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Exhibit 99.1
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
6% SECURED CONVERTIBLE
SUBORDINATED DEBENTURE PURCHASE AGREEMENT
NETMED, INC.
THIS AGREEMENT is made this 12th day of August, 1997, between NETMED, INC., Amex
Symbol "NMD" (the "Company"), incorporated in the State of Ohio, with its
principal office at 000 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000 and CPR
(USA) INC. (the "Purchaser"), with its principal office at 000 Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxx Xxxx, XX 00000.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this
Agreement:
"Agreement" means this 6% Secured Convertible Subordinated
Debenture Purchase Agreement including all Exhibits and Attachments hereto.
"Closing" means the completion of the purchase and sale of the
Debentures and Warrants on the Closing Date.
"Closing Date" means the date of the delivery of the original
Debentures and original Warrants to the Purchaser against a wire transfer of the
funds to the Escrow Agent.
"Closing Price" shall mean the last transaction price as
reported on the American Stock Exchange, Inc. ("Amex") or, in the event no
transaction is reported on any day during such period, the closing bid price for
the Common Stock on such day.
"Common Stock" means the Common Stock of the Company, no par
value.
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"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company. Ninety (90) calendar days
after the Closing Date, the Purchaser may convert one-half (1/2) of the
Purchaser's initial investment, including any and all interest and additional
interest, if any. Two hundred seventy (270) calendar days after the Closing
Date, Purchaser may convert the remaining portion of its initial investment,
including any and all interest and additional interest, if any. The Company can
prohibit conversions into the Company's Common Stock from December 14, 1997 to
February 1, 1998 (the "Blackout Period").
"Conversion Price" means an amount equal to the lesser of (a)
a twenty (20%) percent discount to the average closing bid price as reported by
the American Stock Exchange, Inc. ("Amex") or such other Exchange on which the
securities are listed ("Closing Bid Price") for the three (3) business days
preceding the Conversion Date (for conversions taking place after March 31, 1998
the discount shall be a twenty-five (25%) percent discount to the average
Closing Bid Price for the three (3) business days preceding the Conversion
Date); or (b) one hundred ten (110%) percent of the average Closing Price for
the Common Stock as reported on the Amex during the three (3) trading days
ending on the day before the Closing Date; provided, however, that in the event
the Conversion Price for (a) or (b) above is less than Three ($3) Dollars per
share prior to March 31, 1998, the Purchaser may either convert into the
Company's shares or the Pledged Shares, as defined herein, at the indicated
discount for the Company's shares as per (a) or (b) above and the discount set
forth in Section 7(iii) of the Pledge Agreement for the Pledged Shares.
"Conversion Shares" means the underlying common stock issued
upon the conversion of the Convertible Debentures.
"Convertible Debenture" means the $3,000,000 in aggregate
principal amount of Convertible Debenture of the Company convertible into common
stock of the Company as hereinafter provided.
"Debenture" or "Debentures" means the Convertible Debenture or
Convertible Debentures purchased on the Closing Date, as appropriate.
"Registration Effective Date" means the date upon which the
registration of the Conversion Shares and Shares underlying the Warrants is
approved by the SEC.
"Pledged Shares" means Four Hundred Seventy-Five Thousand
(475,000) Shares of free trading common shares of Neuromedical Systems, Inc.
(NASDAQ Symbol "NSIX") which shall be held in escrow and will be subject to a
Pledge Agreement annexed hereto as Attachment II.
"Warrant" or "Warrants" means the Warrants purchased from the
Company on the Closing Date, as appropriate.
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Section 2. Authorization and Sale of Debenture.
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2.1 AGREEMENT TO EXECUTE AND DELIVER THE DEBENTURE AGREEMENT
AND THE DEBENTURE. The Company will borrow Two Million Two Hundred Thousand
($2,200,000) Dollars from the Purchaser in reliance upon the representations and
warranties of the Purchaser contained in this Agreement. The Purchaser will lend
such sum to the Company, in reliance upon the representations and warranties of
the Company contained in this Agreement. Such loan shall occur on the Closing
Date and shall accrue interest from the Closing Date.
2.2 AUTHORIZATION. Subject to the terms and conditions of this
Agreement, the Company has authorized the execution and delivery of one or more
Convertible Debentures in an aggregate principal amount of up to Three Million
($3,000,000) Dollars (the "Principal"), with a maturity date three (3) years
after the date of issuance (the "Maturity Date"). The Company promises to pay to
the Purchaser the Principal, if any remains unconverted, with interest at six
(6%) percent per annum, in cash or shares of Common Stock at the Conversion
Price at the discretion of the Company on the Maturity Date. Such loan shall
occur on the Closing Date and shall accrue interest from the Closing Date. The
form of such Debenture is annexed hereto as Exhibit A. Alternatively, at the
Maturity Date the Company may, at its option, provide the Purchaser with the
Common Stock of the Company at the Conversion Price, the Pledged Shares (or
other shares of NSIX that the Company owns) and or immediate payment of cash at
one hundred twenty-five (125%) percent of the principal, plus accrued interest,
or any combination of the same.
2.3 WARRANTS ISSUABLE UPON CLOSING. The Purchaser shall
receive a pro rata portion of warrants to purchase a total of One Hundred
Thousand (100,000) Shares of the Company's Common Stock, for each Three Million
(US$3,000,000) Dollars principal amount of Debentures purchased as per the terms
of a separate Stock Purchase Warrant, the form of which is attached hereto as
Exhibit B.
2.4 TIME AND PLACE OF CLOSINGS. The Closing shall be
held at the offices of Xxxxxxx X. Xxxxxxxxx, P.C., 00 Xxxxxxxx, 00xx Xx., Xxx
Xxxx, XX 00000 ("Escrow Agent") on the Closing Date.
2.5 ESCROW AGREEMENT. The parties have entered into
an Escrow Agreement annexed hereto as Attachment II.
2.6 PAYMENT AND DELIVERY. At or prior to the Closing,
the following shall occur:
(a) The Company shall deliver or cause to be
delivered to Purchaser original Debentures and Warrants, substantially in the
form set forth in Exhibits A and B hereby, bearing the original signatures of an
authorized officer of the Company at which time Purchaser shall remit by wire
transfer the Purchase Price to the Company.
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(b) Wire instructions to Xxxxxxx X. Xxxxxxxxx, PC as
follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of
United States Trust Company of New York
Account #000-0-000000
In Favor of Xxxxxxx X. Xxxxxxxxx, P.C. Attorney
Trust Account
Account #59-02347
Section 3. GENERAL REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company hereby represents and warrants to, and covenants with, the
Purchaser that the following are true and correct as of the date hereof.
3.1 ORGANIZATION; QUALIFICATION. The Company is a corporation
duly organized and validly existing under the laws of the State of Ohio and is
in good standing under such laws. The Company has all requisite corporate power
and authority to own, lease and operate its properties and assets, and to carry
on its business as presently conducted. The Company is qualified to do business
as a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 CAPITALIZATION AND CONVERSION. The authorized capital
stock of the Company consists of 20,000,000 Shares of Common Stock, no par
value, of which 10,947,114 shares of Common Stock have been issued as of June
30, 1997, 250,000 shares of voting preferred stock, no par value, and 250,000
non-voting preferred stock, no par value, none of which are issued and
outstanding. All issued and outstanding Shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. As of the
Closing Date, the Company had reserved from its authorized but unissued shares
of Common Stock a sufficient number of shares of Common Stock for issuance upon
conversion of the aggregate principal of the Debenture. Each such conversion
shall reduce the principal amount owing on the Debenture by the amount stated in
the Notice of Conversion (Exhibit C) and will be reflected in a Convertible
Debenture Principal Reduction Schedule signed by an authorized officer of the
Company.
3.3 AUTHORIZATION. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Debenture by the Company, the authorization, sale, issuance and delivery of the
Conversion Shares and the performance of the Company's obligations hereunder has
been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company enforceable
in accordance with its terms,
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subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy as they may apply to the indemnification provisions set forth in Section
7.3 of this Agreement. Upon their issuance and delivery pursuant to this
Agreement, the Conversion Shares will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances except for those
imposed by or on behalf of the Purchaser, its creditors or agents.
3.4 NO CONFLICT. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Articles of Incorporation, and any amendments thereto,
Regulations and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 ACCURACY OF REPORTS AND INFORMATION. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the Amex.
The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer and sale of the Debenture (or for such shorter period that
the Company has been required to file such material).
3.6 SEC FILINGS/FULL DISCLOSURE. For a period of at least
twelve (12) months immediately preceding this offer and sale, or such shorter
period that the Company has been required to file such Reports as defined
herein, (i) none of the Company's filings with the Securities and Exchange
Commission contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, and (ii) the Company has timely filed all requisite forms, reports
and exhibits thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than general
economic conditions known to the public generally or conditions generally
affecting the medical device industry) that has not been publicly disclosed by
the Company or disclosed in writing to the Purchaser which (i) could reasonably
be expected to have a material adverse effect on the condition (financial or
otherwise) or on earnings, business affairs, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform
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its obligations pursuant to this Agreement.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except as set forth in the Reports (as hereinafter defined) or
as incurred in the ordinary course of business after the date of the Reports.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Debenture, or the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement for the purpose of
registering the Common Stock underlying the Debenture.
3.9 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the
Form 10-K/A's, Form 10-Q's and Form 8-Ks filed by the Company for a period of at
least twelve (12) months immediately preceding this offer, or such shorter
period that the Company has been required to file such Reports as defined herein
(the "Reports"), the Company has sufficient trademarks, trade names, patent
rights, copyrights and licenses to conduct its business as presently conducted.
To the Company's knowledge, except as disclosed in the Reports, neither the
Company nor its products is infringing or will infringe any trademark, trade
name, patent right, copyright, license, trade secret or other similar right of
others currently in existence; and there is no claim being made against the
Company regarding any trademark, trade name, patent, copyright, license, trade
secret or other intellectual property right which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Company.
3.10 MATERIAL CONTRACTS. Except as set forth in the Reports,
the material agreements to which the Company is a party described in the Reports
are valid agreements, in full force and effect, the Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default (with or without notice or lapse of time, or both) under any of such
agreements.
3.11 LITIGATION. Except as disclosed in the Reports, there is
no action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Company. The Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate which will materially effect the Company.
3.12 TITLE TO ASSETS. Except as disclosed in the Reports, the
Company has good
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and marketable title to all properties and material assets described in the
Reports as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.
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3.13 SUBSIDIARIES. Except as disclosed in the Reports and the
financial statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity, except for Ceram Oxygen Technologies, Inc., an Ohio
corporation.
3.14 REQUIRED GOVERNMENTAL PERMITS. The Company is in
possession of and operating in material compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
3.15 LISTING. The Company will maintain the listing of its
Common Stock on the Amex, NASDAQ or other National Securities Exchange.
3.16 OTHER OUTSTANDING SECURITIES. Except as disclosed in the
Reports and excluding outstanding options to employees and directors, there are
no other outstanding debt or equity securities presently convertible into shares
of Common Stock. Except as disclosed in the Reports, the Company has no
outstanding restricted shares of Common Stock, or shares of Common Stock sold
under Regulation D or Regulation S under the Securities Act of 1933, as amended
or outstanding, under any other exemption from registration, which are available
for sale as unrestricted free trading stock.
3.17 LEGAL OPINION. Purchaser shall, upon the purchase of the
Debentures and warrants, receive an opinion letter from counsel to the Company,
and the Company represents that it will immediately obtain such an opinion from
counsel to the Company to the effect that:
(i) The Company is duly incorporated and validly
existing under the laws and jurisdiction of its incorporation. The
Company and/or its subsidiaries are duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions where
the Company and/or its subsidiaries owns or leases properties,
maintains employees or conducts business, except for jurisdictions in
which the failure to so qualify would not have a material adverse
effect on the Company, and has all requisite corporate power and
authority to own its properties and conducts its business.
(ii) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the Company
which might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, conditions, affairs
or operations of the Company.
(iii) The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.
(iv) There is no action, suit, proceeding or
investigation by the
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Company currently pending or which the Company currently intends to
initiate.
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(v) All issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable.
(vi) The Debentures which shall be issued at the
closing are properly issued under the Company's state of incorporation.
(vii) The Purchase Agreement, the issuance of the
Debentures, Warrants and the issuance of Common Stock upon conversion
of the Debentures and exercise of the Warrants, have been duly approved
by all required corporate action and that all such securities, upon
delivery, shall be validly issued and outstanding, fully paid and
nonassessable.
(viii) The issuance of the Debentures will not
violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are
listed.
(ix) Assuming the accuracy of the representations and
warranties of the Company and the Purchaser set forth in the 6% Secured
Convertible Subordinated Debenture Purchase Agreement, the offer,
issuance and sale of the Debentures, Warrants, Conversion Shares and
the Warrant Shares to be issued upon exercise to the Purchaser pursuant
to the 6% Secured Convertible Subordinated Debenture Purchase Agreement
are exempt from the registration requirements of the Securities Act.
3.18 DILUTION. The Company is aware and acknowledges that
conversion of the Debentures could cause dilution to existing shareholders and
could significantly increase the outstanding number of shares of Common Stock.
3.19 RIGHT OF FIRST REFUSAL. In the event that the Company
wishes to obtain further debt or equity financing within one hundred eighty
(180) days following the Closing Date, the Purchaser shall have the right of
first refusal to participate in such offerings and shall have three (3) business
days to reply in writing after facsimile receipt of a term sheet outlining such
transaction from the Company for facsimile response. In the event the Company
does not receive a response within three (3) business days, this will be deemed
a refusal by the Purchaser.
3.20 SECURITY. In order to secure its obligations under this
Agreement and related documents, the Company has arranged to deliver the Pledged
Securities as per separate Pledge Agreement annexed hereto as Attachment I.
Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
4.1 AUTHORITY. The Purchaser has all requisite right, power
and authority to
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execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of the Purchaser, its
directors, shareholders, members or partners necessary for the authorization,
execution, delivery and performance of this Agreement, and the purchase of the
Debentures and Warrants as well as their respective conversion and exercise, and
the performance of the Purchaser's obligations hereunder, has been taken. The
Purchaser's signatory has all right, power, authority and capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Purchaser and
will constitute the legal, valid and binding obligations of the Purchaser,
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in Section 7.3 of this Agreement.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Company's business affairs and financial condition and has had access to
and has acquired sufficient information about the Company, including the
Reports, to reach an informed and knowledgeable decision to acquire the
Debentures and Warrants. Purchaser has such business and financial experience as
is required to give it the capacity to protect its own interests in connection
with the purchase of the Debentures and Warrants. Purchaser is engaged, as a
substantial part of its business, in purchasing and holding securities.
4.3 INVESTMENT INTENT. Without limiting its ability to resell
the underlying Common Stock pursuant to an effective registration statement,
Purchaser represents that it is purchasing the Debentures and Warrants for its
own account as principal for investment purposes, and not with a view to a
distribution. Purchaser understands that its acquisition of the Debentures and
Warrants have not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchaser or otherwise acquire or take a pledge
of) any of the Debentures, Warrants or the underlying Common Stock, except in
compliance with the Securities Act and any applicable state securities laws, and
the rules and regulations promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the Debentures, Warrants or the Conversion
Shares may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
unless an exemption from such registration is available. Purchaser understands
that the Debentures, Warrants and, if converted or exercised as the case may be,
the Conversion Shares and Shares underlying the Warrants will be imprinted with
a legend that prohibits the transfer of such securities unless (i) it is
registered or such registration is not required pursuant to an exemption
therefrom, and (ii) if the transfer is pursuant to an
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exemption from registration other than Rule 144 under the Securities Act and an
opinion of counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Debentures and Warrants constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Debentures and the Warrants.
4.6 PURCHASER REVIEW. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports, and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company, the Debenture and the Warrants. Nothing stated
in the previous two sentences, however, shall be deemed to affect the
representations and warranties of the Company contained in this Agreement.
4.7 CERTAIN RISKS. The Purchaser recognizes that the purchase
of the Debentures, Warrants and the Conversion Shares and shares underlying the
Warrants involves a high degree of risk in that:
(i) an investment in the Company is highly
speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Debentures,
Warrants and the respective underlying securities;
(ii) a purchaser may not be able to liquidate its
investment;
(iii) transferability of the Debentures, Warrants and
Conversion Shares and shares underlying the Warrants is extremely
limited;
(iv) in the event of disposition, Purchaser could
sustain the loss of its entire investment;
(v) the Debentures represent non-voting securities,
which have the right to convert into and purchase shares of voting
equity securities in a corporate entity;
(vi) no return on investment, whether through
distributions, appreciation, transferability or otherwise, and no
performance by, through or of the Company, has been promised, assured,
represented or warranted by the Company, or by any director, officer,
employee, agent or representative thereof;
(vii) while the Common Stock is presently quoted and
traded on the
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Amex and while the Purchasers are beneficiaries of certain registration
rights provided herein:
(a) the Debentures, Warrants and the Conversion
Shares and the shares underlying the Warrants are not
registered under applicable federal or state
securities laws, and thus may not be sold, conveyed,
assigned or transferred unless registered under such
laws or unless an exemption from registration is
available under such laws, as more fully described
below; and
(b) the Debentures and Warrants are not quoted,
traded or listed for trading or quotation on the
Amex, or any other organized market or quotation
system, and there is therefore no present public or
other market for such Debentures or Warrants, nor can
there be any assurance that the Common Stock will
continue to be quoted, traded or listed for trading
or quotation on the Amex or on any other organized
market or quotation system.
4.8 NO REGISTRATION, REVIEW OR APPROVAL. The Purchaser
acknowledges and understands that the limited private offering and sale of the
Debentures, Warrants and the Conversion Shares pursuant to this Agreement has
not been reviewed or approved by the SEC or by any state securities commission,
authority or agency, and is not registered under the Act or under the securities
or "blue sky" laws, rules or regulations of any state. The Purchaser
acknowledges, understands and agrees that the Debentures, Warrants and the
Conversion Shares are being offered and sold hereunder pursuant to (i) a private
placement exemption to the registration provisions of the Act pursuant to
Section 3(b) or Section 4(2) of such Act and Regulation D promulgated under such
Act, and (ii) a similar exemption to the registration provisions of applicable
state securities laws.
4.9 NO HEDGING. Purchaser shall not, directly or indirectly,
engage in any long or short sale of the stock of the Company during the three
(3) days prior to any Conversion Date.
4.10 RESTRICTIONS ON CONVERSION OF DEBENTURES. The Purchaser
or any subsequent holder of the Debentures shall be prohibited from converting
any portion of the Debentures which would result in the Purchaser or the holder
being deemed a beneficial owner, in accordance with the provisions of Rule 13d-3
of the Securities Exchange Act of 1934, as amended, of 4.99% or more of the then
issued and outstanding Common Stock of the Company.
Section 5. CONDITIONS TO THE PURCHASER'S OBLIGATION TO
PURCHASE. The Company understands that the Purchaser's obligation to purchase
the Debentures and Warrants is conditioned upon:
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(a) Acceptance by Purchaser of this Debenture
Purchase Agreement for the purchase of the Debentures and Warrants, as evidenced
by the execution of this Agreement by its authorized officers;
(b) Delivery of the original Debentures and Warrants
to Purchaser;
(c) Delivery of legal opinion as required by this
Agreement;
(d) Execution and delivery by the Company of the
Pledge Agreement, Escrow Agreement and Registration Rights Agreement, in the
form of Attachments I, II and III.
Section 6. CONDITIONS TO COMPANY'S OBLIGATION TO SELL.
Purchaser understands that the Company's obligation to sell the Debentures and
Warrants is conditioned upon:
(a) The receipt and acceptance by the Company of this
Debenture Purchase Agreement for the Debentures and Warrants as evidenced by
execution of this Debenture Purchase Agreement by any duly authorized signatory
for the Purchaser; and
(b) Delivery to the Company of good funds
($2,200,000) as payment in full for the purchase of the Debentures and Warrants.
(c) Execution and delivery by the Purchaser of the
Pledge Agreement, Escrow Agreement and Registration Rights Agreement in the form
of Attachments I, II and III.
Section 7. Compliance with the Securities Act.
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7.1 REGISTRATION RIGHTS AGREEMENT. The parties will enter into
a Registration Rights Agreement, annexed hereto as Attachment III.
7.2 UNDERWRITER. The Company understands that the Purchaser
disclaims being an "underwriter," as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter"), but
Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder, except as may be required by law.
7.3 INDEMNIFICATION. Each of the Company and the Purchaser
agrees to indemnify the other and to hold the other harmless from and against
any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees) which the other may sustain or incur in connection
with the breach by the indemnifying party of any representation, warranty or
covenant made by it in this Agreement.
7.4 INFORMATION AVAILABLE. So long as any registration
statement is effective covering the resale of the Common Stock underlying the
Debenture, the Company will furnish to
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Purchaser:
(a) as soon as possible after available (but in the
case of the Company's Annual Report to Stockholders, within 150 days after the
end of each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual report shall contain financial statements audited in
accordance with generally accepted accounting principles by a national firm of
certified public accountants); (ii) each of its Quarterly Reports to
Stockholders, and its Quarterly Reports on Form 10-Q; and (iii) a full copy of
the registration statement covering the Conversion Shares (the foregoing, in
each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such
other information that is generally available to the public.
7.5 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Underlying Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any of the Conversion Shares without registration.
7.6 TEMPORARY CESSATION OF OFFERS AND SALES BY PURCHASER. The
Purchaser acknowledges that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchaser hereby covenants that it will not sell any
Common Stock pursuant to said prospectus during a
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period of not more than twenty (20) days commencing at the time at which the
Company gives the Purchaser notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Purchaser notice that
the Purchaser may thereafter effect sales pursuant to said prospectus, as the
same may have been supplemented or amended.
7.7 TRANSFER OF COMMON STOCK AFTER REGISTRATION. Purchaser
hereby covenants with the Company not to make any sale of the Common Stock
except either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.8 TERMINATION OF OBLIGATIONS. The obligations of the Company
pursuant to the Registration Rights Agreement shall cease and terminate upon the
earlier to occur of (i) such time as all of the Conversion Shares have been
re-sold, or (ii) such time as all of the Conversion Shares may be re-sold in any
three-month period pursuant to Rule 144 under the Securities Act.
7.9 LEGEND. The certificate or certificates representing the
Debentures, Warrants and, upon conversion, the Conversion Shares shall be
subject to a legend restricting transfer under the Securities Act of 1933, such
legend to be substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH,
EXCEPT IN THE CASE OF AN EXEMPTION UNDER SAID ACT, IS CONFIRMED IN A
LEGAL OPINION SATISFACTORY TO THE COMPANY."
Such securities shall also include any legends required by any applicable state
securities laws.
With respect to the Conversion Shares and the shares
underlying the Warrants, the legend(s) shall be removed and the Company shall
issue a replacement certificate without such legend to the holder of such
certificate if such holder provides to the Company an opinion of counsel
reasonably acceptable to the Company, to the effect that a public sale, transfer
or assignment of such stock may be made without registration.
7.10 Mandatory Conversion/Mandatory Redemption.
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(a) The Company has the right to require the Purchaser to
convert the Debentures, pursuant to this Agreement, in the event the average of
the Closing Price of the shares for a consecutive two week period remain one
hundred fifty (150%) percent above the average Closing Price for the three (3)
days prior to the Closing Date and the average trading volume for thirty (30)
trading days prior to the date of notice from the Company to convert its
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shares pursuant to this section averages thirty-five thousand (35,000) shares
per day, outside of volume created by Purchaser's sales, if any, of the
Conversion Shares.
(b) The Company has the right to redeem the Debentures, in
whole or in part, in cash upon payment of the outstanding principal amount of
the Debentures, plus the premium based on the Conversion Price and accrued
interest. Upon notice of its right to redeem the Debenture the Company shall
immediately wire transfer the appropriate amount of funds into an escrow account
mutually agreed upon by both Company and Purchaser. If after three (3) business
days from the date the notice of redemption is received by the Purchaser the
funds have not been received by the escrow agent, then the Purchaser shall again
have the right to convert the Debenture and the Company shall have the right to
redeem the Debenture but only upon simultaneously sending a notice of redemption
to the Purchaser and wire transferring the appropriate amount of funds to the
Escrow Agent. Such notice of redemption shall not be applicable to Debentures
for which the Company has received a Notice of Conversion.
Section 8. LEGAL FEES AND EXPENSES. The Company shall pay all
fees as per Section 1.4 of the Escrow Agreement (Attachment II).
Section 9. NOTICE OF CONVERSION. Conversion of the Debenture
to Common Stock may be exercised in whole or in part by Purchasers telecopying
an executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit C) to the Company and delivering the original Notice of Conversion and
the certificate representing the Debenture to the Company by express courier
within three (3) business days of exercise. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
shall be deemed a Conversion Date. The Company shall notify the transfer agent
to transmit the certificates representing the Common Stock issuable upon
conversion of all or any part of the Debenture (together with the certificates
representing portions of the Debenture not so converted) to the Purchaser or a
custodian designated by Purchaser via express courier or electronic transfer
within five (5) business days after the Company has received the original Notice
of Conversion and Debenture certificate being so converted. In addition to any
other remedies which may be available to the Purchaser, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within such five (5) business day period, the Purchaser will have the option to
revoke the relevant Notice of Conversion by delivering by telecopier with an
original by overnight courier a notice to such effect to the Company whereupon
the Company and the Purchaser shall each be restored to their respective
positions immediately prior to the delivery of the Notice of Conversion, upon
receipt of such Notice, the Company shall return by overnight courier the
original certificate representing the Debenture, or Purchaser can elect to deem
the Notice of Conversion sent an effective notice from the telecopying date. The
Notice of Conversion and certificate representing the portion of the Debenture
converted shall be delivered as follows:
To the Company:
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NetMed, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx and Xxxx Xxxxx, Esq.
(tele) (000) 000-0000
(fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of
the Debenture is not delivered within five (5) business days of receipt by the
Company of a valid Conversion Notice and the Debenture to be converted, through
the fault of the Company (such date of receipt referred to as the "Conversion
Date"), Purchaser may draw down on the Pledged Shares or in the event the
Pledged Shares have been depleted, the Company shall pay to the Purchaser, by
wire transfer, as non-cumulative additional interest for such failure and not as
a penalty, for each $100,000 of Debenture sought to be converted, $500 for each
of the first ten (10) days, and $1,000 per day thereafter that the Conversion
Shares are not delivered, which non-cumulative additional interest shall run
from the sixth business day after the Conversion Date.
Section 10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
NetMed, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx and Xxxx Xxxxx, Esq.
(tele) (000) 000-0000
(fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
CPR (USA) Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
(tele) (000) 000-0000
(fax) (000) 000-0000
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copy to:
Xxxxxxx X. Xxxxxxxxx, P.C.
00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
(tele) (000) 000-0000
(fax) (000) 000-0000
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a
Purchaser, at such address or addresses as shall have been furnished to the
Company at the time of the transfer or transfers, or at such other address or
addresses as may have been furnished by such transferee or transferees to the
Company in writing.
Section 11. Miscellaneous.
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11.1 ENTIRE AGREEMENT. This Agreement, including all Exhibits
and Attachments embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or agreement or
any kind not expressly set forth in this Agreement shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
11.2 AMENDMENTS. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by
Purchaser.
11.3 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
11.4 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.5 GOVERNING LAW/JURISDICTION. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of Ohio, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal district court for the Southern District of Ohio in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions.
Each party hereby agrees that if
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either party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
11.6 RECOVERY OF ATTORNEY'S FEES. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.7 FEES. The Company acknowledges that Purchaser shall have
no responsibility for the payment of any of its fees in connection with this
offering.
11.8 COUNTERPARTS/FACSIMILE. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
11.9 PUBLICITY. Neither the Purchaser nor the Company shall
issue any press releases or otherwise make any public statement with respect to
the transactions contemplated by this Agreement without the prior written
consent of the other, except as may be required by applicable law or regulation.
11.10 SURVIVAL. The representations and warranties in this
Agreement shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
NETMED, INC.
By /s/Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx, President
CPR (USA) INC.
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By /s/Xxxxxx X. Xxxxxxxx
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Chief Operations Officer
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