discretion: a. The Company shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to the Buyer. b. The Common Stock shall be authorized for quotation on the Nasdaq SmallCap Market and trading in the Common Stock shall not have been suspended for any reason and all of the Conversion Shares issuable upon conversion of the Series B Preferred Shares shall be approved for listing. c. The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, without limitation an update as of the Closing Date regarding the representation contained in Section 3(c) above. 13 14 d. The Buyer shall have received the opinion of the Company's counsel dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Buyer and in substantially the form of Exhibit "D" attached hereto. e. The Company shall have executed and delivered to the Buyer the Certificates (in such denominations as the Buyer shall request) for the Series B Preferred Shares being purchased by the Buyer at the Closing. f. The Board of Directors of the Company shall have adopted the resolutions in substantially the form of Exhibit "E" attached hereto. g. As of the Closing Date, the Company shall as of the Closing Date have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Shares, such number of shares of Common Stock equal to or greater than 100% of the number of shares of Common Stock for which are issuable upon conversion of all of the Series B Preferred Shares, and the Warrant Shares could be issued at any time under this Agreement. h. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company's transfer agent. 8. INDEMNIFICATION. In consideration of the Buyer's execution and delivery of this Agreement and acquiring the Series B Preferred Shares, the Conversion Shares, and the Warrants, and the Warrant Shares hereunder and in addition to all of the Company's other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Buyer and each other holder of the Series B Preferred Shares, the Conversion Shares, and the Warrants, and the Warrant Shares and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Series B Preferred Shares, the Warrants, or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, the Certificate of Designations, the Warrants, or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Indemnities, any transaction financed or to be financed in whole or in part, 14 15 directly or indirectly, with the proceeds of the issuance of the Series B Preferred Shares or the status of the Buyer or holder of the Series B Preferred Shares, the Warrants, or the Conversion Shares or the Warrant Shares, as an investor in the Company, except for any Indemnified Liability which directly or primarily results from the particular Indemnitee's gross negligence or willful misconduct for which such holder shall indemnify the Company in the same manner as provided in this Section 8. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 9. GOVERNING LAW: MISCELLANEOUS. a. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Georgia without regard to the principles of conflict of laws. Any dispute or controversy between the parties arising in connection with this agreement or the subject matter contemplated by this agreement shall be resolved by arbitration before a three-member panel of the American Arbitration Association in accordance with the commercial arbitration rules of said forum and the Federal Arbitration Act, 9 U.S.C. 1 et seq., with the resulting award being final and conclusive. Said arbitrators shall be empowered to award all forms of relief and damages claimed, including, but not limited to, attorney's fees, expenses of litigation and arbitration, exemplary damages, and prejudgment interest. Notwithstanding the foregoing, Buyer may at any time and at its option, whether or not an arbitration action is then pending, initiate a civil action for temporary and permanent injunctive and other equitable relief against Company. Company acknowledges that upon any breach of Buyer's conversion rights hereunder, Buyer's resulting injury may not be adequately compensated by a remedy at law. Accordingly, upon such breach, Buyer, at its election and without limitation of its other remedies, shall be entitled to pursue a claim for specific performance of this Agreement, and Company hereby waives the right to assert any defense thereto that Purchaser has an adequate remedy at law. The parties further agree that any arbitration action between them shall be heard in Atlanta, Georgia, and expressly consent to the jurisdiction and venue of the Superior Court of Fulton County, Georgia, and the United States District Court for the Northern District of Georgia, Atlanta Division for the adjudication of any civil action asserted pursuant to this Paragraph. b. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof. c. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. 15 16 d. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. e. Entire Agreement, Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. f. Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: If to the Company: 5655 Peachtree Parkway Atlanta, Georgia 30092 Attn: Chief Financial Officer Telephone: (770) 246-2000 Facsimile: (770) 368-0784 With a copy to (which shall not constitute notice): Raymond L. Moss, Esq. Sims Moss Kline & Davis LLP 400 Northpark Town Center, Suite 310 1000 Abernathy Road, N.E. Atlanta, Georgia 30328 Telephone: (770) 481-7201 Facsimile: (770) 481-7210 If to the Transfer Agent: 16 17 American Stock Transfer 40 Wall Street New York, New York 10005 Attn: Wallace Chun Telephone: (718) 921-8206 Facsimile: (718) 921-8336 If to the Buyer, to its address and facsimile number on the Schedule of Buyers, with copies to the Buyer's counsel as set forth on the Schedule of Buyers. Each party shall provide five (5) days' prior written notice to the other party of any change in address or facsimile number. g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. The Buyer may assign its rights hereunder without the consent of the Company, provided, however, that the Company is given written notice by such holder at the time of such transfer, stating the name and address of such transferee and any such assignment shall not release the Buyer from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption. h. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. i. Survival. The representations and warranties of the Company and the Buyer contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8 shall survive for a period of one year following the Closing. The Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder. j. Publicity. The Company and the Buyer shall have the right to approve before issuance any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release and shall be provided with a copy thereof). k. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably 17 18 request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 1. Termination. In the event that the Closing shall not have occurred with respect to the Buyer on or before five (5) business days from the date hereof due to the Company's or the Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party. m. Placement Agent. The Company acknowledges that it has engaged J.P. Carey Securities, Inc. and Greenfield Capital Partners, LLC as agents in connection with the sale of the Series B Preferred Shares (the "Placement Agents"). The Company shall be responsible for the payment of any finder's fees (which includes cash and warrants to purchase Common Stock) relating to or arising out of the transactions contemplated hereby. n. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. o. Independent Counsel. The parties to this Agreement acknowledge that the Company has received independent counsel form the law firm of Sims Moss Kline & Davis LLP which is acting as its counsel. Buyers and the Placement Agents have been advised by Sims Moss Kline & Davis LLP to seek independent advice with respect to the terms and conditions of this Agreement and any related agreements before signing them. 10. PUBLICITY. The Company agrees that it will not issue any press release or other public announcement of the transactions contemplated by this Agreement without the prior consent of the Buyer, which shall not be unreasonably withheld nor delayed by more than two trading days from its receipt of such proposed release; provided, however, that if the Company is advised by its outside counsel that it is required by law or the applicable rules of any Principal Market to issue any such press release or public announcement, then, it may do so without the prior consent of the Buyer, although it shall be required to provide prior notice (which may be by telephone) to the Buyer that it intends to issue such press release or public announcement. No release shall name the Buyer without its express consent. REMAINDER OF PAGE INTENTIONALLY BLANK 18 19 IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above. "COMPANY" BIOSHIELD TECHNOLOGIES, INC. By: ______________________________________ Name: Timothy C. Moses Its: Chairman of the Board and Chief Executive Officer "BUYER" WILSON LLC By: ______________________________________ Name: ____________________________________ Title:____________________________________ 19 20 SCHEDULE OF BUYERS
NUMBER OF SERIES B BUYER'S NAME ADDRESS/FACSIMILE NUMBER OF BUYER PREFERRED SHARES ------------ --------------------------------- ------------------ WILSON LLC c/o Citco Trustees (Cayman) Ltd. 500 Attn: David Sims Corporate Centre, Windwood One West Bay Road P.O. Box 31106 SMB Grand Cayman, Cayman Islands 284-494-4771
21 SCHEDULE 3(c) Capitalization 22 SCHEDULE 3(e) Conflicts None. 23 SCHEDULE 3(f) Financial Statements Reference is made to all public filings made by the Company with the SEC available at http://www.sec.gov/. 24 SCHEDULE 3(h) Litigation None. 25 SCHEDULE 3(n) Intellectual Property None. 26 SCHEDULE 3(n) Liens None. 27 SCHEDULE 3(p) Tax Status None. 28 SCHEDULE 4(d) Use of Proceeds Working capital. 29 EXHIBIT A Amendment to Articles of Incorporation See Tab 2. 30 EXHIBIT B Registration Rights Agreement See Tab 3. 31 EXHIBIT C Warrant Agreement See Tab 4. 32 EXHIBIT D Legal Opinion See Tab 6. 33 EXHIBIT E Board Resolutions See attached.