U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
Commission file no. 0-27101
National Boston Medical, Inc.
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(Name of small business issuer in its charter)
Nevada 04-3464312
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
43 Taunton Green, 3rd Floor
Taunton, Massachusetts 02780
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (508) 884-8820
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
-----------------------------------
(Title of class)
Copies of Communications Sent to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
As of September 30, 1999, there are 62,395,426 shares of voting stock
of the registrant issued and outstanding (in addition, the Company has
20,333,336 shares issued and outstanding and held in escrow pending conversion,
which escrowed shares cannot be voted until converted).
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<TABLE>
<CAPTION>
PART I
Item 1. Financial Statements
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Condensed Balance Sheets as of September 30, 1999 and June 30, 1999 F-2
Condensed Statements of Operations for the Three Months Ended
September 30, 1999 and 1998 F-3
Statements of Cash Flows for the Three Months Ended
September 30, 1999 F-4
Notes to the Condensed Financial Statements F-5
</TABLE>
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<TABLE>
<CAPTION>
NATIONAL BOSTON MEDICAL, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, 1999
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Assets
Current Assets
Cash $ 19,409
Accounts Receivable (net) 249,595
Inventory 168,458
Deposits 40,000
Prepaid Expenses 975,200
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Total current assets 1,452,662
Property and equipment, net 493,099
Other Assets
Intangible assets, net 879,763
Investment in subsidiaries 1,875,000
Capitalized licenses, net 6,454,852
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Total other assets 9,209,615
Total Assets $ 11,155,376
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable and accrued expenses $ 1,136,133
Customer Deposits 245,051
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Total current liabilities 1,381,184
Notes Payable 2,518,359
Stockholders' Equity
Preferred stock, $0.01 par value, 10,000,000
shares authorized; 55,375 shares issued and
outstanding in September and June 1999 $ 554
Common stock, $0.01 par value, 100,000,000
shares authorized; 62,395,426 shares issued and
outstanding at September 30, 1999 623,954
Escrowed shares, $0.01 par value, 20,333,336
Shares issued and outstanding at Sept. 30, 1999 203,333
Additional paid-in-capital 24,567,782
Accumulated deficit (18,139,790)
Total stockholders' equity 7,255,833
Total Liabilities and Stockholders' Equity $ 11,155,376
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
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<TABLE>
<CAPTION>
NATIONAL BOSTON MEDICAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Three Months Ending September 30
1999 1998
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Net Sales $ 1,315,380 $ 79,645
Cost of Goods Sold 508,065 54,060
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807,315 25,585
Costs and expenses
Payroll expense 321,772 201,225
Professional fees 614,164 425,856
Selling expenses 809,098 126,023
Other expenses 470,535 508,686
Depreciation and amortization 150,864 83,516
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Total costs 2,366,433 1,345,306
Interest expenses 33,273 51,847
Other (income)/expense (136) (3,041)
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Net loss before income taxes (1,592,255) (1,368,526)
Provision for income taxes 0 0
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Net loss $(1,592,255) $(1,368,526)
============ ==========
Net loss per share $ (0.03) $ (0.08)
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
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<TABLE>
<CAPTION>
NATIONAL BOSTON MEDICAL, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
September 30, 1999
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
<S> <C>
Net Loss $ (1,592,255)
Adjustments to reconcile net loss to net cash used by operating activities
Stock issued for services rendered 1,359,061
Stock issued for payment of interest 14,202
Depreciation and amortization 150,864
Changes in assets and liabilities
(Increase) decrease in inventory 29,764
(Increase) decrease in accounts receivable 297,766
(Increase) decrease in other (971,674)
Increase (decrease) in accounts payable 18,102
Increase (decrease) in customer deposits (437,016)
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Net cash provided (used) by operating activities (1,131,186)
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CASH FLOWS USED BY INVESTING ACTIVITIES
Investments in businesses, intangibles and affiliates 2,503,000
Acquisition of property and equipment 32,000
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Net cash flows used by investing activities 2,535,000
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CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Common stock issued for acquisitions 1,753,000
Issuance of debt 1,982,500
Repayments of debt 81,153
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Net cash flow provided (used) by financing activities 3,654,347
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Net increase (decrease) in cash $ (11,839)
CASH, beginning of period 31,248
CASH, end of period $ 19,409
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash $ 19,071
Non-Cash Investing and Financing Activities
Stock issued to acquire business, affiliates and exclusive licenses $ 1,753,000
Stock issued towards conversion of debt $ 130,344
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
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Notes to the Condensed Financial Statements
Note 1 - Account Policies
Basis of Presentation
The condensed financial statements of National Boston Medical, Inc. (Company)
have been prepared without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These consolidated financial statements should be read in
conjunction with the financial statement and notes thereto included in the
Company's audited financial statements for the year ended June 30, 1998 in its
Form 10SB filed with the Securities and Exchange Commission.
The results of operations for the three month period ended September 30, 1999
are not necessarily indicative of the results to be expected for any other
period or for the full year.
In the opinion of the Company's management the accompanying unaudited financial
statements contain all adjustments, consisting of only normally recurring
adjustments necessary to present fairly the financial position as of September
30, 1999, the results of operations and cash flows for the three months ended
September 30, 1999 and September 30, 1998.
Net Loss Per Share
Net loss per share has been computed in accordance with Statement of Financial
Accounting Standards (FASB) no. 128, "Earnings Per Share," by dividing net loss
by the weighted average number of shares outstanding during the period. Common
stock equivalents have not been included in the computation of weighted average
number of shares outstanding since the effect would have been anti-dilutive.
Note 2 - Stock Compensation Expense
During the three months ended September 30, 1999 the Company issued 2,037,500
shares of its restricted common stock valued at $613,250 to seven (7) employees
under the terms of their respective employee agreements.
Note 3 - Escrowed Shares and Reserve
20,333,336 shares booked at par value ($0.01) and held in escrow as security for
notes to Oxford Capital (10,000,000 shares), Product Sourcing Limited (1,833,336
shares) and Thomson Kernaghan (8,500,000 shares) pending conversion, which
conversion cannot be guaranteed. A reserve for notes payable has been
established as an offset to the calculated par value of the
escrowed shares.
F-5
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Item 2. Management's Discussion and Analysis of Results of Operations.
General
On August 19, 1999, the Company executed a 10% convertible note in the
amount of $1,700,000 in favor of Thomson Kernaghan & Co., Ltd. ("TK") in
exchange for cash payable to the Company $700,000 on the execution date,
$600,000 on or before November 2, 1999 and $400,000 payable on or before
November 29, 1999. Such note and accrued and unpaid interest is due November 1,
2000. Interest is payable, at TK's election, in cash or in the Company's Common
Stock. In the event that all shares were converted and the floor price were the
conversation price, the Company would be obligated to deliver 8,500,000 shares
of its restricted Common Stock. NBM also issued warrants to purchase 2,500,000
shares of the Company's Common Stock at an exercise price of $0.25 per share
("A" Warrant) and warrants to purchase 333,333 shares of the Company's Common
Stock at an exercise price of $0.30 per share ("B" Warrant. The "A" Warrant is
exercisable from the issuance date until the earlier of November 1, 2000 or
thirty (30) days from the effective date of a registration statement under the
Securities Act of 1933, as amended (the "Act"). The "B" Warrant is exercisable
from the issuance date until November 1, 2000. The note is convertible into
restricted shares of the Company's Common Stock and both the note and the
warrants have piggy-back registration rights. A total of 8,500,000 shares have
been issued and are held in escrow pending conversion. Such escrowed shares have
been included in the calculation of shareholder equity at par. For such
offering, the Company relied upon Section 4(2) of the Securities Act of 1933, as
amended (the "Act") and Rule 506 promulgated under Regulation D of the Act
("Rule 506"). No state exemption was required as TK is located in Canada.
The facts the Company relied upon for the exemption under Section 4(2)
of the Act and Rule 506 are the following: (i) the issuance of the shares did
not involve a public offering, (ii) there were no more than 35 investors
(excluding "accredited investors"), (iii) each investor who was not an
accredited investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that such
purchaser comes within this description, (iv) the offers and sales were made in
compliance with Rules 501 and 502, (v) the securities were subject to Rule 144
limitation on resale and (vi) each of the parties is a sophisticated purchaser
and had full access to the information on the Company necessary to make an
informed investment decision by virtue of the due diligence conducted by the
purchaser or available to the purchaser prior to the transaction (the "Federal
Reliance Facts").
In August 1999, the Company entered into a stock purchase agreement
with Product Sourcing, Ltd. ("PSL") whereby the Company agreed to pay $750,000
and to issue 2,500,000 shares of the Company's Common Stock valued at $750,000
for all of the issued and outstanding capital stock of PSL. Of the $750,000,
$100,000 was due at closing, another $100,000 was due ninety (90) days after
closing and a Promissory Note in the amount of $550,000 was executed for the
remaining balance. The note is for a term of two (2) years, payable in equal
1
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monthly installments and bears interest at a rate of 5.3% per annum. Each
installment payment and accrued and unpaid interest is convertible, at the
option of PSL, into 76,389 shares of the common stock of NBM, which shares have
been issued but are held in escrow pending a closing and, if closed, notice of
conversion from PSL. Such escrowed shares have been included in the calculation
of shareholder equity at par. Also as a part of the Agreement, the Company
signed an employment agreement with Jeff Freedman to serve as the Executive
Vice-President of Product Development at an annual salary of $100,000. In
connection with the employment agreement, the Company is obligated to pay Mr.
Freedman quarterly cash bonuses, to issue Mr. Freedman 100,000 shares of the
Company's Common Stock annually (the first of which issuance has been made and
was valued at $30,000) and to grant Mr. Freedman an annual option to purchase
150,000 shares of the Company's Common Stock at a price equivalent to 75% of the
average annual trading price of the Company's stock per share. Such options have
no expiration date. The term of the employment agreement is for a period of
three (3) years. Although the agreements were signed in August, an audit of PSL
is required before a closing can take place. To date, no money has been paid
PSL, no monthly installment has been paid, nor converted into stock, and,
although the 2,500,000 shares has been issued, such shares are held in escrow
pending a closing. For such offering, the Company relied upon Section 4(2) of
the Act, Rule 506 and the Federal Reliance Facts and Section 10-5-9(13) of the
Georgia Code.
For purposes of Section 10-5-9(13) of the Georgia Code, the facts upon
which the Company relied are: (i) the number of Georgia purchasers did not
exceed fifteen (15); (ii) the securities were not offered for sale by means of
any form of general or public solicitations or advertisements; (iii) a legend
was placed upon the certificates; and (iv) each purchaser represented that he
purchased for investment.
In August 1999, the Company entered into a settlement agreement with
Ernest Zavoral, who currently serves as a Director and the Company's Manager of
the Infotopia Division f/k/a the Flex Marketing Division. As a part of that
agreement, the Company issued 487,040 shares of its Common Stock to Mr. Zavoral
in exchange for a release from debt in the amount of $73,056. For such offering,
the Company relied upon Section 4(2) of the Act, Rule 506 and the Federal
Reliance Facts and Section 1707.03(K)(2) of the Ohio Code.
For purposes of Section 1707.03(K)(2) of the Ohio Code, the facts upon
which the Company relied are: (i) the issuance was made exclusively with or to
its security holders; and (ii) no commission or other remuneration was given
directly or indirectly for soliciting the exchange.
In August 1999, the Company entered into a settlement agreement with
Raymond Volpe, who currently serves as the Company's Manager of the Bontempi
Instruments Plus Division f/k/a the Medical Products Division. As a part of that
Agreement, the Company issued 32,060 shares of its Common Stock to Volpe in
exchange for a release from debt in the amount of $4,809. For such offering, the
Company relied upon Section 4(2) of the Act, Rule 506 and the Federal Reliance
Facts and Section 517.061(11) of the Florida code.
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For purposes of Section 517.061(11) of the Florida Code, the facts upon
which the Company relied are: (i) sales of the shares of Common Stock were not
made to more than thirty-five (35) persons; (ii) neither the offer nor the sale
of any of the shares was accomplished by the publication of any advertisement;
(iii) all purchasers either had a preexisting personal or business relationship
with one or more of the executive officers of the Company or, by reason of their
business or financial experience, could be reasonably assumed to have the
capacity to protect their own interests in connection with the transaction; (iv)
each purchaser represented that he was purchasing for his own account and not
with a view to or for sale in connection with any distribution of the shares;
and (v) prior to sale, each purchaser had reasonable access to or was furnished
all material books and records of the Company, all material contracts and
documents relating to the proposed transaction, and had an opportunity to
question the executive officers of the Company. Pursuant to Rule 3E-500.005, in
offerings made under Section 517.061(11) of the Florida Statutes, an offering
memorandum is not required; however each purchaser (or his representative) must
be provided with or given reasonable access to full and fair disclosure of
material information. An issuer is deemed to be satisfied if such purchaser or
his representative has been given access to all material books and records of
the issuer; all material contracts and documents relating to the proposed
transaction; and an opportunity to question the appropriate executive officer.
In the regard, the Company supplied such information and was available for such
questioning.
In August 1999, the Company entered into a settlement agreement with
Blitz Media Sales, LLC d/b/a Blitz Marketing, LLC ("Blitz"), whereby the Company
agreed to present both the Blitz Marketing/Paradise Value Discount Service
Program and the Nutritional Supplement Program to every customer that places an
order for a Company infomercial product for the next fifty-two (52) weeks. As a
part of the Agreement, the Company issued Blitz 250,000 shares of its Common
Stock valued at $37,500 and warrants to purchase an additional 250,000 shares of
its Common Stock at an exercise price of $0.25 per share, which warrants have no
expiration date. The Company also agreed to pay Blitz $0.50 for every retail
sale by the Company of its Backstroke product. The Company agreed to purchase
4,100 bottles of Blitz' PM Relax vitamin supplement for $20,000, or in the
alternative, to include the PM Relax Vitamin Continuity on the present
Backstroke infomercial. For such offering, the Company relied upon Section 4(2)
of the Act, Rule 506 and the Federal Reliance Facts and Section 25102(f) of the
California Code.
For purposes of Section 25102(f) of the California Code, the facts upon
which the Company relied are: (i) shares were sold to not more than thirty-five
(35) persons, including persons not in California; (ii) all purchasers had a
preexisting relationship with the offeror or its officers, directors or by
reason of business or financial experience or by reason of their professional
advisors had the capacity to protect their own interests; (iii) each purchaser
represented that they were purchasing for their own account and with a view to
or for sale in connection with any distribution; and (iv) the offer and sale
were not accomplished by the publication of any advertisement. Although the Rule
required the filing of notice, none was filed. Failure to file notice did not
affect the applicability of the exemption.
In August 1999, the Company entered into a settlement agreement with
Workhorse Computers, Inc. f/k/a Remote Information Systems, Inc., whereby the
3
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Company paid $11,000 and issued 74,982 shares of its Common Stock valued at
$11,274 to Workhorse in exchange for a release from debt in the amount of
$22,274. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and the Federal Reliance Facts and Section 5[581-5](E) of the Texas
code.
For purposes of Section 5[581-5](E) of the Texas Code, the facts upon
which the Company relied are: (i) the offer was made to its existing security
holders; and (ii) no commission or other remuneration was paid or given directly
or indirectly for soliciting any security holder in Texas.
In August 1999, the Company entered into an employment agreement with
Edward Galanif, who currently serves as the Company's Controller. The term of
the agreement is for a period of one (1) year and is automatically renewable.
Mr. Galanif is entitled to minimum quarterly cash bonuses and to participate in
an annual incentive bonus plan, should such plan be adopted by the Company in
the future. Mr. Galanif was entitled to 200,000 shares of the Company's Common
Stock valued at $60,000 and $10,000 upon execution of the agreement, although
such shares have not been issued to date, they have been included in the
shareholder equity calculation since they are a binding obligation of the
Company. Mr. Galanif is entitled to an additional 100,000 shares of the
Company's Common Stock on each anniversary date of the agreement (for which he
is currently entitled to vote and receive dividends). Mr. Galanif is also
entitled, upon any subsequent issuance of shares of stock by the Company to any
third party, to purchase from the Company additional shares of the Company's
Common Stock at a price equivalent to seventy-five percent (75%) of the price
offered to the third party in an amount necessary to maintain Mr. Galanif's
equity percentage ownership of the Company. Mr. Galanif has the option to
convert one-third (1/3) of his annual salary into shares of the Company's Common
Stock at a price equal to the lower of the average price of the Company's Common
Stock for the twelve (12) months prior to conversion or the then current market
price. All shares issued in connection with the employment agreement have
piggy-back registration rights. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and the Federal Reliance Facts and Section
402(b)(9) of the Massachusetts Code.
For purposes of Section 402(b)(9) of the Massachusetts Code, the facts
upon which the Company relied are: (i) the transaction was pursuant to an offer
directed by the offeror to not more than twenty-five persons; and (ii) the
seller reasonably believed that all the buyers in Massachusetts purchased for
investment.
In September 1999, as amended in November 1999, the Company entered
into a debenture purchase agreement with Oxford Capital Corporation ("Oxford"),
whereby Oxford agreed to loan the Company up to $1,500,000 in the form of
convertible notes bearing interest at the rate of 12% per annum. As part of such
transaction, the Company granted a warrant to purchase 375,000 shares of the
Company's restricted Common Stock exercisable on or before September 2, 2000 at
an exercise price determined by formula, but in no event less than $0.10 per
share. The notes are convertible into shares of Common Stock at a conversion
price determined by formula, but in no event for less than $0.10 per share. A
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total of 10,000,000 shares have been issued and are held in escrow pending
conversion of which a portion are in the process of being delivered pursuant to
conversion notices. Such escrowed shares are included in the calculation of
shareholder equity at par. Of the 10,000,000, 1,526,717 shares are unrestricted
shares of the Company's Common Stock and 8,473,283 are restricted shares of the
Company's Common Stock. To date, the Company has received $1,055,557 in proceeds
under the debenture purchase agreement, of which $591,130 plus interest has been
converted into 1,526,717 shares of unrestricted Common Stock and 3,127,852
shares of restricted Common Stock. For such offering of unrestricted Common
Stock, the Company relied upon Section 3(b) of the Act, Rule 504 and Section
139.19 of the Texas Code. For such offering of restricted Common Stock, the
Company relied upon Section 4(2) of the Act, Rule 506, the Federal Reliance
Facts and Section 5[581-5](E) of the Texas Code.
Section 139.19 of the Texas Code provides for an exemption from
registration and permits general solicitations and general advertising as long
as sales are made only to "accredited investors". Oxford is an "accredited
investor" as so defined and, in the event of conversion into the unrestricted
shares, will otherwise be in compliance with this provision.
For purposes of Section 5[581-5](E) of the Texas Code, the facts upon
which the Company relied are: (i) the offer was made to its existing security
holders; and (ii) no commission or other remuneration was paid or given directly
or indirectly for soliciting any security holder in Texas.
In September 1999, the Company entered into a manufacturing, marketing
and distribution agreement with Cactus Jack's Marketing Corp. ("Cactus Jack").
Pursuant to the agreement, the Company (i) issued 1,000,000 shares of its Common
Stock valued at $330,000, (ii) agreed to issue an additional 250,000 shares of
its Common Stock on each anniversary date of the agreement so long as the
Agreement is in force, (iii) granted royalties in the amount of fifty percent
(50%) of net profits on all sales of Cactus Jack products sold by the Company,
(iv) agreed to establish a division of its operations devoted to the activities
of manufacturing, marketing and distributing Cactus Jack products and (v) to
make certain minimum royalty payments per quarter. In exchange, Cactus Jack
granted the Company the exclusive right to manufacture, use, distribute, sell,
advertise, promote and otherwise exploit certain Cactus Jack products, which
rights include the use Cactus Jack patents, trademarks and artwork. The Company
also has a right of first refusal on all future Cactus Jack products. The term
of the Agreement is until such time as the Company fails to make a reasonable
commercial effort to sell Cactus Jack products or to meet the minimum royalty
payments. For such offering, the Company relied on Section 4(2) of the Act, Rule
506 and Federal Reliance Facts and Section 191-50.14(502) under authority
granted by Section 502.203(18) of the Iowa Code. Although a notice filing, a
consent to service of process and a fee were required, none were filed.
On September 7, 1999, the Company amended its articles of incorporation
to increase its authorized capital stock to one hundred ten million
(110,000,000) shares, consisting of one hundred million (100,000,000) shares of
Common Stock and ten million (10,000,000) shares of preferred stock. For such
action, the Company relied upon Article 2, Section 9 of its Bylaws and Nevada
Revised Statutes ss.78.320.
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In September 1999, the Company entered into a manufacturing, marketing
and distribution agreement with Dean Tornabene and Charles Perez ("DTCP"),
whereby the Company (i) gained the exclusive right to manufacture, use,
distribute, sell, advertise, create Brand recognition, promote and otherwise
exploit certain products invented by DTCP in exchange for 500,000 shares of the
Company's Common Stock valued at $170,000, (ii) paid an initial payment of
$50,000 upon execution of the agreement, (iii) agreed to pay royalties of ten
percent (10%) of gross sales on all DTCP products including up-sells and (iv)
also agreed to establish a division of its operations which will be responsible
for the activities of manufacturing, marketing and distributing DTCP products.
The Company also must issue additional shares of its Common Stock on each
anniversary date of the agreement at which the agreement is still in force. The
number of shares to be issued is dependent upon the number of shares of the
Company then outstanding. For such offering, the Company relied upon Section
4(2) of the Act, Rule 506 and the Federal Reliance Facts and Section 25102(f) of
the California Code.
For purposes of Section 25102(f) of the California Code, the facts upon
which the Company relied are: (i) shares were sold to not more than thirty-five
(35) persons, including persons not in California; (ii) all purchasers had a
preexisting relationship with the offeror or its officers, directors or by
reason of business or financial experience or by reason of their professional
advisors had the capacity to protect their own interests; (iii) each purchaser
represented that they were purchasing for their own account and with a view to
or for sale in connection with any distribution; and (iv) the offer and sale
were not accomplished by the publication of any advertisement. Although the Rule
required the filing of notice, none was filed. Failure to file notice did not
affect the applicability of the exemption.
In September 1999, the Company issued 150,000 shares of its Common
Stock to Clinton Smith, who currently serves as a Director of the Company. The
shares were issued as payment for legal services rendered by Mr. Smith on behalf
of the Company valued at $37,500. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and the Federal Reliance Facts and Section
51:709(8) of the Louisiana Code.
For purposes of Section 51:709(8) of the Louisiana Code, the facts upon
which the Company relied are: (i) the offer was made exclusively to existing
security holders of the issuer; and (ii) no commission or other remuneration was
paid or given directly or indirectly for soliciting any security holder in
Louisiana.
In September 1999, the Company issued 500,000 shares of its Common
Stock to Global Development Advisor, Inc. for investor relations, public
relations and consulting services rendered on behalf of the Company valued at
$125,000. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and the Federal Reliance Facts and Section 517.061(11) of the Florida
Code.
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For purposes of Section 517.061(11) of the Florida Code, the facts
upon which the Company relied are: (i) sales of the shares of Common Stock were
not made to more than thirty-five (35) persons; (ii) neither the offer nor the
sale of any of the shares was accomplished by the publication of any
advertisement; (iii) all purchasers either had a preexisting personal or
business relationship with one or more of the executive officers of the Company
or, by reason of their business or financial experience, could be reasonably
assumed to have the capacity to protect their own interests in connection with
the transaction; (iv) each purchaser represented that he was purchasing for his
own account and not with a view to or for sale in connection with any
distribution of the shares; and (v) prior to sale, each purchaser had reasonable
access to or was furnished all material books and records of the Company, all
material contracts and documents relating to the proposed transaction, and had
an opportunity to question the executive officers of the Company. Pursuant to
Rule 3E-500.005, in offerings made under Section 517.061(11) of the Florida
Statutes, an offering memorandum is not required; however each purchaser (or his
representative) must be provided with or given reasonable access to full and
fair disclosure of material information. An issuer is deemed to be satisfied if
such purchaser or his representative has been given access to all material books
and records of the issuer; all material contracts and documents relating to the
proposed transaction; and an opportunity to question the appropriate executive
officer. In the regard, the Company supplied such information and was available
for such questioning.
In September 1999, the Company entered into an employment agreement
with Michael Steinberg, who currently serves as the Company's Investor Relations
Specialist, wherein the Company agreed to pay an annual salary of $72,000 and
performance based bonuses consisting of shares of the Company's Common Stock,
with a maximum of 200,000 shares per year. Mr. Steinberg has the option to
convert one-third (1/3) of his annual salary into shares of the Company's Common
Stock at a price of the lower of the average price of the Company's Common Stock
for the twelve (12) months prior to conversion or the then current market price.
Mr. Steinberg also is entitled to a signing bonus of 300,000 shares of the
Company's Common Stock valued at $79,500, and although such shares have not been
issued to date, they are included in the shareholder equity calculation because
they it is a binding obligation of the Company. All shares issued in connection
with the employment agreement have piggy-back registration rights. The term of
the agreement is for a period of one (1) year and is automatically renewable.
For such offering, the Company relied upon Section 4(2) of the Act, Rule 506 and
Federal Reliance Facts and Section 10-5-9(13) of the Georgia Code.
For purposes of Section 10-5-9(13) of the Georgia Code, the facts upon
which the Company relied are: (i) the number of Georgia purchasers did not
exceed fifteen (15); (ii) the securities were not offered for sale by means of
any form of general or public solicitations or advertisements; (iii) a legend
was placed upon the certificates; and (iv) each purchaser represented that he
purchased for investment.
In September 1999, the Company entered into a settlement agreement,
whereby the Company issued 103,180 shares of its Common Stock to Patrick Lawless
in exchange for a release from debt in the amount of $15,477. For such offering,
the Company relied upon Section 4(2) of the Act, Rule 506 and Federal Reliance
Facts and Section 25102(f) of the California Code.
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For purposes of Section 25102(f) of the California Code, the facts upon
which the Company relied are: (i) shares were sold to not more than thirty-five
(35) persons, including persons not in California; (ii) all purchasers had a
preexisting relationship with the offeror or its officers, directors or by
reason of business or financial experience or by reason of their professional
advisors had the capacity to protect their own interests; (iii) each purchaser
represented that they were purchasing for their own account and with a view to
or for sale in connection with any distribution; and (iv) the offer and sale
were not accomplished by the publication of any advertisement. Although the Rule
required the filing of notice, none was filed. Failure to file notice did not
affect the applicability of the exemption.
In September 1999, the Company entered into an employment contract with
Raymond Volpe to serve as the Company's Vice-President of OTC Products at an
annual salary of $75,000. The term of the agreement is for a period of one (1)
year and is automatically renewable. Mr. Volpe is entitled to minimum quarterly
bonuses and to participate in an annual incentive bonus plan and stock option
plan, should such plans be adopted by the Company in the future.
In September 1999, the Company entered into a settlement agreement with
American National Lithographers and Engravers, Inc. d/b/a American National,
Ltd., whereby the Company paid $10,000 and issued 92,735 shares of its Common
Stock valued t $13,910 in exchange for the filing of a Voluntary Dismissal with
Prejudice. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 Federal Reliance Facts and Section 517.061(11) of the Florida Code.
For purposes of Section 517.061(11) of the Florida Code, the facts
upon which the Company relied are: (i) sales of the shares of Common Stock were
not made to more than thirty-five (35) persons; (ii) neither the offer nor the
sale of any of the shares was accomplished by the publication of any
advertisement; (iii) all purchasers either had a preexisting personal or
business relationship with one or more of the executive officers of the Company
or, by reason of their business or financial experience, could be reasonably
assumed to have the capacity to protect their own interests in connection with
the transaction; (iv) each purchaser represented that he was purchasing for his
own account and not with a view to or for sale in connection with any
distribution of the shares; and (v) prior to sale, each purchaser had reasonable
access to or was furnished all material books and records of the Company, all
material contracts and documents relating to the proposed transaction, and had
an opportunity to question the executive officers of the Company. Pursuant to
Rule 3E-500.005, in offerings made under Section 517.061(11) of the Florida
Statutes, an offering memorandum is not required; however each purchaser (or his
representative) must be provided with or given reasonable access to full and
fair disclosure of material information. An issuer is deemed to be satisfied if
such purchaser or his representative has been given access to all material books
and records of the issuer; all material contracts and documents relating to the
proposed transaction; and an opportunity to question the appropriate executive
officer. In the regard, the Company supplied such information and was available
for such questioning.
8
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In September 1999, the Company entered into a settlement agreement with
Michael Hodge, whereby the Company issued 80,000 shares of its Common Stock in
exchange for a release from debt in the amount of $18,000. For such offering,
the Company relied upon Section 4(2) of the Act, Rule 506 and Federal Reliance
Facts and Section 8-6-11(9) of the Alabama Code.
For purposes of Section 8-6-11(9) of the Alabama Code, the facts upon
which the Company relied are: (i) there were no more than ten (10) purchasers;
(ii) written disclosure was made to each purchaser that the securities had not
been registered under the act and, therefore, could not be resold unless they
were registered under the act or unless an exemption from registration was
available; (ii) a legend was placed on the certificate; (iii) no commission or
other remuneration was paid or given directly or indirectly for soliciting any
purchaser; and (iv) no public advertising or general solicitation was used in
connection with the issue of which the transaction in reliance exemption was a
part.
In October 1999, the Company entered into an Addendum to the Exclusive
Distribution Agreement previously entered into between the Company and Bontempi
Medical Corp., Canada and Bontempi Medical Corp., USA. As part of that
agreement, the Company issued 2,187,500 shares of its Common Stock valued at
$175,000 to Bontempi Snc. For such offering, the Company relied upon Section
4(2) of the Act, Rule 506 and the Federal Reliance Facts. No state exemption was
necessary, as Bontempi Snc. is an Italian corporation.
In October 1999, the Company entered into a Settlement Agreement with
AfterMarket Company ("AfterMarket"), whereby the Company paid $34,193 to
AfterMarket and committed to pay an additional $2,000 per week until the balance
of $68,387 is paid in full. Additionally, the Company issued 500,000 shares of
its Common Stock valued at $93,750, of which 250,000 shares will be returned to
the Company upon payment of the balance in full. For such offering, the Company
relied upon Section 4(2) of the Act, Rule 506, the Federal Reliance Facts and
Section 14-4-126(f) of the Arizona Code.
For purposes of Section 14-4-126(f) of the Arizona code, the facts upon
which the Company relied are: (i) Shares were sold to less than thirty-five (35)
persons; (ii) each purchaser who was not an accredited investor either alone or
with purchaser representative had such knowledge and experience in financial and
business matters sufficient to evaluate the merits and risks of the prospective
investment; (iii) the bad boy provisions of the rule apply to neither the
Company nor its predecessors or affiliates; and (iv) neither the issuer nor any
person acting on its behalf offered or sold the securities by any form of
general solicitation or general advertising. Although a filing was required by
the Rule, none was made.
During this quarter, the Company commenced the commercial shipping of
SafeShield to its exclusive distributor, DermaGuard, Inc., launched an
infomercial to promote its Cactus Jack products and changed the names of its
divisions.
9
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Discussion and Analysis
National Boston Medical, Inc., a Delaware corporation ("NBMDE") was
formed for the initial purpose of combating the potential spread of germs
through hand to hand contact. The founding philosophy arose from a concern
regarding the occupational risks of healthcare workers. Its initial product,
Safeshied (originally called Virashield) for which patent protection is being
sought, forms a long lasting antimicrobial, waterproof barrier on the skin.
Since inception, NBMDE and now the Company, has broadened its mission from
purely pharmaceuticals to include a line of medical instruments. Since the
acquisition, the Company has further expanded into the area of health, wellness
and fitness products.
The Company was in the development stage until October 1998 when the
Share Exchange took place between NBMDE and the Company. NBMDE commenced the
commercial shipment of Safeshield(TM) in October, 1999 and has had substantial
recent sales of its Backstroke(TM) product. From the date of the Share Exchange
in October 1998 through September 30, 1999, the Company generated revenues of
approximately $2,991,000 from a limited number of customers. Since the date of
the Share Exchange through September 30, 1999, the Company has generated
cumulative losses of approximately $7,798,000. Although the Company has
experienced a significant percentage growth in revenues and gross profit from
October 1998 to date, the Company does not believe prior growth rates are
indicative of future operating results, especially in light of the fact that the
Company's Backstroke(TM) product has a finite lifespan. Due to the Company's
operating history and limited resources, among other factors, there can be no
assurance that profitability or significant revenues on a quarterly or annual
basis will occur in the future.
The Company is currently marketing the Backstroke(TM) product,
Safeshield and all approximately 10,500 Bontempi medical, dental and veterinary
instruments, expects to introduce other products by the end of 1999, and expects
to continue to invest significant resources in several new products and
enhancements prior to 2000.
Since execution of the agreement with DermaGuard, and receipt of the
initial order for Safeshield in the amount of $630,000, the Company's Medical
Products Division ("MPD") has begun to make preparations for a period of growth,
which may require it to significantly increase the scale of its operations. This
increase will include the hiring of additional personnel in all functional areas
and will result in significantly higher operating expenses. The increase in
operating expenses is expected to be matched by a concurrent increase in
revenues. However, the Company's net gain may not continue even if revenues
increase and operating expenses may still continue to increase. Expansion of the
Company's operations may cause a significant strain on the Company's management,
financial and other resources. The Company's ability to manage recent and any
possible future growth, should it occur, will depend upon a significant
expansion of its accounting and other internal management systems and the
implementation and subsequent improvement of a variety of systems, procedures
and controls. There can be no assurance that significant problems in these areas
will not occur. Any failure to expand these areas and implement and improve such
systems, procedures and controls in an efficient manner at a pace consistent
with the Company's business could have a material adverse effect on the
Company's business, financial condition and results of operations. As a result
10
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of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
Since the acquisition of Flex and formation of the Flex Marketing
Division ("FMD"), the Company has experienced significant growth, which may
require it to substantially increase the scale of its operations. This increase
will include the hiring of additional personnel in all functional areas and will
result in significantly higher operating expenses. The increase in operating
expenses is expected to be matched by a concurrent increase in revenues.
However, the Company's net gain may not continue even if revenues increase and
operating expenses may still continue to increase. Expansion of the Company's
operations may cause a significant strain on the Company's management, financial
and other resources. The Company's ability to manage recent and any possible
future growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations.
Since NBMDE's Exclusive Distribution Agreement, Bontempi instruments
have begun to be marketed in the Bontempi international catalogue. The Company
also has begun to make preparations for a period of growth, which may require it
to significantly increase the scale of its operations. This increase will
include the hiring of additional personnel in all functional areas and will
result in significantly higher operating expenses. The increase in operating
expenses is expected to be matched by a concurrent increase in revenues.
However, the Company's net gain may not continue even if revenues increase and
operating expenses may still continue to increase. Expansion of the Company's
operations may cause a significant strain on the Company's management, financial
and other resources. The Company's ability to manage recent and any possible
future growth, should it occur, will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures and controls. There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and controls in an efficient manner at a pace consistent with the Company's
business could have a material adverse effect on the Company's business,
financial condition and results of operations. As a result of such expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting revenue levels, the Company expects to continue to
experience significant fluctuations in its revenues, costs and gross margins,
and therefore its results of operations.
11
<PAGE>
Results of Operations for the Three Months Ended September 30, 1999 and 1998
Overview
From its inception, the Company has incurred losses from operations. As of
September 30, 1999, the Company had cumulative net losses totaling approximately
$1,592,000 as compared with cumulative net losses totaling approximately
$1,368,000 for the period ending September 30, 1998. Through fiscal 1998, the
Company focused primarily on developing its marketing and organizational
structure. During fiscal year 1999, management shifted its focus to aggressively
marketing its proprietary products.
Financial Position
Working capital as of September 30, 1999 was approximately $715,000, as
compared to working capital deficit of approximately $1,009,000 at September 30,
1998. This increase is primarily due to realization of sales from customer
deposits of the Company's proprietary products and the conversion of certain
expenses and notes payable to equity.
Revenues
For the three months ended September 30, 1999 and 1998, the Company had
total net revenues of approximately $1,315,000 and $79,000, respectively. For
the three months ended September 30, 1999, revenues were comprised primarily of
international and domestic sales of its Backstroke(TM) product. The increase of
approximately $1,236,000 is due to Backstroke(TM) and its ancillary sales as
well as sales from its Bontempi line under its exclusive licensing agreement
acquired on July 17, 1998.
Selling, General, and Administrative Expenses
For the three months ended September 30, 1999, operating expenses increased
by approximately $1,021,000 or 76% from $1,345,000 for the three months ended
September 30, 1998. This increase is primarily related to costs associated with
increased sales as well as organizational and infrastructure enhancements. In
accordance with the Company's marketing plan for fiscal 1999 year, expenses
related to promotion, trade shows, and conventions were increased to enhance the
industry awareness of the Company's products and services.
In the past, the Company has focused on the design and development of
proprietary products. For fiscal 2000, the Company has launched an aggressive
marketing plan that is designed to increase worldwide sales of its products. The
Company believes that the increased operating expenses incurred during the three
months ended September 30, 1999 will position the Company to generate increased
revenue in the second quarter and throughout its fiscal year 2000.
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Liquidity and Capital Resources
The Company's operations are being funded primarily from the sales of its
proprietary products, debentures and equity transactions.
It is the Company's intention to pursue additional debt and or equity
financing in the range of $2,000,000 to $5,000,000 during the remainder of
fiscal 1999, however, there can be no assurance that they will be successful in
their efforts. The Company believes that cash flows generated from operations
and borrowing capacity, combined with proceeds from future debt or equity
financing will provide adequate flexibility for funding the Company's working
capital obligations.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize the date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company determined that the Year 2000 impact is not material to NBM and
that it will not impact its business, operations or financial condition since
all of the internal software utilized by the Company has the capability of being
upgraded to support Year 2000 versions.
The Company believes that it has disclosed all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), demand
for the Company's products and services, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that
13
<PAGE>
may be presented to and pursued by the Company; changes in laws or regulation;
and other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
PART II
Item 1. Legal Proceedings.
On February 10, 1999, James McInerney and Auckland Trust Co. Limited as
Trustee for First Pacific Master Superannuation Fund filed suit in the Superior
Court of Commonwealth of Massachusetts (trial court), Civil Action Number
C99-00198. As a result, NBM's accounts were attached ex-parte at BankBoston,
N.A., Fleet Bank, N.A. and Merrill Lynch Corp. until a Discharge of Trustee
Process and Attachment was filed March 11, 1999.
Mr. McInerney is the sole bondholder from the NBMDE offering who did not
convert his outstanding debt to shares of the Company's common stock. Although
his Note was not payable for three (3) years, Mr. McInerney demanded immediate
payment of all amounts owed. The Company made several unsuccessful attempts to
pay the amount owed ($525,000), but had insufficient cash flow and was unable to
raise such funds. Thereafter, Mr. McInerney filed this action. Mr. McInerney has
filed, and the court has granted a dismissal with prejudice.
On April 5, 1999, Randall E. Perez, an individual, a/k/a Randy Perez filed
Case # 99-08545 CA 10 in the General Jurisdiction Division in the Circuit Court
of the 11th Judicial Circuit in and for Dade County, Florida against NBM(NV) and
NBMDE for Breach of Contract, Conversion and Unjust Enrichment. Mr. Perez is a
former employee, officer and director of NBM. NBM and Mr. Perez disputed the
amount due him upon termination of his employment. The matter has since been
settled and a dismissal with prejudice has since been granted by the court.
In 1998, Genomic filed a lawsuit in the United States District Court for
the Middle District of Florida against Garrick Perry and SAI which contends that
Genomic had a contractual relationship with SAI and that SAI produced Safeshield
for NBM using the proprietary confidential formula owned by Genomic. Genomic
also contends that Safeshield test numbers and data are identical to the tests
conducted on Genomic's product and that the use of that testing data by SAI (or
NBM) is unauthorized.
The Company is a party to an action claiming patent infringement by its
Safeshield product. Genomic and BMM brought suit against NBM and Daniel Hoyng
for violation of 15 U.S.C. 1125(A) - Reverse Passing Off, violation of Florida
Deceptive and Unfair Trade Practices Act, breach of fiduciary duty and
conversion. Genomic and BMM allege that NBM and Hoyng used and continue to use
confidential proprietary information which is the property of Genomic and
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relates to the Activ product. NBM and Hoyng each filed a motion to dismiss.
Although Hoyng's motion to dismiss was recently granted, NBM's motion to dismiss
has been effectively denied. NBM has not received a copy of the Order denying
its motion. NBM has prepared an extensive counter-suit against Genomic, BMM,
William Coury and others and plans to file it as soon as the Order is served.
On April 7, 1999, DeVo Media, Inc. ("DeVo") filed a suit in the Court
of Common Pleas, Mahoning County, Youngstown, Ohio, Case No. 99 CV 832 against
Flex, NBM, Zavoral and Hayek for fraud and breach of contract seeking $136,000
compensatory damages, prejudgment interest at a rate of 10% percent per annum
and $500,000 in punitive damages. The action stems from a contract entered into
on July 10, 1997, which was later modified on February 10, 1998. In May 1999,
Flex, NBM, Zavoral and Hayek filed answer, affirmative defenses and
counterclaims for fraud in the inducement and breach of contract. On October 28,
1999, the Company entered into a Compromise and Settlement Agreement with DeVo,
whereby the Company agreed to pay DeVo $65,000. The first payment was made on or
about November 15, 1999 and the second payment is due December 20, 1999. Upon
receipt of both payments, all parties have agreed to file a dismissal with
prejudice.
On June 10, 1999 American National Lithographers and Engravers, Inc.
d/b/a American National Ltd. ("National") filed suit in the Circuit Court of
Dade County, Florida, Civil Action Number 99-13897 against the Company which
contends that the Company owes National $19,273.38 for printing costs. On
September 21, 1999, National filed a Notice of Voluntary Dismissal with the
court following performance on a Joint Stipulation for Settlement entered by the
parties On September 3, 1999. As part of the Settlement, National received
$10,000 and 92,735 shares of the Company's Common Stock valued at $13,910.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending September 30, 1999,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
None
15
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Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Description
- -------------------------------------------------------------------------------
3.(i).1 Articles of Incorporation of Frozen Assets, Inc.,
filed June 21, 1995
3.(i).2 Certificate of Reinstatement, Frozen Assets, Inc.,
dated June 30, 1997
3.(i).3 Restated Articles of Incorporation of Frozen Assets, Inc.,
filed July 30, 1997.
3.(i).4 Certificate of Amendment of Articles of Incorporation of Frozen
Assets, Inc., changing the Name of Corporation to Growth Indus.,
Inc., filed March 16, 1998.
3.(i).5 Certificate of Amendment of Articles of Incorporation of Growth
Industries, Inc., changing the Name of Corporation to Fragrance
Express, Inc., filed June 4, 1998.
3.(i).6 Certificate of Amendment of Articles of Incorporation of Fragrance
Express, Inc., changing the Name of Corporation to National Boston
Medical, Inc., filed October 15, 1998.
3.(i.).7 * Certificate of Amendment of Articles of Incorporation
increasing authorized Capital Stock filed September 7, 1999.
3.(ii).1 Bylaws of Frozen Assets, Inc.
3.(ii).1 Bylaws of Frozen Assets, Inc.
4.1 Form of Private Placement of Offering of 12% common shares and
Warrants at $1.25 per share.
4.2 Form of Private Placement of Offering of 12% common shares and
Warrants at $2.50 per share.
4.3 Certificate of Designation Establishing 12% Convertible Cumulative
Redeemable Stock, Series A.
4.4 Securities Subscription Agreement in connection with the Private
Placement of 12% Series A Senior Subordinated Convertible
Redeemable Promissory Notes of Growth Industries, Inc.
4.5 Conversion of Securities and Share Exchange Agreement
regarding the 12% , 3 year convertible bond convertible at
$1.25 per share.
4.6 Settlement Agreement between National Boston Medical, Inc., and
James McInerney and Auckland Trust Co., Limited as Trustee for
First Pacific Master Superannuation Fund, dated February, 1999.
4.7 Extension of February Settlement Agreement between National Boston
Medical, Inc., and James McInerney and Auckland Trust Co., Ltd as
Trustee for First Pacific Master Superannuation Fund, dated
May 21, 1999.
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4.8 Conversion of Securities and Share Exchange Agreement
regarding the 12% , 3 year convertible bond convertible at
$2.50 per share.
4.9 Conversion of Securities and Share Exchange Agreement regarding
the 12% Convertible Redeemable Preferred Stock, Series A.
4.10 Convertible Debenture Term Sheet for November 25, 1998 Convertible
Note in favor of Thomson Kernaghan & Co., Ltd.
4.11 $750,000 Convertible Note dated November 25, 1998 by NBM in favor
of Thomson Kernaghan & Co., Ltd.
4.12 * $1,700,000 Convertible Note dated August 19, 1999 by NBM in favor
of Thomson Kernaghan & Co. Ltd.
4.13 * Form of Debenture Purchase Agreement, form of the Note and
form of the Warrant between the Company and Oxford Capital
Corp.
10.1 Acquisition Agreement between Frozen Assets, Inc., and Growth
Industries, Inc., dated 2/14/98.
10.2 Acquisition Agreement between Growth Industries, Inc. and
Fragrance Express, Inc., dated 3/24/98.
10.3 Agreement for the Exchange of Stock between Fragrance Express,
Inc., and shareholders who own shares of National Boston Medical,
Inc., a Delaware corporation, dated October 8, 1998.
10.4 Agreement to Purchase Medical Marketing Group, LLC by National
Boston Medical, Inc. dated November 3, 1997.
10.5 Exclusive Distribution Agreement Between Bontempi Medical Corp.
Canada and Bontempi Medical Corp. USA and National Boston Medical,
Inc., a Delaware corporation.
10.6 Agreement for the Exchange of Stock between National Boston
Medical, Inc. and Flex Marketing Inc., dated November 21, 1998.
10.7 Spin Off Agreement between National Boston Medical and Fragrance
Express, Inc., dated January, 1999.
10.8 Letter of Confirmation of Agreement between National Boston
Medical, Inc. and Ira Weingarten d/b/a Equity Communications re
Financial Public Relations Counsel commencing February 16, 1998
and terminating February 15, 1999.
10.9 General Release of National Boston Medical, Inc., dated November
23, 1998, of all Claims arising out of or from the Agreement with
Ira Weingarten d.b.a. Equity Communications dated May 21, 1998.
10.10 Agreement between National Boston Medical, a Delaware
corporation, and Rothschild Reserve International, Inc., a
Florida corporation, and Mayflower Industries, Inc. dated
May 21, 1998.
10.11 Consulting Agreement with Good Works, Inc., dated October 9, 1998.
10.12 Consulting Agreement with Rothschild Reserve International, Inc.,
dated October 9, 1998.
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10.13 Letter of Confirmation of Agreement between National Boston
Medical, Inc. and Ira Weingarten d/b/a Equity Communications re
Financial Public Relations Counsel commencing February 1, 1999
and terminating August 1, 1999.
10.14 General Release of National Boston Medical, Inc., dated April
13, 1999, of all Claims arising out of or from the Agreement with
Ira Weingarten d/b/a Equity Communications dated February 1, 1999.
10.15 Consulting Agreement with GFC Communications Corp. dated February
11, 1999.
10.16 Consulting Agreement with Buying Power Network dated May 5, 1999.
10.17 Operating Agreement for Boston Medical Marketing dated April, 1997
10.18 Exclusivity Agreement with South Atlantic Industries, Inc. dated
November 7, 1997.
10.19 Contract with Webfoot Marketing, Inc. dated February 25, 1999.
10.20 Stock Exchange Agreement with DermaGuard, Inc. dated June 23, 1998
10.21 Manufacturing, Distribution and Assignment Agreement with
DermaGuard, Inc., dated June 23, 1998.
10.22 First Amendment to Manufacturing, Distribution and
Assignment Agreement with DermaGuard effective June 19,
1998.
10.23 Second Amended & Restated Manufacturing, Distribution and
Assignment Agreement with DermaGuard reconfirmed February
3, 1999.
10.24 Bontempi Medical Corporation/National Boston Medical, Inc. and
Germiphene Corporation Distribution Agreement dated June 29, 1998
10.25 Allergy Guard/Distribution Agreement revised agreement
dated August 5, 1998.
10.26 Agreement with D.V. Back Products , Inc. and Dr. David Vitko,
individually and Flex Marketing dated March 10, 1997.
10.27 Release and Settlement Agreement by and between David V. Vitko,
D.V. Back Products, Inc. and THG Construction Management, Inc.,
Flex Marketing, Inc.,Ernest Zavoral and Remon Hayek dated January
13, 1999.
10.28 Modification of Variable Commercial Revolving or Draw Note, dated
June 1, 1999
10.29 Production Agreement between Flex Marketing and Banyan Productions
dated September 22, 1998.
10.30 Aftermarket - Flex Marketing Inbound Telemarketing
Agreement with Aftermarket Company and Flex Marketing
dated December 23, 1998.
10.31 Media Funding and Service Fee Agreement dated January 18, 1999.
10.32 Letter regarding Media Funding and Servicing Fee Agreement dated
January 18, 1999.
10.33 Accommodation Agreement with Cardservice International for
processing bankcard transactions dated February 15, 1999.
18
<PAGE>
10.34 Contract with ASW Logistics, Inc.
10.35 Blitz Marketing Agreement with Blitz Marketing, Inc. and Flex
Marketing, Inc., a National Boston Medical Company dated November
19, 1998.
10.36 Maximum Coverage Media, Inc. Agreement dated March 1, 1999.
10.37 International Campaign Management Agreement with Frederiksen
Television, Inc. dated May 26, 1999.
10.38 Confidentiality & Manufacturing Agreement with Kongent Company
Limited executed August 11, 1998.
10.39 Price Quotation from Kongent Company Ltd., dated March 23, 1998.
10.40 Price Quotation from Sare Plastics dated December 10, 1998.
10.41 Executive Employment Agreement-Daniel J. Hoyng dated May 11, 1999.
10.42 Executive Employment Agreement-Ernest Zavoral dated July 23, 1999
10.43 Executive Employment Agreement-Barry McFarland dated August 2,
1999.
10.44 Executive Employment Agreement-Marek Lozowicki dated July 23, 1999
10.45 Commercial Property Lease of Corporate Offices, 43 Taunton
Green, Taunton, MA 02780, entire third floor, dated
January 28, 1998.
10.46 Commercial Property Lease of Corporate Offices, 43 Taunton
Green, Taunton, MA 02780, Second Floor, Suite Four(4), 400
sq. feet, dated January 28, 1998.
10.47 Rental Agreement of Summit Property with addendums signed
April 8, 1999.
10.48 Campaign Management Agreement with M2 Marketing and Management
Services, Inc. dated May 1, 1999.
10.49 Marketing and Distribution Agreement with Tristar Products, Inc.,
dated July 19, 1999.
10.50 Agreement dated June 30, 1999 between the Company and the David
Arden Group.
10.51 Agreement dated June 30, 1999 between the Company and Dragons
Forever, Ltd.
10.52 Agreement dated Jun 30, 1999 between the Company and
Evergreen Consulting Group, Ltd.
10.53 Agreement dated June 30, 1999 between the Company and Dragons
Forever, Ltd.
10.54 * Stock Purchase Agreement between the Company and Jeff
Freedman dated August 24, 1999.
10.55 * Settlement Agreement between the Company and Ernest Zavoral dated
August 25, 1999
19
<PAGE>
10.56 * Settlement Agreement between the Company and Raymond Volpe
dated August 25, 1999.
10.57 * Settlement Agreement between the Company and Blitz Media
Sales, LLC d/b/a Blitz Marketing, LLC dated August 26, 1999.
10.58 * Settlement Agreement between the Company and Workhorse Computers,
Inc. f/k/a Remote Information Systems, Inc. dated August 30, 1999.
10.59 * Manufacturing, Marketing and Distribution Agreement with Dean
Tornabene and Charles Perez dated September 2,1999.
10.60 * Manufacturing, Marketing and Distribution Agreement with Cactus
Jack's Marketing Corp. dated September 4, 1999.
10.61 * Settlement Agreement between the Company and Patrick Lawless
dated September 15, 1999.
10.62 * Employment Agreement between the Company and Raymond Volpe
dated September 21, 1999.
10.63 * Settlement Agreement between the Company and Michael Hodge
dated September 24, 1999.
10.64 * Employment Agreement between the Company and Edward Galanif
dated August 30, 1999.
10.65 * Employment Agreement between the Company and Michael
Steinberg dated September 14, 1999.
10.66 * Compromise and Settlement Agreement between the Company and DeVo
Media Inc. dated October 28, 1999
10.67 * Addendum to the Bontempi Exclusive Distributorship Agreement dated
July 17, 1999
10.68 * Settlement Agreement between the Company and AfterMarket Company
dated October 18, 1999
27.1 * Financial Data Street
- ----------------
(* Filed herewith, all other exhibits previously filed as exhibits to the
Company's Form 10-SB)
20
<PAGE>
(b) No Reports on Form 8-K were filed during the quarter ended September
30, 1999.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
NATIONAL BOSTON MEDICAL, INC.
(Registrant)
Date: November 19, 1999 By:/s/ Daniel J. Hoyng
-----------------------
Daniel J. Hoyng, President and CEO
By:/s/ Marek Lozowicki
Marek Lozowicki, Secretary
By:/s/ Barry McFarland
Barry McFarland, Chief Financial Officer
21
EXHIBIT 3.(i).7
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Filed By: (After Issuance of Stock)
NATIONAL BOSTON MEDICAL, INC.
Name of Corporation
We the undersigned, Dan Hoyng, Chairman, President and CEO and Marek
Lozowicki, the Secretary and Vice-President of Information Technology of
NATIONAL BOSTON MEDICAL, INC.
do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on September ____, adopted a resolution to amend the original
articles as follows:
Article 4. is hereby amended to read as follows:
Forth: Capital Stock
1. Classes and Number of Shares. The total number of shares of all classes of
stock which the corporation shall have authority to issue is One Hundred
Ten Million (110,000,000), consisting of One Hundred Million (100,000,000)
shares of Common Stock, par value of $0.01 per share (The "Common Stock")
and Ten Million (10,000,000) shares of Preferred Stock, which have a par
value of $0.01 per share (the "Preferred Stock").
2. Powers and Rights of Common Stock
(A) Preemptive Right. No shareholders of the Corporation holding
common stock shall have any preemptive or other right to
subscribe for any additional un-issued or treasury shares of
stock or for other securities of any class, or for rights,
warrants or options to purchase stock, or for scrip, or for
securities of any kind convertible into stock or carrying
stock purchase warrants or privileges unless so authorized by
the Corporation;
(B) Voting Rights and Powers. With respect to all matters upon
which stockholders are entitled to vote or to which
stockholders are entitled to give consent, the holders of the
outstanding shares of the Common Stock shall be entitled to
case thereon one (1) vote in person or by proxy for each
shares of the Common Stock standing in his/her name:
<PAGE>
(C) Dividends and Distributions
(I) Cash Dividends. Subject to the rights of holders of
Preferred Stock, holders of Common Stock shall be
entitled to receive such cash dividends as may be
declared thereon by the Board of Directors from time
to time out of assets of funds of the Corporation
legally available therefor.
(II) Other Dividends and Distributions. The Board of
Directors may issue shares of the Common Stock in the
form of a distribution or distributions pursuant to a
stock dividend or split-up of the shares of the
Common Stock;
(III) Other Rights. Except as otherwise required by the
Nevada Revised Statues and as may otherwise be
provided in these Articles of Incorporation, each
share of the Common Stock shall have identical
powers, preferences and rights, including rights in
liquidation;
3. Preferred Stock. The powers, preferences, rights, qualifications,
limitations and restrictions pertaining to the Preferred Stock, or any
series thereof, shall be such as may be fixed, from time to time, by the
board of Directors in its sole discretion, authority to do so being hereby
expressly vested in such board.
4. Issuance of the Common Stock and the Preferred Stock. The Board of
Directors of the Corporation may from time to time authorize by resolution
the issuance of any or all shares of the Common Stock and the Preferred
Stock herein authorized in accordance with the terms and conditions set
forth in these Articles of Incorporation for such purposes, in such
amounts, to such persons, corporations, or entities, for such consideration
and in the case of the Preferred Stock, in one or more series, as the Board
of Directors in its discretion may determine and without any vote or other
action by the stockholders, except as otherwise required by law. The Board
of Directors, from time to time, also may authorize, by resolution,
options, warrants and other rights convertible into Common or Preferred
stock (collectively "securities."). The securities must be issued for such
consideration, including cash, property, or services, as the Board of
Directors may deem appropriate, subject to the requirement that the value
of such consideration be no less than the par value if the shares issued.
Any shares issued for which the consideration so fixed has been paid or
delivered shall be fully paid stock and the holder of such shares shall not
be liable for any further call or assessment or any other payment thereon,
provided that the actual value of such consideration is not less that the
par value of the shares so issued. The Board of Directors may issue shares
of the Common Stock in the form of a distribution or distributions pursuant
to a stock divided or split-up of the shares of the Common Stock only to
the then holders of the outstanding shares of the Common Stock.
5. Cumulative Voting. Except as otherwise required by applicable law, there
shall be no cumulative voting on any matter brought to a vote of
stockholders of the Corporation.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 48,801,870, that the
said change(s) and amendment have been consented to and approved by a majority
<PAGE>
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Daniel J. Hoyng
----------------------
Daniel J. Hoyng, Chairman, President and CEO
/s/Marke Lozowicki
----------------------
Marek Lozowicki, Secretary and Vice-President of
Information Technology
State of Massachusetts )
) SS.
County of Bristol )
On September 3, 1999, personally appeared before me, a Notary Public,
Daniel J. Hoyng, who acknowledged that he executed the above instrument.
Tracie Ouellette
Signature of Notary
(Notary Stamp or Seal) Tracie Ouellette
My commission expires 6/5/2003
State of Massachusetts )
) SS.
County of Bristol )
On September 3, 1999, personally appeared before me, a Notary Public,
Marek Lozowicki, who acknowledged that he executed the above instrument.
Tracie Ouellette
Signature of Notary
(Notary Stamp or Seal) Tracie Ouellette
My commission expires 6/5/2003
EXHIBIT 4.12
This Note, and the securities issuable upon the conversion of this Note, have
not been registered under the Securities Act of 1933, as amended (the "Act") or
applicable state law and may not be sold, transferred or otherwise disposed of
unless registered under the Act and any applicable state act or unless the
Company receives an opinion from counsel for the holder and is satisfied that
this Note and the underlying securities may be transferred without registration
under the Act.
CONVERTIBLE NOTE
As of August 19, 1999
$1,700,000 Palm Beach, Florida
FOR VALUE RECEIVED, NATIONAL BOSTON MEDICAL, INC., a Nevada corporation (the
"Company"), hereby promises to pay to the order of THOMSON KERNAGHAN & CO.
LIMITED, as Agent, or any subsequent holder of this Note (the "Payee"), at 365
Bay Street, 10th Floor, Toronto, Ontario M5H 2V2, or at such other place as may
be designated by the Payee from time to time by notice to the Company, the
principal sum of One Million Seven Hundred Thousand Dollars ($1,700,000) to be
funded $700,000 on or before August 19, 1999; the additional sum of $600,000 to
be funded on or before November 2, 1999; and the additional amount of $400,000
to be funded on or before November 29, 1999, together with simple interest from
the date hereof (the "Issuance Date") on the unpaid principal amount at an
annual rate equal to ten percent (10.0%) per annum. Such principal and interest
shall be paid in accordance with the terms of Section 1 below, in cash, or by
wire transfer to such account as the Payee shall direct, in immediately
available funds and in lawful currency of the United States of America.
1. PAYMENTS.
(a) Unless previously fully converted into Common Stock of the Company as herein
provided, the unpaid principal amount of this Note shall be payable to the Payee
in cash or Common Stock at the election of the Payee as provided herein on or
before November 1, 2000 (collectively the "Maturity Date").
(b) Interest on the unpaid principal balance of this Note at the rate of ten
percent (10.0%) per annum shall accrue from the date hereof and shall be payable
to the Payee in the event of conversion, in shares of Common Stock of the
Company, the number of which shall be equal to the product of such interest
payment divided by the Conversion Price, as defined herein, with the overage, if
any, payable in cash. Interest shall be calculated on the basis of a 365 day
year.
(c) In the event that any payment of principal and/or interest hereunder becomes
due and payable on a Saturday, Sunday or other day on which commercial banks in
the State of Florida are authorized or required by law to close, then the
maturity thereof shall be extended to the next succeeding "Business Day"
(defined as any days on which national banks in the United States are open for
business); and during any such extension, interest on principal amounts payable
shall accrue and be payable at the applicable rate.
(d) Company shall set aside in an escrow account to be maintained at the offices
of Thomson Kernaghan & Co., Ltd., Toronto 8,500,000 shares of the Restricted
Common Stock of the Company (the "Shares"). The Shares shall carry piggy-back
registration rights as defined in Section 4(k) herein. Upon closing and at all
times thereafter that any portion of the indebtedness is outstanding, Payee
shall have the right to convert the outstanding principal indebtedness to a
portion of the Shares which portion shall be determined as follows: the product
of the outstanding principal indebtedness divided by 1,700,000 shall be
multiplied by 8,500,000. Should the entire outstanding indebtedness be converted
to the corresponding number of the Shares, all obligations by the Company to
Payee shall terminate. In the event of such conversion, Payee shall immediately
refund and remit any royalties paid in connection herewith less any accrued
interest. Should the indebtedness be otherwise paid in full, the Shares shall be
immediately remitted to the Company by overnight mail and all obligations by the
Company to the Payee shall terminate.
2. RANKING OF NOTE.
Subject at all times to the subordination provisions set forth in
Section 9 hereof, this Note shall constitute senior securities of the Company
and, except as provided below, shall rank pari passu with all other indebtedness
for money borrowed by the Company and senior to any other indebtedness for money
borrowed by the Company which, by its terms shall be made expressly subject and
subordinated to this Note.
3. PREPAYMENT OF NOTE.
(a) Prior to November 1, 2000, the Company shall provide the Payee with
a notice that a prepayment event has occurred (the "Prepayment Notice"). The
Payee shall have thirty (30) days from the date of the Prepayment Notice to
elect (i) to take prepayment of the principal amount of the Note and any accrued
but unpaid interest in whole without premium or penalty or (ii) to convert in
accordance with Section 4 hereof; provided, however, that the Company may not
prepay the Note without the Payee's consent unless a registration statement
described in paragraph 4(k)(ii)(B) is effective at the time of the Prepayment
Notice and remains effective for not less than thirty (30) days thereafter.
(b) Subject at all times to the Payee's right to convert all or any
portion of this Note into Common Stock pursuant to Section 4 hereof, the
principal amount of this Note and any accrued and unpaid interest may be
prepaid, at the option of the Company, in whole or in part, without premium or
penalty, at any time or from time to time from and after that date which shall
be the earlier to occur of (i) November 1, 2000 or (ii) the date on which the
Company shall register for resale pursuant to the Securities Act of 1933, as
amended (the "Act") all "Conversion Shares" (as herein defined) issuable upon
conversion of the entire principal amount of this Note, pursuant to a
Registration Statement on the appropriate registration for ____ declared
effective by the Securities and Exchange Commission (the "SEC"). If either event
set forth in this Section 3(b) shall occur, the Company shall provide the Payee
with a Prepayment Notice.
<PAGE>
(c) Each Prepayment Notice shall specify the principal amount of this
Note to be redeemed. Each prepayment of principal of this Note shall be
accompanied by the payment of all interest accrued and unpaid to the prepayment
date on the amount so prepaid. Each such prepayment shall be made by wire
transfer of immediately available funds or by bank cashier's check payable to
the Payee. Any partial prepayment of this Note, whether optional or mandatory,
shall be applied first to accrued and unpaid interest hereon, and then to the
outstanding principal amount of this Note in the inverse order of maturity.
(d) Notwithstanding anything to the contrary set forth in this Section
3, in the event and to the extent that the Company shall provide the Payee of
this Note with a Prepayment Notice, it shall simultaneously provide to the Payee
of this Note evidence of the availability of funds to effect such prepayment;
which evidence of availability of funds shall include, without limitation, (i)
confirmation of cash or cash equivalent bank balances, (ii) an irrevocable bank
letter of credit, or (iii) a written commitment from a recognized lending
institution to effect the financing of such prepayment.
4. CONVERSION.
Subject at all times to the Company's right to prepay this Note as
provided in Section 3 hereof, the Payees of this Note shall have the following
conversion rights (the "Conversion Rights"):
(a) Voluntary Conversion. At any time or from time to time following
the Issuance Date, the Payee of this Note may elect to convert up to one hundred
(100%) percent of the original principal amount of this Note and any accrued but
unpaid interest, into shares of Common Stock of the Company, by written notice
given to the Company in accordance with the provisions of Section 4(g) hereof
(the "Conversion Notice"). In no event may the Payee of this Note effect a
conversion of less than $10,000 principal amount of this Note. Such right of
Voluntary Conversion shall be effected by the surrender of this Note to the
Company for conversion at any time during normal business hours at the office of
the Company, accompanied (i) by the Conversion Notice, (ii) if so required by
the Company, by instruments of transfer, in a form satisfactory to the Company,
duly executed by the registered Payee or by his duly authorized attorney and
(iii) transfer tax stamps or funds therefore, if required pursuant to Section
4(f) herein.
(b) Automatic Conversion. Effective as of November 1, 2000, and
provided that a registration statement described in paragraph 4(k)(ii)(B) is
then effective, to the extent not previously converted by the Payee, all
remaining principal amount of this Note, together with all accrued interest
hereon, shall automatically and without further action on the part of such
Payee, at the election of Company, be paid in cash or converted into Common
Stock of the Company at the Conversion Price then in effect.
In the event that a Registration Statement described in paragraph
4(k)(ii)(B) is not effective as of November 1, 2000 and Payee has not
voluntarily converted pursuant to paragraph 4(a) herein, and also in the event
that the Company elects to pay the balance of the indebtedness in cash, a
premium equivalent to twenty-five percent (25%) of the outstanding principal
shall be applied to the balance due Payee.
(c) Conversion Price. Subject to adjustment from time to time as
provided in Section 4(d) below, the term "Conversion Price" shall mean either:
(i) 75% of the average closing bid price of the Common Stock for the three (3)
trading day preceding November 1, 2000 or (ii) $0.20, whichever is less.
(d) Adjustments of Conversion Price. The Conversion Price in effect
from time to time shall be, subject to adjustment in accordance with the
provisions of this Section 4(d).
(i) Adjustments for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Issuance Date, effect a stock split
of the outstanding Common Stock, the Conversion Price in effect immediately
prior to the stock split shall be proportionately decreased. If the Company
shall at any time or from time to time after the Issuance Date, combine the
outstanding shares of Common Stock, the Conversion Price in effect immediately
prior to the combination shall be proportionately increased. Any adjustments
under this Section 4(d)(i) shall be effective at the close of business on the
date the stock split or combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If the
Company shall at any time or from time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in shares of Common Stock,
then, and in each event, the Conversion Price in effect immediately prior to
such event shall be decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of business on such
record date, by multiplying the Conversion Price then in effect by a fraction;
(A) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and
(B) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. If the Company
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the Conversion Price
shall be made and provision shall be made (by adjustments of the Conversion
Price or otherwise) so that the Payee of this Note shall receive upon
conversions thereof, in addition to the number of shares of Common Stock
receivable thereon, the number of securities of the Company which they would
have received had this Note been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 4(c)(iii) with
respect to the rights of the Payees of the Note.
<PAGE>
(iv) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon conversion of this Note at any time or from time to
time after the Issuance Date shall be changed into the same or a different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections 4(d)(i), (ii)
and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 4(d)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall by made and provisions shall be made (by
adjustments of the Conversion Price of otherwise) so that the Payee of this Note
shall have the right thereafter to convert such Note into the kind and amount of
shares of stock and other securities receivable upon such reclassification,
exchange, substitution or other change, by holders of the number of shares of
Common Stock into which such Note might have been converted immediately prior to
such reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Issuance Date there shall
be a capital reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for in
Section 4(d)(i), (ii) and (iii), or a reclassification, exchange or substitution
of shares provided for in Section 4(d)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person, then as a part of
such reorganization, merger, consolidation, or sale, an appropriate revision to
the Conversion Price shall be made and provision shall be made (by adjustments
of the Conversion Price or otherwise) so that the Payee of this Note shall have
the right thereafter to convert this Note into the kind and amount of shares of
stock and other securities or property of the Company or any successor
corporation resulting from such reorganization, merger, consolidation, or sale,
to which a holder of Common Stock deliverable upon conversion of such shares
would have been entitled upon such reorganization, merger, consolidation, or
sale. In any such case, appropriate adjustment shall be made in the application
of the provisions of this Section 4(d)(v) with respect to the rights of the
Payees of this Note after the reorganization, merger, consolidation, or sale to
the end that the provisions of this Section 4(c)(v) (including any adjustment in
the Conversion Price then in effect and the number of shares of stock or other
securities deliverable upon conversion of this Note) shall be applied after that
event in as nearly an equivalent manner as may be practicable.
(e) No Impediment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Payees of the Note
set forth in this Section 4 against impairment.
(f) Certificate as to Adjustments. Upon occurrence of each adjustment
or readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Note pursuant to this Section 4, the Company at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish notice to the Payee of this Note, a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon written request of the Payee of this Note, at any time, furnish or
cause to be furnished to such Payee a like certificate setting forth such
adjustments and readjustments, the applicable Conversion Price in effect at the
time and the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon the conversion
of such Note. Notwithstanding the foregoing, the Company shall not be obligated
to deliver a certificate unless such certificate would reflect an increase or
decrease of at least one percent (1%) of such adjusted amount.
(g) Issue Taxes. The Company shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Note pursuant hereto; provided, however, that the Company shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any Payee in
connection with any such conversion.
(h) Notices and Delivery of Shares. All notices and other
communications hereunder shall be in writing and shall be deemed given (i) on
the same date, if delivered personally or by facsimile by not later than 7:00
p.m. Florida time (provided, that a copy of such facsimile shall be
simultaneously sent to Donald F. Mintmire, Esq. at (561)659-5371, or (ii) three
business days following being mailed by certified or registered mail, postage
prepaid, return-receipt requested, addressed to the party in accordance with
Section 7 hereof. Not later than seven (7) Business Days following receipt of
notice of conversion as provided herein (the "Delivery Date"), the Company shall
deliver to the Payees of this Note, against delivery of this Note surrendered
for conversion, certificates evidencing all shares of Common Stock into which
this Note shall be converted.
(i) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Note. In lieu of any fractional shares to which
the Payee would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by the Conversion Price of one share of the
Company's Common Stock on the applicable Conversion Date.
(j) Retirement of Note. Conversion of this Note shall be deemed to have
been effected on the applicable Conversion Date. The converting holder shall be
deemed to have become a stockholder of record of the Common Stock on the
applicable Conversion Date. Upon conversion of only a portion of this Note, the
Company shall issue and deliver to such holder, at the expense of the Company,
against receipt of the original Note delivered for partial cancellation, a new
Note representing the unconverted portion of this Note so surrendered and Common
Stock equal to the portion converted.
(k) Regulatory Compliance.
(i) If the Shares of Common Stock to be reserved for the purpose of
conversion of this Note require registration or listing with or approval of any
government authority, stock exchange or other regulatory body under any federal
or state law or regulation or otherwise before such shares may be validly issued
or delivered upon conversion, the Company shall, at its sole cost and expense,
in good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
(ii) The shares of Common Stock issuable upon the election to convert
shall be Rule 144 restricted shares.
(iii) The holder of such shares shall have the following registration
rights:
<PAGE>
(A) In the event the Company shall file a Registration
Statement under the Act, the Company shall include the Shares in such
Registration, subject to the limitations contained herein. The Company shall
cause the registration statement to remain effective until thirty (30) days
after the Debentures have been converted or repaid, whichever comes first.
(B) The Company's obligation to include Restricted Securities
in a Company's Registration Statement pursuant to Section 4(k)(iii)(A) shall be
subject to the following limitations:
(1) The Company shall not be obligated to file a
Registration Statement.
(2) In the event the Company files a Registration
Statement, the Company shall not be obligated to include any Restricted
Securities in a registration statement filed on Form S-4, Form S-8 or such other
similar successor forms then in effect under the Securities Act.
(3) If a Company Registration Statement involves an
underwritten offering and the managing underwriter
advises the Company in writing that in its opinion, the number of securities
requested to be included in such Company Registration Statement exceeds the
number which can be sold in such offering without adversely affecting the
offering, the Company shall include in such Company Registration Statement the
number of such securities which the Company is so advised can be sold in such
offering without adversely affecting the offering, determined as follows:
(i) first, the securities proposed by the
Company to be sold for it own account, and (ii) second, any Restricted
Securities requested to be included in such registration and any other
securities of the Company in accordance with the priorities, if and then
existing among the holders of such securities pro rata among the holders thereof
requesting such registration on the basis of the number of shares of such
securities requested to be included by such holders.
(iii) The Company shall not be obligated to
include Restricted Securities in more than one (1)
Company Registration Statement.
(C) To the extent holder's Restricted Securities are intended
to be included in a Company Registration Statement, holder may include any of
its Restricted Securities in such Company Registration Statement pursuant to
this Agreement only if holder furnishes to the Company in writing, within ten
(10) business days after receipt of a written request therefor, such information
specified in Item 507 of Regulation S-K under the Act or such other information
as the Company may reasonably request for use in connection with the Company
Registration Statement or Prospectus or preliminary Prospectus included therein
and in any application to the NASD. Holder as to which the Company Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make all information previously
furnished to the Company by holder not materially misleading.
5. EVENTS OF DEFAULT.
The occurrence and continuance of any one or more of the following events
is herein referred to as an Event of Default:
(a) If the Company shall default in converting the applicable
principal amount of this Note into Common Stock and delivering stock
certificates in respect of such conversion within ten (10) Business Days from
the Company's receipt of the applicable notice of conversion pursuant to the
provisions hereof, whether on the Maturity Date or otherwise; or
(b) If the Company shall default in the payment of any
installment of interest on this Note when payable in accordance with the terms
thereof for more than ten (10) calendar days after the same shall become due if
the Payee has not elected to take such interest in Common Stock; and if the
Payee has elected to take such interest in Common Stock, if the Company shall
default in delivering stock certificates in respect of such election within ten
(10) Business Days from the Company's receipt of the notice of such election; or
(c) If the Company shall not, at the time of receipt of a
Conversion Notice hereunder, have a sufficient number of authorized and unissued
shares of its Common Stock available for issuance to the Payee of this Note upon
conversion of all or any portion of this Note in accordance with the terms
hereof, and such default shall not have been remedied within sixty (60) calendar
days from the date of such Conversion Notice; or
(d) If the Company shall default in the performance of or
compliance with any of its material covenants or agreements contained herein and
such default shall not have been remedied within thirty (30) calendar days after
written notice thereof shall have been delivered to the Company by the Payee of
this Note in accordance with the notice provisions herein; or
(e) If any representation or warranty made in writing by or on
behalf of the Company in connection with the transactions contemplated hereby
shall prove to have been false or incorrect in any material respect on the date
as of which made; or
(f) If the Company or any of its "Significant Subsidiaries"
(as defined herein) shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy or shall have an order for relief
under the Bankruptcy Act granted against it or them, or shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting or not contesting the material
allegations of a petition filed against the Company or any of its Significant
Subsidiaries in any such proceeding, or shall seek or consent to or acquiesce in
the appointment of any trustee, custodian, receiver or liquidator of the Company
or of all or any substantial part of the properties of the Company or any of its
Significant Subsidiaries, or the Company or its directors shall take any action
looking to the dissolution or liquidation of the Company or any of its
Significant Subsidiaries. For purposes of this Section 5(f), the term
Significant Subsidiary shall mean and include any other person, firm or
corporation (i) more than 50% of the common stock or equity interests of which
are owned of record by the Company or any Subsidiary of the Company, and (ii)
the net income before taxes or total assets of which represent more than 15% of
the consolidated net income before taxes or consolidated assets of the Company
and all of its Subsidiaries; or
(g) If, within sixty (60) days after the commencement of any
proceeding against the Company or any Significant Subsidiary seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, such
proceeding shall not have been dismissed, or if, within sixty (60) days after
the appointment, without the consent or acquiescence of the Company or any
Significant Subsidiary, of any trustee, receiver or liquidator of the Company or
any Significant Subsidiary or of all or any substantial part of the properties
of the Company or any Significant Subsidiary, such appointment shall not have
been vacated.
6. REMEDIES ON DEFAULT; ACCELERATION.
Upon the occurrence and during the continuance of an Event of
Default, the entire unpaid balance of principal and accrued interest on this
Note may be accelerated and declared to be immediately due and payable by the
Payee. Unless waived by the written consent of the Payee, such Payee may proceed
to protect and enforce its rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein, or for an injunction against a violation of any of the terms
hereof, or in aid of the exercise of any power granted hereby or by law. Upon
the occurrence of an Event of Default, the Company agrees to pay to the Payee of
this Note such further amount as shall be sufficient to cover the cost and
expense of collection, including, without limitation, reasonable attorneys' fees
and expenses. No course of dealing and no delay on the part of the Payee of this
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such Payee's rights, powers and remedies. No right, power
or remedy conferred hereby upon the Payee hereof shall be exclusive of any other
right, power or remedy referred to herein nor now or hereafter available at law,
in equity, by statute or otherwise.
<PAGE>
7. ROYALTY.
The Company shall pay a royalty of $2.50 per unit sold of the Backstroke(R) Back
Massager for a period of one (1) year and thereafter a royalty of $1.25 for the
life of the product. The Company shall also pay a $2.50 royalty per unit on all
sales of the Body Rocker for a period of one (1) year and thereafter a royalty
of $1.25 for the life of the product. The following products: Cactus Jack's One
Shot cleaner, Dean Tornebene's Fat Fighting System, Stop Snoring Tonight System,
One Shot Catch-A-Lot Fishing Lure, 3 in 1 Ladder, Spud Wizz, Facial Flex, and
our Cosmo Cooler Bag shall have a $0.75 royalty per unit sold for the life of
each product. In addition, if the Company fails to reach a combined royalty of
$6,000,000, the Company will continue to add products with $0.50 royalty until
such time $6,000,000 is achieved, at which time all royalties shall terminate.
8. ROYALTY PAYMENT TERMS.
The second Friday of each month, the Company shall, through a separate credit
agency, distribute to Payee payment for all royalties on all units shipped and
paid for by any party. The Company will provide a monthly accounting statement
which will include purchase orders for the month and an Account Receivable
Journal providing an indication all payments received.
9. NOTICES.
All notices, requests, demands or other communications hereunder shall be in
writing and personally addressed or sent by telecopier or by registered or
certified mail, return receipt requested, postage pre-paid, addressed or
telecopied as follows or to such other address or telecopier number of which
notice has been given pursuant hereto:
If to the Company: National Boston Medical, Inc.
43 Taunton Green, 3rd Floor
Taunton, MA 02780
Attn: Daniel J. Hoyng
Telephone: (508) 884-8820
Fax: (508) 880-5208
with copy to: Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Attn: Donald F. Mintmire, Esq.
Telephone (561) 832-5696
Fax (561) 659-5371
If to the Payee: Thomson Kernaghan & Co. Ltd., as Agent
365 Bay Street, Tenth Floor
Toronto, Ontario M5H 2V2, Canada
Attention: Mark E. Valentine
Telephone (416) 860-6130
Fax (416) 860-6140, or
to such Payee at the address set forth on the records of the Company.
In addition, copies of all such notices or other communications shall be
concurrently delivered by the person giving the same to each person who has been
identified to the Company by such Payee as a person who is to receive copies of
such notices.
10. GOVERNING LAW.
This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Florida, without giving effect to conflict of law
principles; provided, however that if any provision of this Note is
unenforceable under Florida law but is enforceable under the laws of the state
of Delaware, then that provision shall be governed by, and construed and
interpreted in accordance with, the laws of the state of Delaware.
11. SUBORDINATION TO SENIOR DEBT.
(a) Payment of the principal of and interest on this Note is subordinated, to
the extent and in the manner provided herein, to the prior payment of all
indebtedness of the Company and/or all Subsidiaries of the Company, for money
borrowed or other obligations which is now or may hereafter be owed
(collectively, "A Senior Debt") to any bank, commercial finance company, factor,
insurance company or other institution the lending activities of which are
regulated by law (individually, a "Senior Lender" and collectively, "Senior
Lenders"), which may, hereafter on any one or more occasions provide financing
to the Company or any of its Subsidiaries, secured by liens on any of the assets
and properties of the Company and/or any of its Subsidiaries (individually and
collectively, an "Institutional Borrower").
(b) Upon any payment or distribution of assets or securities of the
Institutional Borrower, as the case may be, of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or total or
partial liquidation or reorganization of the Institutional Borrower, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts payable under Senior Debt shall first be paid in full
in cash, or payment provided for in cash or cash equivalents, before the Payee
hereof shall be entitled to receive any payment on account of principal of or
interest on this Note. Before any payment may be made by the Institutional
Borrower of the principal of or interest on this Note upon any such dissolution
or winding up or liquidation or reorganization, any payment or distribution of
assets or securities of the Institutional Borrower of any kind of character,
whether in cash, property or securities, to which the Payee hereof would be
entitled, except for the provisions of this Section 9, shall be made by the
Institutional Borrower or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt or their representatives to the extent necessary to
pay all such Senior Debt in full after giving effect to any concurrent payment
or distribution to the holders of such Senior Debt.
(c) Upon the happening of any default in payment of the principal of or interest
on any Senior Debt, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment in cash,
property or securities, by set-off or otherwise, shall be made or agreed to be
made by the Institutional Borrower on account of the principal of or interest on
this Note.
(d) Upon the happening of an event of default (other than under circumstances
when the terms of Section 9(c) above are applicable) with respect to any Senior
Debt pursuant to which the Payee thereof is entitled under the terms of such
Senior Debt to accelerate the maturity thereof, and upon written notice thereof
given to each of the Institutional Borrower and the Payee of this Note by such
holder of Senior Debt (A Payment Notice), then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, no action
shall or may be taken for collection of any amounts under this Note, and no
direct or indirect payment in cash, property or securities, by set-off or
otherwise, shall be made or agreed to be made by the Institutional Borrower an
account of the principal of or interest on this Note until such Senior Debt has
been paid in full accordance with its terms.
(e) In the event that, notwithstanding the provisions of this Section 9, any
payment shall be made on account of the principal of or interest on this Note in
contravention of such provisions, then such payment shall be held for the
benefit of, and shall be paid over and delivered to, the holders of such Senior
Debt remaining unpaid to the extent necessary to pay in full in cash or cash
equivalents the principal of and interest on such Senior Debt in accordance with
its terms after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
(f) Nothing contained in this Section 9 shall
(i) impair the conversion rights of the Payee hereof referred to in
Section 4 above,
(ii) impair, as between the Company and the Payee of this Note, the
obligation of the Company, which is absolute and unconditional, to pay to the
Payee hereof principal and interest as the same shall become due and payable, or
(iii) prevent the Payee hereof from exercising all rights, powers and
remedies otherwise provided herein or by applicable law, all subject to the
express limitations provided herein.
(g) Upon the occurrence of an Event of Default, if any Senior Debt shall then be
outstanding, no acceleration of the maturity of this Note shall be effective
until the earlier of (i) ten (10) days shall have passed following the date of
delivery to the Institutional Borrower by a Senior Lender(s) of written notice
of acceleration of any Senior Debt, or (ii) the maturity of any then outstanding
Senior Debt shall have been accelerated by reason of a default hereon. The
<PAGE>
Company may pay the Payee hereof any defaulted payment and all other amounts due
following any such acceleration of the maturity of this Note if this Section 9
would not prohibit such payment to be made at that time.
(h) Upon payment in full of all Senior Debt, the Payee of this Note shall be
subrogated to the rights of the holder or holders of Senior Debt to receive all
payments or distributions applicable on such Senior Debt to the extent of the
prior application thereto of moneys or other assets which would have been
received in respect of this Note, but for these subordination provisions, until
the principal of, and interest on, this Note shall have been paid in full.
(i) The Payee, by accepting this Note
(i) shall be bound by all of the foregoing subordination provisions;
(ii) agrees expressly for the benefit of the present and future holders
of Senior Debt that this Note is subject to the foregoing subordination
provisions;
(iii) authorizes such persons as shall be designated by all holders of
Senior Debt at any given time, on his or its benefit to execute and deliver such
agreements, assignments, proofs of claim and other documents appropriate to
effectuate the foregoing subordination provisions; and
(iv) hereby appoints the person so designated his or its
attorney-in-fact for such purpose.
(j) The foregoing subordination provisions shall be for the benefit of
all holders of Senior Debt from time to time outstanding, and each of such
holders may proceed to enforce such provisions either directly against the Payee
hereof or in any other manner provided by law.
12. PERMITTED PAYMENTS.
Notwithstanding the provisions of Section 9 of this Note, and provided
that no default or event of default (or event which, with the passage of time or
giving of notice or both) has occurred, will occur as a result of the "Permitted
Payment" (herein defined), or will occur with the passage of time or giving of
notice or both, under any document or instrument evidencing such Senior Debt,
the Company may pay to the Payee, and the Payee may accept from the Company, the
principal payments of, and/or interest payments on, the outstanding principal
amount of this Note when due on an unaccelerated basis (herein, "Permitted
Payments"); it being understood and agreed by the Payee by accepting this Note
that neither:
(a) the payment terms set forth in Section l of this Note;
(b) the subordination provisions contained in Section 9 of this Note, nor
(c) the provisions of this Section 10 of this Note, may be modified or amended
without the prior written consent of each and every holder of Senior Debt.
<PAGE>
13. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon and inure to the benefit of the Company and the
Payee hereof and their respective successors and permitted assigns; provided,
however, that the Company may not transfer or assign any of its rights or
obligations hereunder without the prior written consent of the Payee hereof; and
provided, further, that transfer or assignment by the Payee is in accordance
with the rules governing Restricted Securities.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly
authorized officers as of the date first set forth above.
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Barry P. McFarland
----------------------------
Name: Barry P. McFarland
Title Chief Financial Officer
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of August 19, 1999, between National Boston
Medical, Inc., a Nevada corporation (the "Company"), and THOMSON KERNAGHAN &
COMPANY LIMITED, ("THOMSON")
W I T N E S S E T H:
WHEREAS, THOMSON wishes to acquire certain warrants of the Company more
particularly described below; and
WHEREAS, the Company wishes to issue such warrants to Thomson pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant.
The Company hereby grants THOMSON, (the "Holder") the following:
a. The right to purchase, at any time from the date of the
issuance until the later of 5:00 PM Eastern Standard Time on November 1, 2000,
or the thirtieth (30th) day following the effective date of a registration
statement under the Securities Act of 1933, as amended (the "Act") registering
the shares of Common Stock underlying this Warrant (the "Warrant Exercise
Term"), 2,500,000 shares of the Common Stock of the Company (the "Common Stock")
(subject to adjustment as provided in Section 11 hereof) upon payment of $0.25
per Share in lawful funds of the United States of America, plus warrants to
purchase an additional 333,333 shares of the Common Stock of the Company at an
exercise price of $0.30 per share.
2. Warrant Certificates.
The warrant certificates for the Warrant (the "Warrant
Certificate) to be delivered pursuant to this Agreement shall be in the forms
set forth as Exhibit A and Exhibit B, attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions and other variations
as required or permitted by this Agreement.
3. Exercise of Warrants.
In case the Holder of the warrants granted herein shall desire to
exercise the Warrant in whole or in part, the Holder shall surrender the
appropriate warrant, with the form of exercise notice on the last pages hereof
(the "Form of Exercise") duly executed by the Holder, to the Company,
accompanied by payment of the applicable Exercise Price.
(a) The warrant granted herein may be exercised in whole or in
part but not for fractional Shares. In case of the exercise in part only, the
Company will deliver to the Holder a new warrant of like tenor in the name of
the Holder evidencing the right to purchase the number of Shares as to which the
applicable warrant has not been exercised.
(b) As used herein "Date of Exercise" shall mean the date that
the advance copy of the Form of Exercise set forth herein is sent by facsimile
to the Company, provided that the original warrant and original Form of Exercise
are received by the Company within three (3) business days. If the Holder has
not sent advance notice by facsimile, the Date of Exercise shall be the date the
original Form of Exercise is received by the Company.
4. Covenants of the Company.
The Company hereby covenants and agrees that prior to the
expiration of the Warrant by exercise or by their respective terms:
(a) The Company shall at all times reserve and keep available,
out of its authorized and unissued share capital, solely for the purpose of
providing for the exercise, forthwith upon the request of the Holder of the
warrants then outstanding and in effect, such number of shares of Common Stock,
as shall, from time to time, be sufficient for the exercise of the warrants
granted by this Agreement. The Company shall, from time to time, in accordance
with the laws of the State of Florida, increase the authorized amount of its
share capital if at any time the number of shares of Common Stock remaining
unissued and unreserved for other purposes shall not be sufficient to permit the
exercise of the warrants then outstanding and in effect.
(b) The Company covenants and agrees that all shares that may
be issued upon the exercise of the rights represented by the Warrant will, upon
issuance, be validly issued, fully paid and non-assessable, and free from all
taxes, liens and charges with respect to the issue thereof.
5. Loss, Theft, Destruction or Mutilation.
In case the Warrant shall become mutilated or defaced or be
destroyed, lost or stolen, the Company shall execute and deliver a new warrant
(i) in exchange for and upon surrender and cancellation of such mutilated or
defaced warrant or (ii) in lieu of and in substitution for such warrant so
destroyed, lost, or stolen, upon the Holder of such warrant filing with the
Company such evidence satisfactory to it that such warrant has been so lost or
stolen and of the ownership thereof by the Holder; provided, however, that, in
either case, the Company shall be entitled, as a condition to the execution and
delivery of such new warrant, to demand indemnity satisfactory to it and payment
of expenses and charges incurred in connection with the delivery of such new
warrant, and may demand a bond from the Holder. Any warrant so surrendered to
the Company shall be canceled.
<PAGE>
6. Record Owner.
At the time of the surrender of the Warrant, together with the
Form of Exercise properly executed and payment of the applicable Exercise Price,
the person exercising such warrant shall be deemed to be the Holder of record of
the Common Stock deliverable upon such exercise, in whole or in part,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such securities shall not then be
actually delivered to such person.
7. Mailing of Notices, etc.
All notices and other communications from the Company to the
Holder of the Warrant shall be mailed by first-class registered or certified
mail, return receipt requested, postage prepaid, to the Holder at the address
set forth in the records of the Company, or to such other address furnished to
the Company in writing from time to time by the Holder of such warrants in
accordance with this Section 7.
8. Registration Under the Securities Act of 1933, as amended, and
Transfers.
(a) Neither the Warrant nor the Shares underlying each of them
have been registered under the Act. Unless and until registered under the Act,
such warrants and all replacement warrants shall bear the following legend:
This Warrant, and the securities issuable upon the exercise of
this Warrant, have not been registered under the Securities
Act of 1933, as amended (the "Act") or applicable state law
and may not be sold, transferred or otherwise disposed of
unless registered under the Act and any applicable state act
or unless the Company receives an opinion of counsel for the
holder and is satisfied that this Warrant and the underling
securities may be transferred without registration under the
Act.
The Shares issuable upon exercise of such warrants shall be Rule 144
restricted shares (the "Restricted Securities"). After issuance of the Shares,
Company agrees to use its best efforts to assist Holder in registering the
Shares or to register the Shares under the Act subject to the rules,
regulations, and other provisions of said Act.
The Company shall use its best efforts to file a Registration Statement
under the Act as soon as possible, registering the shares of Common Stock
underlying this Warrant. The Company shall cause the registration statement to
remain effective until the this Warrant has expired, or until thirty (30) days
after this Warrant has been fully exercised, whichever comes first.
<PAGE>
(b) No sale, transfer, assignment or other disposition of the
warrants granted herein shall be effective unless the Payee or any subsequent
permitted assignee shall provide the Company with (i) an original form of
assignment (the "Form of Assignment") set forth on the last pages hereof, (ii)
the original warrant and (iii) an opinion of counsel for the Payee or such
subsequent permitted assignee, in a form reasonably satisfactory to the Company,
stating that the warrant and the underlying securities may be transferred
without registration under the Act. Upon acceptance of same for transfer, the
Company shall execute and deliver a new warrant in exchange for the one
surrendered or like tenor in the name of the permitted assignee and enter such
permitted assignee on the books of the Company as the registered holder.
9. Piggyback Registration.
(a) At any time that the Company proposes to file a Company
registration statement on Form S-1, or other appropriate registration form, the
Company shall cause to be included in such registration statement any securities
issued or subject to issuance in this transaction; provided, however, that if,
at any time after giving written notice of its intention to register any
securities, the Company shall determine for any reason not to register or to
delay registration of holder's Restricted Securities, the Company may, at its
election, give written notice of such determination to Holder and, thereupon:
(i) in the case of a determination not to register
such other securities, shall be relieved of its obligation to register Holder's
Restricted Securities in connection with such registration (but not from its
obligation to pay the registration expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be
permitted to delay registering Holder's Restricted Securities for the same
period as the delay in registering such other securities.
(b) The Company's obligation to include Restricted Securities
in a Company's Registration Statement pursuant to Section 10(a) shall be subject
to the following limitations:
(i) The Company may elect, at its sole option and
for any reason, not to register Holder's Restricted Shares, provided however,
that this right is limited to one (1) time and relative to one (1) particular
Company Registration Statement.
(ii) The Company shall not be obligated to include
any Restricted Securities in a registration statement filed on Form S-4, Form
S-8 or such other similar successor forms then in effect under the Securities
Act.
<PAGE>
(iii) If a Company Registration Statement involves an
underwritten offering and the managing underwriter advises the Company in
writing that in its opinion, the number of securities requested to be included
in such Company Registration Statement exceeds the number which can be sold in
such offering without adversely affecting the offering, the Company shall
include in such Company Registration Statement the number of such securities
which the Company is so advised can be sold in such offering without adversely
affecting the offering, determined as follows:
(A) first,the securities proposed by the Company
to be sold for it own account, and
(B) second, any Restricted Securities requested
to be included in such registration and any other securities of the Company in
accordance with the priorities, if and then existing among the holders of such
securities pro rata among the holders thereof requesting such registration on
the basis of the number of shares of such securities requested to be included by
such holders.
(iv) The Company shall not be obligated to include
Restricted Securities in more than one (1) Company Registration Statement.
(c) To the extent Holder's Restricted Securities are intended
to be included in a Company Registration Statement, Holder may include any of
its Restricted Securities in such Company Registration Statement pursuant to
this Agreement only if Holder furnishes to the Company in writing, within ten
(10) business days after receipt of a written request therefor, such information
specified in Item 507 of Regulation S-K under the Act or such other information
as the Company may reasonably request for use in connection with the Company
Registration Statement or Prospectus or preliminary Prospectus included therein
and in any application to the NASD. Holder as to which the Company Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make all information previously
furnished to the Company by Holder not materially misleading.
10. Antidilution Provision.
The applicable Exercise Price in effect from time to time
shall be, subject to adjustment in accordance with the provisions of this
Section 11.
(a) Adjustments for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date hereof, effect a
stock split of the outstanding Common Stock, the applicable Exercise Price in
effect immediately prior to the stock split shall be proportionately decreased.
If the Company shall at any time or from time to time after the date hereof,
combine the outstanding shares of Common Stock, the applicable Exercise Price in
effect immediately prior to the combination shall be proportionately increased.
Any adjustments under this Section 11(a) shall be effective at the close of
business on the date the stock split or combination occurs.
<PAGE>
(b) Adjustments for Certain Dividends and Distributions. If
the Company shall at any time or from time after the date hereof, make or issue
or set a record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in shares of Common Stock,
then, and in each event, the applicable Exercise Price in effect immediately
prior to such event shall be decreased as of the time of such issuance or, in
the event such a record date shall have been fixed, as of the close of business
on such record date, by multiplying the applicable Exercise Price then in effect
by a fraction;
(i) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date; and
(ii) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution.
(c) Adjustments for Other Dividends and Distributions. If the
Company shall at any time or from time to time after the date hereof, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in other than
shares of Common Stock, then, and in each event, an appropriate revision to the
applicable Exercise Price shall be made and provision shall be made (by
adjustments of the Exercise Price or otherwise) so that the Holder of the
warrants shall receive upon exercise thereof, in addition to the number of
shares of Common Stock receivable thereon, the number of securities of the
Company which they would have received had the warrant been exercised into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the date hereof, retained such
securities (together with any distributions payable thereon during such period),
giving application to all adjustments called for during such period under this
Section 11(c) with respect to the rights of the holders of the Warrant.
(d) Adjustments for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon exercise of Warrant at any time
or from time to time after the date hereof shall be changed into the same or a
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
11(a), (b) and (c), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 11(e)), then, and in each event, an appropriate
revision to the applicable Exercise Price shall by made and provisions shall be
made (by adjustments of the Exercise Price of otherwise) so that the Holder of
the Warrant shall have the right thereafter to exercise such warrants into the
kind and amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which such warrant might have been
exercised immediately prior to such reclassification, exchange, substitution or
other change, all subject to further adjustment as provided herein.
<PAGE>
(e) Adjustments for Reorganization, Merger, Consolidation or
Sales of Assets. If at any time or from time to time after the date hereof there
shall be a capital reorganization of the Company (other than by way of a stock
split or combination of shares or stock dividends or distributions provided for
in Section 11(a), (b), and (c), or a reclassification, exchange or substitution
of shares provided for in Section 11(d)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person, then as a part of
such reorganization, merger, consolidation, or sale, an appropriate revision to
the applicable Exercise Price shall be made and provision shall be made (by
adjustments of the Exercise Price or otherwise) so that the holder of The
Warrant shall have the right thereafter to exercise such warrants into the kind
and amount of shares of stock and other securities or property of the Company or
any successor corporation resulting from such reorganization, merger,
consolidation, or sale, to which a holder of Common Stock deliverable upon
exercise of such shares would have been entitled upon such reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 11(e) with respect
to the rights of the holders of The Warrant after the reorganization, merger,
consolidation, or sale to the end that the provisions of this Section 11(e)
(including any adjustment in the applicable Exercise Price then in effect and
the number of shares of stock or other securities deliverable upon exercise of
such warrant) shall be applied after that event in as nearly an equivalent
manner as may be practicable.
11. Laws of the State of Florida.
The Warrant shall be governed by, interpreted under and
construed in all respects in accordance with, the laws of the State of Florida,
irrespective of the place of domicile or residence of any party; provided,
however that if any provision of this Warrant is unenforceable under the laws of
the state of Florida but is enforceable under the laws of the state of Delaware,
then that provision shall be governed by, interpreted under and construed in all
respect in accordance with, the laws of the state of Delaware.
12. Entire Agreement and Modification.
The Company and the Holder hereby represent and warrant that
this Warrant Agreement and the Warrant issued hereunder are intended to and do
contain and embody all of the understandings and agreements, both written and
oral, of the parties hereto with respect to the subject matter of the warrants
granted herein, and that there exists no oral agreement or understanding,
express or implied, whereby the absolute, final and unconditional character and
nature of this Warrant Agreement or the Warrant shall be in any way invalidated,
empowered or affected. A modification or waiver of any of the terms, conditions
or provisions of this Warrant Agreement and the Warrant shall be effective only
if made in writing and executed with the same formality as these documents.
13. Controlling Document.
Notwithstanding anything contained herein, in the event of
conflict between any provision contained herein and those contained in the
Warrant, the provisions contained in this Agreement shall control.
The Warrant will become wholly void and of no effect and the
rights evidenced hereby will terminate unless exercised in accordance with the
terms and provisions hereof at or before 5:00 p.m., Eastern Time, on the
Expiration Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
By: /s/ Barry P. McFarland
----------------------------
Name: Barry P. McFarland
Title Chief Financial Officer
THOMSON KERNAGHAN & COMPANY LIMITED
By: /s/ Michelle McKinnon
------------------------------
Name: Michelle McKinnon
Title: Agent
<PAGE>
EXHIBIT A
This Warrant, and the securities issuable upon the exercise of this Warrant,
have not been registered under the Securities Act of 1933, as amended (the
"Act") or applicable state law and may not be sold, transferred or otherwise
disposed of unless registered under the Act and any applicable state act or
unless the Company receives an opinion of counsel for the holder and is
satisfied that this Warrant and the underling securities may be transferred
without registration under the Act.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
2,500,000 WARRANTS
WARRANT CERTIFICATE
This Warrant Certificate certifies that THOMSON KERNAGHAN & COMPANY
LIMITED ("THOMSON") or registered assigns, is the registered holder of Warrants
to purchase, at any time from the 19th of August, 1999, until 5:00 P.M. Eastern
Standard Time on the earlier of November 1, 2000, or the thirtieth day following
the effective date of a registration statement under the Act registering the
shares of Common Stock underlying this Warrant, whichever comes first
("Expiration Date"), up to 2,500,000 shares ("Shares") of fully-paid and
non-assessable common stock ("Common Stock"), of National Boston Medical, Inc.,
a Nevada corporation (the "Company"), at the Initial Exercise Price, subject to
adjustment in certain events, of $0.25 per Share (the "Exercise Price"), upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Warrant Agreement dated as of August 19, 1999, between the Company
and Thomson (the "Warrant Agreement"). Payment of the Exercise Price may be made
in cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., Eastern Standard Time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and/or number of the Company's securities issuable
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the, request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair, the rights of the holder as set
forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement and in compliance with the rules governing restricted securities,
without any charge except for any tax, or other governmental charge imposed in
connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: September , 1999
By: /s/ Barry P. McFarland
----------------------------
Name: Barry P. McFarland
Title Chief Financial Officer
<PAGE>
EXHIBIT B
This Warrant, and the securities issuable upon the exercise of this Warrant,
have not been registered under the Securities Act of 1933, as amended (the
"Act") or applicable state law and may not be sold, transferred or otherwise
disposed of unless registered under the Act and any applicable state act or
unless the Company receives an opinion of counsel for the holder and is
satisfied that this Warrant and the underling securities may be transferred
without registration under the Act.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
333,333 WARRANTS
WARRANT CERTIFICATE
This Warrant Certificate certifies that THOMSON KERNAGHAN & COMPANY LIMITED
("THOMSON") or registered assigns, is the registered holder of Warrants to
purchase, at any time from the 19th of August, 1999, until 5:00 P.M. Eastern
Standard Time on November 1, 2000 ("Expiration Date"), up to 333,333 shares
("Shares") of fully-paid and non-assessable common stock ("Common Stock"), of
National Boston Medical, Inc., a Nevada corporation (the "Company"), at the
Initial Exercise Price, subject to adjustment in certain events, of $0.30 per
Share (the "Exercise Price"), upon surrender of this Warrant Certificate and
payment of the Exercise Price at an office or agency of the Company, but subject
to the conditions set forth herein and in the Warrant Agreement dated as of
August 19, 1999, between the Company and Thomson (the "Warrant Agreement").
Payment of the Exercise Price may be made in cash, or by certified or official
bank check in New York Clearing House funds payable to the order of the Company,
or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., Eastern Standard Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants issued pursuant to the Warrant Agreement, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events, the
Exercise Price and/or number of the Company's securities issuable thereupon may,
subject to certain conditions, be adjusted. In such event, the Company will, at
the, request of the holder, issue a new Warrant Certificate evidencing the
adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant Certificate at
an office or agency of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement and in compliance with the rules governing restricted securities,
without any charge except for any tax, or other governmental charge imposed in
connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all other purposes, and
the Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed under its corporate seal.
Dated: September , 1999 NATIONAL BOSTON MEDICAL, INC.
By: /s/ Barry P. McFarland
----------------------------
Name: Barry P. McFarland
Title Chief Financial Officer
[FORM OF EXERCISE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ____________ Shares and herewith tenders
in payment for such Shares cash or a certified or official bank check payable in
New York Clearing House Funds to the order of NATIONAL BOSTON MEDICAL, INC., in
the amount of $_______________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of ________________________whose address is _____________________________,
and that such Certificate be delivered to
___________________________________________, whose address is
_______________________________________________________________.
Dated: Signature:_________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
- ------------------------------------
- ------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED ___________________________________________ hereby sells,
assigns and transfers unto______________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
___________________________________, Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: Signature:_________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate)
-------------------------------------
-------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 4.13
DEBENTURE PURCHASE AGREEMENT
BETWEEN
NATIONAL BOSTON MEDICAL, INC.
AND
OXFORD CAPITAL CORP.
September 2, 1999
<PAGE>
DEBENTURE PURCHASE AGREEMENT
This Debenture Purchase Agreement is made as of September 2, 1999, between
National Boston Medical, Inc. (the "Company"), a Nevada corporation, and Oxford
Capital Corp. (the "Purchaser"), a Cayman Island corporation.
In consideration of the premises, mutual covenants and agreements contained
in this Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Defined Terms. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly controls, or
is controlled by, or is under common control with the Company or a Subsidiary;
(2) which directly or indirectly beneficially owns or holds five percent (5%) or
more of any class of voting stock of the Company or any Subsidiary; or (3) five
percent (5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Debenture Purchase Agreement, as amended,
supplemented, or modified from time to time.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks in the United States are authorized or required to close
under the federal laws of the United States of America.
"Capital Lease" means all leases which have been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Closing Date" means September 8, 1999 and any date thereafter that the
Purchaser and the Company agree upon in writing for the first Tranche or any
additional Tranche pursuant to the Debenture.
"Code" means the US Internal Revenue Code of 1986, as amended from time to
time, and the regulations and published interpretations thereof.
"Common Stock means the Company's common stock, $.001 par value.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
414(b) or 414(c) of the Code.
"Company" means National Bostom Medical, Inc., and its subsidiary
companies, joint ventures or any other related entities;
"Conversion Date" means any date 30 days after the Closing Date.
"Debenture and Debentures" shall have the meaning assigned to those terms
in Section 2.01
"Debenture Shares" means the shares of Common Stock of the Company
underlying the Debentures into which the Debentures are convertible.
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<PAGE>
"Debt" means (1) indebtedness or liability for borrowed money; (2)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(3) obligations for the deferred purchase price of property or services
(including trade obligations); (4) obligations as lessee under Capital Leases;
(5) current liabilities in respect of unfunded vested benefits under Plans
covered by ERISA; (6) obligations under letters of credit; (7) obligations under
acceptance facilities; (8) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person or entity, or otherwise to assure a creditor against loss; and (9)
obligations secured by any Liens, whether or not the obligations have been
assumed.
"Default" means any of the events specified in Section 8.01, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Escrow Agreement shall have the meaning assigned to such term in Section
2.06(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" means any of the events specified in Section 8.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Exchange Act" means the US Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles either (i) in the
United States, or (ii) in Canada, whichever is applicable, together with
accompanying adjustments to reflect generally accepted accounting principles in
the United States.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or other registration or
notification of a debt, obligation or security interest under the law of any
jurisdiction to evidence any of the foregoing).
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any pension plan which is covered by Title IV of ERISA and in
respect of which the Company or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA
"Purchaser"means Oxford Capital Corp, a Cayman Island company.
"Principal Office" means Ian H. Kennedy, Barrister & Solicitor, 1013-17th
Avenue S.W., Calgary, Alberta, T2T 0A7.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"Registration Rights Agreement" shall have the meaning assigned to such
term in Section 2.01.
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<PAGE>
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"SEC" means the US Securities and Exchange Commission.
"Securities" means the Debentures and the Warrant.
"Securities Act" means the US Securities Act of 1933, as amended.
"Subsidiary" means, as to the Company, a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by the Company.
"Transaction Documents" means this Agreement, the Debentures, the Warrant,
the Registration Rights Agreement, and the Escrow Agreement.
"Warrant" shall have the meaning assigned to that term in Section 2.01.
"Warrant Shares" means the shares Common Stock underlying the Warrant
issuable upon the exercise thereof.
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.01. Purchase and Sale of Securities. The Company agrees to sell
and, subject to the terms and conditions and in reliance on the Company's
representations and warranties contained in this Agreement, the Purchaser agrees
to purchase, $1,000,000 USD in principal amount of the Company's 12% Convertible
Debentures Due September 2, 2000 (each a "Debenture" and collectively the
"Debentures"), and a warrant to purchase up to $250,000 USD of the Company's
Common Stock (the "Warrant"). The Debentures shall be convertible and the
Warrants shall be exerciseable at price equal to the lower of: (i) 78% of the
average closing bid price of the common stock for 90 trading days preceding
August 13, 1999; or (ii) 78% of the average closing bid price of the common
stock for 5 days preceding the Conversion Date; in no event shall the conversion
and exercise price be less than $ 0.10. The purchase price of each Debenture
shall be 100% of its face value. The purchase price of the Warrant shall be
$.01. The Debentures shall be in the form of Exhibit A hereto. The Warrant shall
be in the form of Exhibit B hereto. All tax returns filed by the Company shall
be consistent in all material respects with such allocation (including for
purposes of section 1271 et seq. of the Code). Contemporaneously with the
execution of this Agreement, the Company shall execute and deliver to the
Purchaser a registration rights agreement (the "Registration Rights Agreement")
in the form of Exhibit C hereto, covering the Debenture Shares and the Warrant
Shares.
Section 2.02. Tranches. The Company shall sell and issue the Debentures to
the Purchaser in tranches (each a "Tranche" and collectively the "Tranches").
The first Tranche shall be in the principal amount of $250,000 and the second
Tranche shall be in the amount of $250,000, or such greater amount as the
Purchaser shall specify.
Section 2.02. Closings. The purchase and sale of the Securities shall take
place at closings (each a "Closing" and collectively the "Closings") at the
Principal Office. The Closing of the first Tranche (the "Initial Closing") shall
take place at 9:00 a.m. Houston, time, on September 3, 1999, or such other
Business Day as may be agreed upon by the Purchaser and the Company (the
"Initial Closing Date"). The Company acknowledges that on September 2, 1999, the
Purchaser will advance the Company the sum of $250,000, which shall represent
the purchase price for the first Debenture (the "Initial Debenture") to be
issued and sold pursuant to this Agreement. At the Initial Closing the
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<PAGE>
Company shall deliver the Initial Debenture and the Warrant to the Purchaser.
Additional Closings shall take place at the Principal Office and on such dates
as the Purchaser shall specify. At each Closing, the Company shall deliver
Debentures in such denomination or denominations and registered in such
Purchaser's name or the name of such nominee or nominees as the Purchaser may
request, against payment of the purchase price therefor by Federal funds bank
wire transfer of same day funds to such account as the Company shall designate
in writing at least two Business Days prior to the Closing.
Section 2.03. Structure Fee. At each Closing, the Company shall pay the
Purchaser a structure fee (the "Structure Fee") in an amount equal to 10% of the
principal amount of Debentures purchased at such Closing. The Company hereby
irrevocably authorizes the Purchaser to deduct the amount of the Structure Fee
from the purchase price of the Debentures, together with any reasonable and
documented out-of-pocket expenses for which such Purchaser is entitled to
reimbursement pursuant to this Section 1.2(c), including the reasonable and
documented fees and expenses of the Purchaser's counsel. If for any reason the
Purchaser does not deduct the amount of the Structure Fee and such expenses from
the purchase price of Debentures, then promptly upon the Purchaser's request,
the Company shall pay and deliver the Structure Fee and such other expenses to
the Purchaser or to such other persons as such Purchaser shall direct, by
Federal funds bank wire transfer of same day funds.
Section 2.04. Anti-Dilution Provisions. After October 1, 1999, so long as
the Debentures or the Warrant are outstanding and not fully converted or
exercised, the Company shall not, without the prior consent of the Holder, issue
or sell (i) any Common Stock without consideration or for a consideration per
share less than $0.15; or (ii) issue or sell any warrant, Warrant, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a consideration per
share less than $0.15.
Section 2.05. Use of Proceeds. The Company shall use the proceeds from the
Debentures solely for working capital to grow and expand its business.
Section 2.06. Exemption from US Registration. The issuance of the
Debentures and the Warrant shall be exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof; and also pursuant to SEC
Regulation D. Accordingly, the Company represents and warrants to the Purchaser
that it has, and covenants and agrees with the Purchaser that it will, comply in
all material respects with the terms and conditions of SEC Regulation D
applicable to the issuance and sale of the Debentures and the Warrant.
Section 2.07. Registration of Common Stock; Reporting Company. (a) As soon
as possible, and in any event on or before October 30, 1999, the Company shall
file the appropriate registration statement or registration statements (each a
"Registration Statement" and collectively "Registration Statements") with the
SEC to (i) register 200% of the Debenture Shares and 100% of the Warrant Shares
under the Securities Act pursuant to the Registration Rights Agreement; and (ii)
cause the Company to become a "reporting company" as defined by the rules and
regulations of the SEC and the NASD.
(b) The Company shall use its best efforts to ensure that the
Registration Statements become effective as soon as possible, and shall cause
the Registration Statements to remain effective until the Debentures have been
converted or paid, and the Warrant fully exercised or expired.
(c) Contemporaneously with the execution of this Agreement the Company
shall enter into an escrow agreement (the "Escrow Agreement") with Ian H.
Kennedy, Barrister & Solicitor, as escrow holder (the "Escrow Holder") in the
form of Exhibit D. Promptly after the execution of this Agreement, the Company
shall deposit the Debenture Shares and the Warrant Shares in escrow with the
Escrow Holder pursuant to the Escrow Agreement. Promptly upon the effectiveness
of a Registration Statement, the Corporation shall deliver unrestricted
certificates for those shares registered thereunder to the escrow holder, in DTC
form, in exchange for any legended or restricted certificates for those Shares.
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<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01. Condition Precedent to Initial Closing. The Purchaser's
obligation to purchase the Initial Debenture is subject to the condition
precedent that the Purchaser shall have received on or before the Initial
Closing Date each of the following, in form and substance satisfactory to the
Purchaser and its counsel:
(1) Debenture. The Initial Debenture, duly executed by the Company;
(2) Warrant. The Warrant, duly executed by the Company;
(3) Registration Rights Agreement. The Registration Rights Agreement,
duly executed by the Company;
(4) Escrow Agreement. The Escrow Agreement, duly executed by the
Company;
(5) Evidence of all corporate action by the Company. Certified (as of
the date of this Agreement) copies of all corporate action taken by the Company,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Transaction Documents to which it is a party
and each other document to be delivered pursuant to this Agreement;
(6) Incumbency and signature certificate of the Company. A certificate
(dated as of the date of this Agreement) of the Secretary of the Company
certifying the names and true signatures of the officers of the Company
authorized to sign the Transaction Documents to which it is a party and the
other documents to be delivered by the Company under this Agreement;
(7) Opinion of counsel for the Company. A favorable opinion of Mintmire
& Associates, Counsel for the Company, in substantially the form of Exhibit E,
and as to such other matters as the Purchaser may reasonably request.
Section 3.02. Condition Precedent to the Second Debenture Purchase. The
obligation of the Purchaser to purchase the second Debenture Traunche shall be
subject to the condition precedent that on the Closing Date:
(1) the Company shall have filed the Registration Statements
described in Section 2.07 and the Registration Statement is
effective; or
(2) the shares underlying the first Debenture Traunche can be
or have been converted into Rule 504 shares.
Section 3.03. Conditions Precedent to All Additional Debenture
Purchases. The obligation of the Purchaser to purchase additional Debentures
shall be subject to the further conditions precedent that on the Closing Date of
each such purchase:
(1) The Company shall have filed the Registration Statements
described in Section 2.07 and the Registration Statement is
effective;
(2) The following statements shall be true and the Purchaser
shall have received a certificate signed by a duly authorized
officer of the Company dated the Closing Date of a Tranche,
stating that
(a) The representations and warranties contained in Article IV
of this Agreement are correct on and as of such Closing Date as though
made on and as of such date; and
(b) No Default or Event of Default has occurred and is
continuing, or would result from such purchase; and
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(c) there has been no material changes in the operations of
the Company that have not been disclosed to the Purchaser.
(3) The Purchaser shall have received such other approvals, opinions,
or documents as the Purchaser may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser that:
Section 4.01. Incorporation, Good Standing, and Due Qualification. The
Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
Section 4.02 Corporate Power and Authority. The execution, delivery,
and performance by the Company of the Transaction Documents to which each is a
party have been duly authorized by all necessary corporate action and do not and
will not (1) require any consent or approval of the stockholders of such
corporation; (2) contravene such corporation's charter or bylaws; (3) violate
any provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to such
corporation; (4) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease, or
instrument to which such corporation is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien, upon or with respect to any of the properties now owned or
hereafter acquired by such corporation; and (6) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination, or award or any such indenture, agreement, lease, or
instrument.
Section 4.03 Legally Enforceable Agreement. This Agreement is, and each
of the other Transaction documents when delivered under this Agreement will be,
legal, valid, and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
Section 4.04. Financial Statements. The financial statements of the
Company, filed with its Form 10-SB at the Securities Exchange Commission, copies
of which have been furnished to the Purchaser, are complete and correct and
fairly present the financial condition of the Company, all in accordance with
GAAP in the United States consistently applied subject to year-end adjustments.
Since the date of the filing of the Form 10-SB, there has been no material
adverse change in the condition (financial or otherwise), business, or
operations of the Company. There are no liabilities of or claims against the
Company, fixed or contingent, which are material but are not reflected in the
financial statements or in the notes thereto, other than liabilities arising in
the ordinary course of business since the filing of the Form 10-SB or as
otherwise disclosed.
Section 4.05. Labor Disputes and Acts of God. The business and the
properties of the Company are not affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) materially and adversely affecting such business
properties or the operation of the Company.
Section 4.06. Other Agreements. The Company is not a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction which could have
a material adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Company, or the ability of the
Company to carry out its obligations under the Transaction Documents other than
as disclosed in the Form 10-SB. The Company is not in default in any respect in
the performance, observance, or fulfillment of any of the obligations, covenants
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or conditions contained in any agreement or instrument material to its business
to which it is a party.
Section 4.07. Litigation. There is no pending or threatened action or
proceeding against or affecting the Company before any court, governmental
agency, or arbitrator which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties, or business of
the Company or the ability of the Company to perform its obligation under the
Transaction Documents other than as disclosed in the Form 10-SB..
Section 4.08. No Defaults on Outstanding Judgments or Orders. There are
no unsatisfied judgments outstanding against the Company, and the Company is not
in default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board, bureau, agency or instrumentality,
domestic or foreign.
Section 4.09. Ownership and Liens. The Company has title to, or valid
leasehold interests in, all of their properties and assets, real and personal,
including the properties and assets and leasehold interest reflected in the
financial statements referred to in Section 4.04 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Company and none of its leasehold interests
is subject to any Lien, except such as may be permitted pursuant to Section 6.01
of this Agreement. Without limiting the generality of the foregoing, this
representation and warrant includes all of the Company's intellectual property
(including software and other technology).
Section 4.10. ERISA and Employee Benefit Laws. The Company is in
compliance in all material respects with all applicable provisions of ERISA, and
all applicable national and state employee benefit of the United States, and any
other applicable jurisdictions.
Section 4.11. Operation of Business. The Company possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted, and the Company and is not
in violation of any valid rights of others with respect to any of the foregoing.
Section 4.12. Taxes. The Company has filed all tax returns (national,
federal, provincial, state, and local) required to be filed and has paid all
taxes, assessments, and governmental charges and levies thereon to be due,
including interest and penalties.
Section 4.13. Environment. The Company has duly complied with, and
their businesses, operations, assets, equipment, property, leaseholds, or other
facilities are in compliance with, the provisions of all national, federal,
provincial, state, and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder.
ARTICLE V
AFFIRMATIVE COVENANTS
So long any of the Debentures are outstanding, or the Warrant has not
been fully exercised or expired, the Company will:
Section 5.01. Maintenance of Existence. Preserve and maintain, and
cause each active Subsidiary to preserve and maintain, its corporate existence
and good standing in the jurisdiction of its incorporation, and qualify and
remain qualified, and cause each Subsidiary to qualify and remain qualified, as
a foreign corporation in each jurisdiction in which such qualification is
required.
Section 5.02. Maintenance of Records. Keep, and cause each Subsidiary
to keep, adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its Subsidiaries.
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Section 5.03. Maintenance of Properties. Maintain, keep, and preserve,
and cause each Subsidiary to maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
Section 5.04. Conduct of Business. Continue, and cause each Subsidiary
to continue, to engage in an efficient and economical manner in a business of
the same general type as conducted by it on the date of this Agreement.
Section 5.05. Maintenance of Insurance. Maintain, and cause each
Subsidiary to maintain, insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as are usually
carried by companies engaged in the same or a similar business and similarly
situated, which insurance may provide for reasonable deductibility from coverage
thereof.
Section 5.06. Compliance With Laws. Comply, and cause each Subsidiary
to comply, in all respects with all applicable laws, rules, regulations, and
orders, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments, and governmental charges imposed upon
it or upon its property.
Section 5.07. Right of Inspection. At any reasonable time and from time
to time, permit the Purchaser or any agent or representative thereof to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Company and any Subsidiary, and to discuss the
affairs, finances, and accounts of the Company and any Subsidiary with any of
their respective officers and directors and the Company's independent
accountants.
Section 5.08. Reporting Requirements. Furnish to the Purchaser:
(1) Quarterly financial statements. As soon as available and in any
event within forty-five (45) days after the end of each of the first three
quarters of each fiscal year of the Company, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end of such
quarter, consolidated and consolidating statements of income and retained
earnings of the Company and its Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, and
[consolidated and consolidating] statements of changes in financial position of
the Company and its Subsidiaries for the portion of the fiscal year ended with
the last day of such quarter, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the previous fiscal year and all prepared in accordance with GAAP consistently
applied and certified by the chief financial officer of the Company (subject to
year-end adjustments);
(2) Annual financial statements. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of the Company,
[consolidated and consolidating] balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and [consolidated and
consolidating] statements of income and retained earnings of the Company and its
Subsidiaries for such fiscal year, and [consolidated and consolidating]
statements of changes in financial position of the Company and its Subsidiaries
for such fiscal year, all in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the prior fiscal
year and all prepared in accordance with GAAP consistently applied and as to the
consolidated statements accompanied by an opinion thereon acceptable to the
Purchaser by Durland & Company, Chartered Accountants, or other independent
accountants selected by the Company and acceptable to the Purchaser;
(3) Management letters. Promptly upon receipt thereof, copies of any
reports submitted to the Company or any Subsidiary by independent certified
public accountants in connection with examination of the financial statements of
the Company or any Subsidiary made by such accountants;
(4) Certificate of no Default. Within forty five (45) days after the
end of each of the quarters of each fiscal year of the Company (or earlier upon
the delivery of the financial statements required by Sections 5.08(1) or (2), a
certificate
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of the chief financial officer of the Company (a) certifying that to the best of
his knowledge no Default or Event of Default has occurred and is continuing or,
if a Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action which is proposed to be taken with respect
thereto, and (b) with computations demonstrating compliance with the covenants
contained in Article VII;
(5) Accountant's report. Simultaneously with the delivery of the annual
financial statements referred to in Section 5.08(2), a certificate of the
independent public accountants who audited such statements to the effect that,
in making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof;
(6) Notice of litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Company or any Subsidiary, which, if determined adversely
to the Company or such Subsidiary, could have a material adverse effect on the
financial condition, properties, or operations of the Company or such
Subsidiary;
(7) Notice of Defaults and Events of Default. As soon as possible and
in any event within five (5) days after the occurrence of each Default or Event
of Default, a written notice setting forth the details of such Default or Event
of Default and the action which is proposed to be taken by the Company with
respect thereto;
(8) ERISA reports. As soon as possible, and in any event within thirty
(30) days after the Company knows or has reason to know that any circumstances
exist that constitute grounds entitling the PBGC to institute proceedings to
terminate a Plan subject to ERISA with respect to the Company or any Commonly
Controlled Entity, and promptly but in any event within two (2) Business Days of
receipt by the Company or any Commonly Controlled Entity of notice that the PBGC
intends to terminate a Plan or appoint a trustee to administer the same, and
promptly but in any event within five (5) Business Days of the receipt of notice
concerning the imposition of withdrawal liability with respect to the Company or
any Commonly Controlled Entity, the Company will deliver to the Purchaser a
certificate of the chief financial officer of the Company setting forth all
relevant details and the action which the Company proposes to take with respect
thereto.
(9) Reports to other creditors. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other party pursuant to the
terms of any indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Purchaser pursuant to any other clause of this
Section 5.08;
(10) Proxy statements, etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements, and reports which
the Company or any Subsidiary sends to its stockholders, and copies of all
regular, periodic, and special reports, and all registration statements which
the Company or any Subsidiary files with the Securities and Exchange Commission
or any governmental authority which may be substituted therefor, or with any
national securities exchange; and
(11) General information. Such other information respecting the
condition or operations, financial or otherwise, of the Company or any
Subsidiary as the Purchaser may from time to time reasonably request.
Section 5.09. Environment. Be and remain, and cause each Subsidiary to
be and remain, in compliance with the provisions of all national, federal,
provincial, state, and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations issued thereunder; notify the
Purchaser immediately of any notice of a hazardous discharge or environmental
complaint received from any governmental agency or any other party; notify the
Purchaser immediately of any hazardous discharge from or affecting its premises;
immediately contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty assessed in connection therewith; permit the
Purchaser to inspect the premises, to conduct tests thereon, and to inspect all
books, correspondence, and records
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pertaining thereto; and at the Purchaser's request, and at the Company's
expense, provide a report of a qualified environmental engineer, satisfactory in
scope, form, and content to the Purchaser, and such other and further assurances
reasonably satisfactory to the Purchaser that the condition has been corrected.
Section 5.10. Be and remain a "reporting company" as defined by the
Exchange Act.
ARTICLE VI
NEGATIVE COVENANTS
So long any of the Debentures are outstanding, or the Warrant has not
been fully exercised or expired, Company will not:
Section 6.01. Mergers, Etc. Wind up, liquidate or dissolve itself,
merge with, or consolidate with another organization unless the other
organization is a subsidiary, or convey, sell, assign, transfer, lease, or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
to any Person, or acquire all or substantially all of the assets or the business
of any Person, or permit any Subsidiary to do so, except that (1) any Subsidiary
may merge into or transfer assets to the Company and (2) any Subsidiary may
merge into or consolidate with or transfer assets to any other Subsidiary.
Section 6.02 Dividends. Declare or pay any dividends; or make any
distribution of assets to its stockholders as such whether in cash, assets, or
obligations of the Company; or allocate or otherwise set apart any sum for the
payment of any dividend or distribution on; or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Company or another
Subsidiary.
Section 6.03.Sale of Assets. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Subsidiary to sell, lease, assign, transfer,
or otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) inventory
disposed of in the ordinary course of business; (2) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (3) that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Company.
Section 6.04 Transactions With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
ARTICLE VII
CORPORATE GOVERNANCE
So long any of the Debentures are outstanding, or the Warrant has not
been fully exercised or expired, Company will ensure that the following are
fulfilled:
Section 7.01. Board of Directors. The Company will have and maintain a
board of directors of not less than four members. The Company's board of
directors shall meet not less frequently than quarterly.
Section 7.02. Audit Committee. The Company's board of directors shall
appoint an Audit Committee of not less than three members and no more than one
(1) of the members of the Audit Committee shall be an officer or employee of or
contractor or consultant to the Company. The Audit Committee shall meet not less
frequently than quarterly. The Audit Committee shall review the Company's
financial statements for accuracy and completeness at least quarterly and before
their release. The Audit Committee shall meet with the Company's independent
accountants prior
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to and immediately following the Company's annual audit, and such other times as
the Audit Committee deems necessary to assure that the Company's financial
statements are accurate, complete and in accordance with GAAP, and to insure
that the Company has adequate financial and reporting policies, procedures,
systems and controls in place.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. Events of Default. If any of the following events shall
occur:
(1) The Company should fail to pay the principal of, or interest
payable pursuant to the Debenture, or any amount of a commitment or other fee,
as and when due and payable;
(2) Any representation or warranty made or deemed made by the Company
in this Agreement or which is contained in any certificate, document, opinion,
or financial or other statement furnished at any time under or in connection
with any Transaction Document shall prove to have been incorrect, incomplete, or
misleading in any material respect on or as of the date made or deemed made;
(3) The Company shall fail to perform or observe any term, covenant, or
agreement contained in Articles V, VI, or VII hereof;
(4) The Company or any of its Subsidiaries shall (a) fail to pay any
indebtedness for borrowed money of the Company or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise), or (b) fail
to perform or observe any term, covenant, or condition on its part to be
performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration
of, after the giving of notice or passage of time, or both, the maturity of such
indebtedness;
(5) The Company or any of its Subsidiaries (a) shall generally not pay,
or shall be unable to pay, or shall admit in writing its inability to pay its
debts as such debts become due; or (b) shall make an assignment for the benefit
of creditors, or petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets; or
(c) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (d) shall have had any
such petition or application filed or any such proceeding commenced against it
in which an order for relief is entered or an adjudication or appointment is
made, and which remains undismissed for a period of thirty (30) days or more; or
(e) shall take any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of thirty
(30) days or more;
(6) One or more judgments, decrees, or orders for the payment of money
in excess of Twenty five Thousand Dollars ($25,000) in the aggregate shall be
rendered against the Company or any of its Subsidiaries and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of 30
consecutive days without being vacated, discharged, satisfied, or stayed or
bonded pending appeal;
(8) Any of the following events shall occur or exist with respect to
the Company and any Commonly Controlled Entity under ERISA: any Reportable Event
shall occur; complete or partial withdrawal from any Multiemployer Plan shall
take place; any Prohibited Transaction shall occur; a notice of intent to
terminate a Plan shall be filed, or a Plan shall be terminated; or circumstances
shall exist which constitute grounds entitling the PBGC to institute proceedings
to terminate a Plan, or the PBGC shall institute such proceedings; and in each
case above, such event or condition, together with all other events or
conditions, if any, could subject the Company to any tax, penalty, or other
liability which in the aggregate may exceed Twenty five Thousand Dollars
($25,000); or
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(9) If the Purchaser receives its first notice of a hazardous discharge
or an environmental complaint from a source other than the Company, and the
Purchaser does not receive notice (which may be given in oral form, provided
same is followed with all due dispatch by written notice given by Certified
Mail, Return Receipt Requested) of such hazardous discharge or environmental
complaint from the Company within twenty-four (24) hours of the time the
Purchaser first receives said notice from a source other than the Company; or if
any federal, state, or local agency asserts or creates a Lien upon any or all of
the assets, equipment, property, leaseholds, or other facilities of the Company
by reason of the occurrence of a hazardous discharge or an environmental
complaint; or if any federal, state, or local agency asserts a claim against the
Company and/or its assets, equipment, property, leaseholds, or other facilities
for damages or cleanup costs relating to a hazardous discharge or an
environmental complaint; provided, however, that such claim shall not constitute
a default if, within five (5) Business Days of the occurrence giving rise to the
claim, (a) the Company can prove to the Purchaser's satisfaction that the
Company has commenced and is diligently pursuing either: (i) a cure or
correction of the event which constitutes the basis for the claim, and continues
diligently to pursue such cure or correction to completion or (ii) proceedings
for an injunction, a restraining order, or other appropriate emergent relief
preventing such agency or agencies from asserting such claim, which relief is
granted within ten (10) Business Days of the occurrence giving rise to the claim
and the injunction, order, or emergent relief is not thereafter resolved or
reversed on appeal; and (b) in either of the foregoing events, the Company has
posted a bond, letter of credit, or other security satisfactory in form,
substance, and amount to both the Purchaser and the agency or entity asserting
the claim to secure the proper and complete cure or correction of the event
which constitutes the basis for the claim;
then, and in any such event, the Purchaser may, by notice to the Company, (1)
declare its obligation to advance funds pursuant to the Debenture be terminated,
whereupon the same shall forthwith terminate, and (2) declare the Debenture, all
interest thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Debenture, all such interest, and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Company.
Upon the occurrence and during the continuance of any Event of Default,
the Purchaser is hereby authorized at any time and from time to time, without
notice to the Company (any such notice being expressly waived by the Company),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Purchaser to or for the credit or the account of the Company against any
and all of the obligations of the Company now or hereafter existing under this
Agreement or the Debenture, irrespective of whether or not the Purchaser shall
have made any demand under this Agreement or the Debenture or such other
Transaction Document and although such obligations may be unmatured. The
Purchaser agrees promptly to notify the Company after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of the Purchaser under this
Section 8.01 are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Purchaser may have.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendments, Etc. No amendment, modification, termination,
or waiver of any provision of any Transaction Document to which the Company is a
party, nor consent to any departure by the Company from any Transaction Document
to which it is a party, shall in any event be effective unless the same shall be
in writing and signed by the Purchaser, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 9.02. Notices, Etc. All notices and other communications
provided for under this Agreement and under the other Transaction Documents to
which the Company is a party shall be in writing (including telegraphic, telex,
and facsimile transmissions) and mailed or transmitted or delivered;
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If to the Company:
National Boston Medical , Inc.
P.O Box 1161
43 Taunton Green
3rd Floor, Taunton, MA 02780
If to the Purchaser:
Oxford Capital Corp.
C/o 1013-17th Avenue S.W.
Calgary, Alberta
T2T 0A7
Ph: (403) 508-5055
Fax: (403) 508-5055
With a copy that does not
constitute notice to:
Ian H. Kennedy,
Barrister & Solicitor
1013 - 17th Avenue
Calgary, Alberta
T2T 0A7
Attn: Ian H. Kennedy
Tel: (403) 508-5055
Fax: (403) 508-5058
; or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section 9.02. Except as otherwise provided in this Agreement, all
such notices and communications shall be effective when deposited in the mails
or delivered to the telegraph company, or sent, answerback received,
respectively, addressed as aforesaid, except that notices to the Purchaser
pursuant to the provisions of Article II shall not be effective until received
by the Purchaser.
Section 9.03. No Waiver. No failure or delay on the part of the
Purchaser in exercising any right, power, or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise thereof or the exercise
of any other right, power, or remedy hereunder. The rights and remedies provided
herein are cumulative, and are not exclusive of any other rights, powers,
privileges, or remedies, now or hereafter existing, at law or in equity or
otherwise.
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Section 9.04. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company and the Purchaser and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights under any Transaction Document to which the Company
is a party without the prior written consent of the Purchaser.
Section 9.05. Costs, Expenses, and Taxes. The Company agrees to pay on
demand all costs and expenses incurred by the Purchaser in connection with the
preparation, execution, delivery, filing, and administration of the Transaction
Documents, and of any amendment, modification, or supplement to the Transaction
Documents, including, without limitation, the fees and out-of-pocket expenses of
counsel for the Purchaser incurred in connection with advising the Purchaser as
to its rights and responsibilities hereunder up to $10,000 USD. The Company also
agrees to pay all such costs and expenses, including court costs, incurred in
connection with enforcement of the Transaction Documents, or any amendment,
modification, or supplement thereto, whether by negotiation, legal proceedings,
or otherwise. In addition, the Company shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Transaction Documents
and the other documents to be delivered under any such Transaction Documents,
and agrees to hold the Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees. This provision shall survive termination of this
Agreement.
Section 9.06. Integration. This Agreement and the Transaction Documents
contain the entire agreement between the parties relating to the subject matter
hereof and supersede all oral statements and prior writings with respect
thereto.
Section 9.07. Indemnity. The Company hereby covenants and agrees to
protect, indemnify and hold harmless the Purchaser and its directors, officers,
11/18/99
15
<PAGE>
employees, solicitors, agents, affiliates, assignees, transferees and successors
in interest (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") from and against all losses, claims, expenses, costs,
damages or liabilities, whether joint or several (including the aggregate amount
paid in reasonable settlement of any actions, suits, proceedings or claims)
which they may suffer or incur caused by or arising directly or indirectly by
reason of: (a) any information or statement (except any information or statement
relating solely to the Purchaser) contained in the Registration Statements being
or being alleged to be a misrepresentation; (b) the omission to state in the
Registration Statements, or any amendment to such document a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except the omission to state a material fact relating solely to the
Purchaser); (c) the Company not complying with any requirement of any securities
legislation or regulatory requirements of any jurisdiction in which Purchasers
reside in connection with the Debentures, the Warrant and the Common Stock
underlying the Debentures and the Warrant; (d) any order made or any inquiry,
investigation or proceeding commenced or threatened by any regulatory authority
based upon an allegation that any untrue statement or alleged omission or any
misrepresentation or alleged misrepresentation in the Registration Statements or
any amendment to such document exists (except information and statements
relating solely to the Purchaser) which prevents or restricts the trading in of
the Common Stock under Canadian or US law; (e) the inaccuracy of any of the
Company's representations or warranties contained in any of the Transaction
Documents; and (e) the Company's failure to comply with any of its obligations
contained in any of the Transaction Documents.
If any action or claim shall be asserted against an Indemnified Party
in respect of which indemnity may be sought from the Company pursuant to the
provisions hereof, or if any potential claim contemplated by this section shall
come to the knowledge of an Indemnified Party, the Indemnified Party shall
promptly notify the Company in writing of the nature of such action or claim
(provided that any failure to so notify shall not affect the Company's liability
under this paragraph unless such delay has prejudiced the defense to such
claim). The Company shall be entitled but not obliged to participate in or
assume the defense thereof, provided, however that the defense shall be through
legal counsel acceptable to the Indemnified Party, acting reasonably. In
addition, the Indemnified Party shall also have the right to employ separate
counsel in any such action and participate in the defense thereof, and the fees
and expense of such counsel shall be borne by the Indemnified Party unless (i)
the employment thereof has been specifically authorized in writing by the
Company; (ii) the Indemnified Party has been advised by counsel acceptable to
the Company, acting reasonably, that representation of the Company and the
Indemnified Party by the same counsel would be inappropriate due to actual or
potential differing interests between them; or (iii) the Company has failed
within a reasonable time after receipt of such written notice to assume the
defense of such action or claim. It is understood and agreed that the Company
shall not, in connection with any suit in the same jurisdiction, be liable for
the legal fees and expenses of more than one separate legal firm to represent
the Indemnified Parties. Neither party shall effect any settlement of any such
action or claim or make any admission of liability without the written consent
of the other party, such consent not to be unreasonably withheld or delayed. The
indemnity hereby provided for shall remain in full force and effect and shall
not be limited to or affected by any other indemnity in respect of any matters
specified in this section obtained by the Indemnified Party from any other
person.
To the extent that any Indemnified Party is not a party to this
Agreement, the Purchaser shall obtain and hold the right and benefit of this
section in trust for and on behalf of such Indemnified ParThe Company hereby
waives its right to recover contribution from the Purchaser with respect to any
liability of the Company by reason of or arising out of any misrepresentation
contained in any Registration Statement or any amendment thereto; provided,
however, that such waiver shall not apply in respect of liability caused or
incurred by reason of or arising out of any misrepresentation which is based
upon or results from information relating solely to the Purchaser contained in
such document.
The Company hereby consents to personal jurisdiction and service and
venue in any court in which any claim which is subject to indemnification
hereunder is brought against the Purchaser or any Indemnified Party and to the
assignment of the benefit of this section to any Indemnified Party for the
purpose of enforcement provided that nothing herein shall limit the Company's
right or ability to contest the appropriate jurisdiction or forum for the
determination of any such claims.
Section 9.08 Governing Law; Jurisdiction. This Agreement and the
Debenture shall be governed by, and construed in accordance with, the laws of
11/18/99
16
<PAGE>
the State of Florida. The courts of the State of Florida, shall have exclusive
jurisdiction and venue for the adjudication of any civil action between them
arising out of relating to this Agreement, and hereby irrevocably consent to
such jurisdiction and venue.
Section 9.09. Severability of Provisions. Any provision of any
Transaction Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 9.10. Headings. Article and Section headings in the Transaction
Documents are included in such Transaction Documents for the convenience of
reference only and shall not constitute a part of the applicable Transaction
Documents for any other purpose.
Section 9.11. Currency. Unless otherwise specifically stated to the
contrary, all currency and dollar amounts stated herein is currency of the
United States of America.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
The Company: The Purchaser:
National Boston Medical, Inc. Oxford Capital Corp.
By/s/Daniel Hoyng, Chairman and CEO By Riaz Mamdami
- -------------------------------------- -------------------
Date signed: September 2, 1999. Dated signed: September 2, 1999.
11/18/99
17
<PAGE>
EXHIBIT A
FORM OF DEBENTURE
Exhibit A - Page 1
<PAGE>
EXHIBIT B
FORM OF WARRANT
Exhibit B - Page 1
<PAGE>
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
Exhibit C - Page 1
<PAGE>
EXHIBIT D
FORM OF ESCROW AGREEMENT
Exhibit D - Page 1
<PAGE>
EXHIBIT E
FORM OF LEGAL OPINION
OF COMPANY'S COUNSEL
Exhibit E - Page 1
<PAGE>
THIS WARRANT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF,
HAVE NOT BEEN FILED OR REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR WITH THE SECURITIES REGULATORY AUTHORITY OF ANY STATE, BUT ARE
BEING ISSUED PURSUANT TO CERTAIN EXEMPTIONS THEREUNDER. THIS WARRANT, AND SUCH
SHARES OF COMMON STOCK, ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION THEREUNDER OR EXEMPTION THEREFROM.
THIS WARRANT WILL BE VOID AFTER SEPTEMBER 2, 2000
PURCHASER WARRANT
TO PURCHASE $250,000 US DOLLARS WORTH OF SHARES OF COMMON STOCK OF
NATIONAL BOSTON MEDICAL, INC.
This is to certify, That FOR VALUE RECEIVED
Oxford Capital Corp. As Nominee
(the "Holder")
is entitled to purchase, (subject to the provisions of this Warrant) from
National Boston Medical, Inc. (the "Company"), a Nevada Corporation, at any time
up to an including September 2, 2000, $250,000 US dollars worth of shares of the
Company's common stock, (the "Common Stock") at a purchase price equal to the
lower of 78% of the average closing bid price of the common stock for the 90
trading days preceding August 13, 1999 or 78% of the average closing bid price
of the common stock for the 5 days preceding the conversion date as decided upon
by the Holder in its sole discretion; in no event shall the purchase price be
less than $0.10. The number of shares of Common Stock to be received upon the
exercise of this Warrant and the price to be paid for a share of Common Stock
may be adjusted from time to time as set forth in accordance with the terms
herein. The shares of the Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares," and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time, is hereinafter sometimes referred to as the
"Exercise Price." This Warrant is the Warrant referred to in the Debenture
Purchase Agreement (the "Purchase Agreement") entered into between the Company
and Oxford Capital Corp. effective as of September 2, 1999.
1. Exercise of Warrant. This Warrant may be exercised in whole
or in part at any time, and from time to time, up to and including September 2,
2000. If the date on which the Holder's right to purchase Common Stock expires,
is a day on which national banks in the United States of America are authorized
by law to close, then the right shall expire on the next succeeding business day
that is not such a day. The Holder shall have the following rights of
relinquishment in respect to the exercise of this Warrant:
(i) the Holder, or his or her heirs or other legal
representatives to the extent entitled to exercise the Warrant under
the terms thereof, in lieu of purchasing the entire number of shares
subject to purchase thereunder, shall have the right to relinquish all
or any part of the then unexercised portion of the Warrant (to the
extent then exercisable) for a number of shares of Common Stock, for an
amount of cash or for a combination of Common Stock and cash to be
determined in accordance with the following provisions of this clause
(i):
(A) The written notice of exercise of such right of
relinquishment shall state the percentage, if any, of the
Appreciated Value (as defined below) that the Holder elects to
receive in cash ("Cash Percentage"), such Cash Percentage to
be in increments of 10% of such Appreciated Value up to 100%
thereof;
Exhibit E - Page 2
<PAGE>
(B) The number of shares of Common Stock, if any,
issuable pursuant to such relinquishment shall be the number
of such shares, rounded to the next greater number of full
shares, as shall be equal to the quotient obtained by dividing
(A) the difference between (I) the Appreciated Value and (II)
the result obtained by multiplying the Appreciated Value and
the Cash Percentage by (B) the then current market value per
share of Common Stock;
(C) The amount of cash payable pursuant to such
relinquishment shall be an amount equal to the Appreciated
Value less the aggregate current market value of the Common
Stock issued pursuant to such relinquishment, if any, which
cash shall be paid by the Company subject to such conditions
as are deemed advisable to permit compliance by the Company
with the withholding provisions applicable to employers under
the Code and any applicable state income tax laws;
(D) For the purpose of this clause (i), "Appreciated
Value" means the excess of (x) the aggregate current market
value of the shares of Common Stock covered by the Warrant or
the portion thereof to be relinquished over (y) the aggregate
purchase price for such shares specified in such Warrant;
(ii) That such right of relinquishment may be exercised only
upon receipt by the Company of a written notice of such relinquishment
which shall be dated the date of election to make such relinquishment;
and that, for the purposes of this Plan, such date of election shall be
deemed to be the date when such notice is sent by registered or
certified mail, or when receipt is acknowledged by the Company, if
mailed by other than registered or certified mail or if delivered by
hand or by any telegraphic communications equipment of the sender or
otherwise delivered; provided, that, in the event the method just
described for determining such date of election shall not be or remain
consistent with the provisions of Section 16(b) of the Exchange Act or
the rules and regulations adopted by the Commission thereunder, as
presently existing or as may be hereafter amended, which regulations
exempt from the operation of Section 16(b) of the Exchange Act in whole
or in part any such relinquishment transaction, then such date of
election shall be determined by such other method consistent with
Section 16(b) of the Exchange Act ;
(iii) That the "current market value" of a share of Common
Stock on a particular date shall be deemed to be its fair market value
on that date as determined in accordance with Paragraph 6(b); and
(iv) That the Warrant, or any portion thereof, may be
relinquished only to the extent that (A) it is exercisable on the date
written notice of relinquishment is received by the Company, and (B)
the holder of such Warrant pays, or makes provision satisfactory to the
Company for the payment of, any taxes which the Company is obligated to
collect with respect to such relinquishment.
(b) Each Holder who is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act ("Covered Holder") shall be
entitled to receive payment only in cash when Warrants are relinquished during
any window period commencing on the third business day following the Company's
release of a quarterly or annual summary statement of sales and earnings and
ending on the twelfth business day following such release ("Window Period");
provided, however, that payment shall be so made in cash only in respect of 50%
of the Warrants. A Covered Holder shall be entitled to receive payment only in
shares of Common Stock upon (a) the relinquishment of Warrants outside a Window
Period and (b) the relinquishment of Warrants during a Window Period once such
Holder has received payment in cash for the relinquishment of 50% of the
Warrants.
(c) Warrants hereunder, are exempt from the operation from Section
16(b) of the Exchange Act or will be amended, if necessary, to permit such
exemption. If a Warrant is relinquished, such Warrant shall be deemed to have
been exercised to the extent of the number of shares of Common Stock covered by
the Warrant or part thereof which is relinquished, and no further Warrants may
be granted covering such shares of Common Stock.
(d) Neither any Warrant nor any right to relinquish the same to the
Company as contemplated by this Paragraph
Exhibit E - Page 3
<PAGE>
7 shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Code, as amended, or the rules thereunder.
The Holder shall exercise all rights to purchase Common Stock by presenting
and surrendering this Warrant to Ian H. Kennedy, Barrister & Solicitor, as
Escrow Agent (the "Escrow Agent"), at 1013 - 17th Avenue S.W., Calgary, Alberta,
T2T 0A7, with the Purchase Form annexed hereto duly executed and accompanied by
payment or relinquishment of Warrants at the Exercise Price for the number of
shares specified in such form. If this Warrant should be exercised or
relinquished in part only the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
holder to purchase the balance of the shares purchasable hereunder. Upon receipt
by the Escrow Agent of this Warrant, in proper form for exercise, with the
Purchase Form annexed hereto duly executed for the number of shares specified in
such form, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder, unless the Company has objected in accordance with the Escrow
Agreement. As soon as practicable after each exercise of this Warrant, the
Escrow Agent will deliver the shares issuable upon such exercise to the Holder
in accordance with the terms of the Escrow Agreement (the "Escrow Agreement")
between the Company and the Escrow Agent dated as of September 2, 1999.
2. Issuance and Delivery of Shares. The Company hereby represents,
warrants and agrees that at all times there shall be reserved for issuance and
delivered to the Escrow Agent the number of shares of Common Stock as shall be
required for issuance or delivery upon exercise of this Warrant.
3. Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange, the
current value shall be the last reported sales price of the Common Stock on
such exchange on the last business day prior to the date of exercise of
this Warrant or if no such sale is made on such day, the average of the
closing bid and asked prices for such day on such exchange; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the National Association of
Securities Dealers Quotation System ("NASDAQ"), or if not so quoted on
NASDAQ then by the National Quotation Bureau, Inc., on the last business
day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Company's board of
directors, and supported by the written fairness opinion of an independent,
nationally-recognized stock valuation expert.
4. Transfer, Assignment or Loss of Warrant.
(a) The Holder may assign this Warrant, in whole or in part, or any
interest herein. This Warrant and the Warrant Shares have not been filed or
registered with the United States Securities and Exchange Commission or
with the securities regulatory authority of any state. This Warrant and the
Warrant Shares are subject to restrictions imposed by federal and state
securities laws and regulations on transferability and resale, and may not
be transferred assigned or resold except as permitted under the Securities
Act of 1933, as amended (the "Act"), and the applicable state securities
laws, pursuant to registration thereunder or exemption therefrom. Upon
receipt by the Company of evidence satisfactory to it that this Warrant or
any portion hereof, has been legally and validly transferred or assigned,
the Company will, at the request of the Holder, upon presentation and
surrender hereof to the Company or at the office of its stock transfer
agent, if any, exchange this Warrant for one or more Warrants,
Exhibit E - Page 4
<PAGE>
in such denominations as the Holder shall specify, registered in such name
or names as the Holder shall designate. If, at the time of such transfer or
assignment, this Warrant has not been registered under the Act, then each
such transferee and assignee shall furnish the Company with evidence
satisfactory to it that such transferee or assignee is acquiring such
Warrant for his, her or its own account, for investment purposes, and not
with a view towards a distribution thereof or of the Warrant Shares
issuable upon its exercise. The term "Warrant," as used herein, includes
any Warrants issued in substitution for or replacement of this Warrant, or
into which this Warrant may be divided or exchanged.
(c) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and in the case of
loss, theft or destruction of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant in the case of mutilation,
the Company will execute and deliver a new Warrant of like tenor and date.
Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this
Warrant so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
(d) The Company may cause any legend required under the Act and
applicable state securities laws, or advisable in the opinion of its legal
counsel, to be set forth on each Warrant.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder as the holder of this Warrant are limited to those
expressed in this Warrant, the Escrow Agreement and the Purchase Agreement.
6. Anti-Dilution Provisions. After October 1, 1999, so long as this
Warrant is outstanding and not fully exercised, the Company shall not, without
the prior consent of the Holder, issue or sell (i) any Common Stock without
consideration or for a consideration per share less than $0.15; or (ii) issue or
sell any warrant, Warrant, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than $0.15.
7. Officer's Certificate. Whenever the Company shall determine the fair
market value of the Common Stock pursuant to Section 3 hereof, the Company shall
forthwith file in the custody of its Secretary at its principal office, with its
stock transfer agent and with the Escrow Agent, an officer's certificate showing
the fair market value and the date as of which it was determined, and setting
forth in reasonable detail the facts requiring such determination and the facts,
assumptions, methodology and calculations employed in determining such value.
The Company shall forthwith deliver a copy of each such officer's certificate to
the Holder, and the Company shall make all such officer's certificates available
at all reasonable times for inspection by and copying by the Holder.
8. Notices to Warrant Holders. So long as this Warrant shall be
outstanding and any portion of it shall be unexercised, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock or (ii) if the
Company shall offer to the holders of Common Stock, for subscription or purchase
by them, any shares of stock of any class or any other rights or (iii) if any
capital reorganization of the Company, reclassification of the Company's capital
stock, consolidation or merger of the Company with or into another corporation,
sale, lease or transfer of all or substantially all of the Company's property
and assets to another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, then in any such
case, the Company shall cause to be delivered to the Holder, at least ten days
prior to the date specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating the date on
which (x) a record is to be taken for the purpose of such dividend, distribution
or rights, or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
9. Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value
Exhibit E - Page 5
<PAGE>
to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Company shall cause effective provision to be made so that the Holder shall have
the right thereafter, by exercising this Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
classification, capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section 9 shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for or of a security of the Company other than
Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of Section 6 hereof with the amount of the
consideration received upon the issue thereof being determined by the Company's
board of directors, such determination to be final and binding on the Holder.
10. Spin-Offs. In the event the Company spins-off a subsidiary by
distributing to the Company's stockholders as a dividend or otherwise the stock
of the subsidiary, the Company shall reserve for the life of the Warrant shares
of the subsidiary to be delivered to the holders of the Warrants upon exercise
to the same extent as if they were owners of record of the Warrant Shares on the
record date for payment of the shares of the subsidiary.
11. Registration under the Securities Act of 1933. On or before
November 2, 1999, the Company shall file a registration statement to be
effective no later than December 2, 1999, to register the issuance of the
Warrant Shares under the Securities Act of 1933, as amended, in accordance with
the terms of the Registration Rights Agreement between the Company and the
Holder, dated September 2,1999.
12. Miscellaneous. All notices given under this Warrant shall be in
writing, addressed to the parties as set forth below, and shall be effective on
the earliest of (i) the date received, or (ii) if given by facsimile transmittal
on the date given if transmitted before 5:00 p.m. the recipients time, otherwise
it is effective the next day, or (iii) on the second business day after delivery
to a major international air delivery or air courier service (such as Federal
Express or Network Couriers):
If to the Company: If to the Purchaser:
National Boston Medical , Inc. Oxford Capital Corp.
P.O Box 1161 C/o 1013-17th Avenue S.W.
43 Taunton Green Calgary, Alberta
3rd Floor, Taunton, MA T2T 0A7
02780 Ph: (403) 508-5055
Fax: (403) 508-5055
With a copy that does not With a copy that does not
constitute notice to: constitute notice to:
Mintmire & Associates Ian H. Kennedy,
265 Sunrise Avenue, Suite 204 Barrister & Solicitor
Palm Beach, Florida 33480 1013 - 17th Avenue
Attn: Donald F. Mintmire Calgary, Alberta
Tel: (561) 832-5696 T2T 0A7
Fax: (561) 659-5371 Attn: Ian H. Kennedy
Tel: (403) 508-5055
Fax: (403) 508-5058
Exhibit E - Page 6
<PAGE>
(a) This Warrant is binding on and, except for the limitations
on transfer and assignment contained in Section 4, shall enure to the
benefit of the successors in interest of the Company and the Holder,
respectively.
(b) This Warrant shall be governed by, and construed in accordance
with the laws of the State of Florida; provided, however, if any provision
of this Agreement is unenforceable under Florida law, but is enforceable
under the laws of the State of Nevada, then Nevada shall govern the
construction and enforcement of that provision.
(c) This Warrant shall be governed by and interpreted in
accordance with the laws of the State of Florida and the federal laws of
the United States of America; provided, however, that if any provision of
the Debenture Agreements is unenforceable under the laws of the State of
Florida or the national laws of the United States of America, but is
enforceable under Nevada law, then such provision shall be governed by and
interpreted in accordance with Nevada law. The parties agree that the
courts of the State of Florida, shall have exclusive jurisdiction and venue
for the adjudication of any civil action between them arising out of
relating to this Agreement, and hereby irrevocably consent to such
jurisdiction and venue.
Dated as of September 2, 1999.
NATIONAL BOSTON MEDICAL , INC.
By
- ---------------------
President
By/s/Marek Lozowicki
- ---------------------
Secretary
Exhibit E - Page 7
<PAGE>
PURCHASE/ RELINQUISH FORM
Date: ____________________
TO: NATIONAL BOSTON MEDICAL, INC.
.
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing/relinquishing _____ shares of Common Stock.
Oxford Capital Corp.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _____________________________________________________
Address: __________________________________________________
City, State, Zip Code: ____________________________________
Signature: ________________________________________________
Exhibit E - Page 8
<PAGE>
EXHIBIT A
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION D PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE COMPANY IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
NATIONAL BOSTON MEDICAL, INC.
12% CONVERTIBLE DEBENTURE
$250,000 USD September 2, 1999
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation (the "Company"), for
the value received, hereby unconditionally and absolutely promises to pay to the
order of OXFORD CAPITAL CORP., or holder (collectively, the "Holder"), upon
presentation and surrender of this Debenture to the Company at its office on the
3rd Floor, 43 Taunton Green, Taunton, MA. P.O Box, 1161, 02780, or such other
place as the Company may designate from time to time, the Principal Sum due
under this Debenture, on September 2, 2000, or if such day is not a regular
business day, then on the next business day thereafter (the "Maturity Date"),
plus interest at the simple rate of twelve percent (12%) per annum with all
accrued and unpaid interest due and payable on the Maturity Date.
All dollar amounts set forth in this Debenture are United
States Dollars. A regular business day is a day on which banks in the State of
New York and the Province of Alberta are open for business and a trading day is
a day in which the New York Stock Exchange is open for trading.
1. PRINCIPAL SUM.
The Principal Sum outstanding at any time shall be Two Hundred
Fifty Thousand Dollars less any Principal Sum prepaid through the date of the
calculation and less any Principal Sum which had been converted into Common
Stock as provided for in Section 2 hereof through the date of the calculation.
2. CONVERSION.
Exhibit E - Page 9
<PAGE>
(a) The Holder of this Debenture shall have the right,
at its option, beginning on the thirtieth (30th) day after the Initial Funding
Date through 5:00 p.m. Alberta, Canada time on the last regular business day
immediately prior to the Maturity Date to convert, subject to the terms and
provisions of this Section 2, any or all of the outstanding Principal Sum of
this Debenture. Conversions pursuant to this Section 2 are at a price (the
"Conversion Price") per share equal to: (i) the lower of seventy-eight percent
(78%) of the average closing bid price of the Common Stock of the Company on the
principal market for such Common Stock for 90 days preceding August 13, 1999; or
(ii) 78% of the average closing bid price of the common stock for the five (5)
trading days immediately preceding the date a conversion notice is provided to
the Company (the AConversion Date@); in no event shall the Conversion Price be
lower than $0.10.
To effect conversion of all or any part of the Principal
Sum secured by this Debenture, the Holder shall present the Company with a
written Notice of Conversion by either registered mail or facsimile on the date
of Conversion. In either case, prior to issuance of previously unissued shares
in the Common Stock of the Company to the Holder, this Debenture must be
surrendered at the principal office of the Company, accompanied by the original
Notice of Conversion duly executed, and, accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly executed by the
Holder or its attorney duly authorized in writing to specify whether the Holder
desires interest on the amount of the Principal Sum being converted to be paid
in cash by Company check, or in shares of Common Stock of the Company.
(b) As promptly as practicable after the surrender,
as herein provided, of this Debenture for conversion and the completed and
executed Notice of Conversion, the Company shall deliver or cause to be
delivered, to or upon the written order of the Holder of this Debenture so
surrendered: (i) certificates representing the largest number of fully paid and
nonassessable full shares of Common Stock into which this Debenture may be
converted in accordance with the provisions of this Section 2; (ii) a check in
payment for fractional shares, based on amount in cash equal to such fraction
multiplied by the current "Market Price" as defined in Section 4 hereof; (iii)
cash or additional shares of Common Stock of the Company for the accrued but
unpaid interest due on the Principal Sum being converted through the date of the
Notice of Conversion; and (iv) a replacement Debenture identical to this
Debenture, except as to the issue date and as adjusted to reflect the Principal
Amount actually outstanding after the conversion, if less than the then
outstanding Principal Sum is being converted. Such conversion shall be deemed to
have been made at the close of business on the date that this Debenture shall
have been received by the Company for conversion, with a Notice of Conversion
duly executed, in satisfactory form for conversion, so that the rights of the
Holder of this Debenture as a Debenture holder as to the Principal Sum being
converted shall cease at such time and, subject to the provisions of this
Section 2(b), the person or persons entitled to receive the shares of Common
Stock upon conversion of this Debenture shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock
(including any Common Stock issued for interest) at such time and such
conversion shall be at the Conversion Price in effect at such time.
3. PREPAYMENT.
After the effective date of a registration statement registering
the Common Stock underlying this Debenture, the Company may prepay, upon at
least fifteen (15) days advance written notice any or all of the outstanding
Exhibit E - Page 10
<PAGE>
Principal Sum of this Debenture by notifying the Holder in writing of the date
the prepayment is to be made. Along with any prepayment of the Principal Sum,
all accrued but unpaid interest on such Principal Sum shall also be paid. Within
seven (7) days of the receipt of a notice of prepayment, the Holder shall notify
the Company as to whether the interest to be paid shall be in cash by Company
check or in Common Stock of the Company. Notwithstanding any notice of intention
to prepay any or all of the then outstanding Principal Sum, such Principal Sum
may be converted into Common Stock pursuant to Section 2 hereof until the
prepayment actually is made.
4. INTEREST.
At the Holder's election, accrued but unpaid interest must be paid in Common
Stock of the Company in an amount of shares equal to the interest to be paid in
Common Stock divided by the Conversion Price applicable to the Principal
hereunder. Not earlier than the sixtieth (60th ) day and not later than the
thirtieth (30th) day prior to the Maturity Date, the Holder shall notify the
Company if it desires to have the accrued but unpaid interest due on the
Maturity Date paid in shares of Common Stock of the Company. If the Holder does
not give any such notice in a timely manner, the interest at Maturity shall be
paid in cash by Company check.
5. ANTI-DILUTION PROVISIONS.
After October 1, 1999, so long as this Debenture is outstanding and not
fully exercised, the Company shall not, without the prior consent of the Holder,
issue or sell (i) any Common Stock without consideration or for a consideration
per share less than $0.15; or (ii) issue or sell any warrant, Warrant, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a consideration per
share less than $0.15.
6. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon conversion of this Debenture) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by converting this Debenture at any time prior to the payment in full
of the Debenture, to acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been acquired
upon conversion of this Debenture immediately prior to such reclassification,
change consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Debenture. The foregoing
provisions of this Section 5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, ales or conveyances. In the event
Exhibit E - Page 11
<PAGE>
s that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 5 hereof.
7. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Company shall register the shares of the Common Stock which may be
issued upon the conversion of the principal sum of the Debenture and for the
interest payable thereunder as provided for in Exhibit C to the Debenture
Purchase Agreement, the Registration Rights Agreement.
8. REGULATION D.
This Debenture and the Common Stock issuable upon conversion or as interest
under this Debenture were issued under Regulation D under the Securities Act of
1933, as amended, and may be transferred only as provided for in the Debenture
Acquisition Agreement.
9. EVENTS OF DEFAULT.
If one or more of the following described events shall occur (each an
"Event of Default"):
(a) The Company shall fail to pay the principal of, or interest on, this
Debenture within five (5) days after the Holder has given written notice to
the Company that the same has become due; or
(b) The Company shall fail to perform or observe any of the provisions
contained in any other Section of this Debenture or the Debenture
Acquisition Agreement and such failure shall continue for more than thirty
(30) days after the Holder has given written notice to the Company; or
(c) Any material representation or warranty made in writing by or on behalf of
the Company in this Debenture shall prove to have been false or incorrect
in any material respect, or omits to state a material fact required to be
stated therein in order to make the statements contained therein, in the
light of the circumstances under which made, not misleading, on the date as
of which made, and the Company shall have failed to cure such false or
incorrect statement within thirty (30) days after the Holder has given
written notice to Borrower; or
(d) The Company shall be adjudicated a bankrupt or insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or the Company shall apply for or
consent to the appointment of a receiver, trustee, or similar officer for
it or for all or any substantial part of its property; or such receiver,
trustee or similar officer shall be appointed without the application or
consent of the Company and such appointment shall continue undischarged for
a period of sixty (60) days; or the Company shall
Exhibit E - Page 12
<PAGE>
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Company and shall remain
undismissed for a period of ninety (90) days; or any judgment, writ,
warrant of attachment or execution or similar process shall be issued or
levied against a substantial part of the property of the Company and such
judgment, writ, or similar process shall not be released, vacated or fully
bonded within ninety (90) days after its issue or levy; or
(e) A final judgment for money of over One Hundred Thousand ($100,000) not
covered by insurance shall be rendered against the Company and if, within
ninety (90) days after entry thereof, such judgment shall not have been
discharged, satisfied or execution thereof stayed pending appeal, or if,
within ninety (90) days after the expiration of any such stay, such
judgment shall not have been discharged or satisfied; or
(f) The Company shall be enjoined, restrained or in any way prevented by a
court order from continuing to conduct all or any material part of its
business affairs;
THEN, or at any time thereafter, and in each and every case:
(1) Where the Company is in default under the provisions of Section 8(d)
hereof, the entire unpaid principal amount of the Debenture, all interest
accrued and unpaid thereon, and all other amounts payable to the Holder
hereunder shall automatically become and be forthwith due and payable without
offset or counterclaim of any kind and without presentment, demand, protest or
notice of any kind, and without regard to the running of the statute of
limitations, all of which are hereby expressly waived by the Company; and
(2) In any other case referred to in this Section 8, the Holder may, by
written notice to the Company, declare the entire unpaid principal amount of
this Debenture, all interest accrued and unpaid hereon, and all other amounts
payable hereunder to be forthwith due and payable, whereupon the same shall
become immediately due and payable, without offset or counterclaim of any kind
and without presentment, demand, protest or further notice of any kind, and
without regard to the running of any statutes of limitation, all of which are
hereby expressly waived by the Company.
Any declaration made pursuant to Section 8(2) hereof is
subject to the condition that, if at any time after the principal of this
Debenture shall have become due and payable, and before any judgment or decree
for the payment of the moneys so due, or any thereof, shall have been entered,
all arrears of interest upon this Debenture (except that Principal Sum of this
Debenture which by such declaration shall have become payable) shall have been
duly paid, and every Event of Default shall have been made good, waived or
cured, then and in every such case the Holder shall be deemed to have rescinded
and annulled such declaration and its consequences; but no such rescission or
annulment shall extend to or affect any subsequent Event of Default or impair
any right consequent thereon.
Exhibit E - Page 13
<PAGE>
10. CORPORATE OBLIGATION.
It is expressly understood that this Debenture is solely a corporate
obligation of the Company and that any and all personal liability, either at
common law or in equity, or by constitution or statute, of, and any and all
rights and claims against, every stockholder, officer, or director, as such,
past, present or future, are expressly waived and released by the Holder as a
part of the consideration for the issuance hereof.
11. TRANSFER.
Subject to the appropriate provisions of the Act and of Section 7 hereof,
this Debenture or any portion of the principal amount hereof in One Hundred
Thousand Dollars ($100,000) increments, or multiples thereof (unless the entire
Principal Sum is being transferred), is transferable on the records of the
Company upon presentation of this Debenture, properly endorsed, at its principal
office; upon such presentation and transfer a new Debenture or Debentures will
be issued; provided, however, no transfer shall be made to any competitors of
the Company. For the purposes of payment and all other purposes, the Company
shall deem and treat the person in whose name this Debenture is registered as
the absolute owner hereof and the Company shall not be affected by any notice to
the contrary.
12. MISCELLANEOUS.
(a) Notwithstanding the foregoing, the Company promises to pay interest
after maturity (whether by acceleration or otherwise, and before as well as
after judgment) at the same rate as above provided prior to maturity on
balances, if any, then outstanding.
(b) Interest under this Debenture shall be computed on the basis of a
thirty (30) day month and a year of 360 days for the actual number of days
elapsed.
(c) In case at any time any Common Stock shall be listed on any stock
exchange or NASDAQ, the Company will list on such exchange or NASDAQ, and all
other exchanges where such stock or other stock, warrants, and securities at the
time issuable upon the conversion of this Debenture may be listed, and keep
listed thereon subject to listing requirements of such exchange or exchanges, an
official notice of issuance upon the conversion of this Debenture, all shares of
common stock and other stock and securities from time to time issuable upon such
conversion.
(d) Unless otherwise specifically proved herein, any notice required by
this Agreement is effective and deemed delivered when faxed to the numbers set
forth herein and receipt of such fax is electronically confirmed. Any such
notice shall also be sent on the day such fax is sent (or if such day is not a
business day, the next business day by overnight courier), properly addressed.
Notices will be sent to the fax numbers and addresses set forth in this
Agreement, unless either party notifies the other of an fax and/or address
change in writing.
Exhibit E - Page 14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed in
Taunton, MA, as of the day and year first above written.
NATIONAL BOSTON MEDICAL, INC.
By: /s/Daniel Hoyng
- --------------------
Its: President
By:
Its:
OXFORD CAPITAL CORP.
By: /s/ Riaz Mamdami
- ----------------------
NBMI - Conv. Deb 9/1/99
<PAGE>
CONVERSION NOTICE
TO: NATIONAL BOSTON MEDICAL, INC.
The undersigned Holder of this Debenture hereby irrevocably exercises
the option to convert $________________ of the Principal Sum of this Debenture
into shares of Common Stock of NATIONAL BOSTON MEDICAL, INC. in accordance with
the terms of this Debenture, or of such other kind of stock or other property as
shall be authorized under the terms of this Debenture, and directs that the
shares or other property issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any accrued and unpaid
interest on the portion being converted and any Debenture representing the
unconverted portion of this Debenture, be issued and delivered to the
undersigned unless a different name has been indicated below. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
The accrued and unpaid interest due upon the Principal Sum being
converted shall be paid in cash__ or Common Stock __. (Please check one of the
blanks, if no blanks are checked, the interest shall be paid in cash.)
The date of this Conversion Notice is _______ ___, _____. The
undersigned has determined the closing bid price for the Common Stock of
NATIONAL BOSTON MEDICAL, INC. for the 5 trading days preceding the date of this
[Notice of Conversion] on the principal market for such Common Stock, was
$_____, $______, $____, $____, and $____, for an average of $____. Therefore
pursuant to Section 2(a) of the Debenture, the Conversion Price is $_____ per
share.
If you want the stock certificate made out in another person's name,
fill in the form below and have your signature guaranteed: (Insert other
person's social security or tax I.D. no.)
(Print or type other person's name, address and zip code)
Date: Your Signature:
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee:
NBMI - Conv. Deb 9/1/99
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: I or we assign and transfer
this Security to (insert assignee's social security or tax I.D. no.)
(print or type other person's name, address and zip code)
and irrevocably appoint
agent to transfer this Debenture on the books of National Boston Medical,
Inc. The agent may substitute another to act for him.
Date: Your Signature:
(Sign exactly as your name appears on the face of this Debenture)
Signature Guarantee:
Note: This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation D under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.
NBMI - Conv. Deb 9/1/99
EXHIBIT 10.54
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of the
24th day of August, 1999, by and between NATIONAL BOSTON MEDICAL, INC., a Nevada
corporation ("Buyer"), and JEFF FREEDMAN ("Seller"). Buyer and the Seller are
referred to collectively herein as the "Parties."
The issued and outstanding capital stock of Product Sourcing Ltd.
("PSL"), a Georgia corporation consists of five hundred (500) shares of common
stock (the "Shares"), all of which are owned by Seller. Seller desires to sell,
and Buyer desires to purchase the Shares on the terms and conditions contained
herein.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Purchase and Sale of Shares. Seller agrees to sell to Buyer, and Buyer agrees
to purchase from Seller, the Shares. Notwithstanding anything to the contrary
herein, the sale of the Shares shall not include the accounts listed on Schedule
"A" attached hereto, and such accounts shall remain the property of the Seller.
2. Purchase Price. The aggregate purchase price (the "Purchase Price") for the
Shares to be purchased by Buyer from the Seller pursuant to the terms hereof
shall be $750,000.00 plus 2,500,000 shares of the restricted common stock of
Buyer (the "NBM Shares").
a. The cash portion of the Purchase Price shall be paid by Buyer to the
Seller as follows:
(i) At the Closing (as hereinafter defined) Buyer shall pay Seller the
amount of $100,000, by wire transfer to an account or accounts
designated by the Seller.
(ii) At the Closing Buyer shall deliver to Seller a Secured Promissory
Note substantially in the form of Exhibit "A" attached hereto (the
"Note"), in the principal amount of $550,000. The Note will be secured
by the Shares and Seller shall deliver a Stock Pledge and Security
Agreement substantially in the form of Exhibit "B" attached hereto,
which shall provide that Seller may take back the Shares in the event
of a default under this Agreement. The Note shall bear interest at the
rate of five and three tenths percent (5.3%) and be payable in 24
equal monthly installments of principal and interest. The Note shall
also provide that Seller shall have the option of electing to take
76,389 additional shares of common stock of the Buyer in lieu of any
monthly installment.
(iii) Ninety days after the Closing Date (as hereinafter defined)
Buyer shall pay Seller the amount of $100,000, by wire transfer to an
account or accounts designated by the Seller.
<PAGE>
b. Anything to the contrary herein notwithstanding, the Buyer agrees that
prior to the payment in full of the Purchase Price, Buyer shall not merge
(where PSL is not the surviving entity in such merger), liquidate,
dissolve, assign, sell all or substantially all the assets of PSL, or
otherwise affect the separate legal identity of PSL or its ongoing business
(collectively, "Sale"). If a Buyer causes a Sale before the payment in full
of the Purchase Price, then upon consummation of such Sale, the Note shall
be due and payable to Seller on the date of such sale.
c. Within two weeks after Closing, a certificate for 2,500,000 NBM Shares
shall be delivered by Buyer to Seller, free and clear of any Liens.
d. Within two weeks after Closing, NBM shall deliver twenty-four (24) stock
certificates for 76,389 shares of NBM restricted common stock each to be
placed in escrow with an attorney mutually agreed upon by Seller and Buyer,
as collateral for the shares to be delivered to Seller, if Seller elects to
receive NBM shares in lieu of any monthly cash payments under the
provisions of the Note.
3. The Closing.
a. The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place simultaneously at the offices of Buyer's
counsel and Seller's counsel at 9:30am on August 27, 1999 via facsimile of
signature pages and overnight delivery of original signature pages, or such
other date as Buyer and the Seller may mutually determine (the "Closing
Date"); provided, however, that the Closing Date shall be no later than
September 1, 1999 which date may be extended with the mutual consent of
Buyer and the Seller.
b. At the Closing, Buyer shall pay the Purchase Price in the manner set
forth in Section above against delivery of all certificates representing
the Shares either duly endorsed in blank or accompanied by stock powers
similarly endorsed. Such certificates shall be canceled at the Closing and
new certificates representing the Shares shall be issued in the name of the
Buyer. All of the Shares shall be conveyed and transferred to Buyer free
and clear of any Liens (as hereinafter defined).
4. Representations and Warranties of Seller. As an inducement to the execution
of this Agreement and the purchase of the Shares by Buyer, Seller represents and
warrants to, and agrees with, Buyer that:
a. PSL is a corporation duly organized, validly existing and in good
standing under the laws of the state of Georgia and has all requisite
corporate power and corporate authority to own or lease and operate its
properties and assets and to carry on its business as, and in the places
where, such properties and assets are now owned or leased and operated and
such business is now being conducted. PSL is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualifications.
<PAGE>
b. The entire authorized capital stock of PSL consists of fifty thousand
(50,000) shares of common stock, of which five hundred (500) shares are
issued and outstanding. The Shares have been duly authorized and validly
issued and are fully paid and non-assessable and none of them was issued in
violation of any pre-emptive or other right. The Shares will be sold to
Buyer free and clear of any and all security interests, liens, claims,
pledges, charges, options, commitments, restrictions (excluding
restrictions on sale under applicable federal and state securities laws),
or other encumbrances whatsoever (all security interests, liens claims,
pledges, charges, options, commitments, restrictions or other encumbrances
being referred to herein as "Liens"). Seller is not a party to or bound by
any contract, agreement or arrangement to issue, sell or otherwise dispose
of or register for sale or other disposition or redeem, purchase or
otherwise acquire any capital stock or any other security of PSL or any
other security exercisable or exchangeable for or convertible into any
capital stock or any other security of PSL. There is no outstanding right
(including unexercised preemptive rights), option, warrant, or other right
to subscribe for or purchase, or contract, agreement or arrangement with
respect to, any capital stock or any other security of PSL or any other
security exercisable or exchangeable for or convertible into any capital
stock or any other security of PSL.
c. The statements contained in this Section are correct and complete as of
the date of this Agreement and will be correct and complete as of the
Closing Date as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section with
respect to himself.
d. Seller has full power and authority to execute and deliver this
Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Seller, enforceable
in accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other laws, decisions or equitable principles now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights or debtors' obligations generally, and to general equity principles,
and (B) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefore may be
brought. Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
e. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any
statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental
agency, or court to which Seller is subject or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest, or other
arrangement to which Seller is a party or by which he is bound or to which
any of his assets is subject.
<PAGE>
f. Seller has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which Buyer could become liable or obligated.
g. Seller is not subject to any unsatisfied judgment, order, decree,
stipulation, injunction, or charge and is not a party or, to the knowledge
of any or its officers (and employees with responsibility for litigation
matters), is threatened to be made a party to any charge, complaint,
action, suit, proceeding, hearing, or investigation of or in any court or
quasi-judicial or administrative agency of any governmental authority or
before any arbitrator. None of Seller and the directors and officers (and
employees with responsibility for litigation matters) of Seller has any
reason to believe that any such charge, complaint, action, suit,
proceeding, hearing, or investigation may be brought or threatened against
Seller.
5. Representations and Warranties of Buyer. As an inducement to the execution of
this Agreement and the sale of the Shares by Seller, Buyer represents and
warrants to, and agrees with, Seller that:
a. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the state of Nevada and has all requisite
corporate power and corporate authority to own or lease and operate its
properties and assets and to carry on its business as, and in the places
where, such properties and assets are now owned or leased and operated and
such business is now being conducted. Buyer is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualifications.
b. The entire authorized capital stock of Buyer consists of 50,000,000
shares of common stock, which will be increased to 100,000,000 shares upon
final approval of the shareholders, of which approximately 48,500,000
shares are issued and outstanding. All of the issued and outstanding shares
have been duly authorized and validly issued and are fully paid and
non-assessable and none of them was issued in violation of any pre-emptive
or other right. The NBM Shares will be delivered to Seller free and clear
of any and all Liens.
c. Except as have been obtained or as may be required by the exchange or
automated quotation system on which the NBM common stock may be listed or
under the applicable state Business Corporation Act, the Securities
Exchange Act of 1934, as amended, the Securities Act of 1933, as amended,
or state securities laws, no consent, authorization, approval, permit or
license of, or filing with, any governmental or public body or authority,
any lender, any lessor or any other person is required to authorize, or is
required in connection with, the execution, delivery and performance of
this Agreement or the agreements contemplated hereby on the part of NBM.
d. The statements contained in this Section are correct and complete as of
the date of this Agreement and will be correct and complete as of the
<PAGE>
Closing Date as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section .
e. Buyer has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of Seller, enforceable in accordance
with its terms and conditions, except that (A) such enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
laws, decisions or equitable principles now or hereafter in effect relating
to or affecting the enforcement of creditors' rights or debtors'
obligations generally, and to general equity principles, and (B) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought. Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
f. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any
statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental
agency, or court to which Buyer is subject or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest, or other
arrangement to which Buyer is a party or by which it is bound or to which
any of its assets is subject.
g. Buyer has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which Seller could become liable or obligated.
h. Except as set forth on Schedule "B", Buyer is not subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge and
is not a party or, to the knowledge of any or its officers (and employees
with responsibility for litigation matters), is threatened to be made a
party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency
of any governmental authority or before any arbitrator. None of Buyer and
the directors and officers (and employees with responsibility for
litigation matters) of Buyer has any reason to believe that any such
charge, complaint, action, suit, proceeding, hearing, or investigation may
be brought or threatened against Buyer.
6. Conditions Precedent to Closing by Buyer. The obligations of the Buyer to
consummate the transaction contemplated hereby are subject to the satisfaction
(or waiver by Buyer) on or prior to the Closing Date of the following
conditions:
<PAGE>
a. The Seller shall have performed and complied with all of his covenants
hereunder in all material respects through the Closing;
b. No material adverse change shall have occurred before the Closing in
PSL, its business or its future business prospects;
c. All consents required to permit the transfer of the Shares without
triggering a default under any obligations and agreements of PSL shall have
been granted and received, and such consents and agreements shall be valid
and enforceable on the Closing Date. All notices required to be delivered
to third parties shall have been delivered.
d. Buyer shall have received from Seller a certificate certifying as to the
accuracy as of the Closing Date of each of the representations and
warranties of Seller made herein.
7. Conditions Precedent to Closing by Seller. The obligations of the Seller to
consummate the transaction contemplated hereby are subject to the satisfaction
(or waiver by Seller) on or prior to the Closing Date of the following
conditions:
a. The Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
b. No material adverse change shall have occurred before the Closing in
NBM's stock price, business or its future business prospects;
c. All appropriate corporate and shareholder authorizations of NBM shall
have been obtained;
d. All consents required to permit the transfer of the NBM Shares without
triggering a default under any obligations and agreements of NBM shall have
been granted and received, and such consents and agreements shall be valid
and enforceable on the Closing Date. All notices required to be delivered
to third parties shall have been delivered.
e. Seller shall have received from Buyer a certificate certifying as to the
accuracy as of the Closing Date of each of the representations and
warranties of Buyer made herein.
f. Seller shall have received a certificate of Buyer certifying as to the
due authorization and authority of Buyer to enter into this Agreement,
together with copies of resolutions of the Board of Directors approving the
transactions contemplated hereby.
g. Seller and Buyer shall have entered into a three year Employment and
Non-compete Agreement substantially in the form of Exhibit "C" attached
hereto.
h. Buyer shall agree to negotiate in good faith, an independent contractor
agreement with Michael Steinberg upon such terms as are determined by Buyer
and Michael Steinberg.
<PAGE>
8. Actions to be Taken Prior to Closing.
a. Each of the Parties will use his or its reasonable best efforts to take
all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
b. Each Party will give any notices to third parties required by this
Agreement or the transactions contemplated hereby, and each Party shall
each use their respective best efforts to cause there to be obtained any
required approvals, consents and waivers by any persons as may be necessary
in connection with the consummation of the transactions contemplated by
this Agreement.
c. Each Party will give prompt written notice to the others of any material
development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement.
9. Indemnification By Seller. After the Closing Date, and only in the event the
transactions contemplated by this Agreement have been consummated, and subject
to the terms and conditions of this Section , Seller agrees to indemnify, defend
and hold NBM, and its directors, officers, members, managers, employees, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses (collectively, "Damages"), as incurred,
asserted against or incurred by such indemnities arising out of or resulting
from:
a. a breach of any representation, warranty or covenant of Seller contained
herein or in any Exhibit or certificate delivered hereunder; or
b. any and all liabilities or obligations of PSL arising from activities
prior to the Closing Date, including but not limited to all claims,
demands, causes of action, losses, liabilities, costs and expenses
(including attorney's fees, costs, and disbursements) asserted against or
incurred by PSL (except in the case of Buyer's negligence or willful
misconduct) against, in connection with, or arising out of the operations,
business and activities of PSL or Seller prior to the date of Closing.
10. Indemnification By Buyer - Pre-Closing. After the Closing Date, and only in
the event the transactions contemplated by this Agreement have been consummated,
and subject to the terms and conditions of this Section , Buyer agrees to
indemnify, defend and hold Seller, and his agents, attorneys and affiliates
harmless from and against all Damages, as incurred, asserted against or incurred
by such indemnities arising out of or resulting from:
a. a breach of any representation, warranty or covenant of Buyer contained
herein or in any Exhibit or certificate delivered hereunder; or
b. any and all liabilities or obligations of Buyer, including but not
limited to all claims, demands, causes of action, losses, liabilities,
costs and expenses (including attorney's fees, costs, and disbursements)
asserted against or incurred by Buyer (except in the case of Seller's
negligence or willful misconduct) against, in connection with, or
<PAGE>
arising out of the operations, business and activities of Buyer prior to
the date of Closing.
11. Indemnification By Buyer - Post Closing. After the Closing Date, and only in
the event the transactions contemplated by this Agreement have been consummated,
and subject to the terms and conditions of this Section , Buyer agrees to
indemnify, defend and hold Seller, and his agents, attorneys and affiliates
harmless from and against all Damages, as incurred, to the extent provided in
the Articles of Incorporation and the Bylaws of Buyer and PSL for directors,
officers and employees of Buyer and PSL, respectively, and as provided by the
states of incorporation of Buyer and PSL.
12. Termination. Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing. Buyer may terminate this
Agreement by giving written notice to the Seller at any time prior to the
Closing in the event Seller is in breach, of any material representation,
warranty, or covenant contained in this Agreement in any material respect, and
Seller may terminate this Agreement by giving written notice to Buyer at any
time prior to the Closing in the event Buyer is in breach, of any material
representation, warranty, or covenant contained in this Agreement in any
material respect.
13. Confidentiality; Publicity and Disclosures. Each party shall keep this
Agreement and its terms confidential, and shall make no press release or public
disclosure, either written or oral, regarding the transactions contemplated by
this Agreement without the prior knowledge and consent of the other parties
hereto; provided that the foregoing shall not prohibit any disclosure (a) by
press release, filing or otherwise that NBM has determined in its good faith
judgment to be required by federal securities laws or the rules of any exchange
upon which the NBM common stock is traded; and (b) to attorneys, accountants, or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement. In the event that the transactions
contemplated hereby are not consummated for any reason whatsoever, the parties
hereto agree not to disclose or use any Confidential Information they may have
concerning the affairs of the other parties, except for information that is
required by law to be disclosed; provided, that should the transactions
contemplated hereby not be consummated, nothing contained in this Section shall
be construed to prohibit the parties hereto from operating businesses in
competition with each other.
a. For purposes of this Agreement, Confidential Information shall mean all
trade secrets and other confidential and/or proprietary information of the
particular party, including information derived from reports and
investigations, research, work in progress, codes, marketing and sales
programs, referral sources, customer lists, financial projections, cost
summaries, pricing, financial information, projections, confidential
filings with any state or federal agency and all other confidential
concepts, methods of doing business, ideas, materials or information
prepared or performed for, by or on behalf of such party by such party's
stockholders, owners, partners, employees, officers, directors, agents,
representatives or consultants. Confidential Information shall not include:
(i) information already known or in the possession of a party before its
receipt by the other party; (ii) information which comes into the public
domain through no fault of either party; and (iii) information which is
disclosed to a party by a third party who has the right to disclose such
information without violating any obligation to the other party.
<PAGE>
14. Miscellaneous.
a. No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
b. Further Assurances. From time to time after the Closing Date, upon the
reasonable request of any party hereto, each other party hereto shall
execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further
actions as such party may reasonably request in order to further and more
effectively implement and effectuate the transactions contemplated hereby,
including the perfection of title to the Shares and the NBM Shares.
Further, Buyer will, and will cause PSL to, use their best efforts to have
Seller released from any and all liability or obligation that Seller may
have pursuant to any guaranty that Seller may have executed with respect to
the debt of PSL.
c. Survival of Representations and Agreements. All representations and
agreements of the parties contained in this Agreement or made pursuant
hereto shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement.
d. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, that may have related in any way to the subject
matter hereof.
e. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or any of his or its rights, interests, or obligations hereunder without
the prior written approval of Buyer and the Seller.
f. Facsimile/Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. A facsimile, telecopy
or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by
one or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of any party
hereto, all parties hereto agree to execute an original of this Agreement
and provide such requesting party with a full set of original signature
pages for each of the parties hereto other than the requesting party within
two (2) days of the original execution date hereof.
g. Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
h. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to a Seller: Jeff Freedman
1270 Vintage Club Drive
Duluth, Georgia 30097
Telephone: (770) 813-8982
Facsimile: (770) 813-8983
with a copy to: Kenneth L. Zirkman, Esq.
Schnader Harrison Segal & Lewis LLP
Suite 2800, SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3252
Telephone: (404) 215-8100
Facsimile: (404) 223-5164
If to Buyer: National Boston Medical, Inc.
P.O. Box 1161
43 Taunton Green, 3rd Floor
Taunton, Massachusetts 02780
Attention: Daniel Hoyng, CEO
Telephone: (508) 884-8820
Facsimile: (508) 880-5208
with a copy to: Donald F. Mintmire , Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, Florida 33480
Telephone: (561) 832-5696
Facsimile: (561) 659-5371
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party
may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
i. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Georgia. The parties
hereto agree that any and all actions concerning any dispute arising
hereunder shall be filed and maintained only in a state or federal court of
appropriate jurisdiction sitting in the state of the non-defaulting party.
<PAGE>
j. Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Buyer and
Seller. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
k. Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction. If the final judgement of a
court of competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
l. Expenses. Buyer shall pay Seller's reasonable legal and accounting costs
incurred in connection with this Agreement and the transactions
contemplated hereby. Such costs shall be paid at Closing.
m. 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
rule of strict construction shall be applied against any Party. Any
reference to any statute or law of any governmental authority shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The Parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
n. Incorporation of Exhibits, Annexes, and Schedules. The Exhibits
identified in this Agreement are incorporated herein by reference and made
a part hereof.
o. Specific Performance. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be
<PAGE>
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of
the United States or any state thereof having jurisdiction over the Parties
and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
under seal as of the date first above written.
BUYER:
Attest NATIONAL BOSTON MEDICAL, INC.
By:/s/ Marek Lozowicki By:/s/ Daniel J. Hoyng
- --------------------------------- -----------------------------
Name: Marek Lozowicki, Secretary Daniel Hoyng, CEO
[Corporate Seal]
SELLER:
/s/ Jeff Freedman (Seal)
----------------------
Jeff Freedman
<PAGE>
Exhibit "A"
SECURED PROMISSORY NOTE
$550,000.00 August 27, 1999
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned NATIONAL BOSTON MEDICAL, INC. (the
"Borrower"), a Nevada corporation, hereby promises to pay to the order of JEFF
FREEDMAN (the "Lender" and, along with each subsequent holder of this Note,
referred to as "Holder"), a Georgia resident, and his successors and assigns, at
1270 Vintage Club Drive, Duluth, Georgia 30097, or at such other place as Holder
may from time to time designate in writing, the principal sum of FIVE HUNDRED
FIFTY THOUSAND AND NO/100THS DOLLARS ($550,000.00), with interest on the
outstanding principal balance from the date hereof until fully paid at a simple
interest rate of five and three-tenths percent (5.3%) per annum, in lawful money
of the United States of America, as hereinafter provided.
This Note shall be payable in twenty-four (24) consecutive monthly
installments of principal and interest in the amount of $24,203.23 each,
commencing on September 30, 1999, and continuing on the30th day of each
successive month with a final payment of all unpaid principal hereof, and
accrued and unpaid interest hereon, being due on August 26, 2001. At anytime a
monthly installment of principal and interest is due, Holder may elect to
receive 76,389 shares of restricted common stock of Borrower in lieu of a cash
payment for such monthly installment. Holder shall have the option to request
common stock in lieu of cash for any or all monthly installments.
This Note is issued to evidence the obligation of the Borrower to pay
the purchase price for certain shares of common stock of Product Sourcing, Ltd.,
described in the Stock Pledge and Security Agreement between the Borrower and
Holder of even date herewith, and this Note is secured thereby.
The Borrower may prepay this Note in full or in part at any time
without notice, penalty, prepayment fee, or payment of unearned interest. All
payments hereunder received from the Borrower by the Holder shall be applied
first to interest to the extent then accrued and then to principal, in reverse
order of maturity.
In no contingency or event whatsoever, whether by reason of advancement
of the proceeds hereof or otherwise, shall the amount paid or agreed to be paid
to Holder for the use, forbearance or detention of money advanced hereunder
exceed the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto; and, in the event any such
payment is inadvertently paid by Borrower or inadvertently received by Holder,
such excess sum shall be, at the Borrower's option, returned to the Borrower
forthwith or credited as a payment of principal, but shall not be applied to the
payment of interest. It is the intent hereof that the Borrower not pay or
contract to pay, and that Holder not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by the Borrower under applicable law.
No waiver by the Holder of any default shall be effective unless in
writing, nor shall it operate as a waiver of any other default or of the same
default on a future occasion. No delay or omission by the Holder in exercising
any of its rights, remedies, powers and privileges hereunder or at law and no
course of dealing between the Holder and the Borrower or any other persons shall
be deemed a waiver by the Holder of any rights, remedies, powers and privileges,
even if such delay or omission is continuous or repeated. No single or partial
exercise of any right, remedy, power or privilege shall preclude exercise of any
other right, remedy, power or privilege by the Holder. Nothing herein shall
limit or restrict any right or remedy granted to the Holder by any other
instrument or by law or in equity.
<PAGE>
It is hereby expressly agreed that the occurrence of any one or more of
the following shall constitute an "Event of Default" hereunder: (i) the failure
of Borrower to pay within ten (10) days after the date due all or any portion of
any sum due hereunder; (ii) the occurrence and continuance of an event of
default under the Stock Pledge and Security Agreement; (iii) the occurrence and
continuance of an event of default under the Employment Agreement between
Borrower and Holder, of even date herewith, or, (iv) the occurrence and
continuance of an event of default under the Stock Purchase Agreement by and
between the Borrower and Holder, of even date herewith. Upon the occurrence of
an Event of Default, Holder may, upon written notice to Borrower (and provided
Borrower shall not have cured such Default), declare all unpaid principal hereof
and accrued interest hereon to be immediately due and payable. Payment may be
enforced and recovered at once without presentment, demand, protest, or notice
of any kind, all of which are hereby expressly waived, and Holder shall be
entitled to exercise any and all of its rights and remedies available to it
pursuant to this Note, the Stock Pledge and Security Agreement, or at law. From
and after the occurrence of any Event of Default, the principal balance
evidenced by this Note shall bear interest, at Holder's election, at a rate per
annum equal to eighteen percent (18%) until either the Event of Default is cured
with Holder's permission and to Holder's satisfaction or otherwise waived in
writing by Holder, or the principal balance of this Note is paid in full.
If this Note is collected by or through an attorney at law, then the
Borrower shall be obligated to pay, in addition to the principal balance and
accrued interest hereof, reasonable attorney's fees, not to exceed fifteen
percent (15%) of such principal and interest, and court costs.
Borrower shall remain primarily liable on this Note until full payment
in accordance with the terms hereof, unaffected by any sale, disposition or
release of Shares (as such term is defined in the Stock Pledge and Security
Agreement), any forbearance or extension of time, any guaranty or assumption by
others, or by any other matter, as to all of which notice is hereby waived by
Borrower. Without limiting the generality of the foregoing, the granting or
allowance of any extension or extensions of time for the payment of any sum or
sums due hereunder, or for the performance of any covenant, condition, or
agreement thereof or hereof, or the release of any Shares or any part thereof or
of other security, or any other action of failure to act by Holder shall in no
way release or discharge the liability of Borrower except as expressly agreed to
in writing by Holder. The failure of Holder to exercise any right or remedy
under this Note, the Stock Pledge and Security Agreement, the Stock Purchase
Agreement, or the Employment Agreement shall not constitute a waiver thereof.
Borrower hereby irrevocable consents to the in personam jurisdiction of
any state or federal court located within Fulton County, Georgia, in any action
to collect the indebtedness evidenced hereby, or owing under the Stock Pledge
and Security Agreement, waives any claim that such forum is inconvenient or
improper, and consents to service of process being made upon it by registered or
certified mail, return receipt requested.
The remedies provided in the Note, the Stock Pledge and Security
Agreement, the Stock Purchase Agreement, and the Employment Agreement or
otherwise available to the Holder for the enforcement of payment of the
principal sum together with interest and payment or performance of the
covenants, conditions and agreements, matters and things herein and therein
contained are cumulative and concurrent and may be pursued singularly or
successively or together at the sole discretion of the Holder, and may be
exercised from time to time as often as occasion therefor shall occur until the
Holder has been paid all sums due hereunder and thereunder in full.
The terms and provisions of the Note are severable. In the event of the
unenforceability or invalidity of any one or more of the terms, covenants,
conditions or provisions of the Note under any applicable law, such
unenforceability or invalidity shall not render any other term, covenant,
condition or provisions hereof
<PAGE>
unenforceable or invalid. In the event any waiver by Maker hereunder is
prohibited by applicable law, such waiver shall be and be deemed to be deleted
herefrom.
Time is of the essence of this Note. The provisions of this Note shall
be construed and interpreted and all rights and obligations of the parties
hereunder determined in accordance with the laws of the State of Georgia. The
undersigned hereby waives presentment, demand, protest or any other notice of
any kind.
Holder, at his option, may enforce his rights against any collateral
securing this Note without enforcing his rights against Borrower, any guarantor
of the indebtedness evidenced hereby or any other property or indebtedness due
or to become due to Borrower. Borrower agrees that, without releasing or
impairing its liability hereunder, Holder may at any time release, surrender,
substitute or exchange any collateral securing this Note and may at any time
release any party primarily or secondarily liable for the indebtedness evidenced
by this Note.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed, sealed and delivered in Atlanta, Georgia, on the date first above
written.
Borrower:
NATIONAL BOSTON MEDICAL, INC.
By:/s/ Daniel J. Hoyng
-------------------------------
Daniel Hoyng, CEO
ATTEST:
/s/ Ernest Zavoral, Sr.
- -----------------------------
Name: Ernest Zavoral, Sr.
Title: COO
[CORPORATE SEAL]
<PAGE>
Exhibit "B"
STOCK PLEDGE AND SECURITY AGREEMENT
THIS STOCK PLEDGE AND SECURITY AGREEMENT (the "Agreement"), is entered
into as of this 27th day of August, 1999, by and between NATIONAL BOSTON
MEDICAL, INC., a Massachusetts corporation (the "Pledgor"), and JEFF FREEDMAN, a
Georgia resident ("Seller").
WITNESSETH
WHEREAS, Seller has sold to Pledgor all of the outstanding common stock
of Product Sourcing, Ltd. ("PSL") as set forth in that certain Stock Purchase
Agreement by and between Pledgor and Seller, dated August 24, 1999;
WHEREAS, Seller agreed to take back a Secured Promissory Note of even
date herewith, for part of the purchase price, in the initial principal amount
of $550,000 (the "Note"); and
WHEREAS, to secure the payment and performance of all obligations of
the Pledgor under the Note, the Pledgor wishes to pledge to the Seller all of
its right, title and interest in and to the issued and outstanding capital stock
of PSL (the "Shares");
NOW, THEREFORE, the parties hereto agree that all capitalized terms
used herein shall have the meanings ascribed to them in the Note to the extent
not otherwise defined or limited herein, and in consideration of the premises,
and intending to be legally bound hereby, the parties further agree as follows:
1. Warranty.
a. Pledgor hereby represents and warrants to the Seller that except for the
security interest created hereby, the Pledgor owns the Shares free and
clear of all liens, charges and encumbrances, that the Shares are duly
issued, fully paid and nonassessable, and that Pledgor has the unencumbered
right to pledge its Shares, and will defend the Shares against the claims
and demands of all third persons.
b. Pledgor will not (i) permit any liens or security interest (other than
Seller's security interest) to attach to any of the Shares, or (ii) permit
any of the Shares to be levied upon or attached under any legal process.
2. Security Interest. Pledgor hereby unconditionally grants and assigns to the
Seller, his successors and assigns, a continuing security interest in and
security title to the Shares and substitutions and replacements therefor.
Pledgor has delivered to and deposited with the Seller herewith all of its
right, title and interest in and to the Shares, together with the certificate
representing the Shares, and a stock power endorsed in blank by Pledgor, as
security for (i) all obligations of the Pledgor to the Seller hereunder; and
(ii) payment and performance of all obligations of Pledgor to the Seller under
the Note, or any extension, renewal, amendment or modification of any of the
foregoing, however created, acquired, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due. Beneficial ownership of the Shares, including, without
<PAGE>
limitation, all voting, consensual and dividend rights, shall remain in the
Pledgor until the occurrence of a default under the terms hereof (as defined in
Section , below).
3. Additional Warrant. In the event that, during the term of this Agreement:
a. any stock dividend, stock split, reclassification, readjustment or other
change is declared or made in the capital structure of PSL, all new,
substituted and additional Shares, or other securities, issued by reason of
any such change and received by Pledgor or to which Pledgor shall be
entitled shall be immediately delivered to the Seller, together with stock
powers endorsed in blank by Pledgor, and shall thereupon constitute the
Shares to be held by the Seller under the terms of this Agreement; and
b. subscriptions, warrants or any other rights or options shall be issued
in connection with the Shares, all new stock or other securities acquired
through such subscriptions, warrants, rights or options by Pledgor shall be
immediately delivered to the Seller and shall thereupon constitute the
Shares to be held by the Seller under the terms of this Agreement.
4. Default. In the event of a demand for payment by the Seller under the terms
of the Note, or a default under the terms of this Agreement, the Stock Purchase
Agreement, or the Employment and Non-Compete Agreement, (any of such occurrences
being hereinafter referred to as a "Default"), Seller may do any or all of the
following, all of which rights and remedies shall be cumulative and any and all
of which may be exercised from time to time and as often as Seller shall deem
necessary or desirable:
a. Exercise any and all rights, privileges and remedies available to Seller
under this Agreement, the Note, the Stock Purchase Agreement between the
Seller and Pledgor, of even date herewith, the Employment and Non-Compete
Agreement between the Seller and Pledgor, of even date herewith, or under
any other instrument, security agreement or other agreement executed by
Pledgor, in favor of Seller;
b. Exercise any and all rights, privileges and remedies available to Seller
as a secured party under the Uniform Commercial Code as enacted in any
applicable jurisdiction, and any and all rights, privileges and remedies
allowed by all other applicable laws;
c. Sell or otherwise dispose of the Shares or any part thereof at any time
and from time to time, at a public or private sale or make other
commercially reasonable disposition of the Shares or any portion thereof,
without advertisement or notice of sale, all of which are hereby waived,
after five (5) days' notice to the Pledgor, which notice Pledgor
acknowledges is sufficient and reasonable, and the Seller may purchase the
Shares or any portion thereof at any public sale. The proceeds of the
public or private sale or other disposition shall be applied (i) to the
costs incurred in connection with the sale, expressly including, without
limitation, any costs under Section hereof; (ii) to any unpaid interest
which may have accrued on any obligations secured hereby; (iii) to any
<PAGE>
unpaid principal; and (iv) to damages incurred by the Seller by reason of
any breach secured against hereby, in such order as the Seller may
determine, and any remaining proceeds shall be paid over to the Pledgor or
others as by law provided. In the event the proceeds of the sale or other
disposition of the Shares are insufficient to pay such expenses, interest,
principal, obligations and damages, the Pledgor shall remain liable to the
Seller for any such deficiency. The Pledgor hereby waives the benefit of
any marshaling statute or similar legal doctrine and agrees that Seller may
exercise its rights against the Shares and apply the proceeds thereof to
any of its obligations in any order in which the Seller, in his sole
discretion, deems appropriate.
5. Additional Rights of Secured Parties. In addition to his rights and
privileges under this Agreement, the Seller shall have all the rights, powers
and privileges of secured parties under the Uniform Commercial Code.
6. Return of Shares to Pledgor. Upon payment in full of all principal and
interest on the Note, the Seller shall return to the Pledgor the Shares and all
rights received by the Seller as agent for the Pledgor as a result of his
possessory interest in the Shares.
7. Disposition of Shares by Agent. The Shares are not registered under the
various Federal or State Securities Acts and disposition thereof after default
may be restricted to one or more private (instead of public) sales in view of
the lack of such registration. The Pledgor understands that upon such
disposition, the Seller may approach only a restricted number of potential
purchasers and further understands that a sale under such circumstances may
yield a lower price for the Shares than if the Shares were registered pursuant
to federal and state securities legislation and sold on the open market.
Pledgor, therefore, agrees that:
a. if the Seller shall, pursuant to the terms of this Agreement, sells or
causes the Shares or any portion thereof to be sold at a private sale, the
Seller shall have the right to rely upon the advice and opinion of any
national brokerage or investment firm having recognized expertise and
experience in connection with the Shares of companies in the direct
response/retail industry (but shall not be obligated to seek such advice
and the failure to do so shall not be considered in determining the
commercial reasonableness of the Seller's action) as to the best manner in
which to expose the Shares for sale and as to the best price reasonably
obtainable at the private sale thereof, and
b. that such reliance shall be conclusive evidence that the Seller has
handled such disposition in a commercially reasonable manner.
8. Pledgor's Obligations Absolute. The obligations of the Pledgor under this
Agreement shall be direct and immediate and not conditional or contingent upon
the pursuit of any remedies against any other person, nor against other security
or liens available to the Seller or his successors, assigns or agents. The
Pledgor hereby waives any right to require that an action be brought against any
other person or to require that resort be had to any security or to any balance
of any deposit account or credit on the books of the Seller in favor of any
other person prior to any exercise of rights or remedies hereunder, or to
require resort to rights or remedies of the Seller in connection with the Note.
<PAGE>
9. Voting Rights.
a. For so long as the Note remains unpaid, after a Default, (i) the Seller
may, upon five (5) days' prior written notice to the Pledgor of his
intention to do so, exercise all voting rights, and all other ownership or
consensual rights of the Shares, but under no circumstances is the Seller
obligated by the terms of this Agreement to exercise such rights, and (ii)
Pledgor hereby appoints the Seller, which appointment shall be effective on
the fifth day following the giving of notice by the Seller as provided in
the foregoing Section (i), Pledgor's true and lawful attorney-in-fact and
IRREVOCABLE PROXY to vote the Shares in any manner the Seller deems
advisable for or against all matters submitted or which may be submitted to
a vote of shareholders. The power-of-attorney granted hereby is coupled
with an interest and shall be irrevocable.
b. For so long as Pledgor shall have the right to vote the Shares, Pledgor
covenants and agrees that it will not, without the prior written consent of
the Seller, vote or take any consensual action with respect to the Shares
which would constitute a Default.
10. Notices. All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to a Seller: Jeff Freedman
1270 Vintage Club Drive
Duluth, Georgia 30097
Telephone: (770) 813-8982
Facsimile: (770) 813-8983
with a copy to: Kenneth L. Zirkman, Esq.
Schnader Harrison Segal & Lewis LLP
Suite 2800, SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3252
Telephone: (404) 215-8100
Facsimile: (404) 223-5164
<PAGE>
If to Buyer: National Boston Medical, Inc.
P.O. Box 1161
43 Taunton Green, 3rd Floor
Taunton, Massachusetts 02780
Attention: Daniel Hoyng, CEO
Telephone: (508) 884-8820
Facsimile: (508) 880-5208
with a copy to: Donald F. Mintmire , Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, Florida 33480
Telephone: (561) 832-5696
Facsimile: (561) 659-5371
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11. Binding Agreement. The provisions of this Agreement shall be construed and
interpreted, and all rights and obligations of the parties hereto determined, in
accordance with the laws of the State of Georgia. This Agreement, together with
all documents referred to herein, constitutes the entire Agreement between the
Pledgor and the Seller with respect to the matters addressed herein and may not
be modified except by a writing executed by the Seller and delivered by the
Seller to the Pledgor. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument.
12. Severability. If any paragraph or part thereof shall for any reason be held
or adjudged to be invalid, illegal or unenforceable by any court of competent
jurisdiction, such paragraph or part thereof so adjudicated invalid, illegal or
unenforceable shall be deemed separate, distinct and independent, and the
remainder of this Agreement shall remain in full force and effect and shall not
be affected by such holding or adjudication.
13. Miscellaneous.
a. The Seller shall not be deemed to have waived any of the Seller's rights
hereunder, or under any other agreement, document or paper signed by the
Pledgor, unless such waiver shall be in writing and signed by the Seller.
No delay or failure on the part of the Seller in exercising any right shall
operate as a waiver of such right or any other right. All rights and
remedies of the Seller are cumulative and concurrent and the exercise of
one right or remedy shall not be deemed a waiver or release of any other
right of remedy. Nor shall a waiver on
<PAGE>
any occasion be construed as a bar to or waiver of any right or remedy on
any future occasion. This Agreement may be amended only by a writing signed
by each of the parties hereto.
b. The provisions of this Agreement shall be in addition to those of any
loan agreement, guaranty, pledge, other security agreement, note, or other
evidence of liability held by the Seller, all of which shall be construed
as complementary to each other. Nothing herein contained shall prevent the
Seller from enforcing any or all other notes, loans, guarantees, pledges or
security agreements in accordance with their respective terms.
c. The rights and privileges of the Seller under this Agreement shall inure
to the benefit of his successors and assigns. All representations,
warranties and agreements of the Pledgor contained in this Agreement shall
bind the Pledgor's respective receivers, trustees, successors and assigns.
If any provision of this Agreement shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as
if such invalid or unenforceable provision had never been contained herein.
d. From time to time, the Pledgor will execute and deliver to the Seller
such additional documents and will provide such additional information as
the Seller may reasonably require to carry out the terms of this Agreement
and be informed of the Pledgor's status and affairs.
e. The Pledgor will pay as part of the debt secured hereby all costs and
expenses, including reasonable fees and expenses of legal counsel for the
Seller, incurred by the Seller in connection with the enforcement of this
Agreement, the collection or attempted collection of the Note, and the
custody, care, preservation, management, sale or collection of, or
realization upon, any of the Shares, including all amounts paid by the
Seller to satisfy liens.
f. This Agreement shall remain in full force and effect until all of the
obligations of the Pledgor to the Seller shall have been paid in full and
all of the undertakings of the Pledgor hereunder and under the Note shall
have been satisfactorily performed in full, whereupon, at the request and
at the expense of the Pledgor, the Seller shall execute and deliver to the
Pledgor such documents as shall be necessary to terminate its security
interest of record or reassign the Shares to the Pledgor.
8. Any failure by the Seller to provide the Pledgor with notice of acts
taken or with copies of instruments executed or endorsed by the Seller on
behalf of or in the name of the Pledgor (or of the Seller) under any power
of attorney herein granted shall not affect the validity of such acts,
execution or endorsement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals, as of the day and year first above written.
Pledgor:
NATIONAL BOSTON MEDICAL, INC.
Attest:
By:/s/ Marek Lozowicki By:/s/ Daniel J. Hoyng
------------------------------ ---------------------------------
Name: Marek Lozowicki, Secretary Daniel Hoyng, CEO
[Corporate Seal]
SELLER:
/s/ Jeff Freedman (Seal)
------------------------
Jeff Freedman
<PAGE>
Exhibit "C"
EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS EMPLOYMENT AND NON-COMPETE AGREEMENT ("Agreement") is made as of
the 27th day of August, 1999 by and among National Boston Medical, Inc. (the
"Company"), a Massachusetts corporation with offices at 43 Taunton Green, 3rd
Floor, Taunton, Massachusetts 02780, and Jeff Freedman (the "Employee") residing
at 1270 Vintage Club Drive, Duluth, Georgia 30097.
R E C I T A L S:
WHEREAS, the Company desires to employ Employee, and Employee desires
to serve as an employee of the Company, on the terms and conditions hereinafter
provided;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein (including, without limitation, the Company's employment of
Employee and the advantages and benefits thereby inuring to Employee) and for
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged by each party hereto, the parties hereby agree as
follows:
1. Employment. The Company agrees to employ Employee, and Employee agrees to be
employed by the Company, pursuant to the terms and conditions of this Agreement.
2. Term. The term of Employee's employment hereunder shall commence on the
effective date set forth above (the "Commencement Date"). Unless earlier
terminated as provided in Section of this Agreement, Employee's employment
hereunder shall continue for a period of three (3) years from the effective date
set forth above. Thereafter, the term of this Agreement may be extended by the
mutual written consent of the parties.
3. Duties. Employee shall serve in the capacity of Executive Vice-President of
Product Development. Employee shall report to the President of the Company.
Employee shall be employed by the Company on a full-time basis and shall not
during the term of this Agreement be engaged in any other business activity that
impedes or detracts from Employee's performance of services for the Company
hereunder.
4. Compensation.
a. Base Salary. During the term hereof, Employee shall be paid an annual
base salary of $100,000. Such base salary shall be payable in accordance
with the normal payroll practices of the Company and shall be subject to
usual and customary withholdings.
b. Out-of-Pocket Expenses. The Company shall promptly reimburse Employee
for the reasonable expenses actually incurred by him in the performance of
his duties hereunder. Employee shall properly account therefor in
accordance with Company policy.
<PAGE>
c. Participation in Benefit and Insurance Plans; Vacations. Employee shall
receive full health insurance, and shall be entitled to participate in or
receive benefits under any retirement, medical, dental, accident, life, or
other employee benefit plan or program made available by the Company to all
of its employees. Employee shall be entitled to paid vacation and holidays
during his employment hereunder in accordance with applicable policies
adopted by the Company for senior executive officers.
d. Bonus. In addition to the base salary, Employee shall receive a bonus
determined in accordance with the provisions set forth on Schedule "A"
attached hereto and made a part hereof.
e. Other Incentives. Employee shall be entitled to participate in or
receive stock options and other standard management incentives made
available by the Company, from time to time, to senior executive officers.
5. Termination Upon Death or Disability or for Cause.
a. Employee's employment hereunder (i) shall be terminated by his death or
total disability and (ii) may be terminated by the Company at any time for
cause. In the event of any such termination of employment, Employee shall
be paid his base salary through the date of death, total disability or
termination for cause, as the case may be, and shall not be entitled to
receive any further compensation or benefits; and, in particular, shall not
receive any severance pay. Employee's employment may be terminated for
cause, effective immediately, upon the giving of written notice to Employee
by the Company's President or Board of Directors.
b. Whenever used herein,
i. "total disability" shall mean the failure or inability of Employee
to perform substantially all of his duties of employment as required
hereunder for a total of 180 days (whether continuous or not) due to
any physical or mental disorder; and
ii. "cause" shall mean: (A) any willful or material breach or
violation of any of Employee's covenants under this Agreement, or any
willful or material neglect of or failure or refusal to perform any of
such covenants, (B) any willful or material misconduct, including,
without limitation, misconduct involving fraud or dishonesty in the
performance of such covenants, duties, or obligations, or conduct
which is reasonably deemed to be injurious to the Company, or (C) the
commission by Employee of a crime involving moral turpitude.
6. Duties Upon Termination. Upon Employee's termination of employment hereunder
for any reason, Employee shall promptly return to the Company any and all
records, files, notes, memoranda, reports, tape recordings, computer programs,
disks, cassettes, copies and other physical representations of any information
relating to the Company or its
<PAGE>
subsidiaries or affiliates whether or not constituting Confidential Information
(as hereinafter defined). Employee hereby acknowledges that any and all such
items are and shall remain at all times the sole property of the Company.
7. Employee's Covenants.
a. Employee covenants and agrees with the Company that Employee will not,
directly or indirectly, while in the Company's employ and through the
period ending one year after the termination of Employee's employment with
the Company for any reason, provide within the Territory, Services (as
hereinafter defined) to any person who is, directly or indirectly, in
competition with the Business of the Company (as hereinafter defined) or
any subsidiary or affiliate thereof engaged in similar business, whether as
an officer, director, shareholder, partner, proprietor, employee, agent,
consultant, independent contractor, or otherwise.
b. Employee covenants and agrees with the Company that while in the
Company's employ and through the period ending one year after the
termination of Employee's employment with the Company for any reason,
Employee will not, directly or indirectly, within the Territory on his own
behalf or on behalf of any person, solicit, divert, or appropriate or
attempt to solicit, divert or appropriate to any such competing person, the
business or services of any person that was a customer or prospective
customer with whom Employee had Material Contact (as hereinafter defined)
while an employee of the Company.
c. For purposes of this Agreement:
i. "Business of the Company" shall mean the business of direct
response sales.
ii. "Confidential Information" shall mean information (in any form or
media) regarding the Company's customers, prospective customers
(including lists), methods of operation, billing rates, billing
procedures, suppliers, business methods, finances, management, or any
other business information relating to the Company (whether
constituting a trade secret or proprietary or otherwise) which has
value to the Company and is treated by the Company as being
confidential;
iii. "Material Contact" shall mean contact between the Employee and
each customer or prospective customer (A) with whom the Employee
dealt; (B) whose dealings with the Company were coordinated or
supervised by the Employee; (C) about whom the Employee obtained
Confidential
Information in the ordinary course of business as a result of the
Employee's association with the Company; or (D) who receives products
or services authorized by the Company, the sale or provision of which
results or resulted in compensation, commissions or earnings for the
Employee, in each of cases (A) through (D) within one year prior to
the date of the Employee's termination;
<PAGE>
iv. "person" shall mean and include any individual, partnership,
association, corporation, trust, unincorporated organization, or any
other business entity or enterprise;
v. "prospective customer" shall mean any person to whom the Company
has sent or delivered a written sales or servicing proposal or
contract in connection with the Business of the Company;
vi. "Services" shall mean services substantially similar to those
services contemplated herein to be provided by the Employee to the
Company and those services actually provided by Employee to the
Company within one year prior to the termination of the Employee's
employment with the Company;
vii. "Territory" shall mean that geographical area consisting of
World.
d. Employee acknowledges that his breach of any covenant contained in this
Section will result in irreparable injury to the Company and that the
Company's remedy at law for such a breach will be inadequate. Accordingly,
Employee agrees and consents that the Company, in addition to all other
remedies available at law and in equity, shall be entitled to both
preliminary and permanent injunctions to prevent and/or halt a breach or
threatened breach by Employee of any covenant contained herein.
e. Each covenant contained in this Section shall be construed as separate
and independent of any other covenant or provision of this Agreement, and
the existence or assertion of any claim, demand, action, or cause of action
against the Company, whether predicated upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of any of
the covenants contained in this Section . In the event that the provisions
of this Section should ever be deemed to exceed the time, scope, or
geographic limitations permitted by applicable law, then such provisions
shall be reformed to the maximum time, scope, and geographic limitations
permitted by such law.
f. Notwithstanding any provision to the contrary, if the Company is in
default under the Stock Purchase Agreement between the Company and
Employee, dated August 24, 1999, or the Secured Promissory Note or Stock
Pledge and Security Agreement, each between the Company and Employee and of
even date herewith, as such term may be defined in each respective
agreement, or if this Agreement is terminated without cause, the provisions
of this Section shall not apply and Employee shall not be bound to any of
the covenants contained in this Section.
8. General Provisions.
a. Assignment. The rights and obligations of the Company under this
Agreement may be assigned or delegated by the Company to any subsidiary,
affiliate, or
<PAGE>
successor of the Company, and in such event, shall inure to the benefit of
and be enforceable by any such assignee or delegate.
b. Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties hereto relating to the subject matter hereof, and
there are no written or oral terms or representations made by either party
other than those described herein. No amendment or modification of this
Agreement shall be valid or binding unless made in writing and duly
executed by each of the parties hereto. Employee acknowledges that he has
read and understood this Agreement and that he has been given a copy hereof
for his personal use and records.
c. Notices. All notices which may or are required to be given pursuant to
this Agreement shall be (i) either delivered in person or sent via
certified or registered mail, return receipt requested, and (ii) addressed
to the party to whom sent or given as at the address set forth on the first
page hereof or to such other address as any party hereto may have given to
the other party hereto in such manner. If delivered, such notice shall be
deemed given when received; if mailed, such notice shall be deemed made or
given five days after such notice has been mailed as provided above.
d. Miscellaneous. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the State of Georgia.
The parties hereto agree that any and all actions concerning any dispute
arising hereunder shall be filed and maintained only in a state or federal
court of appropriate jurisdiction sitting in the state of the
non-defaulting party. Every portion of this Agreement is intended to be
severable. Whenever possible, each such provision shall be interpreted in
such manner as to be valid and enforceable under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under such
law, such provision shall be deemed severed herefrom and shall be
unenforceable to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
Witness: Company:
National Boston Medical, Inc.
/s/ Ernest Zavoral By:/s/Daniel J. Hoyng
- ------------------ -----------------------
Name: Ernest Zavoral Daniel Hoyng, CEO
Title:COO
[CORPORATE SEAL]
Witness: Employee:
/s/ Ernest Zavoral /s/ Jeff Freedman
- ------------------ -----------------
Jeff Freedman
<PAGE>
EXHIBIT "A"
BONUS
The Bonus shall consist of the following:
1. $5,000.00 quarterly cash payment;
2. 100,000 shares of NBM restricted common stock awarded each year of
this Agreement; and
3. Option to purchase 150,000 shares of NBM restricted common stock at
75% of the average annual trading price for NBM stock.
<PAGE>
Schedule "A"
ACCOUNTS NOT INCLUDED IN SALE
1. Merrill Lynch Account No. 714-62995 in the name of J. L. Freedman.
2. Merrill Lynch Account No. 714-07748 in the name of Product Sourcing,
Ltd.
3. Merrill Lynch Account No. 714-89140 Product Sourcing, Ltd SEP Account.
4. Nationsbank/Bank of America Product Sourcing, Ltd. checking account
no. 0001 0416 9181.
<PAGE>
Schedule "B"
LITIGATION MATTERS
On February 10, 1999, James McInerney and Auckland Trust Co. Limited as
Trustee for First Pacific Master Superannuation Fund filed suit in the
Superior Court of Commonwealth of Massachusetts (trial court), Civil Action
Number C99-00198. As a result, NBM's accounts were attached ex-parte at
BankBoston, N.A., Fleet Bank, N.A. and Merrill Lynch Corp. until a
Discharge of Trustee Process and Attachment was filed March 11, 1999.
Mr. McInerney is the sole bondholder from the NBMDE offering who did not
convert his outstanding debt to shares of the Company's common stock.
Although his Note was not payable for three (3) years, Mr. McInerney
demanded immediate payment of all amounts owed. The Company made several
unsuccessful attempts to pay the amount owed ($525,000), but had
insufficient cash flow and was unable to raise such funds. Thereafter, Mr.
McInerney filed this action.
A hearing has been scheduled for August 6, 1999 on Plaintiff's Motion for
an Injunction which contains a request for an order stating that monies
received by Company be placed in escrow. The hearing will be canceled
pending performance on a settlement.
On May 21, 1999, a Settlement Agreement was entered into under which NBM
must pay Mr. McInerney $50,000 by August 6, 1999. Once this amount has been
paid, Mr. McInerney will enter a dismissal with prejudice and execute a
General Release.
<PAGE>
On April 5, 1999, Randall E. Perez, an individual, a/k/a Randy Perez filed
Case # 99-08545 CA 10 in the General Jurisdiction Division in the Circuit
Court of the 11th Judicial Circuit in and for Dade County, Florida against
NBM(NV) and NBMDE for Breach of Contract, Conversion and Unjust Enrichment.
Mr. Perez is a former employee, officer and director of NBM. NBM and Mr.
Perez disputed the amount due him upon termination of his employment. The
matter has since been settled. A settlement agreement has been filed with
the Court. The Court will retain jurisdiction over the matter to enforce
the terms of the settlement agreement.
In 1998, Genomic filed a lawsuit in the United States District Court for
the Middle District of Florida against Garrick Perry and SAI which contends
that Genomic had a contractual relationship with SAI and that SAI produced
Safeshield for NBM using the proprietary confidential formula owned by
Genomic. Genomic also contends that Safeshield test numbers and data are
identical to the tests conducted on Genomic's product and that the use of
that testing data by SAI (or NBM) is unauthorized.
<PAGE>
The Company is a party to an action claiming patent infringement by its
Safeshield product. Genomic and BMM have brought suit against NBM and
Daniel Hoyng for violation of 15 U.S.C. 1125(A) - Reverse Passing Off,
violation of Florida Deceptive and Unfair Trade Practices Act, breach of
fiduciary duty and conversion. Genomic and BMM allege that NBM and Hoyng
have used and continue to use confidential proprietary information which is
the property of Genomic and relates to the Activ product. NBM and Hoyng
have each filed a motion to dismiss which are currently pending. Should the
case not be dismissed against either NBM or Hoyng, each have prepared an
extensive counter-suit against Genomic, BMM, William Coury and others.
On April 7, 1999, DeVo Media, Inc. filed a suit in the Court of Common
Pleas, Mahoning County, Youngstown, Ohio, Case No. 99 CV 832 against Flex,
NBM, Zavoral and Hayek for fraud and breach of contract seeking $136,000
compensatory damages, prejudgment interest at a rate of 10% percent per
annum and $500,000 in punitive damages. The action stems from a contract
entered into on July 10, 1997, which was later modified on February 10,
1998. In May 1999, Flex, NBM, Zavoral and Hayek filed answer, affirmative
defenses and counterclaims for fraud in the inducement and breach of
contract. The Company believes that it has numerous defenses to this
action.
On June 10, 1999 American National Lithographers and Engravers, Inc. d/b/a
American National Ltd. ("National") filed suit in the Circuit Court of Dade
County, Florida, Civil Action Number 99-13897 against the Company which
contends that the Company owes National $19,273.38 for printing costs. The
total amount in dispute exclusive of fees and costs is $19,273.38. The
Company has filed its answer, affirmative defenses and a counterclaim in
response to the complaint. The Company believes that it has several
defenses to the claims listed in the complaint and does not consider the
lawsuit to be material.
EXHIBIT 10.55
SETTLEMENT AGREEMENT
This Settlement Agreement made as of August 25, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and ERNEST ZAVORAL, who
resides at 211 Dartmouth Avenue, Canfield, OH 44406 ("ZAVORAL").
Currently NBM owes $73,056.00 to ZAVORAL (the "INDEBTEDNESS"). In
exchange for the following consideration as well as other good and valuable
consideration paid in hand, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. NBM shall issue to ZAVORAL (or his designee) and ZAVORAL shall
accept 487,040 shares of NBM restricted common stock (the
"STOCK") as full and final satisfaction of the INDEBTEDNESS,
to be issued within two (2) weeks of execution of this
Agreement.
2. Upon receipt of the STOCK, ZAVORAL shall immediately cause a
General Release of All Claims to be executed in favor of NBM.
This Settlement Agreement is freely and voluntarily executed by ZAVORAL
after being apprized of all relevant information and data by his consultants
and/or attorneys. ZAVORAL in executing this Settlement Agreement does not rely
on any inducements, promises, or representations made by NBM or any of the NBM's
representatives. Furthermore, no promise, inducement, or agreement not herein
set forth, has been made to ZAVORAL and this Settlement Agreement contains the
entire agreement between the parties hereto, and the terms of this Settlement
Agreement are contractual and not merely a recital.
All terms contained herein are subject to approval by the Board of
Directors of NBM (the "BOARD"). Should the BOARD fail to approve all or any
portion of this Settlement Agreement, this Settlement Agreement shall be null
and void and the parties returned to their original positions ab initio.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. ERNEST ZAVORAL
By:/s/ Daniel J. Hoyng By:/s/ Ernest Zavoral
------------------------------ ------------------------
Daniel Hoyng, President, CEO and Chairman Ernest Zavoral
EXHIBIT 10.56
SETTLEMENT AGREEMENT
This Settlement Agreement made as of August 25, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and RAYMOND VOLPE, who
resides at 7800 Fairway Trail, Boca Raton, FL 33487 ("VOLPE").
Currently NBM owes $4,809.00 to VOLPE (the "INDEBTEDNESS"). In exchange
for the following consideration as well as other good and valuable consideration
paid in hand, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree to the following:
1. NBM shall issue to VOLPE (or his designee) and VOLPE shall
accept 32,060 shares of NBM restricted common stock (the
"STOCK") as full and final satisfaction of the INDEBTEDNESS,
to be issued within two (2) weeks of execution of this
Agreement.
2. Upon receipt of the STOCK, VOLPE shall immediately cause a
General Release of All Claims to be executed in favor of NBM.
This Settlement Agreement is freely and voluntarily executed by VOLPE
after being apprized of all relevant information and data by his consultants
and/or attorneys. VOLPE in executing this Settlement Agreement does not rely on
any inducements, promises, or representations made by NBM or any of the NBM's
representatives. Furthermore, no promise, inducement, or agreement not herein
set forth, has been made to VOLPE and this Settlement Agreement contains the
entire agreement between the parties hereto, and the terms of this Settlement
Agreement are contractual and not merely a recital.
All terms contained herein are subject to approval by the Board of
Directors of NBM (the "BOARD"). Should the BOARD fail to approve all or any
portion of this Settlement Agreement, this Settlement Agreement shall be null
and void and the parties returned to their original positions ab initio.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. RAYMOND VOLPE
By:/s/ Daniel J. Hoyng By:/s/ Raymond Volpe
--------------------------- -----------------------------
Daniel Hoyng, co-CEO/Chairman Raymond Volpe
EXHIBIT 10.57
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is entered into as of
the 25th day of August, 1999.
A. Parties
The parties to this Agreement are as follows:
1. Blitz Media Sales, L.L.C. dba Blitz Marketing, L.L.C.,
("Blitz"), on its own behalf and on behalf of all of its
agents, affiliates, subsidiaries and assigns, including, but
not limited to, Blitz. All of the terms of this Agreement
shall apply to and be binding on and for the benefit of Blitz,
and all of its agents, affiliates subsidiaries and assigns.
Execution of this Agreement by Blitz shall be deemed to
constitute execution by all of its affiliates and subsidiaries
as well.; and ,
2. National Boston Medical, Inc., on its own behalf and on behalf
of all of its agents, affiliates, subsidiaries and assigns,
including, but not limited to, FlexMarketing, Inc.
(collectively referred to as "NBMI"). All of the terms of this
Agreement by NBMI shall be deemed to constitute execution by
all of its affiliates and subsidiaries as well.
B. Recitals
1. Prior to the date hereof, Blitz and NBMI, had entered into a
written marketing agreement date November 19, 1998, all terms
of which are in full force and effect unless otherwise amended
herein, for the purpose of offering the sale of membership in
Blitz Marketing's Connections Discount Buying Service in
connection with customers responding to NBMI's nationally
broadcast infomercials selling Backstroke (hereinafter
referred to as the "Discount Services Contract" attached
hereto as Exhibit A and incorporated by reference).
2. On November 19, 1998, Blitz and NBMI, entered into a legally
binding oral agreement, all terms of which are in full force
and effect unless otherwise amended herein, for the purpose of
offering for sale Blitz Marketing's vitamin products to
customers responding to the Backstroke infomercial
(hereinafter referred to as the "Glucosamine Contract").
3. Blitz claims, inter alia, that NBMI has failed to perform
certain contractual terms, pursuant to the Discount Services
Contract. Blitz further claims that NBMI has damaged Blitz in
an amount exceeding four million two hundred thousand dollars
($4,200,000.00), in addition to attorneys fees and costs.
4. In reliance on the parties settling the disputes between them,
the execution of this Agreement and adherence to the terms of
this Agreement, Blitz has refrained from pursuing litigation
to redress NBMI's conduct.
<PAGE>
5. In consideration of Blitz's agreement not to file suit against
NBMI, NBMI hereby agrees that:
a) NBMI represents and warrants that it is the process of
developing several new products and is in the process of
beginning production on a new Infomercial for a facial toning
device to be aired within 24 months of the execution hereof.
Further, NBMI represents that NBMI will run both the Blitz
Marketing/Paradise Value Discount Service program and the
Nutritional Supplement Program, memorialized and pursuant to
the terms of the agreement attached hereto as Exhibits "B" and
"C" respectively (hereinafter referred to as the "Programs").
Notwithstanding anything to the contrary contained herein,
NBMI agrees that the Programs, respectively, shall be
presented to every customer that places an order per the terms
of the applicable contract for a minimum of fifty two (52)
weeks; provided that, no week shall count toward the fifty two
(52) week minimum in which the media expenditure ("media
expenditure") shall be defined as the dollar amount of
television media time purchased for a respective Program) for
each such respective Program is less than one hundred thousand
dollars ($100,000.00) for that week. In the event that the
fifty two (52) week minimum requirement is not satisfied
during the time that the facial toning Infomercials are aired,
if at all, it is understood that NBMI agrees to continue to
run the programs on any other Infomercials it is airing at the
time, without limitation, until such time that the fifty two
(52) week minimum requirements are satisfied.
b) The payout terms for the Discount Service Contract shall be
$12.50 per order (the "Signup Fee") see Exhibit "C"). The
payout for the paradise Program (as set forth in Exhibit "B")
shall be $3.00 per month on the Nutritional Supplement
Program.
c) Blitz will have the option of doing "insert programs") in
lie of the foregoing conventional Programs. For the purposes
of this Agreement, an "Insert Program" is defined as a program
based on a video image, graphic terms and conditions and
voice-over of terms and conditions being edited into the blue
screen portion(s) of an "infomercial". For purposes of this
Agreement, "Infomercial" shall be defined as a direct response
television advertisement with an airing time of one (1) to
thirty (30) minutes in length. Under the terms of this Insert
Program, every primary order ("primary order" shall be defined
as the primary product presented for sale within the
Infomercial) generated by the Infomercial also generates an
order for the inserted item ("inserted item" shall be defined
as the Paradise Value Discount Service and/or Nutritional
Supplement). NBMI responsibilities are to either edit in the
material per Blitz' specifications or to allow Blitz to edit
the material to NMBI's master videotape. NBMI then must
provide Blitz with daily downloads of data files of all credit
card and order information from their inbound telemarketing
firms(s). Blitz shall then ship out the item(s) directly to
the customer and bill customers in accordance with the
original terms and conditions disclosed at the time of sale.
Blitz shall compensate NBMI in accordance with the terms set
forth in standard agreements attached hereto as Exhibits "D"
and "E" respectively.
<PAGE>
d) NBMI hereby warrants that it will pay Blitz directly $.50
per "retail unit" shipped (illegible) if NBMI enters into any
agreement between it and a third party involving the
assignment or transfer of the rights or obligation under this
contract, said agreement will contain a provision that the
third party will pay Blitz directly the $.50 per retail unit
(for the purpose s of this Agreement, "Retail Unit" shall
defined as follows: Any "Backstroke Back Massager" shipped for
resale on a retail basis including, but not limited to , a
retail store, kiosk show, catalog or internet). If any third
party or assignee fails to perform its obligations to Blitz,
NBMI will remain liable to Blitz for that failure. NBMI shall
provide quarterly accounting to ascertain the adequacy of such
payments.
f) Within seven (7) calendar days following the execution
hereof, NBMI shall: Purchase 4,100 bottles of the "PM relax"
vitamin supplement for twenty thousand dollars ($20,000.00)
payable to Blitz in advance of shipment thereof provided that
such payment is received no later than 14 calendar days
following the execution hereof; or, in the alternative,
immediately include the PM Relax Vitamin Continuity on the
present "Backstroke Back Massager" Infomercial, subject to the
same terms set forth in the blitz Insert Continuity Program
contract attached hereto as Exhibit "E".
g) All monies payable to Blitz by NBMI under the terms of this
Agreement shall be received by Blitz no later than fourteen
(14) calendar days from the date of shipment of the subject
item of sale from which such payment is derived. Notice of
each such shipment shall be evidenced to Blitz by NBMI by way
of a copy of the applicable bill of landing which shall be
sent via facsimile to Blitz no later than 72 hours following
each respective shipment.
A. Releases
Except for claims relating to the parties' obligations under this Agreement,
NBMI and Blitz irrevocably and unconditionally release and forever discharge
each other from any and all known and unknown claims of action that the parties
have had in the past, or now have or may have in the future arising from or
relating in any way to any known or unknown events, actions or failure to act
that occurred at any time prior to the date of this Agreement, including, any
and all claims related to the parties' business relationships and any oral or
written agreements.
B. Confidentiality
The terms of this Agreement are to be kept strictly confidential, and shall not
be disclosed by the parties except as follows: (a) to the parties' attorneys,
accountants, or other financial or legal advisors; and (b) disclosures required
by law.
C. Other
1. This Agreement sets forth the complete and final agreement of the
parties relating to the matters addressed herein, and, except as expressly
provided herein, supersedes all prior
<PAGE>
arrangements, understandings, agreements and discussions between Blitz
Marketing, Inc. and NBMI. NBMI and Blitz Marketing Group, Inc. Are entering into
this Agreement of their own free will after consulting counsel of their choice,
and are not relying on any promises or representations other than those
expressly stated herein. No change, modification, alteration or addition to any
provision hereof shall be binding unless in writing and signed by both parties.
The parties agree that they have not assigned and will not without prior written
notice, assign, transfer or delegate any of their rights, duties or obligations
hereunder and any attempt to do so shall be null and void.
2 This Agreement may be executed in counterparts, which altogether
shall constitute a single document; it may be effective upon the exchange of
facsimile signatures which shall be deemed "executed originals."
3. Should any party breach any provision herein, that party will be
liable to the other for reasonable attorney's fees.
4. This Agreement shall be governed and construed according to the
internal laws of the State of California and any actions to enforce said
agreement will be brought in Los Angeles County.
5. NBMI will maintain books and records which report sales and
exploitation of the Retail Units and other such items for which Blitz is
entitled to payment from the sale of hereunder. Summaries of such books and
records shall be sent to Blitz on a quarterly basis. Blitz may, at Blitz's own
expense, examine those books and records upon reasonable request to NBMI to
verify such summaries and the applicable payments to Blitz by NBMI.
6. In the event that Blitz determines that NBMI is in breach of this
Agreement, Blitz shall notify NBMI of such breach in writing. Upon receipt of
said notice, NBMI shall have seven (7) calendar days to cure such breach
(hereinafter the "Cure Period"). In the event that NBMI does not cure such
breach within the cure Period, Blitz, at its discretion, may seek the
intervention of the courts for all available legal Relief to which it is
entitled or to which it was entitled prior to entering into this Agreement
including all claims for damages that were available prior to entering into this
Agreement.
G. Effective Date.
This settlement Agreement is not effective until executed by all of the Parties
to this Settlement Agreement.
DATED AND EFFECTIVE on this 26th day of August 1999.
BLITZ NBMI
By: /s/ (illegible) MacGregor By: /s/ Daniel J. Hoyng
----------------------------- ------------------------
(illegible) MacGregor
President Its: CEO
EXHIBIT 10.58
SETTLEMENT AGREEMENT
This Settlement Agreement made as of August 25, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and WORKHORSE COMPUTERS,
INC. f/k/a Remote Information Systems, Inc., with offices at 1004 Silbury Drive,
Austin, TX 78758 and DOUG JONES (collectively referred to herein as "WCI").
Currently NBM owes $22,274.17 to WCI. In exchange for the following
consideration as well as other good and valuable consideration paid in hand, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree to the following:
1. NBM shall pay WCI and WCI shall accept $11,000 on or before
August 27, 1999 with no additional interest accruing thereon
and no penalty for prepayment.
2. NBM shall issue 74,982 shares of its restricted common stock
to WCI (or its designee) within two (2) weeks of execution of
this Agreement.
3. Upon receipt of the items contained in numbers 1 and 2 above,
WCI shall immediately cause a General Release of All Claims to
be executed in favor of NBM.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. DOUG JONES
By:/s/ Daniel J. Hoyng By:/s/ Douglas Jones
----------------------------- ------------------------
Daniel Hoyng, co-CEO/Chairman Doug Jones
WORKHORSE COMPUTERS, INC.
By:/s/ Douglas Jones
------------------------------
Doug Jones, President
EXHIBIT 10.59
MANUFACTURING, MARKETING
AND DISTRIBUTION
AGREEMENT
"DTCP" PRODUCTS
This Agreement ("Agreement") is by and between DEAN TORNABENE and
CHARLES PEREZ as individuals or a company to be designated by them at a future
date (collectively, "DTCP"), and NATIONAL BOSTON MEDICAL, INC., a Nevada
corporation ("National Boston"), both of which are sometimes referred to herein
as a "party" or the "parties".
WHEREAS, DTCP owns and/or controls all rights of manufacturing,
distribution and sale with respect to products as described in Exhibit A and all
improvements, line extensions and modifications thereof (the "Product", and when
more than one - "Products"); and
WHEREAS, DTCP is in the business, among other things, of manufacturing,
advertising, marketing and distributing products in various media; and
WHEREAS, National Boston is also in the business, among other things,
of manufacturing, advertising, marketing and distributing products in various
media, including television, print, and retail; and
WHEREAS, the parties wish to set forth in this Agreement their
understanding of the terms, and conditions upon which DTCP will grant to
National Boston rights to manufacture, use, distribute, sell, advertise, promote
and otherwise exploit the Products as well as additional products to be added to
Exhibit A from time to time hereafter by mutual agreement of the parties.
NOW THEREFORE, in consideration of the premises and the mutual promises
and undertakings set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Manufacturing, Marketing and Distribution Rights.
1.1 Grant of Rights. DTCP hereby grants to National Boston the
following rights which National Boston may, but is not obligated to, exercise
alone or through any one or more of its affiliates:
(a) Generally. The exclusive right, license and privilege
during the Term (as hereafter defined) throughout the World (the "Territory") to
manufacture, use, distribute, sell, advertise, create Brand recognition, promote
and otherwise exploit the Products by any and all means and media, in any and
all markets, including but not limited to broadcast, cable, satellite and all
other forms of television transmission now existing or hereafter developed,
including without limitation, infomercials, commercial spots, promos, television
shopping programs such as QVC and HSN, radio, electronic and computer retailing
media (such as the Internet), all print media, direct mail solicitation, package
inserts, inbound and outbound telemarketing, credit card syndication, CD- ROM,
catalog sales, retail sales, and all other channels or means of distribution now
existing or hereafter developed;
(b) Use of Patents. The right to use any U.S. and foreign
patents that exist or that may issue on the Product and on like or related
matter developed, owned or controlled by DTCP (collectively referred to as the
"Patents"), copies of which have been or will be provided to National Boston.
DTCP represents and warrants that any patent applications and any patents it may
own with respect to the Product are described on Exhibit B hereto;
(c) Use of Trademarks. The right to use any and all trademarks
that DTCP may own or control with respect to the Products including without
limitation the trademarks described in Exhibit C hereto (the "Trademarks"), and
the right to advertise, promote, market, sell and distribute the Products under
or in connection with such other trademarks or identifying names or marks as
National Boston may determine;
(d) Products in Development. The right to use any and all
technology, know-how, mechanical drawings, initial prototypes, manufacturing
specifications, molds, tooling, and other materials owned or in the control of
DTCP which would be necessary or useful in the manufacturing and marketing of
the Products ("DTCP's Technology"), all of which DTCP shall provide to National
Boston for this purpose;
(e) Use of DTCP's Artwork. The right to copy and use any and
all artwork and promotional materials that DTCP may own or control with respect
to the Products ("DTCP's Artwork"), copies of all of which DTCP shall provide to
National Boston for this purpose;
(f) Names, Likenesses and Endorsements. The right to use the
names, likenesses (including, without limitation, photographs, illustrations,
films and videotapes), endorsements and testimonials of all endorsers and other
persons that DTCP may own or control with respect to the Products. Dean
Tornabene agrees to appear in infomercials and other advertising for the
Products, and to allow his name, likeness, image, voice and persona to be used
in such advertising and in the packaging for the Products. National Boston
agrees to promote and use Dean Tornabene's name, likeness and persona in
connection with the Products to extent appropriate, featuring his name and
likeness in the packaging and exploitation of the Products, videos, and retail
boxes and displays, all subject to the artistic approval of Dean Tornabene. Dean
Tornabene and Charles Perez will be reimbursed his reasonable out-of-pocket
expenses incurred in travel in relation to such promotional activities;
(g) Packages. The right to develop such groupings, ensembles,
configurations and packaging of the Products and other ancillary goods for sale
as National Boston may determine; and
(h) Subdistributors. The right to appoint such subdistributors
as National Boston, in its sole judgment, may deem appropriate in order to
market and distribute the Products in retail. National Boston must obtain
approval from DTCP, such approval not to be unreasonably withheld, prior to
sublicensing any infomercial to a third party in order to market and distribute
the Products.
<PAGE>
1.2 Additional Products. The parties contemplate that from time to time
they will mutually agree upon additional products to be licensed by DTCP to
National Boston. Such products will be added to the Exhibits attached hereto,
and unless otherwise agreed at such time all of the terms and conditions of this
Agreement shall be applicable to such additional products. National Boston
agrees that any up-sells of food, ingestables or herb products will be purchased
at market competitive prices from Herbal Technologies, Inc.(HTI). Such market
competitive prices to be not higher than ten (10%) percent above prices for
comparable competitive products.
1.3 Non-Compete. During the term of this Agreement, DTCP shall not,
directly or indirectly, either alone or in participation with any other person
or entity, engage in or be involved with manufacturing, marketing or
distributing any other products substantially similar in design, composition,
content or function to the Products. At any time during the term of this
Agreement when National Boston is marketing a particular Product, and for one
year following the date that National Boston ceases active marketing of the
particular Product, National Boston will not, directly or indirectly, either
alone or in participation with any other person or entity, engage in or be
involved with manufacturing, marketing or distributing any other products
substantially similar in design, composition, content or function to such
Product.
Notwithstanding the foregoing, it is understood and agreed that DTCP
can be involved in the manufacture, marketing and distribution of two existing
products, the Ab Rocker and the Bull Worker, even if these existing product are
substantially similar in design, composition, content or function to the
Products which are the subject of this Agreement.
1.4 Prices. National Boston, in its sole judgment, shall have the right
to sell and distribute the Products at such prices, and on such terms and
conditions (including shipping and handling charges), as National Boston may
establish. Notwithstanding the above National Boston will from time to time
consult with Dean Tornabene and take into consideration his advice and
recommendations on pricing decisions.
1.5 Minimum Royalty Requirements. National Boston shall not have any
minimum sales requirement under this Agreement. However, National Boston's
continued rights to manufacture and market Products are subject to National
Boston's meeting certain minimum royalty conditions, as described in Section 9
hereof.
1.6 Quality Control. National Boston shall adhere to any reasonable
requests and directions of DTCP relating to the maintenance of the quality of
the Products manufactured, and the Trademark applied to such Products, pursuant
to the terms of this Agreement.
2. Exploitation of the Products by National Boston.
National Boston shall be responsible for the commercial exploitation of
the Products. It shall pay all costs for the development, manufacturing,
marketing, and selling of the Products. DTCP shall have no responsibility to pay
for any of these expenses.
<PAGE>
3. Initial Payment and Royalty.
National Boston shall pay DTCP U.S. $50,000 upon execution of this
Agreement by all parties and, monthly, a royalty equal to ten percent (10%) of
gross sales for Products. Gross sales shall include up-sells (but not up-sells
of HTI products) and exclude shipping and handling charges, and shall be reduced
by returns, retail markdowns, discounts and credits.
4. Reports; Record Keeping; and Inspection Rights.
4.1 Separate Division to be Established. National Boston intends to
establish a division of its operations which will be responsible for the
activities of manufacturing, marketing and distributing products licensed to it
by DTCP. The books and records of National Boston shall be prepared in a manner
that will recognize this division and facilitate the calculation of net profits
earned from the DTCP products and the royalties to be paid to DTCP.
4.2 Reports to DTCP. National Boston shall provide monthly reports to
DTCP showing the calculation of any royalty that has accrued in respect of sales
of the Products in form and content as National Boston customarily provides to
other licensers. The monthly reports shall accompany the royalty payment, and
shall be provided by the last business day of each month following the month for
which the royalties are calculated.
4.3 National Boston's Records; Inspection. National Boston shall
maintain complete and accurate records of all sales by National Boston of the
Products, and shall retain such records for a period of two years. During such
period, all such records that are relevant to the calculation of royalties to be
paid by National Boston to DTCP shall be made available for inspection by DTCP
(or DTCP's designee at DTCP's sole expense) not more than one time every quarter
per year during normal business hours upon reasonable prior notice to National
Boston.
5. Proprietary Rights.
5.1 DTCP's Intellectual Property.
(a) Generally. Subject to the rights granted to National
Boston under this Agreement, all right, title and interest in and to the design
of the Products and/or its derivatives, the Patents, Trademarks, DTCP's
Technology, and DTCP's Artwork (collectively, "DTCP's Intellectual Property"),
is and shall remain the sole property of DTCP, and neither National Boston nor
any third party shall acquire any right, title or interest in DTCP's
Intellectual Property by virtue of this Agreement or otherwise, except as
expressly provided herein. Any trademarks developed by National Boston to be
used in conjunction with sales of the Product shall be owned by National Boston.
Any unauthorized use of DTCP's Intellectual Property by National Boston shall be
deemed an infringement of the rights of DTCP therein. National Boston shall not
in any way or at any time dispute or attack the validity or contest the rights
of DTCP in or to any of DTCP's Intellectual Property. The provisions of this
Section 5.1(a) are subject in all respects to the accuracy of the
representations and warranties of DTCP given pursuant to Section 6.2.
(b) Enforcement of Rights. DTCP may at its own expense
enforce its rights in DTCP's Intellectual Property against infringement thereof.
<PAGE>
If National Boston requests DTCP to enforce such rights and DTCP declines to do
so, National Boston shall have the right (but shall not be required) to enforce
such rights, and may do so in DTCP's name with DTCP's written agreement which
shall not be unreasonably withheld.
5.2 National Boston's Intellectual Property. All right, title and
interest in and to the entire editorial, visual, audio, and graphic content of
all advertisements and promotional materials developed by National Boston in
connection with its activities under this Agreement, any new trademarks
developed by National Boston to be used in conjunction with sales of the
Product, any commercials and infomercials that National Boston produces, and all
related materials and the contents thereof (collectively, "National Boston's
Intellectual Property") shall be and remain the sole property of National
Boston, and neither DTCP nor any third party shall acquire any right, title or
interest in National Boston's Intellectual Property by virtue of this Agreement
or otherwise. Any unauthorized use of any of National Boston's Intellectual
Property by DTCP shall be deemed an infringement of the rights of National
Boston therein. DTCP shall not in any way or at any time dispute or attack the
validity or contest the rights of National Boston in or to any of National
Boston's Intellectual Property.
5.3 Customer List. National Boston may compile a list of the names and
addresses of persons and entities who order the Products through it or its
affiliates or are otherwise targeted by or on behalf of it or its affiliates as
potential customers of the Products (the "Customer List"). The Customer List
shall be the sole property of National Boston. At their request DTCP may have
access to the Customer List. In such event, DTCP shall pay a reverse royalty to
National Boston of 5% of gross sales derived from such use. Such royalties will
be due to National Boston by the last business day of each month following the
month for which the royalties are calculated accompanied by monthly reports
showing the calculation of any royalty that has accrued in respect of sales in
form and content as DTCP customarily provides to other licensers.
5.4 Future Patent Applications; Improvements; Modifications. National
Boston shall have the right, but not the obligation, to prosecute any patent
application, United States and foreign, for the Product, and to file for any
patents modifications or improvements, in DTCP's name and on behalf of DTCP and
DTCP shall cooperate fully with National Boston with respect thereto, but all
costs of such activity shall be included in the calculation of net profits for
the purpose of determining royalties that may be due to DTCP. National Boston
shall have no liability under any circumstances to DTCP for any decision or
failure by National Boston to apply for such patents, to continue to prosecute
or to discontinue any such prosecution of any such application, or for any
action, activity, neglect or failure by National Boston, its representatives and
agents, in connection therewith.
6. DTCP's Representations, Warranties and Covenants.
6.1 The Products. DTCP represents, warrants and covenants to National
Boston that:
(a) Information. All information provided to National Boston
by DTCP relating to the Products is and will be, to the best of DTCP's knowledge
and belief, true and correct, including without limitation all information
regarding the effectiveness, quality, characteristics or
<PAGE>
fitness of the Products;
(b) Substantiation. DTCP will provide to National Boston all
information in DTCP's possession or control which substantiates all claims made
by DTCP to National Boston about the Product; and
(c) Patent. The Product sample shown to National Boston
conforms to the description contained, and is consistent with the claims made,
in the Patents (if there are Patents associated with such Product).
(d) Stage of Development. The Products have been fully
developed and are ready for manufacturing and sale to customers.
6.2 Proprietary Rights. DTCP represents, warrants and covenants to
National Boston that:
(a) DTCP's Intellectual Property. DTCP owns or otherwise
controls, or shall own or otherwise control, all right, title and interest in
and to DTCP's Intellectual Property, which constitutes and shall constitute all
of the intellectual property and other proprietary rights necessary or
appropriate for the manufacture, marketing, distribution and sale of the
Products;
(b) Power and Authority. DTCP has and shall have all necessary
power and authority to grant to National Boston all of the rights and privileges
granted pursuant to this Agreement;
(c) No Infringement. Neither the granting of the rights and
privileges granted hereunder nor the exercise thereof by National Boston in
accordance with the terms of this Agreement will infringe or otherwise violate
the intellectual property or other proprietary rights of any person or entity;
(d) No Adverse Claims. DTCP has not been and is not, as of the
date of this Agreement, a party to any litigation enforcing or defending DTCP's
rights in, to or with respect to the Products or any of DTCP's Intellectual
Property, and is not aware of any claims or demands made or threatened by any
person or entity involving the validity of DTCP's rights in, to or with respect
to the Products or any of DTCP's Intellectual Property; and
(e) Applicable Patents, Copyrights, Trademarks and Licenses.
DTCP will at the time of execution of this Agreement, and thereafter, provide
National Boston with copies of all patents, abstracts of all copyright
registrations, copyright applications, trademark registrations, trademark
applications, licenses and other agreements and instruments relating to the
Products and DTCP's Intellectual Property (and all amendments, supplements, and
modifications thereof) which are now in existence or which DTCP shall obtain,
file or enter into during the term of this Agreement.
6.3 Other Warranties. The warranties and representations of DTCP set
forth in this Section 6 and elsewhere in this Agreement are in addition to and
without prejudice to all other warranties expressed or implied by law.
<PAGE>
6.4 No Warranty By National Boston. DTCP acknowledges that National
Boston, by executing this Agreement and exercising its rights hereunder, makes
no representation, warranty, endorsement or certification regarding the
effectiveness, quality, character or fitness of the Products.
7. Additional Representations and Warranties. Each party represents and warrants
to the other as follows:
7.1 Power and Authority. It has all requisite power and authority to
enter into this Agreement, and has duly authorized by all necessary action the
execution and delivery hereof by the officer or individual whose name is signed
on its behalf below.
7.2 No Conflict. The execution and delivery of this Agreement by it,
and the performance of its obligations hereunder, do not and will not conflict
with or result in a breach of or a default under its organizational instruments
or any other agreement, instrument, order, law or regulation applicable to it or
by which it may be bound. DTCP acknowledges that it is prohibited by existing
contract from the development of any certain products for the two-year period
commencing approximately January 1, 1999 through December 31, 2001. This
includes products known as the AB Rocker and the Bull Worker.
7.3 Binding Effect. This Agreement has duly and validly executed and
delivered by it and constitutes its valid and legally binding obligation,
enforceable in accordance with it terms.
8. Indemnification.
8.1 By National Boston.
(a) Generally. Subject to Section 8.1 (b), National Boston
shall defend, indemnify and hold harmless DTCP and its affiliated companies and
their respective officers, directors, shareholders, employees, licensees,
agents, successors and assigns from and against any and all without limitation,
claims, damages, judgments, awards, settlements, investigations, costs, and
reasonable attorneys fees and disbursements (collectively "Claims") which any of
them may incur or become obligated to pay arising out of or resulting from (i)
the breach by National Boston of any of its representations, warranties,
covenants, obligations, agreements or duties under this Agreement, and (ii) any
advertising claims made by National Boston based on information not provided to
it by DTCP.
(b) Exceptions. National Boston shall have no duty under
Section 8.1(a) or otherwise to defend, indemnify or hold harmless with respect
to any Claims which (i) arise out of or result from the breach by DTCP of any of
its representations, warranties, covenants, obligations, agreements or duties
under this Agreement; or (ii) are subject to DTCP's duty to defend, indemnify
and hold harmless pursuant to Section 8.2(a).
8.2 By DTCP.
<PAGE>
(a) Generally. Subject to Section 8.2(b), DTCP shall defend,
indemnify and hold harmless National Boston, its affiliated companies and their
respective officers, directors, shareholders, employees, licensees, agents,
successors and assigns from and against any and all without limitation, claims
which any of them may incur or become obligated to pay arising out of or
resulting from (i) the breach by DTCP of any of its representations, warranties,
covenants, obligations, agreements or duties under this Agreement, and (ii) any
advertising claims made by National Boston based upon documentation, studies,
substantiation, and representations made or provided by DTCP to National Boston.
(b) Exceptions. DTCP shall have no duty under Section 8.2(a)
or otherwise to defend, indemnify or hold harmless with respect to any Claims
which (i) arise out of or result from the breach by National Boston of any of
its representations, warranties, covenants, obligations, agreements or duties
under this Agreement; or (ii) are subject to National Boston's duty to defend,
indemnify and hold harmless pursuant to Section 8.1(a).
8.3 Procedure. Promptly after learning of the occurrence of any event
which may give rise to it rights under the provisions of this Section 8, any
party seeking to enforce such right (a "Claiming Person") shall give written
notice of such matter to the party against whom enforcement of such rights is
sought (the "Indemnifying Party"). The Claiming Person shall cooperate with the
Indemnifying Party in the negotiation, compromise and defense of any such
matter. The Indemnifying Party shall be in charge of and control such
negotiations, compromise and defense and shall have the right to select counsel
with respect thereto, provided that the Indemnifying Party shall promptly notify
the Claiming Person of all material developments in the matter. In no event
shall the Indemnifying Party compromise or settle any such matter without the
prior consent of the Claiming Person, which shall not be bound by any such
compromise or settlement absent its prior consent.
9. Term.
National Boston's rights to manufacture and market each individual
Product described on an Exhibit A shall become an irrevocable license with
respect to such Product (but not any other Product for which there is a separate
Exhibit A) once certain sales levels have been met as referenced in Exhibit D.
National Boston shall pay the royalties in at least the amounts stated in
Exhibit D for such Product. If National Boston fails to meet the minimum
royalties as stated in Exhibit D, and such condition is not cured by National
Boston within 30 days of written notification by DTCP of National Boston's
failure to meet such requirements, National Boston shall have no further rights
with respect to such Product (except for the sell-off rights contained in
Section 10.3). The failure to meet the minimum royalty shall not be considered a
breach of this Agreement, rather it is a condition of National Boston's
continued right to manufacture and market the Product.
10. Termination.
10.1 Termination Events.
(a) Election by National Boston. National Boston may
terminate this Agreement, or its rights to manufacture and sell any individual
Product, at any time upon 30 days prior written notice by so notifying DTCP and
<PAGE>
this Agreement, or the rights relating to the individual Product, subject to the
provisions of Section 10.3, shall terminate 30 days following DTCP's receipt of
such notice.
(b) Election By DTCP. DTCP may terminate, subject to Section
10.3, National Boston's rights to manufacture and sell any individual Product
upon 30 days prior written notice to National Boston under the condition, if
any, described in Exhibit D and Exhibit E. DTCP may also terminate this
agreement and all rights hereto shall revert to DTCP upon the event of National
Boston becoming insolvent, committing any act of bankruptcy, including, but not
limited to the appointment of a trustee or receiver for any part of National
Boston property, or the commencement of any proceedings by or against National
Boston under any law having to do with the relief of debtors.
(c) Termination Upon Breach. Either party may terminate this
Agreement upon 30 days written notice to the other party upon the breach by the
other party of any of its material representations, warranties, covenants or
agreements contained in this Agreement. Upon the expiration of such notice
period, this Agreement shall terminate without the need for further action by
either party; provided, however, that if the breach upon which such notice of
termination is based shall (i) have been cured within such 30 day period, or
(ii) not be capable of cure within such 30 days, but can be cured within a
reasonable time thereafter, and the breaching party is taking reasonable steps
to effect such a cure, then such notice of termination shall be deemed
rescinded, and this Agreement shall be deemed reinstated and in full force and
effect. Such right of termination shall be in addition to such other rights and
remedies as the terminating party may have under applicable law.
10.2 Obligations Deemed Fulfilled in the Event of Early Termination.
Any early termination pursuant to Section 10.1(a) or (b) of this Agreement shall
not be viewed to be a breach of this Agreement. Unless either of the parties has
separately breached a commitment made elsewhere in this Agreement, such parties
shall be deemed to have fulfilled all of their obligations hereunder, except
those which by their nature survive the termination of the Agreement (e.g.
warranties and representations, payment obligations, confidentiality and
indemnifications, etc.).
10.3 Limited Sales Rights After Termination. For a period of six months
following the termination of this Agreement, National Boston shall retain
non-exclusive rights to manufacture, use, distribute, sell, advertise, promote
and otherwise exploit the Products in the same manner as provided for in this
Agreement in order for it to (i) complete the manufacturing of all Products for
which it has parts either in its possession or on order, or is otherwise
obligated to manufacture, and (ii) sell all of its inventory of, and fulfill any
existing or expected orders for, the Product.
10.4. Effect of Termination. Upon termination or expiration of this
Agreement for any reason whatsoever:
(a) National Boston shall, at its own expense, return any of
DTCP's Technology and any of DTCP's Artwork in its possession or control.
(b) National Boston shall continue to pay such royalties as
may be due to DTCP for sales made both before termination and during the
sell-off period.
<PAGE>
(c) Each party shall retain any and all rights and remedies
available to it at law or equity.
11. Confidentiality.
11.1 Generally. All customer lists, price lists, written and
unwritten marketing plans, techniques, methods and data, sales and transaction
data, all technology and know-how relating to the manufacture of the Products,
and other information provided by either party shall constitute confidential
information of such party ("Confidential Information"). Either party receiving
Confidential Information (a "Receiving Party") from the other party (a
"Conveying Party") shall hold all Confidential Information in the strictest
confidence and shall protect all Confidential Information of the Conveying Party
with at least the same degree of care that the Receiving Party exercises with
respect to its own propriety information. Without the prior written consent of
the Conveying Party, the Receiving Party shall not use, disclose, divulge or
otherwise disseminate any Confidential Information of the Conveying Party to any
person or entity, except for the Receiving Party's attorneys, accountants and
such other professionals as the Receiving Party may retain in order for it to
perform and enforce the provisions of this Agreement.
11.2 Exceptions. Notwithstanding Section 11.1, the Receiving Party
shall have no obligation with respect to any Confidential Information of the
Conveying Party which (i) is or becomes within the public domain through no act
of the Receiving Party in breach of this Agreement, (ii) was lawfully in the
possession of the Receiving Party without any restriction on use or disclosure
prior to its disclosure in connection with this Agreement and the negotiations
leading to this Agreement, (iii) is lawfully received from another source
subsequent to the date of this Agreement without any restriction on use or
disclosure, or (iv) is required to be disclosed by order of any court of
competent jurisdiction or other governmental authority (provided in such latter
case, however, that the Receiving Party shall timely inform the Conveying Party
of all such legal or governmental proceedings so that the Conveying Party may
attempt by appropriate legal means to limit such disclosure, and the Receiving
Party shall further use its best efforts to limit the disclosure and maintain
confidentiality to the maximum extent possible).
11.3 Material Provisions of this Agreement are Confidential. The
material content of this Agreement dealing with amount of royalties to be paid,
minimum royalties to maintain rights, issuance's of stock, and the like, are
deemed by the parties to be Confidential Information.
12. Injunction.
Each party acknowledges that a breach of the obligations not to compete
under Section 1.3, and/or of confidentiality under Section 11 will result in
irreparable and continuing damage to the non-breaching party for which there
will be no adequate remedy at law. Accordingly, in the event of any such breach,
the non-breaching party shall be entitled to temporary and/or permanent
injunctive relief and/or an order for specific performance, without bond, with
respect to such breach. Neither party shall oppose such relief on the grounds
that there is an adequate remedy at law, and such right shall be cumulative and
in addition to any other remedies at law or in equity (including monetary
<PAGE>
damages) which the non-breaching party may have upon the breach of either of the
other party's obligation of exclusivity or confidentiality hereunder.
13. Independent Contractor.
No party or any of its officers, employees, agents or representatives
is a partner, employee or agent of any other party for any purpose whatsoever.
Rather, each party is and shall at all times remain an independent contractor.
No party has, nor shall it hold itself out at as having, any right, power or
authority to create any contract or obligation, either express or implied, on
behalf of, in the name of, or binding upon the other party, unless such other
party shall consent thereto in writing. Each party shall have the right to
appoint and shall be solely responsible for its own employees, agents and
representatives, who shall be at such party's own risk, expense and supervision
and shall not have any claim against any other party for compensation or
reimbursement.
14. Force Majeure.
In the event of war, fire, flood, labor troubles, strike, riot, act of
governmental authority, acts of God, or other similar contingencies beyond the
reasonable control of either of the parties interfering with the performance of
the obligations of such party, the obligations so affected shall be deferred to
the extent necessitated by such event or contingency without liability, but this
Agreement shall otherwise remain unaffected. Notice with full details of any
circumstances referenced herein shall be given by the affected party to the
other party, promptly after its occurrence. The affected party shall use due
diligence, where practicable, to minimize the effects of or end any such event.
15. Further Actions.
The parties agree to execute such additional documents and to perform
all such other and further acts as may be necessary or desirable to carry out
the purposes and intentions of this Agreement.
16. Right of First Refusal.
Provided that National Boston achieves gross sales (defined as any
sales of the Products) in the initial 24 months following the first Product
rollout of one hundred million dollars ($100 million) and fifty million dollars
($50 million) in each subsequent 12 month period, DTCP shall provide to National
Boston, for the 48 month period following the first Product rollout, the right
to match any substantiated offer to manufacture, market and distribute any other
products owned and/or controlled by DTCP which have been sufficiently developed
for potential marketing, distribution and/or exploitation. In the event that
National Boston is interested in distributing, selling, advertising, publicizing
and/or otherwise exploiting any such products presented by DTCP, then National
Boston and DTCP shall negotiate in good faith the terms and conditions of a
mutually agreeable marketing arrangement with respect to each such product. It
is envisioned that the terms of this Agreement will be the foundation for any
such marketing arrangement, and that the specific terms for each of the products
will be described in new Exhibits A-E to be attached to this Agreement. If
National Boston notifies DTCP that it is not interested in pursuing any such
product or fails to notify DTCP
<PAGE>
of its interest or lack of interest with respect to such product within 30
business days following presentation of such product to National Boston, or the
parties cannot agree on the terms and conditions of marketing arrangement within
30 days after such presentation, then in each such case, DTCP shall be free to
market, distribute, and/or exploit any such product in any manner it shall
choose thereafter without accounting to National Boston for any compensation
except that to the extent that DTCP markets such products utilizing the Brand
identifications (existing or to be developed) under this Agreement, then DTCP
will pay a royalty to National Boston of five percent (5%).
17. Royalties Owing to Third Parties.
Unless otherwise expressly stated in this Agreement, DTCP shall be
responsible to pay all third parties that are entitled to royalties, if any,
from the exploitation of the Product by reason of agreements entered into by it
or others prior to the date of execution of this Agreement. National Boston
shall be responsible to pay all third party royalties for which it may after the
date of this Agreement incur an obligation.
18. Stock in National Boston.
National Boston shall issue to DTCP 500,000 shares of its restricted
common stock within 30 days following the execution of this Agreement by all of
the parties. In addition, on each subsequent anniversary date of this Agreement
until this Agreement is terminated, National Boston will issue additional
restricted shares to DTCP. If this Agreement is terminated before any such
anniversary date, National Boston will issue shares pro rata to DTCP for the
portion of the year this Agreement was in effect. The amount of restricted
shares to be issued on each anniversary date is as follows:
No. of Shares then Outstanding Amount to be Issued to DTCP
Less than 60 million -100,000-
60 million to 74.999 million -150,000-
75 million or more -200,000-
(Thereafter, for every additional 15 million) -an additional 50,000-
Further, if this Agreement is terminated by National Boston under
Section 10.1(c) because of a breach by DTCP of any material representation,
warranty, covenant or agreement, DTCP shall forfeit and immediately return to
National Boston any shares of National Boston's stock not then registered with
the Securities and Exchange Commission. The restricted shares issued to DTCP
will be subject to piggyback registration rights as described below and any
restrictions that may be imposed by current or future SEC rules and regulations.
The shares referred to in this Section 18 are being issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule 506
of Regulation D promulgated thereunder ("Rule 506") or other applicable
provisions. The shares shall be Rule 144 restricted shares. After issuance of
the shares, at any time that National Boston proposes to file a National Boston
registration statement (except Form 10, Form 10-SB or Form S-8) under the Act
(the "Registration Statement") either for its own account or for the account of
a stockholder, National
<PAGE>
Boston shall give DTCP written notice of its intention to do so and of the
intended method of sale (the "Registration Notice") within a reasonable time
prior to the anticipated filing date of National Boston's Registration
Statement. DTCP may request inclusion of any restricted shares in such
Registration Statement by delivering to National Boston, within ten business
days after receipt of the Registration Notice, a written notice (the "Piggyback
Notice") stating the number of restricted shares proposed to be included and
that such shares are to be included in any underwriting only on the same terms
and conditions as the shares of common stock otherwise being sold through
underwriters under such Registration Statement. National Boston shall use its
best efforts to cause all restricted shares specified in the Piggyback Notice to
be included in the Registration Statement and any related offering, all to the
extent requisite to permit the sale by DTCP of its restricted shares in
accordance with the method of sale applicable to the other shares of common
stock included in such Registration Statement. DTCP shall pay its pro rata
portion of the costs of such registration based on the number of shares to be
sold. DTCP shall have only one right to participate in a Registration Statement,
and if it does not include all of its restricted shares in such registration,
National Boston shall have no further obligation to DTCP to facilitate the
registration of the remaining shares.
19. Miscellaneous.
19.1 Notices. All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission, (ii) on the next day
if delivered by overnight mail or courier, or (iii) on the date indicated on the
return receipt, or if there is no such receipt, on the third calendar day
(excluding Sundays) after being sent by certified or registered mail, postage
prepaid, to the party for whom intended to the following addresses:
If to National Boston:
National Boston Medical, Inc.
43 Taunton Green, Suite 5
Taunton, Massachusetts 02780
Attn: Daniel Hoyng, President
Fax No: (508) 880-5208
If to DTCP:
DTCP
2554 Lincoln Blvd., Suite 219
M.D.R., California 90291
Attn: Dean Tornabene
Fax No: (___) ___-____
Each party may by written notice given to the other in accordance with
this Agreement change the address to which notices to such party are to be
delivered.
<PAGE>
19.2 Entire Agreement. This Agreement contains the entire understanding
of' the parties and supersedes all prior agreements and understandings, whether
written or oral, between them with respect to the subject matter hereof. Each
party has executed this Agreement without reliance upon any promise,
representation or warranty other than those expressly set forth herein.
19.3 Amendment. No amendment of this Agreement shall be effective
unless embodied in a written instrument executed by both of the parties.
19.4 Waiver of Breach. The failure of any party hereto at any time to
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provisions, or in any way to affect the validity of
this Agreement or any provisions hereof or the right of any party to thereafter
enforce each and every provision of this Agreement. No waiver of any breach of
any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party against which enforcement of such
waiver is sought; and no waiver of any such breach shall be construed or deemed
to be a waiver of any other or subsequent breach.
19.5 Assignability. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns. Neither of the parties hereto can assign their
respective rights under this Agreement without the prior written consent of the
other party, but any such assignment shall not relieve such parties from their
obligations contained herein.
19.6 Governing Law; Venue; Waiver of Jury Trial. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
in which the action is brought without regard to conflict of law principles. All
disputes relating to or arising out of this Agreement shall be resolved (i) in
the state courts of Massachusetts located closest to the offices of National
Boston if such action is brought by DTCP and (ii) in the state courts of
California located closest to the offices of DTCP if such action is brought by
National Boston. The parties hereto waive any right to a jury trial with respect
to any matter arising out of or related to this Agreement.
19.7 No Representation as to Extent of Sales. Notwithstanding the
minimums required to maintain the license, National Boston has not made and does
not hereby make any representation or warranty with respect to the extent or
volume it may achieve in the sale or other exploitation of the Products
hereunder. National Boston shall make such effort to exploit successfully the
Products and the related rights herein granted as it may determine in accordance
with its business judgment; however, DTCP recognizes and acknowledges that such
matters are speculative and agrees that the judgment of National Boston and its
related companies or licensees in regard to any such matters shall be binding
and conclusive upon DTCP. DTCP agrees that it will not make any claim nor shall
any liability be imposed upon National Boston based upon any claim that more or
better business could have been done than was actually obtained or done by
National Boston or any of its related companies or licensees, or that better
prices or terms could have been obtained or that profitability could have been
enhanced. DTCP agrees that decisions related to the spending levels associated
with any sales or manufacturing activity covered by this Agreement shall be at
the sole discretion and judgment of National Boston.
19.8 Severability. All of the provisions of this Agreement are intended
to be distinct and several. If any provision of this Agreement is or is declared
<PAGE>
to be invalid or unenforceable in any jurisdiction, it shall be ineffective in
such jurisdiction only to the extent of such invalidity or unenforceability.
Such invalidity or unenforceability shall not affect either the balance of such
provision, to the extent it is not invalid or unenforceable or the remaining
provisions hereof, or render invalid or unenforceable such provision in any
other jurisdiction.
19.9 Headings. The headings of sections and subsections have been
included for convenience only and shall not be considered in interpreting this
Agreement.
19.10 Counterparts; Facsimiles. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, and all
of which together shall constitute one and the same Agreement. This Agreement
may be executed and delivered by electronic facsimile transmission with the same
force and effect as if it were executed and delivered by the parties
simultaneously in the presence of one another, and signatures on a facsimile
copy hereof shall be deemed authorized original signatures.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on the date last written below.
/s/ Dean Tornabene 09/02/99 /s/ Edward Stark
- ------------------------------------- ---------------------------
Dean Tornabene Date Hereby Witnessed Date
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Daniel J. Hoyng Sept. 2, 1999 /s/ Edward Stark
- --------------------------------------- ---------------------------
Daniel Hoyng Date Hereby Witnessed Date
CEO/Chairman of the Board
<PAGE>
Agreement by Dean Tornabene, Individual,
to See to the Presentation of Products to National Boston; to Not Compete;
and to Honor Right of First Refusal
I, Dean Tornabene, as an individual, agree as an inducement to National Boston's
execution of this Agreement, that I will (i) not individually, directly or
indirectly, either alone or in participation with any other person or entity,
engage in or be involved with manufacturing, marketing or distributing any other
products similar in design, composition, content or function to the Products,
and (ii) offer any new products owned and/or controlled by me or any entity of
which I, directly or indirectly, have control over (if the products are not
otherwise owned by the company to which I may assign this Agreement as allowed
in the first paragraph of this Agreement) which have been sufficiently developed
for potential marketing, distribution and/or exploitation to National Boston on
the same terms and conditions as stated in Section 16 of the above Agreement.
This paragraph shall be binding on me even if I assign this Agreement to another
company.
/s/ Dean Tornabene 09/02/99
- -------------------------------------------------
Dean Tornabene, Individual Date
<PAGE>
Agreement by Charles Perez, Individual,
to See to the Presentation of Products to National Boston; to Not Compete;
and to Honor Right of First Refusal
I, Charles Perez, as an individual, agree as an inducement to National Boston's
execution of this Agreement, that I will (i) not individually, directly or
indirectly, either alone or in participation with any other person or entity,
engage in or be involved with manufacturing, marketing or distributing any other
products similar in design, composition, content or function to the Products,
and (ii) offer any new products owned and/or controlled by me or any entity of
which I, directly or indirectly, have control over (if the products are not
otherwise owned by the company to which I may assign this Agreement as allowed
in the first paragraph of this Agreement) on the same terms and conditions as
stated in Section 16 of the above Agreement. This paragraph shall be binding on
me even if I assign this Agreement to another company.
Charles Perez 9-17-99
- -------------------------------------
Charles Perez, Individual Date
<PAGE>
EXHIBIT A-1
As defined in this Agreement, "Products" shall mean the following:
The 3 in 1 ladder
<PAGE>
EXHIBIT B-1
As defined in this Agreement, "Patents " shall mean the following:
<PAGE>
EXHIBIT C-1
As defined in this Agreement, "Trademarks" shall mean the following:
<PAGE>
EXHIBIT D-1
Minimum Royalty Payments to Maintain License:
$50,000 for each calendar quarter commencing with the earlier of (i) the first
full calendar quarter following the month in which the Product is rolled out on
a national basis in television direct response marketing or (ii) third quarter
of the year 2000. Royalty payments shall be cumulative in effect and payments
made in any period in excess of the quarterly minimum for that period shall be
applied toward future period minimum payment requirements in order to maintain
the license. National Boston may make payments in lieu of earned royalties in
order to meet the minimums stated herein, and such payments shall be deemed to
be advances to be credited against future royalties actually earned by DTCP. It
is agreed that since the royalties are actually paid monthly on the last
business day of each month following the month for which the royalties are
calculated, the calculation to determine whether the quarterly minimums have
been met will be made based on royalties actually paid by the last business day
of the month following the third month of the quarter. There shall be no minimum
royalty payment requirement once National Boston has achieved $35 million in
gross sales, however the ten percent (10%) gross royalty payments continue.
<PAGE>
EXHIBIT E-1
Additional Termination Rights Afforded to DTCP:
1. If National Boston does not commence filming of a new infomercial or
modification of an existing infomercial for the Product either before or within
90 days following execution of this Agreement.
OTHER AGREEMENTS OF THE PARTIES:
1. [If there is an existing infomercial for the Product, the rights of the
parties with respect to such infomercial should be described here. If there is a
production agreement with a producer, or talent or host agreements, requiring
the payment of royalties, then copies of such agreements should be provided to
National Boston].
<PAGE>
EXHIBIT A-2
As defined in this Agreement, "Products" shall mean the following:
Body Rocker
<PAGE>
EXHIBIT B-2
As defined in this Agreement, "Patents" shall mean the following:
<PAGE>
EXHIBIT C-2
As defined in this Agreement, "Trademarks" shall mean the following:
<PAGE>
EXHIBIT D-2
Minimum Royalty Payments to Maintain License:
$100,000 for each calendar quarter commencing with the earlier of (i) the first
full calendar quarter following the month in which the Product is rolled out on
a national basis in television direct response marketing or (ii) the first
quarter of the year 2000. Royalty payments shall be cumulative in effect and
payments made in any period in excess of the quarterly minimum for that period
shall be applied toward future period minimum payment requirements in order to
maintain the license. National Boston may make payments in lieu of earned
royalties in order to meet the minimums stated herein, and such payments shall
be deemed to be advances to be credited against future royalties actually earned
by DTCP. It is agreed that since the royalties are actually paid monthly on the
last business day of each month following the month for which the royalties are
calculated, the calculation to determine whether the quarterly minimums have
been met will be made based on royalties actually paid by the last business day
of the month following the third month of the quarter. There shall be no minimum
royalty payment requirement once National Boston has achieved $100 million in
gross sales, however the ten percent (10%) gross royalty payments continue.
<PAGE>
EXHIBIT E-2
Additional Termination Rights Afforded to DTCP:
1. If National Boston does not commence filming of a new infomercial or
modification of an existing infomercial for the Product either before or within
30 days following execution of this Agreement.
OTHER AGREEMENTS OF THE PARTIES:
1. [If there is an existing infomercial for the Product, the rights of the
parties with respect to such infomercial should be described here. If there is a
production agreement with a producer, or talent or host agreements, requiring
the payment of royalties, then copies of such agreements should be provided to
National Boston].
<PAGE>
EXHIBIT A-3
As defined in this Agreement, "Products" shall mean the following:
Mini Gym
<PAGE>
EXHIBIT B-3
As defined in this Agreement, "Patents " shall mean the following:
<PAGE>
EXHIBIT C-3
As defined in this Agreement, "Trademarks" shall mean the following:
<PAGE>
EXHIBIT D-3
Minimum Royalty Payments to Maintain License:
$25,000 for each calendar quarter commencing with the earlier of (i) the first
full calendar quarter following the month in which the Product is rolled out on
a national basis in television direct response marketing or (ii) third quarter
of the year 2000. Royalty payments shall be cumulative in effect and payments
made in any period in excess of the quarterly minimum for that period shall be
applied toward future period minimum payment requirements in order to maintain
the license. National Boston may make payments in lieu of earned royalties in
order to meet the minimums stated herein, and such payments shall be deemed to
be advances to be credited against future royalties actually earned by DTCP. It
is agreed that since the royalties are actually paid monthly on the last
business day of each month following the month for which the royalties are
calculated, the calculation to determine whether the quarterly minimums have
been met will be made based on royalties actually paid by the last business day
of the month following the third month of the quarter. There shall be no minimum
royalty payment requirement once National Boston has achieved $25 million in
gross sales, however the ten percent (10%) gross royalty payments continue.
<PAGE>
EXHIBIT E-3
Additional Termination Rights Afforded to DTCP:
None
OTHER AGREEMENTS OF THE PARTIES:
<PAGE>
EXHIBIT A-4
As defined in this Agreement, "Products" shall mean the following:
<PAGE>
EXHIBIT B-4
As defined in this Agreement, "Patents " shall mean the following:
<PAGE>
EXHIBIT C-4
As defined in this Agreement, "Trademarks" shall mean the following:
<PAGE>
EXHIBIT D-4
Minimum Royalty Payments to Maintain License:
<PAGE>
EXHIBIT E-4
Additional Termination Rights Afforded to DTCP:
OTHER AGREEMENTS OF THE PARTIES:
<PAGE>
ADDENDUM TO MANUFACTURING, MARKETING
AND DISTRIBUTION AGREEMENT
This Addendum modifies the Agreement of 9/2/99 between DEAN TORNABENE and
CHARLES PEREZ, as individuals or a company to be designated by them at a future
date (collectively, "DTCP"), and NATIONAL BOSTON MEDICAL, INC., a Nevada
corporation.
1. Section 1.1 (f). The sentence beginning "National Boston agrees to promote
and use..." is deleted and replaced with the following sentence"National
Boston agrees to promote and use Dean Tornebene's name, likeness and
persona in connection with the Products and to use Dean Tornabene as the
focal Talent, primarily as host, whenever both possible and appropriate in
addition featuring his name and likeness in the packaging and exploitation
of the Products, videos, and retail boxes and displays, all subject to the
artistic approval of Dean Tornabene. If it is deemed that Dean Tornabene
will not be the featured Talent (primarily as host) for a particular
promotion he will still be featured through name and likeness as the
Product's inventor. Dean Tornabene and Charles Perez will be reimbursed
their reasonable out-of-pocket expenses incurred in travel in relation to
such promotional activities.";
2. Section 1.2. This paragraph is changed by adding one word. The thrid
sentence should read: "National Boston agrees that any up-sales of food
supplements, ingestables...";
3. Section 1.3. Added to this paragraph is the following: "All parties
acknowledge that the Cosmo Cooler Cosmetic Bag is currently being sold by
DTCP. National Boston may purchase and sell this item on a nonexclusive
basis."
4. Section 5.3 The following sentence is added: "The data base information
will be mailed to DTCP monthly on a disk;
5. Section 5.4 The first sentence will be changed as follows: "National Boston
shall have the right, but not the obligation to prosecute any patent
application, United States and foreign, for the Product, and to file for
any patents, modification, or improvements, in DTCP's name and on behalf of
DTCP and DTCP shall cooperate fully with National Boston with respect
thereto, but all cots of such activity shall be included in the calculation
of gross sales and those costs shall be deducted from the royalty
calculation described ibn Section 3, herein, substantiated by paid
invoices, for the purpose of determining royalties that may be due to
DTCP."
Except as stated above, the Agreement remains otherwise unchanged.
I have read the above and agree that the terms are acceptable and shall
be deemed an Addendum to the Manufacturing and Distribution Agreement of
September 2, 1999 between Dean
<PAGE>
Tornabene, Charles Perez and National Boston Medical, Inc.
/s/ Dean G. Tornabene 09-17- , 1999
---------------------------------- ------------------
Dean Tornabene, Individual Date
/s/ Charles Perez 9-17-99, 1999
------------------------------ -----------------
Charles Perez, Individual Date
NATIONAL BOSTON MEDICAL, INC
By:. Barry McFarland 9-15 , 1999
------------------------------------- ------------------
Date
Barry McFarland, CFO
EXHIBIT 10.60
MANUFACTURING, MARKETING AND DISTRIBUTION
AGREEMENT
CACTUS JACK PRODUCTS
This Agreement ("Agreement") is by and between CACTUS JACK'S MARKETING
CORP., an Iowa corporation ("Cactus Jack"), and NATIONAL BOSTON MEDICAL, INC., a
Nevada corporation ("National Boston"), both of which are sometimes referred to
herein as a "party" or the "parties".
WHEREAS, Cactus Jack owns and/or controls all rights of manufacturing,
distribution and sale with respect to products as described in Exhibit A and all
improvements, line extensions and modifications thereof (the "Product", and when
more than one - "Products"); and
WHEREAS, Cactus Jack is in the business, among other things, of
manufacturing, advertising, marketing and distributing products in various
media; and
WHEREAS, National Boston is also in the business, among other things,
of manufacturing, advertising, marketing and distributing products in various
media, including television, print, and retail; and
WHEREAS, the parties wish to set forth in this Agreement their
understanding of the terms, and conditions upon which Cactus Jack will grant to
National Boston rights to manufacture, use, distribute, sell, advertise, promote
and otherwise exploit the Products as well as additional products to be added to
Exhibit A from time to time hereafter by mutual agreement of the parties.
NOW THEREFORE, in consideration of the premises and the mutual promises
and undertakings set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Manufacturing, Marketing and Distribution Rights.
1.1 Grant of Rights. Cactus Jack hereby grants to National
Boston the following rights which National Boston may, but is not obligated to,
exercise alone or through any one or more of its affiliates:
(a) Generally. The exclusive right, license and
privilege during the Term (as hereafter defined) throughout the World (the
"Territory") to manufacture, use, distribute, sell, advertise, promote and
otherwise exploit the Products by any and all means and media, in any and all
markets, including but not limited to broadcast, cable, satellite and all other
forms of television transmission now existing or hereafter developed, including
without limitation, infomercials, commercial spots, promos, television shopping
programs such as QVC (subject to provisions of Exhibits E) and HSN, radio,
electronic and computer retailing media (such as the Internet), all print media,
direct mail solicitation, package inserts,
<PAGE>
inbound and outbound telemarketing, credit card syndication, CD-ROM, catalog
sales, retail sales, and all other channels or means of distribution now
existing or hereafter developed;
(b) Use of Patents. The right to use any U.S. and
foreign patents
that exist or that may issue on the Product and on like or related matter
developed, owned or controlled by Cactus Jack (collectively referred to as the
"Patents"), copies of which have been or will be provided to National Boston.
Cactus Jack represents and warrants that any patent applications and any patents
it may own with respect to the Product are described on Exhibit B hereto;
(c) Use of Trademarks. The right to use any and
all trademarks that Cactus Jack may own or control with respect to the Products
including without limitation the trademarks described in Exhibit C hereto (the
"Trademarks"), and the right to advertise, promote, market, sell and distribute
the Products under or in connection with such other trademarks or identifying
names or marks as National Boston may determine;
(d) Products in Development. The right to use any
and all technology, know-how, mechanical drawings, initial prototypes,
manufacturing specifications, molds, tooling, and other materials owned or in
the control of Cactus Jack which would be necessary or useful in the
manufacturing and marketing of the Products ("Cactus Jack's Technology"), all of
which Cactus Jack shall provide to National Boston for this purpose;
(e) Use of Cactus Jack's Artwork.The right to copy
and use any and all artwork and promotional materials that Cactus Jack may own
or control with respect to the Products ("Cactus Jack's Artwork"), copies of all
of which Cactus Jack shall provide to National Boston for this purpose;
(f) Names, Likenesses and Endorsements. The right
to use the names, likenesses (including, without limitation, photographs,
illustrations, films and videotapes), endorsements and testimonials of all
endorsers and other persons that Cactus Jack may own or control with respect to
the Products;
(g) Packages. The right to develop such groupings,
ensembles, configurations and packaging of the Products and other ancillary
goods for sale as National Boston may determine; and
(h) Subdistributors. The right to appoint such
subdistributors as National Boston, in its sole judgment, may deem appropriate
in order to market and distribute the Products.
(i) Reserved Rights. Not withstanding, Cactus Jack
shall retain the right to market and distribute the existing Products
exclusively on live shop at home programming on QVC and non-exclusively at trade
shows, fairs, on the internet (QVC only), to existing local distributors to whom
licensor distributes products through, provided that such sale is not to
in-store retail distributors with three or more stores, locations, franchises or
similar multi store operations. National Boston acknowledges that there may be
existing web sites used by these existing distributors for the sale of Products
covered by this Agreement. The existence of such shall not constitute a
violation of this Agreement by Cactus Jack. However, National Boston
<PAGE>
reserves the right to prohibit further distribution of the Products on sites
established subsequent to the execution of this Agreement.
1.2 Additional Products. The parties contemplate that from
time to time they will mutually agree upon additional products to be licensed by
Cactus Jack to National Boston. Such products will be added to the Exhibits
attached hereto, and unless otherwise agreed at such time all of the terms and
conditions of this Agreement shall be applicable to such additional products.
1.3 Non-Compete. During the term of this Agreement, Cactus
Jack shall not, directly or indirectly, either alone or in participation with
any other person or entity, engage in or be involved with manufacturing,
marketing or distributing any other products similar in design, composition,
content or function to the Products.
1.4 Prices. National Boston, in its sole judgment, shall have
the right to sell and distribute the Products at such prices, and on such terms
and conditions (including shipping and handling charges), as National Boston may
establish.
1.5 Minimum Royalty Requirements. National Boston shall not
have any minimum sales requirement under this Agreement. However, extensions of
the Term of this Agreement are subject to National Boston's meeting certain
minimum royalty conditions, as described in Section 9 hereof.
1.6 Quality Control. National Boston shall adhere to any
reasonable requests and directions of Cactus Jack relating to the maintenance of
the quality of the Products manufactured, and the Trademark applied to such
Products, pursuant to the terms of this Agreement.
2. Exploitation of the Products by National Boston.
National Boston shall be responsible for the commercial exploitation of
the Products. It shall pay all costs for the development, manufacturing,
marketing, and selling of the Products. Cactus Jack shall have no responsibility
to pay for any of these expenses.
3. Royalty.
National Boston shall pay Cactus Jack, monthly, a royalty equal to
fifty percent (50%) of National Boston's net profits from sales and exploitation
of the Products.
Net profits shall mean all gross receipts including shipping and
handling revenues received by National Boston from such sales, less all direct,
third party costs (without markup by National Boston, save for National Boston's
administrative overhead fee described below), incurred by National Boston
related thereto including, but not limited to, the costs listed below:
(a) cost of Products (including all costs of development and
manufacturing);
<PAGE>
(b) returns, discounts, commissions and/or allowances for Products;
(c) advertising and media costs;
(d) packaging and fulfillment-related activities;
(e) production/editing costs of commercials and infomercials and any
printed materials;
(f) sales and use taxes, VAT;
(g) shipping, handling and transportation costs;
(h) outside professional fees, including legal fees related to
compliance issues;
(i) samples of the Product retained by the parties for their own
internal use, and for promotional activities;
(j) third party royalties;
(k) telemarketing expenses;
(l) credit card fees and chargebacks;
(m) inventory and media financing fees and expenses;
(n) sales commissions;
(o) reasonable reserves to include reserves for return and
non-salable or less than first quality inventory; and
(p) an administrative overhead fee to National Boston of twelve
percent (12%) of all of National Boston's gross receipts from
sales or exploitation of the Products.
National Boston may, but is under no obligation to, amortize or
capitalize any costs it incurs in connection with the activities described
herein. Decisions related to the spending levels associated with any sales
activity of the Products covered by this Agreement shall be at the sole
discretion and judgment of National Boston.
National Boston's administrative overhead fee shall be in lieu of any
charges by National Boston for the time of its personnel, and customary overhead
expenses, to include internal copying expenses, telephone, travel, Federal
Express services, etc.
Cactus Jack shall not be responsible for any losses incurred by
National Boston in respect of National Boston's activities permitted by this
Agreement, but the expenses associated with any such losses will be carried
forward and included in calculating whether there have been net profits in
future accounting periods. To the extent that there may have
<PAGE>
been losses in one area of activity, such as direct response sales, the expenses
associated with such losses may be carried over and applied to the calculation
of profits in any other area of activity, such as retail sales, in determining
the moneys to be paid to Cactus Jack, at the sole discretion of National Boston.
All of the Cactus Jack products (all products for which there is an Exhibit A
attachment), will be aggregated for the purpose of determining whether or not
there is net profit.
When the Product is distributed in combination with another product
which has not been licensed to National Boston by Cactus Jack, net profits will
not include revenues and costs reasonably allocable to the other product, and
allocations will be made to reflect the portion of such sales that relate to the
Product. However, in the event the above described product is branded as "Cactus
Jack" or "One Shot" then revenues and costs reasonably allocable to such
products will be included in net profit calculations due to Cactus Jack.
4. Reports; Record Keeping; and Inspection Rights.
4.1 Separate Division to be Established. National Boston
intends to establish a division of its operations which will be responsible for
the activities of manufacturing, marketing and distributing products licensed to
it by Cactus Jack. The books and records of National Boston shall be prepared in
a manner that will recognize this division and facilitate the calculation of net
profits earned from the Cactus Jack products and the royalties to be paid to
Cactus Jack.
4.2 Reports to Cactus Jack. National Boston shall provide
monthly reports to Cactus Jack showing the calculation of any royalty that has
accrued in respect of sales of the Products in form and content as National
Boston customarily provides to other licensers. The monthly reports shall
accompany the royalty payment, and shall be provided by the last business day of
each month following the month for which the royalties are calculated.
4.3 National Boston's Records; Inspection. National Boston
shall maintain complete and accurate records of all sales by National Boston of
the Products, and shall retain such records for a period of two years. During
such period, all such records that are relevant to the determination of the net
profits to be paid by National Boston to Cactus Jack shall be made available for
inspection by Cactus Jack (or Cactus Jack's designee at Cactus Jack's sole
expense) twice per year during normal business hours upon reasonable prior
notice to National Boston.
5. Proprietary Rights.
5.1 Cactus Jack's Intellectual Property.
(a) Generally. Subject to the rights granted to
National Boston under this Agreement, all right, title and interest in and to
the design of the Products and/or its derivatives, the Patents, Trademarks,
Cactus Jack's Technology, and Cactus Jack's Artwork (collectively, "Cactus
Jack's Intellectual Property"), is and shall remain the sole property of Cactus
Jack, and neither National Boston nor any third party shall acquire any right,
title or interest in Cactus Jack's Intellectual Property by virtue of this
Agreement or otherwise, except as expressly provided herein. Any trademarks
developed by National Boston to be used in
<PAGE>
conjunction with sales of the Product shall be owned by National Boston. Any
unauthorized use of Cactus Jack's Intellectual Property by National Boston shall
be deemed an infringement of the rights of Cactus Jack therein. National Boston
shall not in any way or at any time dispute or attack the validity or contest
the rights of Cactus Jack in or to any of Cactus Jack's Intellectual Property.
The provisions of this Section 5.1(a) are subject in all respects to the
accuracy of the representations and warranties of Cactus Jack given pursuant to
Section 6.2.
b) Enforcement of Rights. Cactus Jack may at its
own expense enforce its rights in Cactus Jack's Intellectual Property against
infringement thereof. If National Boston requests Cactus Jack to enforce such
rights and Cactus Jack declines to do so, National Boston shall have the right
(but shall not be required) to enforce such rights, and may do so in Cactus
Jack's name with Cactus Jack's written agreement which shall not be unreasonably
withheld. Any expenses incurred and any recoveries obtained by National Boston
will be used in the calculation of net profits for the purposes of determining
royalties that may be due to Cactus Jack.
5.2 National Boston's Intellectual Property. All
right, title and interest in and to the entire editorial, visual, audio, and
graphic content of all advertisements and promotional materials developed by
National Boston in connection with its activities under this Agreement, any new
trademarks developed by National Boston to be used in conjunction with sales of
the Product, any commercials and infomercials that National Boston produces, and
all related materials and the contents thereof (collectively, "National Boston's
Intellectual Property") shall be and remain the sole property of National
Boston, and neither Cactus Jack nor any third party shall acquire any right,
title or interest in National Boston's Intellectual Property by virtue of this
Agreement or otherwise. Any unauthorized use of any of National Boston's
Intellectual Property by Cactus Jack shall be deemed an infringement of the
rights of National Boston therein. Cactus Jack shall not in any way or at any
time dispute or attack the validity or contest the rights of National Boston in
or to any of National Boston's Intellectual Property.
5.3 Customer List. National Boston may compile a list of the
names and addresses of persons and entities who order the Products through it or
its affiliates or are otherwise targeted by or on behalf of it or its affiliates
as potential customers of the Products (the "Customer List"). The Customer List
shall be the sole property of National Boston, but proceeds from the sale of
this list shall be included in the calculation of gross receipts for purposes of
determining the royalty due to Cactus Jack.
5.4 Expense Re-imbursement. Cactus Jack shall be entitled to
reimbursement for all reasonable expenses, including travel and entertainment
incurred by the Cactus Jack at the request of National Boston. Cactus Jack will
maintain records and written receipts as required by National Boston policy to
substantiate such expenses.
5.5 Future Patent Applications; Improvements; Modifications.
National Boston shall have the right, but not the obligation, to prosecute any
patent application, United States and foreign, for the Product, and to file for
any patents modifications or improvements, in Cactus Jack's name and on behalf
of Cactus Jack and Cactus Jack shall cooperate fully with National Boston with
respect thereto, but all costs of such activity shall be included in the
calculation of net profits for the purpose of determining royalties that may be
due to Cactus Jack. National Boston shall have no liability under any
circumstances
<PAGE>
to Cactus Jack for any decision or failure by National Boston to apply for such
patents, to continue to prosecute or to discontinue any such prosecution of any
such application, or for any action, activity, neglect or failure by National
Boston, its representatives and agents, in connection therewith.
6. Cactus Jack's Representations, Warranties and Covenants.
6.1 The Products. Cactus Jack represents, warrants and
covenants to National Boston that:
(a) Information. All information provided to
National Boston by Cactus Jack relating to the Products is and will be, to the
best of Cactus Jack's knowledge and belief, true and correct, including without
limitation all information regarding the effectiveness, quality, characteristics
or fitness of the Products;
(b) Substantiation. Cactus Jack will provide to
National Boston all information in Cactus Jack's possession or control which
substantiates all claims made by Cactus Jack to National Boston about the
Product; and
(c) Patent. The Product sample shown to National
Boston conforms to the description contained, and is consistent with the claims
made, in the Patents (if there are Patents associated with such Product).
6.2 Proprietary Rights. Cactus Jack represents, warrants
and covenants to National Boston that:
(a) Cactus Jack's Intellectual Property. Cactus
Jack owns or otherwise controls, or shall own or otherwise control, all right,
title and interest in and to Cactus Jack's Intellectual Property, which
constitutes and shall constitute all of the intellectual property and other
proprietary rights necessary or appropriate for the manufacture, marketing,
distribution and sale of the Products;
(b) Power and Authority. Cactus Jack has and shall
have all necessary power and authority to grant to National Boston all of the
rights and privileges granted pursuant to this Agreement;
(c) No Infringement. Neither the granting of the
rights and privileges granted hereunder nor the exercise thereof by National
Boston in accordance with the terms of this Agreement will infringe or otherwise
violate the intellectual property or other proprietary rights of any person or
entity;
(d) No Adverse Claims. Cactus Jack has not been
and is not, as of the date of this Agreement, a party to any litigation
enforcing or defending Cactus Jack's rights in, to or with respect to the
Products or any of Cactus Jack's Intellectual Property, and is not aware of any
claims or demands made or threatened by any person or entity involving the
validity of Cactus Jack's rights in, to or with respect to the Products or any
of Cactus Jack's Intellectual Property; and
<PAGE>
(e) Applicable Patents, Copyrights, Trademarks and
Licenses. Cactus Jack will at the time of execution of this Agreement, and
thereafter, provide National Boston with copies of all patents, abstracts of all
copyright registrations, copyright applications, trademark registrations,
trademark applications, licenses and other agreements and instruments relating
to the Products and Cactus Jack's Intellectual Property (and all amendments,
supplements, and modifications thereof) which are now in existence or which
Cactus Jack shall obtain, file or enter into during the term of this Agreement.
6.3 Other Warranties. The warranties and representations of
Cactus Jack set forth in this Section 6 and elsewhere in this Agreement are in
addition to and without prejudice to all other warranties expressed or implied
by law.
6.4 No Warranty By National Boston. Cactus Jack acknowledges
that National Boston, by executing this Agreement and exercising its rights
hereunder, makes no representation, warranty, endorsement or certification
regarding the effectiveness, quality, character or fitness of the Products.
7. Additional Representations and Warranties. Each party represents and
warrants to the other as follows:
7.1 Power and Authority. It has all requisite power and
authority to enter into this Agreement, and has duly authorized by all necessary
action the execution and delivery hereof by the officer or individual whose name
is signed on its behalf below.
7.2 No Conflict. The execution and delivery of this Agreement
by it, and the performance of its obligations hereunder, do not and will not
conflict with or result in a breach of or a default under its organizational
instruments or any other agreement, instrument, order, law or regulation
applicable to it or by which it may be bound.
7.3 Binding Effect. This Agreement has duly and validly
executed and delivered by it and constitutes its valid and legally binding
obligation, enforceable in accordance with it terms.
8. Indemnification.
8.1 By National Boston.
(a) Generally. Subject to Section 8.1 (b), National
Boston shall defend, indemnify and hold harmless Cactus Jack and its affiliated
companies and their respective officers, directors, shareholders, employees,
licensees, agents, successors and assigns from and against any and all without
limitation, claims, damages, judgments, awards, settlements, investigations,
costs, and reasonable attorneys fees and disbursements (collectively "Claims")
which any of them may incur or become obligated to pay arising out of or
resulting from (i) the breach by National Boston of any of its representations,
warranties, covenants, obligations, agreements or duties under this Agreement,
and (ii) any advertising claims made by National Boston based on information not
provided to it by Cactus Jack.
<PAGE>
(b) Exceptions. National Boston shall have no duty
under Section 8.1(a) or otherwise to defend, indemnify or hold harmless with
respect to any Claims which (i) arise out of or result from the breach by Cactus
Jack of any of its representations, warranties, covenants, obligations,
agreements or duties under this Agreement; or (ii) are subject to Cactus Jack's
duty to defend, indemnify and hold harmless pursuant to Section 8.2(a).
8.2 By Cactus Jack.
(a) Generally. Subject to Section 8.2(b), Cactus
Jack shall defend, indemnify and hold harmless National Boston, its affiliated
companies and their respective officers, directors, shareholders, employees,
licensees, agents, successors and assigns from and against any and all without
limitation, claims which any of them may incur or become obligated to pay
arising out of or resulting from (i) the breach by Cactus Jack of any of its
representations, warranties, covenants, obligations, agreements or duties under
this Agreement, and (ii) any advertising claims made by National Boston based
upon documentation, studies, substantiation, and representations made or
provided by Cactus Jack to National Boston.
(b) Exceptions. Cactus Jack shall have no duty
under Section 8.2(a) or otherwise to defend, indemnify or hold harmless with
respect to any Claims which (i) arise out of or result from the breach by
National Boston of any of its representations, warranties, covenants,
obligations, agreements or duties under this Agreement; or (ii) are subject to
National Boston's duty to defend, indemnify and hold harmless pursuant to
Section 8.1(a).
8.3 Procedure. Promptly after learning of the occurrence of
any event which may give rise to it rights under the provisions of this Section
8, any party seeking to enforce such right (a "Claiming Person") shall give
written notice of such matter to the party against whom enforcement of such
rights is sought (the "Indemnifying Party"). The Claiming Person shall cooperate
with the Indemnifying Party in the negotiation, compromise and defense of any
such matter. The Indemnifying Party shall be in charge of and control such
negotiations, compromise and defense and shall have the right to select counsel
with respect thereto, provided that the Indemnifying Party shall promptly notify
the Claiming Person of all material developments in the matter. In no event
shall the Indemnifying Party compromise or settle any such matter without the
prior consent of the Claiming Person, which shall not be bound by any such
compromise or settlement absent its prior consent.
9. Term.
This Agreement shall commence on the date of its execution by all of
the parties and shall continue so long as National Boston makes reasonable
commercial efforts to sell the Products. However, National Boston's rights to
manufacture and market each individual Product described on an Exhibit A shall
terminate with respect to such Product (but not any other Product for which
there is a separate Exhibit A), and National Boston shall have no further rights
with respect thereto (except for the sell-off rights contained in Section 10.3)
if National Boston does not pay royalties to Cactus Jack in at least the amount
stated in Exhibit D for such Product and such condition is not cured by National
Boston within 30 days of written notification by Cactus Jack of National
Boston's failure to meet such requirements.
<PAGE>
10. Termination.
10.1 Termination Events.
(a) Election by National Boston. National Boston
may terminate this Agreement, or its rights to manufacture and sell any
individual Product, at any time upon 30 days prior written notice by so
notifying Cactus Jack and this Agreement, or the rights relating to the
individual Product, subject to the provisions of Section 10.3, shall terminate
30 days following Cactus Jack's receipt of such notice.
(b) Election By Cactus Jack. Cactus Jack may
terminate, subject to Section 10.3, National Boston's rights to manufacture and
sell any individual Product upon 30 days prior written notice to National Boston
under the condition, if any, described in Exhibit E.
(c) Termination Upon Breach. Either party may
terminate this Agreement upon 30 days written notice to the other party upon the
breach by the other party of any of its material representations, warranties,
covenants or agreements contained in this Agreement. Upon the expiration of such
notice period, this Agreement shall terminate without the need for further
action by either party; provided, however, that if the breach upon which such
notice of termination is based shall (i) have been cured within such 30 day
period, or (ii) not be capable of cure within such 30 days, but can be cured
within a reasonable time thereafter, and the breaching party is taking
reasonable steps to effect such a cure, then such notice of termination shall be
deemed rescinded, and this Agreement shall be deemed reinstated and in full
force and effect. Such right of termination shall be in addition to such other
rights and remedies as the terminating party may have under applicable law.
10.2 Obligations Deemed Fulfilled in the Event of Early
Termination. Any early termination pursuant to Section 10.1(a) or (b) of this
Agreement shall not be viewed to be a breach of this Agreement. Unless either of
the parties has separately breached a commitment made elsewhere in this
Agreement, such parties shall be deemed to have fulfilled all of their
obligations hereunder, except those which by their nature survive the
termination of the Term (e.g. warranties and representations, payment
obligations, confidentiality and indemnifications, etc.).
10.3 Limited Sales Rights After Termination. For a period of
six months following the termination of this Agreement, National Boston shall
retain non-exclusive rights to manufacture, use, distribute, sell, advertise,
promote and otherwise exploit the Products in the same manner as provided for in
this Agreement in order for it to (i) complete the manufacturing of all Products
for which it has parts either in its possession or on order, or is otherwise
obligated to manufacture, and (ii) sell all of its inventory of, and fulfill any
existing or expected orders for, the Product.
10.4. Effect of Termination. Upon termination or expiration of
this Agreement for any reason whatsoever:
<PAGE>
a) National Boston shall, at its own expense, return any
of Cactus Jack's Technology and any of Cactus Jack's
Artwork in its possession or control.
(b) National Boston shall continue to pay such royalties as
may be due to Cactus Jack for sales made both before
termination and during the sell-off period.
(c) Each party shall retain any and all rights and remedies
available to it at law or equity.
11. Confidentiality.
11.1 Generally. All customer lists, price lists, written and
unwritten marketing plans, techniques, methods and data, sales and transaction
data, all technology and know-how relating to the manufacture of the Products,
and other information provided by either party shall constitute confidential
information of such party ("Confidential Information"). Either party receiving
Confidential Information (a "Receiving Party") from the other party (a
"Conveying Party") shall hold all Confidential Information in the strictest
confidence and shall protect all Confidential Information of the Conveying Party
with at least the same degree of care that the Receiving Party exercises with
respect to its own propriety information. Without the prior written consent of
the Conveying Party, the Receiving Party shall not use, disclose, divulge or
otherwise disseminate any Confidential Information of the Conveying Party to any
person or entity, except for the Receiving Party's attorneys, accountants and
such other professionals as the Receiving Party may retain in order for it to
perform and enforce the provisions of this Agreement.
11.2 Exceptions. Notwithstanding Section 11.1, the Receiving
Party shall have no obligation with respect to any Confidential Information of
the Conveying Party which (i) is or becomes within the public domain through no
act of the Receiving Party in breach of this Agreement, (ii) was lawfully in the
possession of the Receiving Party without any restriction on use or disclosure
prior to its disclosure in connection with this Agreement and the negotiations
leading to this Agreement, (iii) is lawfully received from another source
subsequent to the date of this Agreement without any restriction on use or
disclosure, or (iv) is required to be disclosed by order of any court of
competent jurisdiction or other governmental authority (provided in such latter
case, however, that the Receiving Party shall timely inform the Conveying Party
of all such legal or governmental proceedings so that the Conveying Party may
attempt by appropriate legal means to limit such disclosure, and the Receiving
Party shall further use its best efforts to limit the disclosure and maintain
confidentiality to the maximum extent possible).
11.3 Material Provisions of this Agreement are Confidential.
The material content of this Agreement dealing with amount of royalties to be
paid, minimum royalties to maintain rights, issuance's of stock, and the like,
are deemed by the parties to be Confidential Information.
12. Injunction.
Each party acknowledges that a breach of the obligations not to compete
under Section 1.3, and/or of confidentiality under Section 11 will result in
irreparable and continuing damage to the non-breaching party for which there
will be no adequate remedy
<PAGE>
at law. Accordingly, in the event of any such breach, the non-breaching party
shall be entitled to temporary and/or permanent injunctive relief and/or an
order for specific performance, without bond, with respect to such breach.
Neither party shall oppose such relief on the grounds that there is an adequate
remedy at law, and such right shall be cumulative and in addition to any other
remedies at law or in equity (including monetary damages) which the
non-breaching party may have upon the breach of either of the other party's
obligation of exclusivity or confidentiality hereunder.
13. Independent Contractor.
No party or any of its officers, employees, agents or representatives
is a partner, employee or agent of any other party for any purpose whatsoever.
Rather, each party is and shall at all times remain an independent contractor.
No party has, nor shall it hold itself out at as having, any right, power or
authority to create any contract or obligation, either express or implied, on
behalf of, in the name of, or binding upon the other party, unless such other
party shall consent thereto in writing. Each party shall have the right to
appoint and shall be solely responsible for its own employees, agents and
representatives, who shall be at such party's own risk, expense and supervision
and shall not have any claim against any other party for compensation or
reimbursement.
14. Force Majeure.
In the event of war, fire, flood, labor troubles, strike, riot, act of
governmental authority, acts of God, or other similar contingencies beyond the
reasonable control of either of the parties interfering with the performance of
the obligations of such party, the obligations so affected shall be deferred to
the extent necessitated by such event or contingency without liability, but this
Agreement shall otherwise remain unaffected. Notice with full details of any
circumstances referenced herein shall be given by the affected party to the
other party, promptly after its occurrence. The affected party shall use due
diligence, where practicable, to minimize the effects of or end any such event.
15. Further Actions.
The parties agree to execute such additional documents and to perform
all such other and further acts as may be necessary or desirable to carry out
the purposes and intentions of this Agreement.
16. Right of First Refusal.
During the Term of this Agreement, Cactus Jack shall provide to
National Boston the exclusive opportunity to first look at any other products
owned and/or controlled by Cactus Jack which have been sufficiently developed
for potential marketing, distribution and/or exploitation. In the event that
National Boston is interested in distributing, selling, advertising, publicizing
and/or otherwise exploiting any such products presented by Cactus Jack, then
National Boston and Cactus Jack shall negotiate in good faith the terms and
conditions of a mutually agreeable marketing arrangement with respect to each
such product. It is envisioned that the terms of this Agreement will be the
foundation for any such marketing arrangement, and that the specific terms for
each of the products will be described
<PAGE>
in new Exhibits A-E to be attached to this Agreement. If National Boston
notifies Cactus Jack that it is not interested in pursuing any such product or
fails to notify Cactus Jack of its interest or lack of interest with respect to
such product within 30 business days following presentation of such product to
National Boston, or the parties cannot agree on the terms and conditions of
marketing arrangement within 30 days after such presentation, then in each such
case, Cactus Jack shall be free to market, distribute, and/or exploit any such
product in any manner it shall choose thereafter without accounting to National
Boston for any compensation.
17. Royalties Owing to Third Parties.
Unless otherwise expressly stated in this Agreement, Cactus Jack shall
be responsible to pay all third parties that are entitled to royalties, if any,
from the exploitation of the Product by reason of agreements entered into by it
or others prior to the date of execution of this Agreement. National Boston
shall be responsible to pay all third party royalties for which it may after the
date of this Agreement incur an obligation.
18. Reverse Royalties and QVC Exemptions
Cactus Jack shall retain the exclusive right to sell and retain 100% of the net
profits associated with sales of Cactus Jack's One Shot Cleaning System and
Cactus Jack's Laundry Vitamins on QVC worldwide. Cactus Jack shall purchase its
product requirements for QVC sales only from the contract manufacturer supplying
the product to National Boston. If Cactus Jack is able to place additional
Cactus Jack products on QVC, then Cactus Jack will pay to National Boston a
reverse royalty of $1.00 for each unit of any such additional product that
Cactus Jack sells on QVC for which National Boston has produced an infomercial.
This royalty will be paid monthly, by the last business day of the month
following the month of payment by QVC to Cactus Jack, and National Boston shall
have the right to inspect the books and records of Cactus Jack relating to such
sales. Cactus Jack will be the sole liaison to QVC on these products, unless
otherwise approved by Cactus Jack in writing. Cactus Jack shall maintain
complete and accurate records of all such sales by Cactus Jack of the additional
products, and shall retain such records for a period of two years. During such
period, all such records that are relevant to the determination of the Reverse
Royalty to be paid by Cactus Jack to National Boston shall be made available for
inspection by National Boston (or National Boston's designee at National
Boston's sole expense) twice per year during normal business hours and upon
reasonable prior notice to Cactus Jack.
19. Stock in National Boston.
National Boston shall issue to Cactus Jack 1,000,000 shares of its
restricted common stock within 30 days following the execution of this Agreement
by all of the parties. These shares shall be considered earned by Cactus Jack
upon execution of this Agreement. In addition, on each subsequent anniversary
date of this Agreement until this Agreement is terminated, National Boston will
issue an additional 250,000 restricted shares to Cactus Jack. If this Agreement
is terminated before any such anniversary date, National Boston will issue
shares pro rata to Cactus Jack for the portion of the year this Agreement was in
effect.
<PAGE>
The restricted shares issued to Cactus Jack will be subject to
piggyback registration rights as described below and any restrictions that may
be imposed by current or future SEC rules and regulations.
The shares referred to in this Section 18 are being issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule 506
of Regulation D promulgated thereunder ("Rule 506") or other applicable
provisions. The shares shall be Rule 144 restricted shares. After issuance of
the shares, at any time that National Boston proposes to file a National Boston
registration statement (except Form 10, Form 10-SB or Form S-8) under the Act
(the "Registration Statement") either for its own account or for the account of
a stockholder, National Boston shall give Cactus Jack written notice of its
intention to do so and of the intended method of sale (the "Registration
Notice") within a reasonable time prior to the anticipated filing date of
National Boston's Registration Statement. Cactus Jack may request inclusion of
any restricted shares in such Registration Statement by delivering to National
Boston, within ten business days after receipt of the Registration Notice, a
written notice (the "Piggyback Notice") stating the number of restricted shares
proposed to be included and that such shares are to be included in any
underwriting only on the same terms and conditions as the shares of common stock
otherwise being sold through underwriters under such Registration Statement.
National Boston shall use its best efforts to cause all restricted shares
specified in the Piggyback Notice to be included in the Registration Statement
and any related offering, all to the extent requisite to permit the sale by
Cactus Jack of its restricted shares in accordance with the method of sale
applicable to the other shares of common stock included in such Registration
Statement. Cactus Jack shall pay its pro rata portion of the costs of such
registration based on the number of shares to be sold. Cactus Jack shall have
only one right to participate in a Registration Statement, and if it does not
include all of its restricted shares in such registration, National Boston shall
have no further obligation to Cactus Jack to facilitate the registration of the
remaining shares.
20. Miscellaneous.
20.1 Notices. All notices, requests, instructions, consents
and other communications to be given pursuant to this Agreement shall be in
writing and shall be deemed received (i) on the same day if delivered in person,
by same-day courier or by telegraph, telex or facsimile transmission, (ii) on
the next day if delivered by overnight mail or courier, or (iii) on the date
indicated on the return receipt, or if there is no such receipt, on the third
calendar day (excluding Sundays) after being sent by certified or registered
mail, postage prepaid, to the party for whom intended to the following
addresses:
If to National Boston:
National Boston Medical, Inc.
43 Taunton Green, Suite 5
Taunton, Massachusetts 02780
Attn: Daniel Hoyng, President
Fax No: (508) 880-5208
<PAGE>
If to Cactus Jack:
Cactus Jack's Marketing Corp.
3203 Greenwood Circle
Ames, Iowa 50010
Attn: Jack Barringer, President
Fax No: (515) 292-7163
Each party may by written notice given to the other in accordance with
this Agreement change the address to which notices to such party are to be
delivered.
20.2 Entire Agreement. This Agreement contains the entire
understanding of' the parties and supersedes all prior agreements and
understandings, whether written or oral, between them with respect to the
subject matter hereof. Each party has executed this Agreement without reliance
upon any promise, representation or warranty other than those expressly set
forth herein.
20.3 Amendment. No amendment of this Agreement shall be
effective unless embodied in a written instrument executed by both of the
parties.
20.4 Waiver of Breach. The failure of any party hereto at any
time to enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provisions, or in any way to affect the
validity of this Agreement or any provisions hereof or the right of any party to
thereafter enforce each and every provision of this Agreement. No waiver of any
breach of any of the provisions of this Agreement shall be effective unless set
forth in a written instrument executed by the party against which enforcement of
such waiver is sought; and no waiver of any such breach shall be construed or
deemed to be a waiver of any other or subsequent breach.
20.5 Assignability. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. Neither of the parties hereto can
assign their respective rights under this Agreement without the prior written
consent of the other party, but any such assignment shall not relieve such
parties from their obligations contained herein.
20.6 Governing Law; Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State in which the action is brought without regard to conflict of
law principles. All disputes relating to or arising out of this Agreement shall
be resolved (i) in the state courts of Massachusetts located closest to the
offices of National Boston if such action is brought by Cactus Jack and (ii) in
the state courts of Iowa located closest to the offices of Cactus Jack if such
action is brought by National Boston. The parties hereto waive any right to a
jury trial with respect to any matter arising out of or related to this
Agreement.
20.7 No Representation as to Extent of Sales. Notwithstanding
the minimums required to maintain the license, National Boston has not made and
does not hereby make any representation or warranty with respect to the extent
or volume it may achieve in the sale or other exploitation of the Products
hereunder. National Boston shall
<PAGE>
make such effort to exploit successfully the Products and the related rights
herein granted as it may determine in accordance with its business judgment;
however, Cactus Jack recognizes and acknowledges that such matters are
speculative and agrees that the judgment of National Boston and its related
companies or licensees in regard to any such matters shall be binding and
conclusive upon Cactus Jack. Cactus Jack agrees that it will not make any claim
nor shall any liability be imposed upon National Boston based upon any claim
that more or better business could have been done than was actually obtained or
done by National Boston or any of its related companies or licensees, or that
better prices or terms could have been obtained or that profitability could have
been enhanced. Cactus Jack agrees that decisions related to the spending levels
associated with any sales or manufacturing activity covered by this Agreement
shall be at the sole discretion and judgment of National Boston.
20.8 Severability. All of the provisions of this Agreement are
intended to be distinct and several. If any provision of this Agreement is or is
declared to be invalid or unenforceable in any jurisdiction, it shall be
ineffective in such jurisdiction only to the extent of such invalidity or
unenforceability. Such invalidity or unenforceability shall not affect either
the balance of such provision, to the extent it is not invalid or unenforceable
or the remaining provisions hereof, or render invalid or unenforceable such
provision in any other jurisdiction.
20.9 Headings. The headings of sections and subsections have
been included for convenience only and shall not be considered in interpreting
this Agreement.
20.10 Counterparts; Facsimiles. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original,
and all of which together shall constitute one and the same Agreement. This
Agreement may be executed and delivered by electronic facsimile transmission
with the same force and effect as if it were executed and delivered by the
parties simultaneously in the presence of one another, and signatures on a
facsimile copy hereof shall be deemed authorized original signatures.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date last written below.
CACTUS JACK'S MARKETING CORP.
By: /s/ Jack Barringer 9/4/99
- --------------------------- ----------
Jack Barringer Date
Chief Executive Officer
NATIONAL BOSTON MEDICAL, INC.
By: /s/ Daniel J. Hoyng 9/4/99
- ---------------------------- -----------
Daniel Hoyng Date
President
<PAGE>
Agreement by Jack Barringer, Individual,
Not to Compete and to Honor Right of First Refusal
I, Jack Barringer, as an individual, agree as an inducement to National
Boston's execution of this Agreement, that I will (i) not individually, directly
or indirectly, either alone or in participation with any other person or entity,
engage in or be involved with manufacturing, marketing or distributing any other
products similar in design, composition, content or function to the Products,
and (ii) offer any new products owned and/or controlled by me (if they are not
otherwise products of Cactus Jack) which have been sufficiently developed for
potential marketing, distribution and/or exploitation to National Boston on the
same terms and conditions as stated in Section 16 of the above Agreement.
/s/ Jack Barringer 9/4/99
- ------------------------ ----------
Jack Barringer, Individual Date
<PAGE>
EXHIBIT A-1
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's One Shot Catch-a-lot Fishing Lure
EXHIBIT B-1
As defined in this Agreement, "Patents " shall mean the following:
Patent pending
EXHIBIT C-1
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
"One shot Catch A lot"
"Catch A lot"
"The Bait that Bleeds"
"The Lure that Thinks it's a Tackle Box"
EXHIBIT D-1
Minimum Royalty Payments to Maintain License:
$60,000 for each calendar quarter commencing with the earlier of (i) the first
full calendar quarter following the month in which the Product is rolled out on
a national basis in television direct response marketing or (ii) second quarter
of the year 2000. Royalty payments shall be cumulative in effect and payments
made in any period in excess of the quarterly minimum for that period shall be
applied toward future period minimum payment requirements in order to maintain
the license. National Boston may make payments in lieu of earned royalties in
order to meet the minimums stated herein, and such payments shall be deemed to
be advances to be credited against future royalties actually earned by Cactus
Jack. It is agreed that since the royalties are actually paid monthly on the
last business day of each month following the month for which the royalties are
calculated, the calculation to determine whether the quarterly minimums have
been met will be made based on royalties actually paid by the last business day
of the month following the third month of the quarter.
<PAGE>
EXHIBIT E-1
Additional Termination Rights Afforded to Cactus Jack:
1. If National Boston does not commence filming of a new infomercial or
modification of an existing infomercial for the Product either before or within
60 days following execution of this Agreement.
OTHER AGREEMENTS OF THE PARTIES:
1. [If there is an existing infomercial for the fishing lure, the
rights of the parties with respect to such infomercial should be described here.
If there is a production agreement with a producer, or talent or host
agreements, requiring the payment of royalties, then copies of such agreements
should be provided to National Boston].
None
<PAGE>
EXHIBIT A-2
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's One Shot Cleaning System
EXHIBIT B-2
As defined in this Agreement, "Patents" shall mean the following:
One Shot (design patent)
EXHIBIT C-2
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
"One Shot"
EXHIBIT D-2
Minimum Royalty Payments to Maintain License:
$30,000 for each calendar quarter commencing with the earlier of (i) the first
full calendar quarter following the month in which the Product is rolled out on
a national basis in television direct response marketing or (ii) the first
quarter of the year 2000. Royalty payments shall be cumulative in effect and
payments made in any period in excess of the quarterly minimum for that period
shall be applied toward future period minimum payment requirements in order to
maintain the license. National Boston may make payments in lieu of earned
royalties in order to meet the minimums stated herein, and such payments shall
be deemed to be advances to be credited against future royalties actually earned
by Cactus Jack. It is agreed that since the royalties are actually paid monthly
on the last business day of each month following the month for which the
royalties are calculated, the calculation to determine whether the quarterly
minimums have been met will be made based on royalties actually paid by the last
business day of the month following the third month of the quarter.
<PAGE>
EXHIBIT E-2
Additional Termination Rights Afforded to Cactus Jack:
1. If National Boston does not commence filming of a new infomercial or
modification of an existing infomercial for the Product within 30 days of
execution of this Agreement.
OTHER AGREEMENTS OF THE PARTIES:
1. [If there is an existing infomercial for the cleaning system, the rights of
the parties with respect to such infomercial should be described here. If there
is a production agreement with a producer, or talent or host agreements,
requiring the payment of royalties, then copies of such agreements should be
provided to National Boston].
Royalties to Third Parties include: HSND (Home Shopping Network Direct)
@$1.00 /unit; Kevin Harrington @ 1/2% of gross revenue; 2-D Productions
@ 1/2% of gross revenue
<PAGE>
EXHIBIT A-3
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's Laundry Vitamins
EXHIBIT B-3
As defined in this Agreement, "Patents " shall mean the following:
"One Shot"(design patent)
EXHIBIT C-3
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
"Laundry Vitamins"
EXHIBIT D-3
Minimum Royalty Payments to Maintain License:
None
EXHIBIT E-3
Additional Termination Rights Afforded to Cactus Jack:
None
OTHER AGREEMENTS OF THE PARTIES:
None
<PAGE>
EXHIBIT A-4
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's Growalot Plant Food
EXHIBIT B-4
As defined in this Agreement, "Patents " shall mean the following:
"One Shot" (design patent)
EXHIBIT C-4
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
EXHIBIT D-4
Minimum Royalty Payments to Maintain License:
None
EXHIBIT E-4
Additional Termination Rights Afforded to Cactus Jack:
None
OTHER AGREEMENTS OF THE PARTIES:
None
<PAGE>
EXHIBIT A-5
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's Air Fresh Bullets
EXHIBIT B-5
As defined in this Agreement, "Patents " shall mean the following:
"One Shot" (design patents)
EXHIBIT C-5
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
EXHIBIT D-5
Minimum Royalty Payments to Maintain License:
None
EXHIBIT E-5
Additional Termination Rights Afforded to Cactus Jack:
None
OTHER AGREEMENTS OF THE PARTIES:
None
<PAGE>
EXHIBIT A-6
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's Car Wash and Wax Bullets
EXHIBIT B-6
As defined in this Agreement, "Patents " shall mean the following:
"One Shot" (design Patent)
EXHIBIT C-6
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
EXHIBIT D-6
Minimum Royalty Payments to Maintain License:
None
EXHIBIT E-6
Additional Termination Rights Afforded to Cactus Jack:
None
OTHER AGREEMENTS OF THE PARTIES:
None
<PAGE>
EXHIBIT A-7
As defined in this Agreement, "Products" shall mean the following:
Cactus Jack's Soy Candles
EXHIBIT B-7
As defined in this Agreement, "Patents " shall mean the following:
None
EXHIBIT C-7
As defined in this Agreement, "Trademarks" shall mean the following:
"Cactus Jack"
EXHIBIT D-7
Minimum Royalty Payments to Maintain License:
None
EXHIBIT E-7
Additional Termination Rights Afforded to Cactus Jack:
None
OTHER AGREEMENTS OF THE PARTIES:
None
EXHIBIT 10.61
SETTLEMENT AGREEMENT
This Settlement Agreement made as of September 15, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and PATRICK LAWLESS, who
resides at 21 Bawley Street, Laguna Niguel, CA 92677 ("LAWLESS").
Currently NBM owes $15,477.00 to LAWLESS (the "INDEBTEDNESS"). In
exchange for the following consideration as well as other good and valuable
consideration paid in hand, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. NBM shall issue to LAWLESS (or his designee) and LAWLESS shall
accept 103,180 shares of NBM restricted common stock (the
"STOCK") as full and final satisfaction of the INDEBTEDNESS,
to be issued within two (2) weeks of execution of this
Agreement.
2. Upon receipt of the STOCK, LAWLESS shall immediately cause a
General Release of All Claims to be executed in favor of NBM.
This Settlement Agreement is freely and voluntarily executed by LAWLESS
after being apprized of all relevant information and data by his consultants
and/or attorneys. LAWLESS in executing this Settlement Agreement does not rely
on any inducements, promises, or representations made by NBM or any of the NBM's
representatives. Furthermore, no promise, inducement, or agreement not herein
set forth, has been made to LAWLESS and this Settlement Agreement contains the
entire agreement between the parties hereto, and the terms of this Settlement
Agreement are contractual and not merely a recital.
All terms contained herein are subject to approval by the Board of
Directors of NBM (the "BOARD"). Should the BOARD fail to approve all or any
portion of this Settlement Agreement, this Settlement Agreement shall be null
and void and the parties returned to their original positions ab initio.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. PATRICK LAWLESS
By:/s/ Daniel J. Hoyng By:/s/ Patrick Lawless
------------------------------- ----------------------
Daniel Hoyng, President, CEO and Chairman Patrick Lawless
EXHIBIT 10.62
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 21st
Day of September 1999 by and between National Boston Medical, Inc. (Company) and
Raymond Volpe (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive for a term beginning on the
date of this Agreement and continuing at the mutual consent of both parties as
its Vice President OTC Products or at a comparable management position with the
Company and the Executive hereby accepts such employment in accordance with the
terms of this Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before September 24, 2000, then
it shall automatically continue until (a) the Agreement is terminated earlier in
accordance with the provisions herein or (b) the Board of Directors or the
Executive Committee of the Company notifies the Executive in writing of its
determination to have the date of this Agreement expire ninety (90) days from
the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of Vice
President OTC Products or such responsibility or authority as from time to time
additionally authorized by the Board of Directors. The Executive may engage in
other activities, such as activities including serving on the Board of Directors
of other corporations/organizations, and/or advising other
corporations/organizations in each case to the extent that such activities do
not materially detract from or limit the performance of the Executive's duties
under this Agreement, or inhibit in any material way the business of the Company
and its subsidiaries. The Executive will engage in no activity, paid or
otherwise, for a competitor of the Company so long as this Agreement is in
effect. The Executive shall perform all duties in a professional, ethical and
businesslike manner.
The Executive's primary location for the performance of his duties shall be Boca
Raton, Florida. However, at any time deemed necessary or advisable by the
Company or the Executive, for business purposes, the Executive shall work at
other such location or locations as may be determined by the Company.
Furthermore, the Executive shall not be permanently re-located without his
consent.
<PAGE>
The Executive shall work those hours necessary to accomplish the functions and
responsibilities of the position as assigned and shall not be held to a minimum
or maximum hourly period.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
.) A base salary, commencing September 24, 1999 of not less than $75,000 per
year, (or such greater amounts as may be approved by the Board of Directors or
the executive committee in accordance with authority given by the Board of
Directors) payable in installments on a semi-monthly but not less than a monthly
schedule. The Executive's base salary may be increased consistent with
recommendations of the Executive Committee of the Board. At least annually the
Executive Committee shall review the Executive's base salary for competitiveness
and appropriateness in the industry. In no event shall the Executive's base
salary be less than $75,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $3,000 per
calendar quarter to the Executive. During the term of this Agreement said bonus
shall be paid in cash no later than the 15th day of each calendar quarter. The
effective date of the quarterly bonus for this Agreement shall be September 24,
1999, with the first payment due and payable to the Executive on or before
October 15, 1999 and continuing thereafter until the first day of October 2000.
From time to time during the term of this Agreement, the Executive may receive a
greater quarterly bonus if approved by the Executive Committee; however, the
quarterly bonus shall never be less than $3,000.
C.) In addition to the other payments referred to in this Agreement, the
Executive shall be entitled to receive and participate in an annual incentive
bonus plan. The amount of the Executive's participation and the benefits paid
under the incentive bonus plan shall be based upon goals recommended by the
Executive and approved by the Executive Committee. The annual incentive bonus
plan payments will be paid in cash and the payment will be made not later than
30 days following the close of the fiscal year for each year this Agreement is
in effect.
D.) The Executive shall be entitled to participation in a stock option plan to
be determined by the Board of Directors and approved by the SEC. The Executive
shall have the right to exercise such option by payment in cash, or if approved
by the Board of Directors, the Executive may execute a short term note with the
Company for payment of such options. The exercise period of any options shall be
three years from the date of the grant.
<PAGE>
4. Benefits
A.) Holidays: The Executive will be entitled to at least nine (9) paid holidays
each calendar year and twelve (12) personal days. The Company will notify the
Executive on or about the beginning of each calendar year with respect to the
holiday schedule for the coming year. Personal holidays, if any, will be
scheduled in advance subject to the requirements of the Company. Such holidays
must be taken during the calendar year and unused days shall not carry forward
into the next year.
B.) Vacation: The Executive shall be entitled to three (3) weeks or (15)
paid vacation days per year effective as of the date of the Agreement.
C.) Sick Leave: The Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided by
the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
D.) Medical and Group Life Insurance: Company agrees to include Executive
and his family members in the group medical and hospital plan of the Company and
provide group life insurance at no charge to the Executive, in the amount of not
less than $150,000 during the term of this Agreement. Executive shall be
responsible for any state or federal tax imposed upon these benefits.
E.) Pension and Profit Sharing Plan: The Executive shall be eligible to
participate in any pension or profit sharing plan or other type plan adopted by
the Company for the benefit of its officers and/or regular employees.
F.) Expense Reimbursement: The Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by the
Executive in the performance of his duties. The Executive will maintain records
and written receipts as required by Company policy and reasonably requested by
the Board of Directors to substantiate such expenses.
G.) In addition to any other compensation, the Executive will receive an
automobile allowance in the amount of $675 per month to be paid to the Executive
each month during the term of this Agreement.
5. Termination
The Company shall have the right to terminate this Agreement for any reason upon
ninety (90) days prior written notice or for good cause with Thirty (30) days
written notice.
Termination by the Company of the Executive for "good cause" as used in this
Agreement shall be limited to mean willful breach or habitual neglect of duties,
gross negligence, misappropriation or theft of Company funds or conviction of
state or federal offenses which would prevent the Executive from performance of
his duties.
<PAGE>
With respect to any termination for good cause by the Company, the specifics of
the cause shall be communicated to the Executive in writing at least thirty (30)
days prior to the date on which the termination is proposed to take effect. The
Executive shall be given the opportunity to correct or respond to such cause.
A. If this Agreement is terminated for good cause, Executive's rights and the
Company's obligations hereunder shall forthright terminate except as expressly
provided in this Agreement.
B. If this Agreement is terminated for reasons other than as defined as good
cause, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the Agreement
(ninety days), together with bonus and other incentives as provided for in this
Agreement.
6. Termination by Executive
The Executive shall have the right to terminate this Agreement with thirty (30)
days written notice to the Company given within sixty (60) days of the
occurrence of any of the following events:
A. The Company acts to materially reduce the Executive's position, title,
duties, authority or responsibilities.
B. The Company acts to reduce the compensation, bonus or incentives of the
Executive.
7. Remedies
The Company recognizes that because of the Executive's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
8. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
<PAGE>
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Raymond Volpe
7800 Fairway Trail
Boca Raton, FL 33487
9. Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
10. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
11. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
12. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Executive,
his heirs, distributees and assigns.
13. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
14. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration
<PAGE>
shall be concluded in such place as shall be mutually agreed upon by the
parties. Within fifteen (15) days of the commencement of the arbitration, each
party shall select one person to act as arbitrator, and the two arbitrators
shall select a third arbitrator within ten (10) days of their appointment. Each
party shall bear its own costs and expenses and an equal share of the
arbitrator's expenses and administrative fees of arbitration.
15. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature obtained by him while in the employ of the
Company except as necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Raymond Volpe
- -------------------------
Raymond Volpe
Executive's Signature and Acceptance
/s/ Barry McFarland
- ---------------------------
Barry P. McFarland
CFO
National Boston Medical, Inc.
EXHIBIT 10.63
SETTLEMENT AGREEMENT
This Settlement Agreement made as of September 24, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, Massachusetts 02780 ("NBM") and Michael Hodge, who
resides at P.O. Box 11844, Huntsville, AL 35714 ("HODGE").
Currently NBM owes $18,000.00 to HODGE. In exchange for the following
consideration as well as other good and valuable consideration paid in hand, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree to the following:
1. NBM shall pay HODGE and HODGE shall accept $6,000 on or before
October 1, 1999 with no additional interest accruing thereon
and no penalty for prepayment.
2. NBM shall issue 80,000 shares of its restricted common stock
to HODGE (or its designee) on or before October 8, 1999.
3. HODGE shall cause a General Release of All Claims to be
executed in favor of NBM upon actual receipt of number 1 above
and upon receipt of a facsimile copy of number 2 above.
4. Upon receipt of the General Release of All Claims, NBM shall
cause the aforementioned certificate to be sent to HODGE via
certified mail.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. MICHAEL HODGE
By:/s/ Daniel J. Hoyng By:/s/ Michael Hodge
--------------------------- ---------------------------
Daniel Hoyng, Chairman, President and CEO Michael Hodge
EXHIBIT 10.64
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment agreement (Agreement) is made and effective this 30th
Day of August 1999 by and between National Boston Medical, Inc. (Company) and
Edward Galanif (Executive).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Executive for a term beginning on the
date of this Agreement and ending August 30, 2000 as its Controller or at a
higher responsible management position with the Company and the Executive hereby
accepts such employment in accordance with the terms of this Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before August 30, 2000, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after August 30, 2000, the Board of Directors or the Executive Committee
of the Company notifies the Executive in writing of its determination to have
the date of this Agreement expire one year from the date of such notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Executive
The Executive shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of Controller
or such responsibility or authority as from time to time additionally authorized
by the Board of Directors. The Executive may engage in other activities, such as
activities including serving on the Board of Directors of other
corporations/organizations, and/or advising other corporations/organizations in
each case to the extent that such activities do not materially detract from or
limit the performance of the Executive's duties under this Agreement, or inhibit
in any material way the business of the Company and its subsidiaries. The
Executive will engage in no activity, paid or otherwise, for a competitor of the
Company so long as this Agreement is in effect. The Executive shall perform all
duties in a professional, ethical and businesslike manner.
The Executive will not be required to render services hereunder outside of the
Boston/Taunton metropolitan area without his approval. Whether or not such
approval is
<PAGE>
given, The Executive shall be entitled to full compensation as provided for in
this Agreement.
3. Compensation
The Executive will be paid compensation during this Agreement as follows:
A.) A base salary, commencing August 30, 1999 of not less than $75,000
per year, (or such greater amounts as may be approved by the Board of Directors
or the executive committee in accordance with authority given by the Board of
Directors) payable in installments on a semi-monthly but not less than a monthly
schedule. The Executive's base salary may be increased consistent with
recommendations of the Executive Committee of the Board. At least annually the
Executive Committee shall review the Executive's base salary for competitiveness
and appropriateness in the industry. The Executive shall be entitled to a
minimum annual increase in base salary of three (3) percent. In no event shall
the Executive's base salary be less than $75,000 on an annual basis.
B.) The Company agrees to pay a Quarterly Bonus of not less than $3,000
per calendar quarter to the Executive. During the term of this Agreement said
bonus shall be paid in cash no later than the 15th day of each calendar quarter.
The effective date of the quarterly bonus for this Agreement shall be August 30,
1999, with the first payment due and payable to the Executive on or before
October 15, 1999 and continuing thereafter until the first day of September
2000. From time to time during the term of this Agreement, the Executive may
receive a greater quarterly bonus if approved by the Executive Committee;
however, the quarterly bonus shall never be less than $3,000.
C.) In addition to the other payments referred to in this Agreement,
the Executive shall be entitled to receive and participate in an annual
incentive bonus plan. The amount of the Executive's participation and the
benefits paid under the incentive bonus plan shall be based upon goals
recommended by the Executive and approved by the Executive Committee. The annual
incentive bonus plan payments will be paid in cash and the payment will be made
not later than 30 days following the close of the fiscal year for each year this
Agreement is in effect.
D.) In addition to other payments referred to in this Agreement, the
Executive will be granted 200,000 shares upon execution and an additional
100,000 shares on the anniversary date of this Agreement (August 30, 2000) and
each additional year on the anniversary date that this Agreement is in effect.
The above shares shall carry an anti-dilution provision allowing the Executive
in the event of any additional stock offerings of the Company, to purchase up to
the number of shares necessary to maintain the Executive's stock position prior
to the offering. Such shares will be made available at 75% of the initial price
of each offering. The initial shares shall vest upon execution and be delivered
not later than September 30, 1999. The additional shares shall vest and be
delivered not later that August 30, 2000. Prior to vesting, the Executive shall
be entitled to receive dividends on and vote the unvested shares. Should this
Agreement be terminated prior to August 30, 2000 such shares shall be delivered
and vested to the Executive as stated above.
<PAGE>
E.) It is intended that the Executive have the opportunity to attain a
reasonable ownership position of not less than 1.0 % of the outstanding stock of
the Company. In furtherance of this goal and in addition to the payments
referred to in this Agreement, the Executive shall be entitled to receive
discount option grants (the exercise purchase price shall be the lower of the
average price of the NBM stock during the last twelve months or the current
market price as of the date of the option) to purchase the stock of the Company
totaling no less than 150,000 shares. These shares will be awarded as of August
30,1999. The foregoing shall become vested immediately upon the award of the
shares. The Executive shall have the right to exercise the option by payment in
cash, or if approved by the Board of Directors, the Executive may execute a
short term note with the Company for payment of such stock and options. The
exercise period of any options shall be three years from the date of the grant.
F.) The Executive may choose once each year of this Agreement to
convert one-third of his annual salary to stock or stock options, the purchase
price shall be the lower of the average price of the NBM stock during the last
twelve months or the current market price as of the date the Executive chooses
to exercise such option.
G.) In addition to the other payments referred to in this Agreement,
the Company agrees to award to the Executive a signing bonus of $10,000. Said
bonus to be paid in three equal cash payments over the ninety day period
following execution of this Agreement.
H.) If any payments due the Executive under this Agreement result in
the Executive's liability for an excise tax ("parachute tax") under Section 49
of the Internal Revenue Code of 1986, as amended (the "Code") the Company will
pay to the Executive, after deducting any Federal, State or local income tax
imposed, the "parachute tax" liability. Such payment shall be made to the
Executive no later than 30 days prior to the due date of the "parachute tax."
I.) All shares included in this agreement shall carry piggy back
registration rights.
4. Benefits
A.) Holidays: The Executive will be entitled to at least nine (9) paid
holidays each calendar year and twelve (12) personal days. The Company will
notify the Executive on or about the beginning of each calendar year with
respect to the holiday schedule for the coming year. Personal holidays, if any,
will be scheduled in advance subject to the requirements of the Company. Such
holidays must be taken during the calendar year and unused days shall not carry
forward into the next year.
B.) Vacation: The Executive shall be entitled to four (4) weeks or
twenty-eight (28) paid vacation days per year effective as of the date of the
Agreement.
C.) Sick Leave: The Executive shall be entitled to sick leave and
emergency leave according to the regular policies and procedures of the Company.
Additional sick leave or
<PAGE>
emergency leave over and above paid leave provided by the Company, if any, shall
be granted at the discretion of the Executive Committee of the Board of
Directors.
D.) Medical and Group Life Insurance: Company agrees to include
Executive and his family members in the group medical and hospital plan of the
Company and provide group life insurance at no charge to the Executive, in the
amount of not less than $500,000 during the term of this Agreement. Executive
shall be responsible for any state or federal tax imposed upon these benefits.
E.) Pension and Profit Sharing Plan: The Executive shall be eligible
to participate in any pension or profit sharing plan or other type plan adopted
by the Company for the benefit of its officers and/or regular employees.
F.) Expense Reimbursement: The Executive shall be entitled to reim-
bursement for all reasonable expenses, including travel and entertainment
incurred by the Executive in the performance of his duties. The Executive will
maintain records and written receipts as required by Company policy and
reasonably requested by the Board of Directors to substantiate such expenses.
G.) Financial and Tax Advice: During (a) the term of this Agreement (b)
the 12 month period following the termination of this Agreement as a result of
Death and/or Disability, and (c) the three year period following the voluntary
termination by the Executive with good reason or the involuntary termination by
the Company without cause... the Company shall provide the Executive (or, if
Executive shall have died, his estate) at the Company's expense, third party
professional financial and tax advisory services, primarily oriented to planning
in light of the Executive's entitlement to compensation and benefits and
appropriate in light of circumstances of Executive or his estate. Executive (or
his estate) may select the service professional of his choice.
H.) In addition to any other compensation,the Executive will receive
an automobile allowance in the amount of $675 per month to be paid to the
Executive each month during the term of this Agreement.
5. Termination
A. The Company shall have the right to terminate this Agreement under
the following circumstances:
i. Upon the death of the Executive.
ii. Upon notice to the Executive in the event of notice of
illness or other disability which has incapacitated him from performing his
duties for 12 consecutive months as determined in good faith by the Board.
iii. For good cause upon notice from the Company. Termination
by the Company of the Executive for "good cause" as used in this Agreement shall
be limited to
<PAGE>
mean gross negligence, misappropriation or theft of Company funds or conviction
of state or federal offenses which would prevent the Executive from performance
of his duties. With respect to any termination for good cause by the Company,
the specifics of the cause shall be communicated to the Executive in writing at
least thirty (30) days prior to the date on which the termination is proposed to
take effect. The Executive shall be given the opportunity to correct or respond
to such cause.
D. If this Agreement is terminated pursuant to Section 5 (A - iii)
above, Executive's rights and the Company's obligations hereunder shall
forthright terminate except as expressly provided in this Agreement.
E. If this Agreement is terminated pursuant to Section 5 (A - i or ii)
hereof, Executive or his estate shall be entitled to receive 100% of the
Executives salary and incentives for the balance of the term of the Agreement,
together with bonus and other incentives as provided for in this Agreement.
6. Termination by Executive
The Executive shall have the right to terminate this Agreement with
thirty (30) days written notice to the Company given within sixty (60) days of
the occurrence of any of the following events:
A. The Company acts to materially reduce the Executive's position,
title, duties, authority or responsibilities.
B. The Company acts to reduce the compensation, bonus or incentives of
the Executive.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if
the Company shall terminate the Executive or the Executive's duties under this
Agreement in any way that is a breach by the Company, the following shall apply:
i. The Executive shall receive a cash payment that is equal to
the present value of the Executive's base salary hereunder for the remainder of
the term, payable within 30 days of the date of such termination.
ii. The Executive shall be entitled to bonus payments and
benefits as provided in Section 3 (it being understood, however, that all such
bonus payments, if made pursuant to this clause, shall be paid in cash
regardless of whether or not such payments exceed the cash limit.
iii. All stock options and common stock and restricted stock
granted by the Company to the Executive under this Agreement shall accelerate
and become
<PAGE>
immediately vested and exercisable.
B. The parties believe that because of the limitations of Section 5 the
above payments do not constitute "Excess Parachute Payments" under section 280G
of the Internal Revenue Code of 1954, as amended (the Code). Notwithstanding
such belief, if any benefit is determined to be an "Excess Parachute Payment"
the Company shall pay the Executive an additional amount (Tax Payment) such that
(x) the excess of all Excess Parachute Payments (including payment under this
sentence) over the sum of the excise tax thereon under section 4999 of the Code
and under applicable state law is equal to (y) the excess of all Excess
Parachute Payments (excluding payments under this sentence) over income tax
thereon under subtitle A of the Code and under applicable state law provided
that the Company shall not be obligated to make tax payment in excess of the
value of 6.6667 Compensation Years. For the purposes hereof, the value of a
Compensation Year, including stock options and bonus entitlements, is defined as
equal two (2) times the base salary set forth in this Agreement.
8. Change of Control
If, within twenty-four (24) months following a change of control, the
Executive is terminated, the termination shall be deemed a "Change of Control
Termination." For the purpose of this paragraph... (a) the delivery of a notice
of termination by the Company... within 24 months of a Change of Control and (b)
a Constructive Discharge within 24 months following a Change of Control will
also be deemed a Change of Control Termination. In the event of a Change of
Control Termination, the Company will pay to the Executive a lump sum payment of
299% of the Executive's average annual base salary plus both quarterly and
annual incentive bonuses during the preceding 3 year period. In the event that a
Change of Control Termination occurs before the Executive completes three (3)
years of service, the lump sum payment will be valued at 299% of the Executive's
average annual base salary plus both quarterly and annual incentive bonuses
during all years of service. Additionally, any options and or restricted stock
granted to the Executive shall become fully vested as of the date of the Change
of Control Termination. Provided further, the Executive will receive a cash
payment equal to the value of any options anticipated to be granted... within
three (3) years following the Change of Control Termination.
If any portion of any payment or distribution by the Company, to or for
the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this section ... shall be subject to the
excise tax imposed by section 4999 of the (Internal Revenue) Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax... the Company shall pay to the Executive an additional payment (the Gross-
up Payment) in an amount such that after the payment of such Excise Tax,
including, without limitation, any income tax and excise tax imposed on the
Gross-up payment, the Executive retains an amount including the Gross-up Payment
equal to the total payment hereunder without regard to the Gross-up Payment.
"Change of Control" shall be deemed to have occurred if at any time or from time
to time after the date of this agreement:
<PAGE>
i. Any "person" or "group" ... is or becomes the "beneficial
owner" ... directly or indirectly, of securities of the Company representing 40%
or more of the combined voting power of the Company's then outstanding
securities... or,
ii. The stockholders of the Company approve a merger or
consolidation with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company... continuing to
represent... more than 50% of the combined voting power of the voting securities
or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets...or
iii. The Company has a change in Board Majority unapproved by
at least three-fourths of the directors.
9. Remedies
The Company recognizes that because of the Executive's special talents,
stature, and opportunities in the industry, and because of the creative nature
of and compensation practices of the industry and the material impact that
individual projects can have on a company's results of operations, in the event
of termination by the Company hereunder or in the event of termination by the
Executive before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Executive might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
10. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Executive:
Mr. Edward Galanif
70 Pine Street
Bridgewater, MA 02324
<PAGE>
11. Final Agreement
This Agreement terminates and supersedes all prior understandings or
agreements on the subject matter hereof. This Agreement may be modified only by
a further writing that is duly executed by both parties.
12. Governing Law
This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts.
13. Headings
Headings in this Agreement are provided for convenience only and shall
not be used to construe meaning or intent.
14. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the
Executive, his heirs, distributees and assigns.
15. Severability
If any term of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, then this Agreement, including all
of the remaining terms, will remain in full force and effect as if such invalid
or unenforceable term had never been included.
16. Arbitration
The parties agree that they will use their best efforts to amicably
resolve any dispute arising out of or relating to this Agreement. Any
controversy, claim or dispute that cannot be so resolved shall be settled by
final binding arbitration in accordance with the rules of the American
Arbitration Association and judgement upon the award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction thereof. Any such
Arbitration shall be concluded in such place as shall be mutually agreed upon by
the parties. Within fifteen (15) days of the commencement of the arbitration,
each party shall select one person to act as arbitrator, and the two arbitrators
shall select a third arbitrator within ten (10) days of their appointment. Each
party shall bear its own costs and expenses and an equal share of the
arbitrator's expenses and administrative fees of arbitration.
17. Protection of the Company's Interests
During the term of this Agreement, the Executive shall not directly or
indirectly engage in competition with the Company. At no time shall the
Executive divulge, furnish, or make accessible to any person any information of
a confidential or proprietary nature
<PAGE>
obtained by him while in the employ of the Company except as necessary in the
performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ Edward Galanif
- ----------------------
Edward Galanif
Executive's Signature and Acceptance
/s/ Barry P. McFarland
- ----------------------------
Barry P. McFarland
CFO
National Boston Medical, Inc.
EXHIBIT 10.65
EMPLOYMENT AGREEMENT
This Employment agreement (Agreement) is made and effective this 14th Day of
September 1999 by and between National Boston Medical, Inc. (Company) and
Michael Steinberg (Employee).
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment
The Company hereby agrees to employ the Employee for a term beginning on the
date of this Agreement and ending September 14, 2000 as its Inventor Relations
Specialist or at a higher responsible position with the Company and the Employee
hereby accepts such employment in accordance with the terms of this Agreement.
Not withstanding the aforesaid, if this Agreement shall not have been terminated
in accordance with the provisions herein on or before September 14, 2000, the
remaining term of the Agreement shall be extended such that each and every
moment of time thereafter, the remaining term shall be one year unless (a) the
Agreement is terminated earlier in accordance with the provisions herein or (b)
on or after September 14, 2000, the Board of Directors or the Executive
Committee of the Company notifies the Employee in writing of its determination
to have the date of this Agreement expire one year from the date of such
notification.
In the event of any conflict or ambiguity between the terms of this Agreement
and terms of employment applicable to regular employees, the terms of this
Agreement shall control.
2. Duties of the Employee
The Employee shall devote substantial time, attention and energy to the affairs
of the Company and/or its subsidiaries during the term of this Agreement and
shall have such duties, responsibilities and authority as shall be the character
and dignity appropriate and consistent with the position and title of Inventor
Relations Specialist or such responsibility or authority as from time to time
additionally authorized by the Board of Directors. The Employee may engage in
other activities, such as activities including serving on the Board of Directors
of other corporations/organizations, and/or advising other
corporations/organizations in each case to the extent that such activities do
not materially detract from or limit the performance of the Employee's duties
under this Agreement, or inhibit in any material way the business of the Company
and its subsidiaries. The Employee will engage in no activity, paid or
otherwise, for a competitor of the Company so long as this Agreement is in
effect. The term "competitor" shall include any individual or entity engaged in
the manufacture, sale, marketing or distribution of products or product lines
similar in design, composition, content or function to those products currently
or in the future carried by the Company. The Employee shall perform all duties
in a professional, ethical and businesslike manner.
The Employee will be based out of his current location in Lilburn Georgia. The
Employee will not be required to relocate without his approval.
<PAGE>
3. Compensation
The Employee will be paid compensation during this Agreement as follows:
A.) A base salary, commencing September 14, 1999 of not less than $72,000 per
year, (or such greater amounts as may be approved by the Board of Directors or
the Executive committee in accordance with authority given by the Board of
Directors) payable in installments on a semi-monthly but not less than a monthly
schedule. The Employee's base salary may be increased consistent with
recommendations of the Executive Committee of the Board. At least annually the
Executive Committee shall review the Employee's base salary for competitiveness
and appropriateness in the industry. In no event shall the Employee's base
salary be less than $72,000 on an annual basis.
B.) The Company agrees to pay a Bonus consisting of 10,000 shares of the
Company's restricted Common Stock for each one million dollars ($1 million) of
net sales, defined as Gross Sales less: discounts, returns and allowances of
products sourced by the Employee or through Product Sourcing, Ltd with his
involvement. This bonus is capped at a maximum of 200,000 shares per year. These
shares will be calculated quarterly and delivered to the Employee within 30 days
following the end of each quarter.
C.) The Employee may choose once each year of this Agreement to convert
one-third of his annual salary to stock or stock options, the purchase price
shall be the lower of the average price of the NBM stock during the last twelve
months or the current market price as of the date the Employee chooses to
exercise such option.
D.) In addition to the other payments referred to in this Agreement, the Company
agrees to award to the Employee as of the effective date of this Agreement, a
signing bonus of 300,000 shares of the Company's restricted common stock. These
shares shall be delivered to the Employee within 45 days of the execution date
of this agreement subject to the Employee's successful completion of his 30-day
new hire probationary period.
E.) The Restricted shares issued to the Employee will be subject to piggyback
registration rights as described below and any restrictions that may be imposed
by current or future SEC rules and regulations.
The shares referred to in this Section 3 are being issued pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule 506 of
Regulation D promulgated thereunder ("Rule 506") or other applicable provisions.
The shares shall be Rule 144 restricted shares. After issuance of the shares, at
any time that National Boston proposes to file a National Boston registration
statement (except Form 10, Form 10-SB or Form S-8) under the Act (the
"Registration Statement") either for its own account or for the account of a
stockholder, National Boston shall give the Employee written notice of its
intention to do so and of the intended method of sale (the "Registration
Notice") within a reasonable time prior to the anticipated filing date of
National Boston's Registration Statement. The Employee may request inclusion of
any restricted shares in such Registration Statement by delivering to National
Boston, within ten business days after receipt
<PAGE>
of the Registration Notice, a written notice (the "Piggyback Notice") stating
the number of restricted shares proposed to be included and that such shares are
to be included in any underwriting only on the same terms and conditions as the
shares of common stock otherwise being sold through underwriters under such
Registration Statement. National Boston shall use its best efforts to cause all
restricted shares specified in the Piggyback Notice to be included in the
Registration Statement and any related offering, all to the extent requisite to
permit the sale by the Employee of its restricted shares in accordance with the
method of sale applicable to the other shares of common stock included in such
Registration Statement. The Employee shall pay its pro rata portion of the costs
of such registration based on the number of shares to be sold. The Employee
shall have only one right to participate in a Registration Statement, and if it
does not include all of its restricted shares in such registration, National
Boston shall have no further obligation to the Employee to facilitate the
registration of the remaining shares.
4. Benefits
A.) Holidays: The Employee will be entitled to at least nine (9) paid holidays
each calendar year and twelve (12) personal days. The Company will notify the
Employee on or about the beginning of each calendar year with respect to the
holiday schedule for the coming year. Personal holidays, if any, will be
scheduled in advance subject to the requirements of the Company. Such holidays
must be taken during the calendar year and unused days shall not carry forward
into the next year.
B.) Vacation: The Employee shall be entitled to two (2) weeks or fourteen
(14) paid vacation days per year effective as of the date of the Agreement.
C.) Sick Leave: The Employee shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of the Company.
Additional sick leave or emergency leave over and above paid leave provided by
the Company, if any, shall be granted at the discretion of the Executive
Committee of the Board of Directors.
D.) Medical and Group Life Insurance: Company agrees to include Employee and his
family members in the group medical and hospital plan of the Company and provide
group life insurance at no charge to the Employee, in the amount of not less
than $150,000 during the term of this Agreement. Employee shall be responsible
for any state or federal tax imposed upon these benefits.
E.) Pension and Profit Sharing Plan: The Employee shall be eligible to
participate in any pension or profit sharing plan or other type plan adopted by
the Company for the benefit of its officers and/or regular employees.
F.) Expense Reimbursement: The Employee shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment incurred by the
Employee in the performance of his duties. The Employee will maintain records
and written receipts as required by Company policy and reasonably requested by
the Board of Directors to substantiate such expenses.
5. Termination
A. The Company shall have the right to terminate this Agreement under the
following circumstances:
<PAGE>
i. Upon the death of the Employee.
ii. Upon notice to the Employee in the event of notice of illness or
other disability which has incapacitated him from performing his duties for 12
consecutive months as determined in good faith by the Board.
iii. For good cause upon notice from the Company. Termination by the
Company of the Employee for "good cause" as used in this Agreement shall be
limited to mean gross negligence, misappropriation or theft of Company funds or
conviction of state or federal offenses which would prevent the Employee from
performance of his duties.
With respect to any termination for good cause by the Company, the specifics of
the cause shall be communicated to the Employee in writing at least thirty (30)
days prior to the date on which the termination is proposed to take effect. The
Employee shall be given the opportunity to correct or respond to such cause.
D. If this Agreement is terminated pursuant to Section 5 (A - iii) above,
Employee's rights and the Company's obligations hereunder shall forthright
terminate except as expressly provided in this Agreement.
E. If this Agreement is terminated pursuant to Section 5 (A - i or ii) hereof,
Employee or his estate shall be entitled to receive 100% of the Employees salary
and incentives for the balance of the term of the Agreement, together with bonus
and other incentives as provided for in this Agreement.
6. Termination by Employee
The Employee shall have the right to terminate this Agreement with thirty (30)
days written notice to the Company given within sixty (60) days of the
occurrence of any of the following events:
A. The Company acts to materially reduce the Employee's position, title,
duties, authority or responsibilities.
B. The Company acts to reduce the compensation, bonus or incentives of the
Employee.
7. Consequences of Breach by the Company
A. If this Agreement is terminated pursuant to Section 5 hereof, or if the
Company shall terminate the Employee or the Employee's duties under this
Agreement in any way that is a breach by the Company, the following shall apply:
B. The Employee shall receive a cash payment that is equal to the present value
of the Employee's base salary hereunder for the remainder of the term, payable
within 30 days of the date of such termination.
C. The Employee shall be entitled to bonus payments and benefits as provided in
Section 3 (it being understood, however, that all such bonus payments, if made
pursuant to this clause, shall be paid at the option of the Employee, in cash
regardless of whether or not such payments exceed the cash limit.
<PAGE>
D. All stock options and common stock and restricted stock granted by the
Company to the Employee under this Agreement shall accelerate and become
immediately vested and exercisable.
8. Remedies
The Company recognizes that because of the Employee's special talents, stature,
and opportunities in the industry, and because of the creative nature of and
compensation practices of the industry and the material impact that individual
projects can have on a company's results of operations, in the event of
termination by the Company hereunder or in the event of termination by the
Employee before the end of the agreed term, the Company acknowledges and agrees
that the provisions of this Agreement regarding further payments of base salary,
bonuses and the exercisability of stock options constitute fair and reasonable
provisions for the consequences of such termination, do constitute a penalty and
such payments and benefits shall not be limited or reduced by amounts that the
Employee might earn or be able to earn from any other employment or ventures
during the remainder of the agreed term of this Agreement.
9. Notices
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
be certified mail, postage pre-paid, or recognized overnight delivery service;
If to the Company:
National Boston Medical, Inc.
43 Taunton Green
Taunton, MA 02780
Attn.: Daniel Hoyng, CEO
If to the Employee:
Michael Steinberg
546 Daisey Nash Drive
Lilburn, GA 30047
10 Final Agreement
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
11. Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
12. Headings
Headings in this Agreement are provided for convenience only and shall not be
used to construe meaning or intent.
<PAGE>
13. Binding Agreement
This Agreement shall be binding upon and inure to the benefit of the Employee,
his heirs, distributees and assigns.
14. Severability
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
15. Arbitration
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrator or arbitrators may be
entered in any court having jurisdiction thereof. Any such Arbitration shall be
concluded in such place as shall be mutually agreed upon by the parties. Within
fifteen (15) days of the commencement of the arbitration, each party shall
select one person to act as arbitrator, and the two arbitrators shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
16. Protection of the Company's Interests
During the term of this Agreement, the Employee shall not directly or indirectly
engage in competition with the Company. At no time shall the Employee divulge,
furnish, or make accessible to any person any information of a confidential or
proprietary nature obtained by him while in the employ of the Company except as
necessary in the performance of his duties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
/s/ Michael Steinberg
- ---------------------------
Michael Steinberg
Employee's Signature and Acceptance
/s/ Barry P. McFarland
- ------------------------------
Barry P. McFarland
CFO
National Boston Medical, Inc.
EXHIBIT 10.66
COMPROMISE AND SETTLEMENT AGREEMENT
This Agreement is entered into between DeVo Media, Inc. ("DeVo"), and Flex
Marketing, Inc., National Boston Medical, Inc., Ernest Zavoral and Remon P.
Hayek, collectively referred to as ("Flex"):
Whereas, Devo asserts claims against Flex alleging breach of Strategic
Alliance Agreement entered into on July 10, 1997 as well as a claim for
fraudulent inducement. Based on these claims, a civil complaint has been filed
in the Mahoning County Court of Common Please entitled DeVo Media, Inc. v. flex
Marketing, Inc., et. al. (Case No. 99 CV 832).
All parties to this agreement wish to reach full and final settlement of
all matters and all causes of action arising out of the facts and claim as set
forth above.
The parties to this agreement, in consideration of the mutual covenants and
agreements to be performed, as set forth below, agree as follows:
1. Flex agrees to pay DeVo the sum of Sixty Five Thousand Dollars
($65,000.00), in consideration of which DeVo agrees that all matters
arising out of the claim as set forth above (including the
above-described suit which is based on that claim) will be, and are,
finally compromised and settled.
2. The payments from Flex to DeVo will be made as follows:
November 15, 1999 - $32,500.00
December 20, 1999 - $32,500.00
3. All payments are to be made by certified check, money order, or by
check from the Aggers & Joseph IOLTA Account, payable to "DeVo Media,
Inc. and its Attorney, Michael W. Callahan"
4. All payments are due on the dates described in item 2 above and are to
be delivered to the office of Attorney Michael W. Callahan, 500
Mayfield Road, Suite 301, Cleveland, Ohio 44124.
5. Upon receipt of the sum of Sixty Five Thousand Dollars ($65,000.00)
and final execution of this Agreement, DeVo agrees to file a
dismissal, with prejudice, in the action described above.
6. DeVo, for and on behalf of itself, any agents, heirs, executors,
administrators and assigns, hereby agrees to release and forever
discharge Flex and all of its successors and assigns, and all of its
and their respective agents, directors, officers, partners, employees,
representatives, insurers, attorneys, and joint ventures, and each of
them, from any and all claims, whether or not known to itself now,
which are based upon acts or events that occurred on or before the
date on which this Release becomes
<PAGE>
effective, including any and all claims arising under any state or
federal statute or common law.
7. DeVo also warrants and promises that no person other than itself is
entitled to assert any claims of any kind against Flex on its behalf,
and agrees to indemnify and hold harmless Flex against any such claims
that may be asserted by any other person..
8. This Agreement is not an admission by Flex that it has violated any
common law, or any federal, state or local statute, or acted
wrongfully in any way.
9. This Agreement is conditioned upon all payments, as described in item
2 above, being made in a timely manner.
All parties have read this Agreement and understand all of its terms. All
parties have the option to allow an attorney to review this Agreement. All
parties execute Agreement with full knowledge of its significance.
Flex Marketing, Inc. DeVo Media, Inc.
By: /s/ Ernest Zavoral By: Berbie Vogel
- -------------------------- -----------------------
Date:10-27-99 Date: 10/22/99
National Boston Medical, Inc. Ernest Zavoral
By: /s/ Daniel Hoyng By: /s/ Ernest Zavoral
- ------------------------- ------------------------
Date: Date: 10-27-99
Remon P. Hayek
By: /s/ Remon P. Hayek
- ------------------------------
Date: 10/28/99
EXHIBIT 10.67
ADDENDUM TO EXCLUSIVE DISTRIBUTION AGREEMENT
DATED JULY 17, 1998
WHEREAS, National boston Medical, Inc. ("NBM"), Bontempi Medical Corp.,
Canada and Bontempi Medical Corp., USA (collectively "Bontempi") are parties to
an Exclusive Distribution Agreement dated July 17, 1998 (the "Agreement").
WHEREAS, the parties to the Agreement, as well as Bontempi, Snc. agree
that a material term was omitted in the paperwork drafted to memorialize the
Agreement, but was agreed to by all the parties to the Agreement.
NOW THEREFORE, in exchange for mutual consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree to the following:
1. NBM shall pay to Bontempi, Snc. and Bontempi, Snc. shall accept
$175,000 in consideration for certain exclusive distribution rights
granted to NBM as part of the Agreement.
2. The foregoing was a material term inadvertently omitted from the
Agreement and is hereby added to, incorporated by reference and made a
part thereof nunc pro tunc as of July 17, 1998.
All amounts due herein shall be convertible to the restricted Common
Stock of NBM in accordance with the terms of the Agreement.
IN WITNESS WHEREOF, the Parties hereto executed this Addendum to the Exclusive
Distribution Agreement dated July 17, 1998 on October 6, 1999.
BONTEMPI MEDICAL CORP. CANADA NATIONAL BOSTON MEDICAL, INC.
/s/ Vittorio Bianchi /s/ Daniel J. Hoyng
- ---------------------------- -----------------------------
Vittorio Bianchi, President Daniel J. Hoyng, President
BONTEMPI MEDICAL CORP. USA BONTEMPI, SNC.
/s/ Vittorio Bianchi /s/ Bontempi
- -------------------------- ---------------------------
Vittorio Bianchi, President , an authorized representative
EXHIBIT 10.68
NATIONAL BOSTON MEDICAL, INC.
PHONE (508) 884-8820 - FAX (508) 880-5208
SETTLEMENT AGREEMENT
This Settlement Agreement made as of October 18, 1999 by and between
NATIONAL BOSTON MEDICAL, INC., a Nevada corporation, with offices at 43 Taunton
Green, 3rd Floor, Taunton, MA 02780 ("National Boston Medical, Inc.") and
AfterMarket Company, 5260 West Phelps, Suite B, Glendale, AZ 85306 (AMC).
Currently National Boston Medical, Inc. owes $68,386.98 to AMC (the
"INDEBTEDNESS"). In exchange for the following consideration as well as other
good and valuable consideration paid in hand, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agrees to the following:
1. NBM shall issue to AMC (or the designee) and AMC shall accept 250,000
shares of the restricted common stock of National Boston Medical, Inc.
(the "STOCK"), to be issued within two (2) weeks of execution of this
Agreement.
2. NBM shall pay to AMC and AMC shall accept from National Boston
Medical, Inc. $34,193.49 (1/2 the "MONEY"), to be paid within two (2)
weeks of execution of this Agreement.
3. NBM shall pay $200.00 per week until such balance is paid in full.
4. NBM shall issue an additional 250,000 shares to be held by AMC until
balance is paid in full, at which time the 250,000 shares shall be
returned to the treasury of NBM.
5. Upon receipt of both the STOCK and the MONEY, AMC shall immediately
cause a General Release of ALL Claims to be executed in favor NBM (the
"RELEASE").
This Settlement Agreement is freely and voluntarily executed by AMC
after being apprized of all relevant information and date by its consultants
and/or attorneys. AMC in executing this Settlement Agreement does not rely on
any inducements, promises, or representations made by NBM or any of NBM's
representatives. Furthermore, no promise, inducement, or agreement not herein
set forth, has been made to AMC and this Settlement Agreement contains the
entire agreement between the parties hereto, and the terms of this Settlement
Agreement are contractual and not merely a recital.
Should the foregoing terms meet with your approval, please acknowledge
such by affixing your name hereto.
NATIONAL BOSTON MEDICAL, INC. AFTERMARKET
/s/ Daniel Hoyng /s/ Carmen Arno
---------------------------- ---------------------------
Daniel Hoyng, CEO
43 TAUNTON GREEN - THIRD FLOOR - TAUNTON, MA 02780
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<PERIOD-START> Jul-01-1999
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