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As filed with the Securities and Exchange Commission on November 2, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NETMED, INC.
(Exact name of Registrant as specified in its charter)
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Ohio 5047 31-1282391
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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6189 Memorial Drive
Dublin, Ohio 43107
(614) 793-9356
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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David J. Richards, President
NetMed, Inc.
6189 Memorial Drive
Dublin, Ohio 43017
(614) 793-9356
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of Correspondence to:
William J. Kelly, Jr., Esq.
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
(614) 227-2136
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Approximate date of commencement of proposed sale of the securities to the
public:___________________ From time to time after the Effective Date of this
Registration Statement, as determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share* Price* Fee*
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Common stock, without par value 8,000,000 $ .375 $ 3,000,000 $834
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* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average high and low prices of
the Common Stock as reported on the American Stock Exchange on October
27, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - NOVEMBER 2, 1998
PROSPECTUS
8,000,000 SHARES
NETMED, INC.
6189 Memorial Drive
Dublin, Ohio 43017
(614) 793-9356
COMMON STOCK
(without par value)
This Prospectus relates to the sale of up to 8,000,000 shares of common stock,
without par value, of NetMed, Inc., an Ohio corporation, which we may issue to
certain persons who convert their Series A, 6% Convertible Preferred Stock into
common stock. The issuance of common stock upon conversion of the preferred
stock is not covered by this Prospectus, but rather only the resale of such
common stock. The shares of common stock which are the subject of this
Prospectus also include 212,740 shares of common stock that were issued upon
conversion of certain debentures previously sold by us. For a more detailed
discussion of the transaction, see "Prospectus Summary."
Our common stock is currently listed on the American Stock Exchange under the
symbol "NMD." On October 27, 1998, the last reported sale price of our common
stock on the American Stock Exchange was $0.375 per share.
THERE ARE CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
SHARES IN THIS OFFERING. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November __, 1998.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary .................................................................................. 3
Risk Factors......................................................................................... 3
Available Information................................................................................ 7
Information Incorporated By Reference................................................................ 7
Forward Looking Statements........................................................................... 8
The Company.......................................................................................... 8
Recent Developments.................................................................................. 9
Use of Proceeds...................................................................................... 9
Selling Shareholder.................................................................................. 9
Plan of Distribution................................................................................. 10
Description of Capital Stock......................................................................... 10
Certain Provisions Of Articles and Regulations....................................................... 12
Experts.............................................................................................. 14
Legal Matters........................................................................................ 15
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PROSPECTUS SUMMARY
The shares offered by this Prospectus consist of up to 8,000,000 common
shares (the "Shares"), without par value (the "Common Stock") of NetMed, Inc.,
an Ohio corporation. We may issue the Common Stock to certain persons who
convert their Series A, 6% Convertible Preferred Stock ("Preferred Stock"). The
Preferred Stock was issued in October 1998. As of the date of this Prospectus,
100,000 shares of the Preferred Stock are outstanding. Pursuant to an exchange
agreement between us and the holders of the Preferred Stock (the "Exchange
Agreement"), the Preferred Stock was issued in exchange for certain debentures
issued by us in August, 1997. The number of shares registered for sale by the
registration statement equals 150% of the number of shares into which the
Preferred Stock was convertible as of October 27, 1998, assuming the Preferred
Stock was fully converted on that date plus shares of Common Stock previously
issued to the holders on conversion of the debentures. For a further description
of the terms of the Preferred Stock, see "Selling Shareholders."
This Prospectus covers the sale of the Shares by the Selling
Shareholders. The issuance of Shares upon conversion of the Preferred Stock is
not covered by this Prospectus, but rather only the resale of such Shares and
Shares previously acquired by the Selling Shareholders on conversion of the
debentures. The Shares may be offered from time to time by the Selling
Shareholders. We will pay all expenses of the registration. However, any
brokers' or underwriters' fees or commissions will be paid by the Selling
Shareholders. We will not receive any proceeds from the sale of the Shares by
the Selling Shareholders.
The Selling Shareholders have not advised us of any specific plans for
the distribution of the Shares covered by this Prospectus. However, we
anticipate that the Shares will be sold from time to time primarily in
transactions on the American Stock Exchange at the then current market price,
although sales may also be made in negotiated transactions or otherwise. The
Selling Shareholders and the brokers and dealers through whom sale of the Shares
may be made may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and their commissions
or discounts and other compensation may be regarded as underwriters'
compensation. See "Plan of Distribution."
We are located at 6189 Memorial Drive, Dublin, Ohio 43017, telephone:
(614) 793-9356.
RISK FACTORS
Investment in the securities being sold involves a high degree of risk,
including, but not limited to, the risk factors described below. Prospective
investors should carefully consider the following risk factors, in addition to
the other information in this Prospectus, in evaluating an investment in the
securities sold.
RISKS RELATING TO OPERATIONS AND PAST PERFORMANCE
We are in the early stage of our operations. Therefore we are subject
to risks incident to any new business, including the absence of earnings. We
have to date had limited income from operations, and as of June 30, 1998 have a
retained deficit of $6,065,939. While we intend to complete development and
begin selling the OxyNet(R) oxygen concentration system, we have to date focused
our efforts primarily on the marketing of the PAPNET(R) Testing System. Until a
successful commercial launch of the oxygen product (which is not assured) we
will be dependent upon the successful marketing of the PAPNET System for
revenues.
We cannot accurately predict the extent of our future capital needs.
However, we will likely incur substantial expenditures during 1998 and 1999 to
complete development and commercialization of the OxyNet oxygen concentrator. We
do not currently have adequate funds to accomplish this objective, and
anticipate that we may need to raise additional capital in 1999. We are unsure
whether capital will be available at that time. If we issue equity securities to
raise funds, each current shareholder's interest may be reduced. Further, such
equity securities may have rights, preferences or privileges senior to the
Common Stock.
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We have not paid and do not anticipate paying any cash dividends in the
foreseeable future. We intend to retain future earnings for the development and
expansion of our business. We have accumulated substantial losses since our
inception. There can be no assurance that our operations will result in
sufficient revenues to enable us to operate at profitable levels or to generate
positive cash flow.
The success of our operations is highly dependent upon David J.
Richards, our founder and President, as well as its other key executive
officers. The loss of any of these persons could have a materially adverse
effect on us.
RISKS RELATING TO NSI
We obtain all of the information relating to the PAPNET Testing System
and service from NSI, and in most cases cannot independently verify this
information. Therefore, we are dependent on NSI to accurately report the results
of clinical studies and other data relating to the capabilities and performance
of the PAPNET Testing System.
We have no ownership rights in the PAPNET technology. NSI has granted
us exclusive rights with respect to the marketing of the PAPNET Testing System
and service in certain geographic territories. Therefore, our business is
dependent upon a number of factors, many of which are controlled by NSI. These
factors include:
- - maintaining the PAPNET Testing System's compliance with FDA and other
regulatory requirements
- - maintenance of the technological advantages of the PAPNET Testing
System
- - maintenance of product liability insurance
- - the ability to manufacture and deliver the equipment required to
operate the PAPNET Testing System
Further, NSI is in a stage of development that may require additional funding
for its operations. In the event that NSI should fail to perform in any of these
areas, or in any others that could affect its licensees, such failure could have
an adverse effect on us and our business.
Additional risks relating to the business of NSI which may have an
impact on us are set forth in
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NSI's periodic reports filed with the SEC, including its Annual Report on Form
10-K.
RISKS RELATING TO LICENSE AGREEMENTS AND PATENTS
Our marketing rights for the PAPNET Testing System and the revenues
generated by these activities are governed by the terms of our licenses from NSI
(the "Licenses"). The Licenses impose significant territorial and other
restrictions on our marketing rights, and place certain limitations on the
amounts of royalty revenues which we can generate through the marketing of the
PAPNET Testing System and Service. In December 1995, we entered into an
agreement with NSI which contemplated the execution of a new license agreement.
To date no such agreement has been signed by the parties, although negotiations
have been concluded and a final form of agreement awaits approval of NSI's Board
of Directors.
The technologies underlying the PAPNET System and the OxyNet oxygen
concentrator are protected by various patents. There can be no assurance that
these patents will afford protection from material infringement by third parties
or that such patents will not be challenged. We and NSI also rely on trade
secrets and proprietary know-how, which we seek to protect, in part, through
confidentiality agreements with employees, consultants and other parties. There
can be no assurance that these agreements will not be breached, that there will
be adequate remedies for any breach or that our trade secrets will not otherwise
become known to, or independently developed by, competitors. Litigation is
currently pending between NSI and a competitor over alleged infringement of
NSI's patents.
There has been extensive litigation in the medical device industry
regarding patents and other intellectual property rights. Although patent and
intellectual property disputes in the medical device area have often been
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial. There can be no assurance that necessary
licenses would be available to NSI or us on satisfactory terms or at all.
Adverse determinations as to the PAPNET and OxyNet patents could:
- - limit or destroy the value of our license rights to these technologies
- - subject us to significant liabilities from third parties
- - require us to seek licenses from third parties
- - prevent us from manufacturing or selling these products
Any of these determinations could have a material adverse effect on our
business, financial condition and results of operations.
RISKS RELATED TO THE COMMON SHARES
Our directors, executive officers and principal shareholders (5% or
greater) collectively beneficially own or have the right to acquire under
currently exercisable options approximately 25% of the outstanding Common Stock.
As a result, these shareholders will be able to exercise significant influence
over matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. Such concentration of
ownership may have the effect of delaying or preventing a change in control.
We had 11,673,422 common shares outstanding as of October 27, 1998.
Approximately 1,925,000 shares are held by affiliates of NetMed who will be
entitled to resell them only pursuant to a registration statement under the
Securities Act or an applicable exemption from registration. In August 1997, we
sold $3 million in principal amount of Debentures convertible into Common Stock
at a discount to the market price at the time of conversion. These Debentures
were exchanged for Preferred Stock pursuant to the Exchange Agreement on
____________, 1998. If the $1,502,000 in stated value of the Preferred Stock
issued in the exchange were converted at the prevailing market price on that
date approximately _________ additional shares of Common Stock would be issued.
This registration statement will cover all such shares to be resold to the
public. Such resales may adversely affect the pricing and volatility of trading
in the Common Stock. See "Selling Shareholders."
Although the Common Stock is currently listed for trading on the
American Stock Exchange, trading volume has been limited. There can be no
assurance that there will continue to be an active and liquid trading market.
The stock market has
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experienced extreme price and volume fluctuations and volatility that has
particularly affected the market prices of many technology, emerging growth and
developmental stage companies. Such fluctuations and volatility have often been
unrelated or disproportionate to the operating performance of such companies.
Factors such as announcements of the introduction of new or enhanced services or
related products by us or our competitors may have a significant impact on the
market price of the Common Stock.
In addition, the staff of the American Stock Exchange (the "Exchange")
has recommended that the Common Stock be delisted from trading on the Exchange
because of our failure to meet minimum financial requirements for continued
listing. We have appealed this determination to the Board of Governors of the
Exchange. The Board of Governors has extended our listing on the Exchange until
March 31, 1999. However, there can be no assurance that our Common Stock will
continue to be listed on the Exchange. If the Common Stock is delisted, it is
likely that the Common Stock will be quoted on the National Association of
Securities Dealers, Inc. (Nasdaq) Bulletin Board.
Market prices of securities of medical technology companies, including
the Common Stock, have experienced significant volatility from time to time.
There may be volatility in the market price of the Common Stock due to factors
that may not relate to our performance. Various factors and events, such as
announcements by us or our competitors concerning new product developments,
governmental approvals, regulations or actions, developments or disputes
relating to patent or proprietary rights and public concern over product
liability may have a significant impact on the market price of the Common Stock.
RISKS RELATING TO GOVERNMENT REGULATION
Both our and NSI's services, products and manufacturing activities are
subject to extensive and rigorous government regulation, including the
provisions of the Medical Device Amendment to the Federal Food, Drug and
Cosmetic Act. Sales to certain foreign countries are also subject to government
regulations. The process of obtaining required regulatory approvals can be
lengthy, expensive and uncertain. Moreover, regulatory approvals, if granted,
may include significant limitations on the indicated uses for which a product
may be marketed. The FDA actively enforces regulations prohibiting marketing
without
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compliance with the premarket approval provisions of products and conducts
periodic inspections to determine compliance with Good Manufacturing Practice
regulations.
Failure to comply with applicable regulatory requirements can result in
fines, suspensions of approvals, seizures or recalls of products, operating
restrictions and criminal prosecutions. Furthermore, changes in existing
regulations or adoption of new regulations could prevent us or NSI from
obtaining, or affect the timing of, future regulatory approvals. The effect of
governmental regulation may be to delay for a considerable period of time or to
prevent the marketing and/or full commercialization of future products or
services that we or NSI may develop and/or impose costly requirements on us or
NSI. There can be no assurance that either we or NSI will be able to obtain
regulatory approvals of any products on a timely basis or at all. Delays in
receipt of or failure to receive such approvals or loss of previously received
approvals would adversely affect the marketing of NSI's and our proposed
products. There can also be no assurance that additional regulations will not be
adopted or current regulations amended in such a manner as will materially
adversely effect NSI or NetMed.
RISKS RELATING TO THIRD PARTY REIMBURSEMENT
In the United States, many Pap smears are currently paid for by the
patient. Further, the level of reimbursement by third-party payers that do
provide reimbursement differ considerably. Third-party payers
(Medicare/Medicaid, private health insurance, health maintenance organizations,
health administration authorities in foreign countries and other organizations)
may affect the pricing or relative attractiveness of our products and services
by regulating the maximum amount of reimbursement for products or services
provided by us or by not providing any reimbursement at all. Restrictions on
reimbursement may limit the price which we can charge for our products and
services or reduce the demand for them. In the case of PAPNET testing, if the
level of such reimbursement is significantly below what laboratories charge
patients to perform the test, the size of the potential market available to us
may be reduced. There can be no assurance of the extent to which costs of PAPNET
testing will become reimbursable or that the level of reimbursement will be
sufficient to permit us to generate substantial revenues in our PAPNET business.
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RISKS RELATING TO MARKETABILITY AND COMPETITION
Until successful completion and sale of the OxyNet system (if ever),
our performance will depend upon sale of the PAPNET System. The extent of, and
rate at which, market acceptance and penetration are achieved are functions of
many variables including, but not limited to:
- - price
- - effectiveness
- - acceptance by patients, physicians and laboratories
- - manufacturing
- - slide processing and training capacity
- - reimbursement practice
- - marketing and sales efforts
There can be no assurance that the PAPNET System will achieve or maintain
acceptance in our target markets.
We are aware of several companies that either have developed or are
developing systems that are competitive with the PAPNET System and other
technologies targeted for development by us. The sale of such products could
have a material adverse effect on our business, financial condition and results
of operations. Competitors may have substantially greater financial,
manufacturing, marketing and technical resources, and represent significant
potential long-term competition. Competitors may succeed in developing products
that are more effective or less costly than any that may be developed by NSI or
us. New developments are expected to continue at a rapid pace in both industry
and academia. There can be no assurance that research and development by others
will not render NSI's or our current and contemplated products obsolete.
Competition may increase further as a result of advances that may be made in the
commercial applicability of technologies and greater availability of capital for
investment in these fields.
RISKS RELATING TO PRODUCT LIABILITY
Our business could expose us to the risks inherent in the production
and distribution of medical diagnostic and treatment equipment. Although NSI has
attempted to reduce the exposure to product liability risk by disclosing the
demonstrated range of accuracy of the PAPNET Testing System, there can be no
assurance that we will not be exposed to liability resulting from the failure or
inaccuracy of the
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PAPNET System. We currently carry no product liability insurance. However, NSI
is required, under the terms of the Licenses, to name us as an additional
insured on its product liability policies. There can be no assurance that NSI
will have the resources necessary to purchase and maintain the insurance, that
such insurance will be sufficient to cover potential claims, or that NSI will
have adequate resources to indemnify us from any uninsured loss.
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by us with the Securities and
Exchange Commission (the "Commission") under the Securities Act, omits certain
of the information set forth in the Registration Statement. Reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to us and the securities offered hereby. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described below.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith file reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the Public Reference Section of the Commission at:
Securities and Exchange
Commission
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
and at the following regional offices of the Commission:
Midwest Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661-2511
Northeast Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such reports and other information filed with the
Commission may also be available at the Commission's site on the World Wide Web
at http://www.sec.gov.
Our Common Stock is listed on the American Stock Exchange, and copies
of our reports, proxy statements and other information filed with the Commission
under the Exchange Act, and other information concerning us, can be inspected at
the American Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, which has been filed with the Commission pursuant to the Exchange Act
(File No. 1-12529), is hereby incorporated by reference into this Prospectus.
The information under the heading "Recent Developments" should be read in
conjunction with our financial statements contained in our annual report on Form
10-K for the fiscal year ended December 31, 1997.
In addition, all documents filed by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to termination of the offering of the Shares offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective date of fling of such documents with the Commission.
Any statement contained herein, or any document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or
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supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute part of the
Registration Statement or this Prospectus. All information appearing in this
Prospectus is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated
herein by reference. This Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. These documents (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference in such documents) are available without charge, upon written or oral
request by any person to whom this Prospectus has been delivered, by directing
such request to NetMed, Inc., 6189 Memorial Drive, Dublin, Ohio 43017,
Attention: President, telephone: (614) 793-9356.
FORWARD LOOKING STATEMENTS
Statements in this Prospectus which relate to other than strictly
historical facts, including statements about our plans and strategies, as well
as management's expectations about new and existing products, technologies and
opportunities, market growth, demand for and acceptance of new and existing
products (including the Papnet(R) Testing System and the OxyNet(R) oxygen
concentration device), are forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements that speak only as of the date
hereof. Investors are cautioned that such statements involve risks and
uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors including, but are not
limited to, our current reliance on a single product marketed under license from
Neuromedical Systems, Inc. ("NSI"), the corresponding dependence on NSI's
patents and proprietary technology, government regulation, continuing losses
from operations and negative cash flow, limited marketing and sales history, the
impact of third party reimbursement decisions, the challenges of research and
development of new products, and other risks detailed herein under the caption
"Risk Factors." We undertake no obligation to publicly update or revise any
forward-looking statements.
THE COMPANY
We are an Ohio corporation engaged in the business of acquiring,
developing and marketing medical and health-related technologies. Our principal
business activity is the marketing of the PAPNET(R) Testing System, which is a
proprietary product of NSI. The PAPNET Testing System is a semi-automated cancer
detection system for the review of cell, tissue or body fluid specimens,
including cervical cytology specimens. Slides containing cytology specimens are
processed using the PAPNET Testing System (either by the laboratory at its own
facilities or at one of NSI's central facilities) which produces processed
images for evaluation by the laboratory's NSI-trained cytotechnologists.
We were originally organized in 1989 for the purpose of acquiring the
exclusive territorial rights to market NSI's proprietary products in Ohio. In
1990, we acquired from NSI marketing rights for Kentucky and the Chicago,
Illinois metropolitan area. On December 16, 1996, we completed a merger with
Cytology Indiana, Inc., Indiana Cytology Review Company, ER Group, Inc., CCWP
Partners, Inc., and Carolina Cytology, Inc. (the "Predecessor Companies"), which
had held the rights to market the PAPNET Testing System in the states of
Missouri, Georgia and North Carolina. We were the surviving corporation in the
Merger. Upon completion of the Merger, we changed our name from Papnet of Ohio,
Inc. to NetMed, Inc.
In addition to exploiting our rights under the license agreement with
NSI, our corporate mission is to become a well diversified health care
technology company founded upon proprietary products that offer a distinct
market advantage. Our intention is to follow the example of our initial
investment, the PAPNET technology, in pursuing other opportunities in healthcare
technology. Specifically, we intend to make early investments in selected
healthcare technologies and apply our management and marketing resources to
develop and implement strategies designed to significantly increase the value of
the investment over a period of two to four years.
In pursuit of this strategy, in early 1997 we entered into an agreement
with CeramPhysics, Inc. of Westerville, Ohio ("Ceram"), pursuant to which we
obtained the right to acquire 95% ownership of a Ceram subsidiary that holds an
exclusive world-wide license to Ceram's patented oxygen generation
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technology for all applications of the technology except oxygen sensors and fuel
cells. Our acquisition of this interest was completed on April 3, 1998. It is
our intention to incorporate the element into an oxygen generation device (the
OxyNet(R) System) that we expect to manufacture and market to the home health
care industry. See "Recent Developments."
Our principal offices are located at 6189 Memorial Drive, Dublin, Ohio
43017, and our telephone number at that address is (614) 793-9356.
RECENT DEVELOPMENTS
On April 3, 1998, we acquired from Ceram Oxygen Technologies, Inc.
("COTI") 95 common shares, representing 95 percent of COTI's outstanding common
shares immediately following the closing, in exchange for a cash payment of
$50,000 and delivery of a note in the principal amount of $150,000 (the "Note").
The Note provides for three equal principal payments of $50,000 on each of June
1, July 1, and August 1, 1998, together with interest at the rate of 8.5 percent
per annum. Following this transaction, COTI's name was changed to "OxyNet, Inc."
("OxyNet"). The remaining 5 percent of OxyNet's outstanding common equity is
owned by CeramPhysics, Inc. ("Ceram") of Westerville, Ohio. COTI holds an
exclusive world-wide license to Ceram's patented oxygen generation technology
for all applications of the technology except oxygen sensors and fuel cells. The
consideration was applied by OxyNet to payment of a $200,000 license fee owed to
Ceram, with $50,000 being paid in cash, and the balance by assignment of the
Note.
The acquisition was made pursuant to a February, 1997 agreement among
us, COTI and Ceram, whereby we agreed to make advances to COTI to complete the
fabrication and testing of a ceramic element incorporating the licensed
technology. Pursuant to the agreement, through April 3, 1998, we had advanced
$363,470 to COTI for this purpose. The agreement also provided that upon
completion of an acceptance test of the ceramic element satisfactory to us, we
had the right to acquire 95% of the equity of COTI for $200,000.
It is our intention to incorporate the ceramic element into an oxygen
generation device (the OxyNet(R) System) that we expect to manufacture and
market to the home health care industry. We believe this system will be lighter,
quieter, more reliable and less costly to operate than current systems. We
expect to demonstrate a prototype of the system before the end of 1998 and to
begin marketing a commercial version of the device in 1999. We also expect to
develop other applications for the technology, including military and industrial
applications. In August, 1998, OxyNet completed the private placement of 500
shares of Series A 8% Convertible Preferred Shares (the "OxyNet Shares") for
gross proceeds of $500,000. These proceeds will be used for further development
of the OxyNet product. The OxyNet Shares are convertible into Common Shares of
OxyNet on a one share for one share basis. If there is not an initial public
offering of the Common Shares of OxyNet within 18 months from the date of
issuance of the OxyNet Shares (the "Issuance Date"), the OxyNet Shares may be
exchanged at their original stated value, plus accrued dividends, for our Common
Stock. This is a one time right to exchange the OxyNet Shares for our Common
Stock and is only available for a period of 30 days following the Issuance Date.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares by the
Selling Shareholders.
SELLING SHAREHOLDERS
The 8,000,000 shares of our Common Stock described in this Prospectus
represent approximately 150% of the number of shares of Common Stock that would
be issuable if all the shares of Preferred Stock were converted, plus Shares
previously issued to the Selling Shareholders upon conversion of the Debentures.
Except for the ownership of the Preferred Stock (and any Shares on conversion
thereof and Shares acquired upon conversion of the debentures), the Selling
Shareholders have not had any material relationship within the past three years
with us. The Shares are being registered to permit public secondary trading of
the Shares, and the Selling Shareholders may offer the Shares for resale from
time to time. See "Plan of Distribution.*
The Shares being offered by the Selling Shareholders hereby are
issuable by us to the Selling Shareholders upon conversion of the Preferred
Stock. The Preferred Stock was issued by us on October __, 1998 to the Selling
Shareholders pursuant the
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<PAGE> 13
Exchange Agreement. The Preferred Stock and any dividends accrued thereon may be
converted into Shares at any time. The Preferred Stock is entitled to cumulative
annual dividends at the rate of 6% of stated value payable in Common Stock at
the time of each conversion, and is convertible into shares of our Common Stock
based on the "Conversion Price" at the time of conversion. The Conversion Price
is an amount equal to 75% of the average closing bid price of the Common Stock
on the American Stock Exchange for the previous three business days ending on
the day before the conversion date. The Conversion Price is subject to equitable
adjustment upon the occurrence of certain events, such as stock splits, stock
dividends, reclassifications or combinations.
A Selling Shareholder is prohibited from converting any portion of the
Preferred Stock which would result in the Selling Shareholder being deemed the
beneficial owner, in accordance with the provisions of Rule 13d-3 under the
Exchange Act, of 4.99% or more of the then issued and outstanding Common Stock.
As required by the Exchange Agreement and related Registration Rights
Agreement, in recognition of the fact that Selling Shareholders may wish to be
legally permitted to sell any Shares acquired upon conversion of the Preferred
Stock when they deem appropriate, we have filed with the Commission under the
Act a Registration Statement on Form S-3, of which this Prospectus forms a part,
with respect to the resale of the Shares by the Selling Shareholders from time
to time on the American Stock Exchange or in privately-negotiated transactions.
<TABLE>
<CAPTION>
NAME OF SELLING SHAREHOLDER NUMBER OF SHARES BENEFICIALLY NUMBER OF SHARES BEING NUMBER OF SHARES BENEFICIALLY
OWNED(1) OFFERED HEREBY(2) OWNED AFTER OFFERING
<C> <S> <C> <C>
CPR (USA), Inc. 4,297,316 5,856,000 0
LibertyView Fund, LLC 1,181,421 1,608,000 0
LibertyView Plus Fund 392,857 536,000 0
</TABLE>
(1) Represents the number of shares of our Common Stock owned by the Selling
Shareholders as of the date of this Prospectus (which were acquired by them on
conversion of the Debentures), plus approximately the aggregate number of shares
of our Common Stock which the Selling Shareholders would be entitled to acquire
upon conversion of the Preferred Stock assuming all of the Preferred Stock was
converted into shares on the date of this Prospectus. The Selling Shareholders
currently hold approximately 212,740 shares in the aggregate, but the actual
number of shares which may be beneficially owned by them on any future date will
depend on the aggregate principal amount of Preferred Stock then outstanding,
the conversion price(s) on the date(s) Preferred Stock has been converted, and
the number of shares of our Common Stock which have previously been sold by them
pursuant to this Registration Statement.
(2) Represents the number of shares of our Common Stock owned by the Selling
Shareholders as of the date of this Prospectus, plus approximately 150% of the
aggregate number of shares of our Common Stock which the Selling Shareholders
would be entitled to acquire upon conversion of the Preferred Stock still
outstanding, assuming the entire remaining principal balance of the outstanding
Preferred Stock was converted on the date of this Prospectus. To the extent that
the number of shares ultimately issued to the Selling Shareholders upon
conversion of the Preferred Stock exceeds the number of shares registered under
the Registration Statement, the Selling Shareholders may require us to file
another registration statement to permit the resale of such excess amount.
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<PAGE> 14
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholders will be sold in
one or more transactions (which may involve block transactions) on the American
Stock Exchange or in privately-negotiated transactions. The sale price to the
public may be the market price prevailing at the time of sale, a price related
to such prevailing market price or such other price as each Selling Shareholder
determines from time to time. A Selling Shareholder shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of Shares
if it deems the purchase price to be unsatisfactory at any particular time.
The Selling Shareholders may also sell the Shares of Common Stock
directly to market makers acting as principals and/or to broker-dealers acting
as agents for themselves or their customers. Brokers acting as agents for the
Selling Shareholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that the
Selling Shareholders will attempt to sell Shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of the
Shares offered hereby will be issued to, or sold by, the Selling Shareholders.
The Selling Shareholders and any brokers, dealers or agents, upon effecting the
sale of any of the Shares offered hereby, may be deemed "underwriters" as that
term is defined in the Securities Act.
The Selling Shareholders have agreed that they will not pay more than
the normal brokerage compensation and that they will not enter into arrangements
for special selling efforts without first advising us and cooperating in the
disclosure of the same in a revised or supplemental prospectus.
The Selling Shareholders, alternatively, may sell all or any part of
the Shares offered hereby through an underwriter. The Selling Shareholders have
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the Selling
Shareholders enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this Prospectus.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 Common Shares,
without par value, 250,000 shares of Voting Preferred Stock, and 250,000 Shares
of Nonvoting Preferred Stock. There are currently outstanding 11,673,422 shares
of Common Stock, and 100,000 shares of Preferred Stock. All outstanding shares
of Common Stock are fully paid and non-assessable.
COMMON STOCK
Holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
shareholders. At a meeting of shareholders at which a quorum is present, a
majority of the votes cast decides all questions, unless the matter is one upon
which a different vote is required by express provision of law or our Articles
of Incorporation ("Articles") or Code of Regulations ("Regulations"). Our
Articles eliminate the right of shareholders to cumulate their votes in the
election of directors. Shareholders have no preemptive or other rights to
subscribe for additional shares nor any other rights to convert their Common
Stock into any other securities.
Subject to the preferences that may be applicable to the holders of any
outstanding shares of Preferred Stock, holders of Common Stock are entitled to
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The payment by us of dividends, if any, rests within the
discretion of its Board of Directors and will depend upon our operating results,
financial condition and capital expenditure plans, as well as other factors
considered relevant by the Board of Directors. We may enter into bank credit
agreements which include financial covenants restricting the payment of
dividends. See "Dividend Policy."
Upon our liquidation, dissolution or winding-up, the assets legally
available for distribution to shareholders are distributable ratably among the
holders of Common Stock at that time outstanding, subject to prior distribution
rights of our
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<PAGE> 15
creditors and preferential rights of any outstanding shares of Preferred Stock.
PREFERRED STOCK
The Articles authorize the Board of Directors to issue up to 250,000
shares of Voting Preferred Stock and up to 250,000 shares of Nonvoting Preferred
Stock in one or more series and to establish such relative dividend, redemption,
liquidation, conversion and other powers, preferences, rights, qualifications,
limitations and restrictions as the Board of Directors may determine without
further approval of our shareholders. The issuance of Preferred Stock by the
Board of Directors could be used, under certain circumstances, as a method of
delaying or preventing a change in control and could permit the Board of
Directors, without any action by holders of Common Stock, to issue Preferred
Stock which could have a detrimental effect on the rights of holders of Common
Stock, including loss of voting control. In certain circumstances, this could
have the effect of decreasing the market price of the Common Stock.
The issuance of any series of Preferred Stock, and the relative powers,
preferences, rights, qualifications, limitations and restrictions of such
series, if and when established, will depend upon, among other things, our
future capital needs, the then-existing market conditions and other factors
that, in the judgment of the Board of Directors, might warrant the issuance of
Preferred Stock.
On October 27, 1998, the directors authorized the creation of 100,000
shares of Voting Preferred Stock to be known as the "Series A, 6% Convertible
Preferred Stock." These shares were used pursuant to the Exchange Agreement
whereby holders of the Debentures received an equal number of Preferred Stock
for their interests in the Debentures.
CERTAIN PROVISIONS OF ARTICLES AND REGULATIONS
The following brief description of certain provisions of our Articles
and Regulations does not purport to be complete and is subject in all respects
to the provisions of the Articles and Regulations, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
CLASSIFIED BOARD OF DIRECTORS
Our Regulations provide for the Board of Directors to be divided into
three classes (unless
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<PAGE> 16
there are fewer than 9 directors in which case there will be two classes) of
directors serving staggered three-year terms. As a result, approximately
one-third of the Board of Directors will be elected each year. Classification of
the Board of Directors expands the time required to change the composition of a
majority of directors and may tend to discourage a proxy contest or other
takeover bid for us.
DIRECTORS' RESPONSE TO ACQUISITION PROPOSALS
Our Articles provide that the Board of Directors must base our response
to any "Acquisition Proposal" on the Board of Directors' evaluation of what is
in our best interest. In evaluating what is in our best interest, the Board of
Directors must consider all relevant factors including, without limitation, the
best interest of the shareholders which, for this purpose, requires the Board of
Directors to consider, among other factors, not only the consideration offered
in the Acquisition Proposal in relation to the then current market price of our
stock, but also in relation to our current value in a freely negotiated
transaction and in relation to the Board of Directors' then estimate of our
future value as an independent entity or as the subject of a future Acquisition
Proposal; and such other factors as the Board of Directors determines to be
relevant, including, among other factors, our long-term and short-term interests
and our subsidiaries and their businesses and properties and the social, legal
and economic effects upon the employees, suppliers, customers, creditors and
other affected persons, firms and corporations and on the communities and
geographical areas in which we and our subsidiaries operate or are located.
"Acquisition Proposal" is defined in the Articles as any proposal for our
consolidation or merger with another corporation, any share exchange involving
our outstanding capital stock, any liquidation or dissolution of us, any
transfer of all or a material portion of our assets and any tender offer or
exchange offer for any of our outstanding stock.
DIRECTOR AND OFFICER INDEMNIFICATION
The Articles provide that we may indemnify any director, officer, or
any former director or officer, and any person who is or has served at our
request as a director, officer or trustee of another corporation, partnership,
joint venture, trust or other enterprise (and his or hers heirs, executors and
administrators) against expenses, including attorney fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by him by reason of
the fact that he is or was such director, officer, incorporator or trustee in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, to the full extent
and according to the procedures and requirements set forth in the Ohio General
Corporation Law as the same may be in effect from time to time. The
indemnification provided shall not be deemed to restrict our right to (i)
indemnify employees, agents and others as permitted by law, (ii) purchase and
maintain insurance or provide similar protection on behalf of the directors,
officers or such other persons against liabilities asserted against them or
expenses incurred by them arising out of their service to us, and (iii) enter
into agreements with such directors, officers, employees, agents or others
indemnifying them against any and all liabilities asserted against them or
incurred by them arising out of their service to us as contemplated herein.
REMOVAL OF DIRECTORS
Our Regulations provide that any director or the entire Board of
Directors may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80% of all of our outstanding
shares of capital stock entitled to vote on the election of directors at a
meeting of shareholders called for that purpose, except that if the Board of
Directors, by an affirmative vote of at least 66 2/3% of the entire Board,
recommends removal of a director to the shareholders, such removal may be
effected by the affirmative vote of the holders of at least a majority of the
outstanding shares of our capital stock present in person or represented by
proxy and entitled to vote on the election of directors at a meeting of
shareholders called for that purpose. These provisions, when coupled with
provisions of the Regulations authorizing only the Board of Directors to fill
vacant directorships, will preclude our shareholders from removing incumbent
directors without cause, and simultaneously gaining control of the Board of
Directors by filling the vacancies with their own nominees.
The term "cause" is not defined in the Articles or the Ohio General
Corporation Law. Consequently, any question concerning the legal standard for
"cause" would have to be
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<PAGE> 17
judicially determined and such a determination could be difficult, expensive and
time consuming.
MEETINGS OF SHAREHOLDERS
The Regulations provide that annual meetings of shareholders shall be
held at such time and on such business day as the Board of Directors may
determine. Except as otherwise provided by law or by the Articles, a quorum for
any meeting of the shareholders is a majority of the capital stock issued and
outstanding and entitled to vote at the meeting. Special meetings of
shareholders may be called by the Chairman of the Board, President or Chief
Executive Officer or by the Board of Directors by action at a meeting or a
majority of the directors without a meeting or by shareholders holding 50% or
more of the voting power entitled to elect directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The Regulations provide that shareholders seeking to bring business
before a meeting of shareholders, or to nominate candidates for election as
directors at a meeting of shareholders, must provide timely notice thereof in
writing. To be timely, a shareholder's notice must be delivered to, or mailed
and received at, our principal executive office, not less than 30 days nor more
than 60 days prior to the scheduled meeting (or, if less than 40 days' notice of
the meeting is given to shareholders not later than the close of business on the
tenth day following the earlier of (i) the day on which such notice of the date
of the meeting was mailed, or (ii) the day on which public disclosure of the
date of the special meeting was made). The Regulations also specify certain
requirements pertaining to the form and substance of a shareholder's notice.
These provisions may preclude some shareholders from making nominations for
directors at an annual or special meeting or from bringing other matters before
the shareholders at a meeting.
VOTING REQUIREMENTS
The Regulations provide that certain provisions in the Regulations may
not be altered, amended or repealed in any respect, and new provisions
inconsistent therewith may not be adopted unless such action is approved by the
affirmative vote of the holders of at least 80% of all of our outstanding shares
of capital stock entitled to vote on such matter at a meeting of shareholders
called for that purpose.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Regulations also specify certain requirements pertaining to the
form and substance of a shareholder's notice. These provisions may preclude some
shareholders from making nominations for directors at an annual or special
meeting or from bringing other matters before the shareholders at a meeting.
Although the Articles and Regulations do not give the Board of
Directors any power to approve or disapprove shareholder nominations for the
election of directors or proposals for action, the foregoing provisions may have
the effect of precluding a contest for the election of directors or the
consideration of shareholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect our own slate of directors or to approve our
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to us and our shareholders. On the
other hand, by requiring advance notice of nominations by shareholders, these
shareholder notice procedures afford the Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform shareholders about such qualifications. By
requiring advance notice of other proposed business, the shareholder notice
procedures provide a more orderly procedure for conducting annual meetings of
shareholders and, to the extent deemed necessary or desirable by the Board,
provide the Board with an opportunity to inform shareholders, prior to such
meeting, of any business proposed to be conducted at the meeting, together with
any recommendations by the Board or statements as to the Board's position
regarding action to be taken with respect to such business, so that shareholders
can better decide whether to attend the meeting or to grant a proxy regarding
the disposition of any such business.
OHIO GENERAL CORPORATION LAW
Certain provisions of the General Corporation Law of Ohio and of our
Articles and
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<PAGE> 18
Regulations, summarized in the following paragraphs, may be considered to have
an anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a shareholder might consider to be in
such shareholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by shareholders.
Section 1701.59 of the Ohio General Corporation Law provides that a
director shall not be found to have violated his duties under the Ohio General
Corporation Law unless it is proved by clear and convincing evidence that the
director has not acted in good faith, in a manner he reasonably believes to be
in or not opposed to the best interests of the corporation, or with the care
that an ordinary prudent person in a like position would use under similar
circumstances. Further, such section provides that a director shall be liable in
damages for any action he takes or fails to take as a director only if it is
proved by clear and convincing evidence that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the corporation or with reckless disregard for the best interests of the
corporation.
Chapter 1704 of the Ohio General Corporation Law prohibits certain
transactions between a Ohio corporation and an "interested shareholder." Chapter
1704 allows for a corporation to exclude itself from Chapter 1704 by exempting
itself in its articles of incorporation. We have not included such an exemptive
provision in the Articles.
EXPERTS
Our financial statements as of December 31, 1996 and 1997, and for each
of the three years in the period ended December 31, 1997, appearing in our 1997
Annual Report on Form 10-K have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for us
by Porter, Wright, Morris & Arthur, 41 South High Street, Columbus, Ohio 43215.
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<PAGE> 19
================================================================================
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON, OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
REGARDS TO THE OFFER MADE IN THIS PROSPECTUS. ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US, THE
SELLING SHAREHOLDERS OR ANY UNDERWRITER, DEALER, OR AGENT. THIS PROSPECTUS ONLY
OFFERS THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
8,000,000 SHARES
NETMED, INC.
COMMON STOCK
----------
PROSPECTUS
----------
November __, 1998
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses relating to the registration of the Shares of Common Stock
being offered hereby, other than underwriting discounts and commissions, will be
borne by the Registrant. The following table shows the amount of such expenses
in connection with the sale and distribution of the Shares registered on
November 2, 1998:
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
Securities and Exchange Commission
Registration Fee $ 834.00
Legal Fees and Expenses 5,000.00
Accounting Fees and Expenses 2,500.00
Miscellaneous Expenses 1,500.00
Total $ 9,834.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Ohio General Corporation Law, Article NINTH of the
Registrant's Amended and Restated Articles of Incorporation ("Articles")
provides that a director, officer, incorporator, or any former officer or
director of the Registrant shall be indemnified by the Registrant to the fullest
extent permitted by the Ohio General Corporation Law.
Indemnification of directors, officers, employees and agents is
required under Section 1701.13 of the Ohio General Corporation Law in those
cases where the person to be indemnified has been successful on the merits or
otherwise in defense of a lawsuit. Indemnification is permitted in third party
actions where the indemnified person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and in criminal actions where he had no reasonable cause to believe
his conduct was unlawful. Indemnification is also permitted in lawsuits brought
by or on behalf of the corporation if the standards of conduct described above
are met, except that no indemnification is permitted in respect to any matter in
which the person is adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless a court shall determine that
indemnification is fair and reasonable in view of all the circumstances of the
case. In cases where indemnification is permissive, a determination as to
whether the person met the applicable standard of conduct must be made either by
the court, disinterested directors, by independent legal counsel, or by the
shareholders. Such indemnification rights are specifically not deemed to be
exclusive of other rights of indemnification by agreement or otherwise and the
corporation is authorized to advance expenses incurred prior to the final
disposition of a matter upon receipt of an undertaking to repay such amounts on
a determination that indemnification was not permitted in the circumstances of
the case.
Under Section 1701.13 of the Ohio General Corporation Law, a
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, or agent of the corporation, or who, while
serving in such capacity, is or was at the request of the corporation, a
director, officer, employee or agent of another corporation or legal entity or
of an employee benefit plan, against liability asserted against or incurred by
such person in any such capacity whether or not the corporation would have the
power to provide indemnity under Section 1701.13 of the Ohio General Corporation
Law.
II-1
<PAGE> 21
The above discussion of the Registrant's Articles and of Section
1701.13 of the Ohio General Corporation Law is not intended to be exhaustive and
is respectively qualified in our entirety by such Articles of Incorporation and
statute.
ITEM 16. EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and ELEVENTH,
of the Registrant's Amended and Restated Articles of
Incorporation and Articles I, V and VII of the Registrant's
Amended and Restated Regulations. (Previously filed as Exhibit
4(b) to the Registration Statement on Form S-4, Registration
No. 333-8199, and incorporated herein by reference.)
4.2 Certificate of Amendment to Registrant's Amended and Restated
Articles of Incorporation.*
5 Opinion of Porter, Wright, Morris & Arthur *
23 Consent of Ernst & Young LLP. *
24 Powers of Attorney.*
99.1 Convertible Debenture Exchange Agreement, dated October 27,
1998, among the Registrant, CPR (USA) Inc., LibertyView Fund,
LLC, and LibertyView Plus Fund.*
99.2 Registration Rights Agreement, dated October 27, 1998, among
the Registrant, CPR (USA) Inc., LibertyView Fund, LLC, and
LibertyView Plus Fund.*
* Filed with this Amendment.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
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<PAGE> 22
under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) It will file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered)and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
PROVIDED, HOWEVER, that the undertakings set forth in
paragraphs 3(i) and (ii) above do not apply if information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this Registration Statement.
(4) It will remove from registration by means of a
post-effective amendment any of the securities being registered that
remain unsold at the termination of the offering.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Act Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in the City of Dublin, State of Ohio, on October 30, 1998.
NETMED, INC.
By: /s/ David J. Richards
----------------------------------
David J. Richards, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David J. Richards President, Director ) October 30, 1998
- ----------------------- (Principal Executive Officer) )
David J. Richards )
)
)
*Kenneth B. Leachman Executive Vice President-Finance, ) October 30, 1998
- ----------------------- Treasurer (Principal Financial and )
Kenneth B. Leachman Accounting Officer) )
)
)
*S. Trevor Ferger Director ) October 30, 1998
- ----------------------- )
S. Trevor Ferger )
)
)
Director ) October 30, 1998
- ----------------------- )
Cecil J. Petitti )
)
)
*Michael S. Blue Director ) October 30, 1998
- ----------------------- )
Michael S. Blue )
)
)
*Robert J. Massey Director ) October 30, 1998
- ----------------------- )
Robert J. Massey )
)
)
Director ) October 30, 1998
- ----------------------- )
James F. Zid )
)
</TABLE>
*By: /s/ David J. Richards
-----------------------
David J. Richards
Attorney-in-fact for each of the persons indicated
II-4
<PAGE> 24
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Articles FOURTH, SIXTH, SEVENTH, EIGHTH, TENTH, and ELEVENTH,
of the Registrant's Amended and Restated Articles of
Incorporation and Articles I, V and VII of the Registrant's
Amended and Restated Regulations. 4.1. (Previously filed as
Exhibit 4(b) to the Registration Statement on Form S-4,
Registration No. 333-8199, and incorporated herein by
reference.)
4.2 Certificate of Amendment to Registrant's Amended and Restated
Articles of Incorporation.*
5 Opinion of Porter, Wright, Morris & Arthur *
23 Consent of Ernst & Young LLP. *
24 Powers of Attorney.*
99.1 Convertible Debenture Exchange Agreement, dated October 27,
1998, among the Registrant, CPR (USA) Inc., LibertyView Fund,
LLC, and LibertyView Plus Fund.*
99.2 Registration Rights Agreement, dated October 27, 1998, among
the Registrant, CPR (USA) Inc., LibertyView Fund, LLC, and
LibertyView Plus Fund.*
* Filed with this Amendment.
II-5
<PAGE> 1
Exhibit 4.2
----------------------
Prescribed by Charter No.___________
Bob Taft, Secretary of State ----------------------
30 East Broad Street, 14th Floor Approved _____________
[LOGO] Columbus, Ohio 43266-0418 Date__________________
Form C-107 (January 1991) Fee
CERTIFICATE OF AMENDMENT
BY DIRECTORS OF
NETMED, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
David J. Richards , who is:
- ---------------------------------
X Chairman of the Board President Vice President (check one)
- --- --- ---
and
William J. Kelly, Jr. ,who is: X Secretary Assistant Secretary (check one)
- ------------------------- --- ---
of the above named Ohio corporation for profit do hereby certify that:
___ a meeting of the Board of Directors called and held on the ______ day of
_____ 19_____,
_X_ in a writing signed by all the Directors pursuant to Section 1701.54 of the
Ohio Revised Code.
the following resolution was adopted pursuant to Section 1701.70(B)(1) of the
Ohio Revised Code:
RESOLVED, that pursuant to the authority granted to the Directors in
Division C of Article FOURTH of the Articles of Incorporation with
respect to the adoption of amendments to the Articles of Incorporation
to provide for the issuance of one or more series of Voting Preferred
Stock, Division C of Article FOURTH of the Articles of Incorporation be
amended to add the designation of the relative rights, preferences and
other terms of a new series of 100,000 shares of Voting Preferred Stock
to be known as the "Series A, 6% Convertible Preferred Stock," as
provided in Exhibit A hereto.
<PAGE> 2
IN WITNESS WHEREOF, the above named officers, acting for and on behalf
of the corporation, have hereunto subscribed their names this 29th day of
October, 1998.
BY:
----------------------------------------
David J. Richards, President
BY:
----------------------------------------
William J. Kelly, Jr., Secretary
NOTE: Ohio law does not permit one officer to sign in two capacities. Two
separate signatures are required even if this necessitates the election of a
second officer before the filing can be made.
<PAGE> 3
Exhibit A
1. Series A 6% Convertible Preferred Stock. The Voting Preferred Stock
shall include a series of 100,000 shares, without par value, and with a stated
value of [$15.02] per share (the "STATED VALUE"), designated as the "Series A,
6% Convertible Preferred Stock," issued pursuant to the terms of an Exchange
Agreement dated October 27, 1998 ("EXCHANGE AGREEMENT") with the following
relative rights, preferences, powers, restrictions and limitations.
a. DIVIDENDS.
The holders of the then outstanding shares of Series A, 6%
Convertible Preferred Stock (hereinafter, "PREFERRED STOCK") shall be entitled
to receive, out of funds legally available therefor, annual dividends at annual
rate per share equal to six percent (6%) of the Stated Value. Such dividends
shall be deemed to accrue on the Preferred Stock beginning November 1, 1998, and
be cumulative, whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. If there shall not
have been a sum sufficient for the payment therefor set apart, the deficiency
shall first be paid before any dividend or other distribution shall be paid or
declared and set apart with respect to any class of the Corporation's capital
stock, now or hereafter outstanding. The accrued dividends shall be due and
payable, upon conversion of the Preferred Stock as set forth herein, in cash or,
at the option of the Corporation, in unrestricted, registered shares of common
stock of the Corporation, without par value (the "COMMON STOCK") at the
applicable Conversion Price (as defined below). The date the Corporation pays
dividends to the holders of the Preferred Stock shall be deemed a "Dividend
Date". Notwithstanding the foregoing, the Corporation shall not declare or pay a
dividend on the Common Stock prior to the Dividend Date.
b. LIQUIDATION, DISSOLUTION OR WINDING UP
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any distribution
may be made with respect to the Common Stock or any other series of capital
stock, holders of each share of Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus, or capital earnings, an amount per share of Preferred Stock equal to
the Stated Value plus the amount of any accrued and unpaid dividends (the
"LIQUIDATION AMOUNT").
(ii) If the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of Preferred Stock the full amount of the Liquidation Amount to which
they shall be entitled, the holders of shares of Preferred Stock shall share
ratably in any distribution of assets according to the amounts which would be
payable with respect to the shares of Preferred Stock held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
(iii) After the payment of the Liquidation Amount shall have
been made in full to the holders of the Preferred Stock or funds necessary for
such payment shall have been set aside by the Corporation in trust for the
account of holders of the Preferred Stock so as to be available for such
<PAGE> 4
payments, the holders of the Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation, and the
remaining assets of the Corporation legally available for distribution to its
shareholders shall be distributed among the holders of other classes of
securities of the Corporation in accordance with their respective terms.
(iv) The Liquidation Amount shall in all events be paid in cash.
c. CONVERSION RIGHTS FOR THE PREFERRED STOCK. The holders of the
Preferred Stock shall have following rights with respect to the conversion of
the Preferred Stock into shares of Common Stock:
(i) Conversion Price. Subject to and in compliance with the provisions
of this Section 1. c., shares of the Preferred Stock may, at the option of the
holder, be converted into the number of fully paid and non-assessable shares of
Common Stock obtained by dividing the Stated Value plus all accrued but unpaid
dividends per share of Preferred Stock, by the Conversion Price. "CONVERSION
PRICE" means an amount equal to the lesser of (a) seventy-five percent (75%) of
the average closing bid price per share of the Common Stock as reported by the
principal exchange or interdealer quotation system on which the securities are
listed or quoted ("CLOSING BID PRICE") for the three (3) trading days
immediately preceding the Conversion Date, or (b) $6.23. "Conversion Date" means
the date on which the holder has telecopied a notice of conversion to the
Corporation in the form attached to the Exchange Agreement as Exhibit B ("NOTICE
OF CONVERSION") as provided in paragraph (v) of this Section 1. c.
(ii) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Preferred Stock shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, then and in each such
event, the holder of each share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such capital reorganization,
reclassification or other change which such holder would have received had its
shares of Preferred Stock been converted immediately prior to such capital
reorganization, reclassification or other change.
(iii) Capital Reorganization, Merger or Sale of Assets. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 1. c.) or a merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, or any transaction or series of related transactions in which more than
fifty percent (50%) of the outstanding voting securities of the Corporation (on
an as converted basis) is sold or assigned (any of which events is herein
referred to as a "Reorganization"), then as a part of such Reorganization,
provision shall be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion of the Preferred Stock, the
number of shares of stock or other securities or property of the Corporation, or
of the successor corporation resulting from such Reorganization, to which such
holder would have been entitled if such holder had converted its shares of
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 1. c. with respect to the rights of the holders of the Preferred
Stock after the Reorganization, to the end that the
<PAGE> 5
provisions of this Section 1 (including adjustment of the number of shares
issuable upon conversion of the Preferred Stock) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
(iv) Certificate as to Adjustments; Notice by Corporation. Upon the
occurrence of each adjustment or readjustment of the Conversion Price of the
Preferred Stock, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate executed by the
president and chief financial officer (or in the absence of a person designated
as the chief financial officer, by the treasurer) setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment are based. The Corporation shall, within five business days after
receipt of a written request (via facsimile) at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a certificate
setting forth (A) the Conversion Price at the time in effect, and (B) the number
or shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
(v) Exercise of Conversion Privilege. Conversion of shares of Preferred
Stock to Common Stock may be effected in whole or in part by the holder
telecopying an executed and completed Notice of Conversion to the Corporation
not later than 5:00 p.m. Eastern Time on any business day, and delivering to the
Corporation at its principal office the original Notice of Conversion and the
certificate(s) representing the shares of Preferred Stock being converted by
express courier within three (3) business days thereafter. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. The certificate or certificates for shares of
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date on which a Notice of
Conversion is telecopied to the Corporation in accordance with the provisions
hereof shall be deemed a "CONVERSION DATE". Within five business days after the
delivery to the Corporation of the original Notice of Conversion and the
certificates representing the shares of Preferred Stock being converted, the
Corporation shall issue and shall deliver to the holder of the shares of
Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Preferred Stock in accordance
with the provisions of this Section 5, and cash, as provided in Section 1. c.
(vi), in respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date. The rights of the holder
as holder of the converted shares of Preferred Stock shall cease upon the
issuance and delivery of the Common Shares upon conversion and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby. The Corporation shall pay any taxes payable with respect to the
issuance of Common Stock upon conversion of the Preferred Stock, other than any
taxes payable with respect to income by the holders thereof. In the event the
shares of Common Stock are not delivered by the Corporation to the holder within
the five business day period specified in this paragraph, the Corporation shall
pay by wire transfer to such holder, as liquidated damages and not as a penalty,
the sum of $1,000 for each day thereafter that the shares are not delivered.
(vi) Cash in Lieu of Fractional Shares. In lieu of issuing fractional
shares of Common Stock which may become due upon conversion of the Preferred
Stock, the Corporation shall pay to the
<PAGE> 6
holder of the shares of Preferred Stock which were converted in cash in respect
of such fractional shares an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) on the close of business on the Conversion
Date. The determination as to whether any fractional shares are issuable shall
be based upon the total number of shares of Preferred Stock being converted at
any one time by any holder thereof, not upon each share of Preferred Stock being
converted.
(vii) Partial Conversion. In the event some but not all of the shares
of Preferred Stock represented by a certificate or certificates surrendered by a
holder are converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Preferred Stock which were not converted.
(viii) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
d. MANDATORY CONVERSION/REDEMPTION RIGHTS.
(i) Mandatory Conversion. The Corporation has the right to
require the holders to convert the Preferred Stock, pursuant to this Section 1
d. (i), in the event both of the following conditions are satisfied: (a) the
average of the Closing Price of the Common Stock is equal to or greater than
$9.35 for ten consecutive trading days (as adjusted for any split or combination
of shares), and (b) the average daily trading volume of the Common Stock for the
thirty (30) trading days immediately preceding the business date the holder
receives, via facsimile, the mandatory conversion notice from the Corporation is
equal to or greater than thirty-five thousand (35,000) shares per trading day,
non-inclusive of trading volume created by sales of Common Stock by the holders,
if any, of Preferred Stock. The Corporation shall provide the holders of the
Preferred Stock written notice of any election under this Section 1 d. (i) via
facsimile, and the date on which such notice is received by the holders shall
constitute a "Conversion Date," and the applicable "Conversion Price" will be
calculated under Section 1 c. (i) as of such date. As promptly as practicable
after the Conversion Date, the holders shall surrender the remaining
certificates for shares of Preferred Stock, be accompanied by proper assignment
thereof to the Corporation or in blank, and the Corporation shall issue to the
holders certificates for the shares of Common Stock issuable on such conversion
in accordance with the delivery requirements set forth in the Purchase
Agreement, and any cash in lieu of fractional shares. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and the rights of a holder as holder of the converted shares of
Preferred Stock shall cease upon the issuance and delivery of the Common Shares
upon such mandatory conversion and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby. The Corporation shall
only be able to require conversion of the Preferred Stock pursuant to the terms
of this Section if the shares of Common Stock issuable
<PAGE> 7
pursuant to such mandatory conversion are included in an effective registration
statement and no transfer restrictions apply thereto. The Corporation must
require conversion of the Preferred Stock pro rata among all of the holders of
the Preferred Stock at such time. Notwithstanding the foregoing, in no event
shall the Company be permitted to force conversion of any share or shares of
Preferred Stock which would result in such holder of the Preferred Stock being
deemed a beneficial owner, in accordance with the provisions of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended, of 4.99% or more of the then
issued and outstanding shares of Common Stock of the Company.
(ii) Redemption Right. The Corporation has the right to redeem the
Preferred Stock, in total or in part, in cash upon the simultaneous wire
transfer to the holders (per share of Preferred Stock) of one hundred twenty
five percent (125%) of the Stated Value of each share of Preferred Stock to be
redeemed, plus all accrued and unpaid dividends due on each share(s) of
Preferred Stock to be redeemed (the "REDEMPTION PRICE") and service on any
business day of a written notice upon the holders of the Preferred Stock of its
election to redeem the Preferred Stock. Upon receipt of the aforementioned
notice and the appropriate Redemption Price, the holders of the Preferred Stock
shall immediately forward to the Corporation, via reputable overnight courier,
the shares of Preferred Stock which are the subject of the redemption. The
Corporation may only send a notice of redemption if at such time it also sends
to the holders of the Preferred Stock immediately available funds specifically
for such purpose. The Corporation must redeem the Preferred Stock pro rata among
all of the holders of the Preferred Stock at such time.
(iii) Surrender of Certificates. Each holder of shares of Preferred
Stock to be redeemed under Section 1. d. (ii) shall surrender the certificate or
certificates representing such shares to the Corporation at the place designated
in the applicable redemption notice upon receipt of the aforementioned notice of
redemption and Redemption Price. The Corporation shall fund all redemptions made
pursuant to this Section 1. d. (ii) by wire transfer of same day funds to the
accounts provided by the holders of the Preferred Stock. Irrespective of whether
the certificates therefor shall have been surrendered, all shares of Preferred
Stock which are subject to redemption under this Section 1. d. (ii) shall be
deemed to have been redeemed and shall be canceled effective as of the business
day in which the holders of the Preferred Stock receive the notice of redemption
and the Redemption Price, unless the Corporation shall default in the payment of
the applicable redemption price.
e. RESTRICTIONS AND LIMITATIONS.
(i) Corporate Securities Action. Except as expressly provided herein or
as required by law, so long as any shares of Preferred Stock remain outstanding,
the Corporation shall not, and shall not permit any subsidiary (which shall mean
any corporation, association or other business entity which the Corporation
and/or any of its other subsidiaries directly or indirectly owns at the time
more than fifty percent (50%) of the outstanding voting shares, or more than 50%
of the combined voting power of the outstanding voting shares, of such
corporation or trust) to, without the approval by vote or written consent by the
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting as a separate class: (i) to amend the Corporation's articles of
incorporation and bylaws and (ii) take any action, or fail to take any action,
which would result in a breach of this Certificate of Amendment, the Purchase
Agreement (including any agreement annexed thereto), or the Exchange Agreement
(including any agreement annexed thereto)or adversely affect the rights of the
holders of Preferred Stock.
<PAGE> 8
(ii) Amendments to Articles of Incorporation. Without limiting the
generality of the preceding paragraph, the Corporation shall not amend its
articles of incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Preferred Stock if such amendment
would:
(A) change the relative seniority rights of the holders of
Preferred Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Corporation, or create any other class or series of
capital stock entitled to seniority as to the payment of dividends in relation
to the holders of Preferred Stock;
(B) reduce the amount payable to the holders of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, or change the relative seniority of the liquidation preferences of
the holders of Preferred Stock to the rights upon liquidation of the holders of
other capital stock of the Corporation, or change the dividend rights of the
holders of Preferred Stock;
(C) cancel or modify the conversion rights of the holders of
Preferred Stock provided for in Section 1. c. herein; or
(D) cancel or modify the rights of the holders of the Preferred
Stock provided for in this Section 1. e.
(iii) No Reissuance. The Corporation shall not reissue any shares of
Preferred Stock which have been canceled by the Corporation through either
conversion, redemption or otherwise.
f. NO DILUTION OR IMPAIRMENT. The Corporation shall not, by amendment of
its Articles 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 of the Preferred Stock set forth herein, but shall at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the holders of the Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the Corporation (i) shall not
increase the par value of any shares of stock receivable on the conversion of
the Preferred Stock above the amount payable therefor on such conversion, (ii)
shall take all such action as may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
stock on the conversion of all Preferred Stock from time to time outstanding,
and (iii) shall not consolidate with or merge into any other person or permit
any such person to consolidate with or merge into the Corporation (if the
Corporation is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all of the terms of the
Preferred Stock set forth herein.
g. NOTICES OF RECORD DATE. In the event of:
(i) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
<PAGE> 9
(ii) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other corporation, or any other entity or
person, or
(iii) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation,
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Preferred Stock a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (B) the date on
which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least twenty (20) business days prior to the date specified in such
notice on which such action is to be taken.
<PAGE> 1
Exhibit 5
November 2, 1998
NetMed, Inc.
6189 Memorial Drive
Dublin, Ohio 43017
Gentlemen:
With respect to the Registration Statement on Form S-3 (the
"Registration Statement") being filed by NetMed, Inc. (the "Company") under the
Securities Act of 1933, as amended, relating to the registration of 8,000,000
common shares of the Company, without par value (the "Shares"), we advise you as
follows:
We are counsel for the Company and have participated in the preparation
of the Registration Statement. We have reviewed the Company's Amended and
Restated Articles of Incorporation, as amended to date, the corporate action
taken to date in connection with the Registration Statement and the issuance and
sale of the Shares, and such other documents and authorities as we deem relevant
for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that, upon compliance
with the Securities Act of 1933, as amended, and with the securities or "blue
sky" laws of the states in which the Shares are to be offered for sale, the
Shares will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
/s/ Porter, Wright, Morris & Arthur
PORTER, WRIGHT, MORRIS & ARTHUR
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of NetMed, Inc. for
the registration of 8,000,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 16, 1998, with
respect to the financial statements of NetMed, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
/s/Ernst & Young LLP
Ernst & Young LLP
Columbus, Ohio
October 30, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
Each of the undersigned officers and/or directors of NetMed, Inc., an
Ohio corporation (the "Company"), hereby appoints David J. Richards, Kenneth B.
Leachman, or William J. Kelly, or any one of them, as his true and lawful
attorney-in-fact, in his name and on his behalf, and in any and all capacities
stated below, to sign and to cause to be filed with the Securities and Exchange
Commission the Company's Registration Statement on Form S-3 (the "Registration
Statement") to register under the Securities Act of 1933, as amended, the sale
by certain shareholders of the Company of up to 8,000,000 shares of common
stock, without par value, of the Company and any and all amendments, including
post-effective amendments, to the Registration Statement, hereby granting unto
such attorney-in-fact, full power and authority to do and perform in the name
and on behalf of the undersigned, in any and all such capacities, every act and
thing whatsoever necessary to be done in and about the premises as fully as the
undersigned could or might do in person, hereby granting to such
attorney-in-fact full power of substitution and revocation, and hereby ratifying
all that any such attorney-in-fact or his substitute may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney in counterparts if necessary, effective as of October 15, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/David J. Richards President, Director
-------------------------------- (Principal Executive Officer)
David J. Richards
/s/Kenneth B. Leachman Executive Vice President-Finance,
-------------------------------- Treasurer (Principal Financial and
Kenneth B. Leachman Accounting Officer)
/s/Trevor Ferger
--------------------------------
Trevor Ferger Director
--------------------------------
Cecil J. Petitti Director
/s/Michael S. Blue
--------------------------------
Michael S. Blue Director
/s/Robert J. Massey
--------------------------------
Robert J. Massey Director
--------------------------------
James F. Zid Director
/s/Susan M. O'Toole
--------------------------------
Susan M. O'Toole Director
</TABLE>
<PAGE> 1
Exhibit 99.1
NETMED INC.
CONVERTIBLE DEBENTURE EXCHANGE AGREEMENT
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This Convertible Debenture Exchange Agreement (the "AGREEMENT") is made
by and between NetMed, Inc., an Ohio corporation ("NMD") and the undersigned
holders (individually a "HOLDER" and collectively, the "HOLDERS") of the
outstanding 6% Convertible Subordinated Debentures of NMD (the "CONVERTIBLE
DEBENTURES").
Recitals
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A. The Holders are currently the record owner of that principal amount
of Convertible Debentures as are set forth on Schedule A annexed hereto, issued
pursuant to the terms of a 6% Secured Convertible Debenture Purchase Agreement
among the parties dated August 12, 1997 (the "PURCHASE AGREEMENT").
B. NMD has created a new class of preferred stock, designated Series A,
6% Convertible Preferred Stock (the "PREFERRED STOCK") with all of the rights
and privileges set forth in the Certificate of Amendment annexed hereto as
Exhibit A (the "CERTIFICATE OF AMENDMENT").
C. The Preferred Stock shall have a Stated Value (as defined in the
Certificate of Amendment) of $15.02 per share.
D. By this Agreement, NMD desires to assign, convey, transfer and
deliver to each Holder of the Convertible Debentures that number of shares of
the Preferred Stock set forth beside such Holder's name on Schedule A hereto, in
exchange for the surrender of the principal amount of Convertible Debentures,
and accrued interest thereon, set forth on such Schedule.
Statement of Agreement
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EXCHANGE OF PREFERRED SHARES. NMD and the Holders agree that
upon the business day that the Holders receive each of the following: (A) the
original shares of Preferred Stock (the number of shares of Preferred Stock to
be issued for the principal amount of Convertible Debentures owned of record by
each Holder, plus accrued interest, as set forth on Schedule A) to be issued
upon the exchange, and (B) notice from NMD that each of the following conditions
(the "Conditions") have been satisfied, (i) written proof that the Registration
Statement (as defined in the Registration Rights Agreement annexed hereto as
Exhibit A) including the shares of Common Stock underlying the Preferred Stock
issuable hereunder has been declared effective by the Securities and Exchange
Commission (the "SEC"), (ii) written proof that the Certificate of Amendment
providing for all of the rights, privileges, and preferences of the Preferred
Stock has been filed and accepted by the Secretary of State for the State of
Ohio, and (iii) receipt of a certificate
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from an officer of NMD that the representations, warranties and covenants of
this Agreement (including all exhibits annexed hereto), are true and correct as
of the date thereof, that the Common Stock has not been delisted from the
American Stock Exchange, and that NMD has not received a final determination
that the Common Stock will be delisted from the American Stock Exchange, the
Holders shall forward to NMD the original Convertible Debentures being exchanged
with NMD in exchange for the number of shares of Preferred Stock for the
principal amount of Convertible Debentures owned of record by each Holder, plus
accrued interest, as set forth on Schedule A. The "EXCHANGE DATE" shall be
defined as the business day upon which the Holders receive the aforementioned
notice and payment. Upon the receipt by the Holders of such shares of Preferred
Stock along with the aforementioned notice, the Holders will cease to have any
right to receipt or payment of interest or principal, in whole or in part, on
the Convertible Debentures, but will begin the right to receipt or payment of
dividends on the Preferred Stock. In the event the Common Stock of NMD is not
listed on the American Stock Exchange, or NMD has received notice of a final
determination that its Common Stock will be delisted in the future, on the date
NMD serves the above referenced notice, or prior to the Exchange Date, the
Holders, shall have the exclusive option to forego the aforementioned exchange.
In the event the Registration Statement to be filed by the Company pursuant to
Section 3(a) above is not declared effective within sixty (60) calendar days
from the date of this Agreement the exchange described in the Exchange Agreement
will not occur. Notwithstanding the foregoing, in the event each of the
Conditions, other than the delisting of the Common Stock from the American Stock
Exchange or final determination, as provided above, is not satisfied as of the
Exchange Date the exchange shall not occur.
2. ACCEPTANCE BY HOLDER. NMD agrees that it will, simultaneously with
sending notice (as set forth in Section 1 above), send a certificate to each
Holder evidencing such Holder's ownership of that number of shares of Preferred
Stock set forth next to such Holders' name on Schedule A. Upon receipt of the
notice and the shares of Preferred Stock from NMD as set forth in herein
(provided the Holders do not choose to forego the exchange as provided above),
the Holders shall deliver to NMD the original Convertible Debenture(s)
evidencing ownership of the Convertible Debentures exchanged hereby.
3. REPRESENTATIONS AND WARRANTIES OF NMD AND HOLDERS.
3.1 NMD REPRESENTATIONS AND WARRANTIES.
(a) ORGANIZATION AND GOOD STANDING. NMD is a corporation duly formed,
validly existing and in good standing under the laws of the State of Ohio, with
the full authority to issue and exchange the Preferred Stock and to carry out
the provisions hereof.
(b) PREFERRED STOCK/CERTIFICATE OF AMENDMENT. The Preferred Stock, when
issued pursuant to the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable. The Certificate of Amendment shall be
filed with the Secretary of State of the State of Ohio, and it shall remain in
full force and effect when the Preferred Stock is issued pursuant to the terms
of this Agreement. The Preferred Stock shall be convertible into shares of
Common Stock of NMD pursuant to the terms and conditions set forth in such
Certificate of Amendment, upon delivery
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of a Notice of Conversion as provided therein, in the form attached hereto as
Exhibit C.
(c) CAPITAL STOCK. The authorized capital stock of NMD consists of
20,000,000 shares of common stock and 500,000 shares of preferred stock.
(d) REGISTRATION RIGHTS. The terms and conditions of the Registration
Rights Agreement between NMD and the Holders, substantially in the form annexed
hereto as Exhibit D, shall be executed by the parties herein, and remain in full
force and effect when the Preferred Stock is issued pursuant to the terms of
this Agreement.
(e) EXECUTION OF THIS AGREEMENT. NMD has the full right, power and
authority to enter into and to perform this Agreement and all other agreements,
certificates and documents executed and delivered, or to be executed and
delivered, by NMD in connection herewith (collectively, with this Agreement, the
"NMD DOCUMENTS"). This Agreement has been duly authorized, executed and
delivered by NMD, and the NMD Documents are (or when executed and delivered will
be) legal, valid and binding obligations of NMD, enforceable in accordance with
their respective terms.
(f) INFORMATION TRUE AND CORRECT. All the information that is set forth
in this Agreement with respect to the NMD is correct and complete as of the date
of this Agreement.
(g) PURCHASE AGREEMENT. Except as modified by this Section 3.1, the
covenants, representations and warranties of NMD contained in Section 3 of the
Purchase Agreement are incorporated herein by reference and are made as of the
date of this Agreement.
3.2 HOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) TITLE. Each of the Holders is the owner, beneficially and of
record, of all the Convertible Debentures set forth beside its name on Schedule
A, exchanged hereby, free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges and restrictions. Each of the
Holders have full power to transfer the Convertible Debentures exchanged hereby
with NMD without obtaining the consent or approval of any other person, entity
or governmental authority. The Convertible Debentures being exchanged hereby
constitute all of the Convertible Debentures owned by each of the Holders.
(b) INFORMATION TRUE AND CORRECT. All the information that is set forth
in this Agreement with respect to each of the Holders is correct and complete as
of the date of this Agreement.
(c) KNOWLEDGE AND EXPERIENCE. Each of the Holders has such knowledge
and experience in financial and business matters that each Holder, together with
its representatives and advisors, if any, is capable of evaluating the merits
and risks of an investment in the Preferred Stock.
(d) HOLDER'S LIQUIDITY. Each of the Holders has adequate means of
providing for its current needs and contingencies and has no need for liquidity
in connection with the investment
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contemplated herein. Each of the Holders acknowledge that it must bear the
economic risk of investment in the Preferred Stock for an indefinite period of
time, and that it could bear a loss of its entire investment in the Preferred
Stock, without materially impairing its financial wherewithal.
(e) SECURITIES RESTRICTIONS ON TRANSFER. Each of the Holders
acknowledges and understands that the Preferred Stock has not been registered
under the Securities Act of 1933, as amended (the " 1933 ACT") or under any
state securities laws and agrees that the Preferred Stock cannot be resold
unless it is subsequently registered under the 1933 Act or pertinent state
securities laws unless an exemption from such registration is available.
(f) RELIANCE ONLY ON PUBLISHED DOCUMENTS. Each of the Holders
acknowledges and represents that it has made the decision to invest in the
Preferred Stock solely on the basis of the publicly available information
previously provided to the Holders by NMD in its Form 10-K for the fiscal year
ended December 31, 1997 and its Forms 10-Q for the fiscal quarter ended June 30,
1998, and that no officer, director or other person affiliated with NMD has
given any information or made any representation, oral or written, other than as
provided in such documents, on which the Holders have relied in deciding to
invest in the Preferred Stock, including, without limitation, any information or
representations with respect to the future operations of NMD or to the economic
returns which may accrue to the Holders as a result of the exchange of the
Convertible Debentures for the Preferred Stock.
(g) EXECUTION OF THIS AGREEMENT. Each of the Holders has the full
right, power and authority to enter into and to perform this Agreement and all
other agreements, certificates and documents executed and delivered, or to be
executed and delivered, by each of the Holders in connection herewith
(collectively, with this Agreement, the "HOLDER DOCUMENTS"). This Agreement has
been duly authorized, executed and delivered by each of the Holders, and the
Holder Documents are (or when executed and delivered will be) legal, valid and
binding obligations of each of the Holders, enforceable in accordance with their
respective terms.
(h) PURCHASE AGREEMENT. Except as modified by this Section 3.2, the
covenants, representations and warranties of each of the Holders contained in
Section 4 of the Purchase Agreement are incorporated herein by reference and are
made as of the date of this Agreement.
4. SHARE CERTIFICATES
4.1 LEGEND. Each certificate representing shares of Preferred Stock
issued pursuant to the provisions hereof shall bear
the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
NEITHER THE SHARES REPRESENTED BY THIS CERTIFICATE NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD PLEDGED OR TRANSFERRED IN THE ABSENCE
OF REGISTRATION OR
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QUALIFICATION OR EXEMPTION THEREFROM UNDER SAID ACT OR STATE
SECURITIES LAWS OR THE RULES AND REGULATIONS PROMULGATED
THEREUNDER, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH LAWS."
4.21 REMOVAL OF LEGEND. The transfer restrictions imposed by the legend
set forth in Section 4.1 hereof shall terminate as to some or all of the
Preferred Stock when:
(a) Such Preferred Stock shall have been effectively registered under
the Securities Act of 1933 and any applicable state law and sold by the holder
thereof in accordance with such registration; or
(b) Written opinions to the effect that such registration is no longer
required or necessary under any federal or state law or regulation or
governmental authority shall have been received from counsel for NMD.
Whenever the restrictions imposed by Section 4.1 hereof shall
terminate, as provided above, any holder of such Preferred Stock as to which
such requirements shall have terminated shall be entitled to receive from NMD,
without expenses to such holder, a new stock certificate evidencing such
Preferred Stock without the restrictive legend set forth in Section 4.1.
5. NOTICES. All notices or other communications in connection with this
Agreement shall be in writing and shall be considered given when personally
delivered or when mailed by registered or certified mail, postage prepaid,
return receipt requested, or when sent via commercial courier or telecopier,
directed as follows:
If to NMD:
NetMed, Inc.
6189 Memorial Drive
Dublin, Ohio 43017
Attention:Kenneth B. Leachman
Telephone No.: (614) 793-9356
Facsimile No.: (614) 793-9376
If to the Holders to the address opposite such Holder's name on
Schedule A hereof.
with a copy to:
Scott H. Goldstein, Esq.
Goldstein, Goldstein & Reis,
LLP
65 Broadway New
York, New York 10006
Telephone No. (212) 809-4220
Telecopier No. (212) 809-4228
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6. CHOICE OF LAW. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of Ohio without regard to principles of
conflicts of laws. Each party consents to the jurisdiction of the federal courts
of the Southern District of the State of Ohio in connection with any dispute
arising under this Agreement and hereby waive, to the maximum extent permitted
by law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions.
7. SURVIVAL OF REPRESENTATIONS. All statements contained in any
certificate or instrument or conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be deemed to be additional representations and warranties of the
parties making such disclosure. All representations and warranties shall survive
the exchange of the Convertible Debentures for the Preferred Stock as
contemplated herein.
8. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party without the prior written
consent of the other party hereto. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and no other person shall have any right,
benefit or obligation hereunder.
9. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, along with
the portions of the Purchase Agreement incorporated herein by reference,
together with all exhibits, attachments and schedules hereto, constitutes the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, amendment, modification
or waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
10. INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein shall
for any reason be held invalid, illegal or unenforceable in any respect, then
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other instrument.
11. FURTHER ASSURANCES. The parties shall cooperate and take such
actions, and execute such other documents, in connection with the transactions
contemplated herein, as either may reasonably request in order to carry out the
provisions or purpose of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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13. COMPLIANCE WITH SECURITIES ACT. THE PROVISIONS OF SECTIONS 7.1
THROUGH 7.8 OF THE PURCHASE AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned has duly executed this Exchange
Agreement on the 27 day of October, 1998.
NETMED, INC.
By: /s/ David J. Richards
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CPR (USA) INC.
By: /s/ Steven S. Rogers
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LIBERTYVIEW FUND, LLC
By: /s/ Steven S. Rogers
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LIBERTYVIEW PLUS FUND
By: /s/ Steven S. Rogers
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SCHEDULE A
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<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF ACCRUED NO. SHARES OF
HOLDER CONVERTIBLE DEBENTURES INTEREST PREFERRED STOCK
<S> <C> <C> <C>
1. CPR (USA) INC. $ 1,025,175.00 $74,992.25 73,227
101 Hudson Street, Suite 3700
Jersey City, New Jersey 07302
2. LIBERTYVIEW FUND, LLC $ 93,825.00 $ 6,863.36 6,702
101 Hudson Street, Suite 3700
Jersey City, New Jersey 07302
3. LIBERTYVIEW PLUS FUND $ 281,000.00 $20,555.34 20,071
101 Hudson Street, Suite 3700
Jersey City, New Jersey 07302
</TABLE>
9
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Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 27th day of
October, 1998, between the person and/or entity whose name and address appears
on the Schedule A annexed hereto (individually a "HOLDER" or collectively the
"HOLDERS") and NETMED, INC., a corporation incorporated in the State of Ohio,
having its principal place of business at 6189 Memorial Drive, Dublin, OH 43017
(the "COMPANY").
WHEREAS, the Holders will be exchanging an aggregate of
$1,400,000 principal amount of 6% Secured Convertible Subordinated Debentures
(the "DEBENTURES") purchased from the Company according to the terms of the 6%
Secured Convertible Subordinated Debenture Purchase Agreement (the "PURCHASE
AGREEMENT"), plus accrued interest through October 31, 1998, for an aggregate of
100,000 shares of Series A 6% Convertible Preferred Stock of the Company (the
"PREFERRED STOCK") pursuant to an Exchange Agreement between the parties of even
date herewith (the "EXCHANGE AGREEMENT"); and
WHEREAS, the Preferred Stock is convertible into shares (the
"CONVERSION SHARES") of the Company's Common Stock, no par value per share (the
"COMMON STOCK"); and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the Conversion Shares.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term
"REGISTRABLE SECURITY" means each of the Conversion Shares; provided, however,
that with respect to any particular Registrable Security, such security shall
cease to be a Registrable Security when, as of the date of determination, (i) it
has been effectively registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT") and disposed of pursuant thereto, (ii) registration under
the Securities Act is no longer required for the immediate public distribution
of such security as a result of the provisions of Rule 144, or (iii) it has
ceased to be outstanding. The term "REGISTRABLE SECURITIES" means any and/or all
of the securities falling within the foregoing definition of a Registrable
Security. In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of Registrable Security
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. RESTRICTIONS ON Transfer. The Holders acknowledge
and understand that prior to the registration of the Conversion Shares as
provided herein, the Preferred Stock and the Conversion Shares are "restricted
securities" as defined in Rule 144 promulgated under the Act. The Holders
understand that no disposition or transfer of the Preferred Stock or Conversion
Shares may be made by the Holders in the absence of (i) an opinion of counsel
reasonably satisfactory to the Company that such transfer may be made, or (ii) a
registration statement under the Securities Act is then in effect with respect
thereto.
Section 3. REGISTRATION RIGHTS.
(a) Within seven business days after the date of this
Agreement, the Company shall prepare and file with the Securities and Exchange
Commission ("SEC"), on one occasion, at the sole expense of the Company (except
as provided in Section 3(c) hereof), in respect of all holders of Registrable
Securities, so as to permit a nonunderwritten public offering and sale of the
Registrable Securities under the Act. The number of
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Conversion Shares to be registered shall be one hundred fifty (150%) percent of
the number of shares that would be required if all the Preferred Stock was
converted on the effective date of the Registration Statement.
(b) The Company will maintain any Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
Securities Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144, or (iii) the third
anniversary of the date of this Agreement.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
any Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holders shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall use its best efforts to qualify any of the securities for sale in
such states as such Holder(s) reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holders with copies of such Registration Statement and
the prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holders.
(d) The Company shall not be required by this Section 3 to
include a Holder's Registrable Securities in any Registration Statement which is
to be filed if, in the opinion of counsel for both the Holders and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holders and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and would
result in all purchasers or transferees obtaining securities which are not
"restricted securities", as defined in Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not declared effective within 60
calendar days from the date of this Agreement the exchange described in the
Exchange Agreement will not occur.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
Section 4. COOPERATION WITH COMPANY. Holders will cooperate
with the Company in all respects in connection with this Agreement, including,
timely supplying all information reasonably requested by the Company and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Registrable Securities.
Section 5. REGISTRATION PROCEDURES. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the Prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of
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all securities covered by such registration statement whenever the Holder or
Holders of such securities shall desire to sell or otherwise dispose of the same
(including prospectus supplements with respect to the sales of securities from
time to time in connection with a registration statement pursuant to Rule 415 of
the Commission);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the Holders, shall reasonably request,
and do any and all other acts and things which may be necessary or advisable to
enable each Holder to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Holder, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
(d) use its best efforts to list such securities on the AMEX
or any securities exchange on which any securities of the Company is then
listed, if the listing of such securities is then permitted under the rules of
such exchange or NASDAQ;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering;
(f) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
Section 6. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holders each officer, director of the
Holders, and each person, if any, who controls the Holders within the meaning of
the Securities Act ("DISTRIBUTING HOLDERS") against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission-or alleged omission made in
such Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the
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Company by the Distributing Holders, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof; arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in a Registration
Statement requested by such Distributing Holder, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Distributing Holders may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section 6. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation, unless
the indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement
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of any action against an indemnified party shall be made without the prior
written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. CONTRIBUTION. In order to provide for just and
equitable contribution under the Securities Act in any case in which (i) the
Distributing Holder makes a claim for indemnification pursuant to Section 6
hereof but is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any Distributing Holder,
then the Company and the applicable Distributing Holder shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Distributing Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Section 8. NOTICES. Any notice pursuant to this Agreement by
the Company or by the Holder shall be in writing and shall be deemed to have
been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery, or (iii) if mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Holders, to their respective addresses set forth
on Schedule A annexed hereto.
(b) If to the Company, at NetMed, Inc. 6189 Memorial Drive,
Dublin, OH 43017, (tele) (614) 793-9356, (fax) (614) 793-9376, or to such other
address as any such party may designate by notice to the other party. Notices
shall be deemed given at the time they are delivered personally or five (5) days
after they are mailed in the manner set forth above. If notice is delivered by
facsimile to the Company and followed by mail, delivery shall be deemed given
two (2) days after such facsimile is sent.
Section 9. ASSIGNMENT. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. This Agreement cannot be assigned, amended or
modified by the parties hereto, except by written agreement executed by the
parties. If requested by the Company, the Holder shall have furnished to the
Company an opinion of counsel reasonably satisfactory to the Company to such
effect.
Section 10. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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Section 11. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 12. GOVERNING LAW/VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio
applicable to contracts made and to be performed entirely within such State,
without regard to its principles of conflicts of laws. Each of the parties
hereto agrees that in the event of any dispute arising hereunder venue shall be
Columbus, Ohio and each party hereby submits to the jurisdiction of the United
States Federal Court for the Southern District of Ohio.
Section 13. SEVERABILITY. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceablity 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.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed, on the day and year first
above written.
NETMED, INC.
By: /s/ David J. Richards
-----------------------
CPR (USA) INC.
By: /s/ Steven S. Rogers
------------------------
LIBERTYVIEW FUND, LLC
By: /s/ Steven S. Rogers
------------------------
LIBERTYVIEW PLUS FUND
By: /s/ Steven S. Rogers
------------------------
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