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Exhibit 99.2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is being entered into as of August 12,
1997 by and among NETMED, INC., an Ohio corporation located at 425 Metro Place
North, Suite 140, Dublin, OH 43017 ("Pledgor"); CPR (USA) INC., a Delaware
corporation, located at 101 Hudson Street, Jersey City, NJ 07302 LIBERTYVIEW
FUND LLC, a Delaware limited liability company, located at at 101 Hudson Street,
Jersey City, NJ 07302, and LIBERTYVIEW PLUS FUND, a Bahamian corporation,
located at Hemisphere House, 9 Church Street, Hamilton, Bermuda HM DX (each a
"Pledgees" and collectively "Pledgeess"); and National City Bank, whose offices
are located at 629 Euclid Avenue, Suite 635, Cleveland, OH 44114 ("Escrow
Agent").
RECITALS
A. The Pledgor is offering to sell to the Pledgees 6% Secured
Convertible Subordinated Debentures due August 12, 2000 of the Pledgor in the
aggregate amount of Three Million ($3,000,000) Dollars (the "Debentures")
pursuant to the terms and conditions of the 6% Secured Convertible Subordinated
Debenture Purchase Agreements executed by the Pledgor and the Pledgees (together
with all attachments and exhibits thereto and documents related thereto, the
"Agreements").
B. Pursuant to the Agreements and the Debentures, the Pledgor
is obligated to comply with, perform and fulfill certain obligations,
undertakings, representations, covenants and responsibilities, all as set forth
in the terms and provisions of the Agreements and the Debentures (the "Pledgor
Obligations") including with respect to certain conversion rights granted
therein to the Pledgees pursuant to which the Pledgees are entitled to convert
the Debentures into shares of Common Stock, no par value per share, of the
Pledgor (the "Common Stock").
C. In addition to the provisions of the Agreements and the
Debentures, the Pledgees requires additional security and benefits from the
Pledgor in the event certain market conditions exist, or the Pledgor fails to
fully perform, comply with, and fulfill all of the Pledgor Obligations.
D. The Pledgor is the owner and holder of Certificate(s) set
forth in Schedule A representing 475,000 fully paid and non-assessable shares of
Common Stock of Neuromedical Systems, Inc. (NSIX) (the "Pledged Shares") and
Pledgor has a direct financial interest in the consummation of the offering of
the Debentures.
E. In order to facilitate the sale of the Debentures, which
sale would be beneficial to the Pledgor, the Pledgor has agreed to pledge and to
deposit with the Escrow Agent for this purpose the Pledged Shares and fully
executed stock powers as security and collateral to secure their obligations and
undertakings under the Agreement and under this Pledge Agreement, all pursuant
to the terms and provisions hereinafter set forth.
F. The Escrow Agent shall act as temporary escrow agent and
will be replaced by Skadden, Arps, Slate, Meagher & Flom, LLP ("Skadden Arps"),
the successor escrow agent. The Escrow Agent shall, upon receipt of the proper
documentation, transfer such Pledged Shares and fully executed stock powers to
Skadden Arps, at which time Escrow Agent and its duties shall terminate.
G. The Pledgor, the Pledgees and the Escrow Agent have agreed
that the Escrow Agent shall be appointed the temporary escrow agent for the
holding of the Pledged Shares and fully executed stock powers pursuant to the
terms and provisions hereinafter set forth.
H. The Pledgor and the Pledgees wish to confirm their
acceptance of and agreement to all of the foregoing and to set forth the terms
and provisions pursuant to which the Escrow
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Agent shall perform its duties hereunder during the period prior to the
appointment of Skadden Arps as escrow agent in the event the Escrow Agent is not
replaced for any reason.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and undertakings herein contained, the parties hereto agree as
follows:
1. Each of the Pledgor and the Pledgees hereby confirms as
true and correct the foregoing recitals, which are hereby incorporated by
reference.
2. The Pledgor hereby agrees that the Pledged Shares shall
serve as security and collateral to secure their obligations to the Pledgees
under the Agreement and hereunder. In connection therewith, the Pledgor agrees
to deliver prior to the Closing Date (as defined in the Agreement) (the
"Delivery Date") the Pledged Shares to the Escrow Agent for the benefit of the
Pledgees as hereinafter set forth together with fully executed stock powers
attached thereto executed in favor of the Pledgees.
3. In the event that during the term of this Pledge Agreement
any stock dividend, reclassification, readjustment or other change is declared
or made in the capital structure of NSIX, all new substituted and additional
shares or other securities issued in respect to the Pledged Shares shall be
promptly delivered by the Pledgor together with stock powers attached thereto
executed in favor of the Pledgees to the Escrow Agent to be held by the Escrow
Agent for the benefit of the Pledgees under the terms of this Pledge Agreement
in the same manner as the Pledged Shares. All references to "Pledged Shares" in
this Pledge Agreement shall include any and all shares or other securities
described in this Section 3.
4. The Pledgor hereby represents and warrants to the Pledgees
that as of the date hereof and hereafter so long as this Pledge Agreement shall
be in effect pursuant to its terms, (i) the Pledgor is and at all times shall be
the sole owner of the Pledged Shares with full power and authority to pledge the
Pledged Shares as herein provided and to be fully bound by the terms and
provisions hereof, (ii) the Pledged Shares are and at all times shall be free of
any encumbrance, security or other interest, lien or claim of any nature
whatsoever except with respect to the Pledgees as herein provided, and (iii)
that the Pledgor has and at all times shall have the right to pledge the Pledged
Shares for the benefit of the Pledgees pursuant to the terms and provisions
hereof without the need to obtain the consent of any person or entity whatever.
5. From and after the date hereof and so long as this Pledge
Agreement shall be in effect pursuant to its terms, each of the Pledgor and the
Pledgees agrees that they shall not take any action that would cause either
party to be in breach or default of any of their Obligations.
All representations and warranties shall survive this Pledge
Agreement.
6. As of the Delivery Date, the Pledgees shall be deemed to
have a priority lien on the Pledged Shares for the purposes and in accordance
with the terms and provisions hereof, and the Pledgor shall cooperate with the
Pledgees and take all action requested by the Pledgees to ensure the same and
with respect thereto.
7. The Pledgor and the Pledgees hereby appoint the Escrow
Agent to perform the following duties in accordance with the following terms and
conditions, and the Escrow Agent hereby accepts such appointment:
(a) The Escrow Agent shall accept delivery of the Pledged
Shares from the Pledgor for and on behalf of the Pledgees, and shall promptly
notify Pledgees and of such receipt.
(b) The Escrow Agent shall hold the Pledged Shares and not
release the same, except as follows:
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(i) Upon receipt of a notice in writing from the
Pledgees certifying to the Pledgor and the Escrow Agent, that the Pledgor has
defaulted on or breached a material Pledgor Obligation, with a brief description
of such breach or default, the Escrow Agent shall promptly deliver the Pledged
Shares together with the appropriate attached stock powers to the Pledgees by
overnight courier at the address set forth herein for the Pledgees or to such
other address as the Pledgees may designate in such written notice.
(ii) Upon receipt of a notice in writing from the
Pledgees certifying to the Pledgor and the Escrow Agent that the Registration
Statement has not been declared effective within ninety (90) days of the Closing
Date. Such notice shall specify the number of Pledge Shares to be released and
the manner in which such number is calculated.
(iii) Upon receipt of a notice in writing from the
Pledgor to each of the Pledgees and the Escrow Agent, stating that a fiscal
quarter has ended and the market value of the remaining Pledged Shares, based
upon the lowest closing share price for the prior consecutive two week period,
is not less than one hundred fifty (150%) percent of the outstanding convertible
debt, the Pledgor may request the Escrow Agent to deliver that portion of the
Pledged Shares together with the appropriate attached stock powers, over the one
hundred fifty (150%) percent of the outstanding convertible debt. Such notice
shall specify the number of Pledged Shares to be released and the manner in
which such number is calculated.
(iv) Upon receipt of a notice in writing from each of
the Pledgees to the Pledgor certifying that it has not sold thirty-five (35%)
percent of its investment by December 15, 1997 and the aggregate trading volume
of the Company's Common Stock from the Registration Effective Date up through
December 15, 1997 is less than six hundred thousand (600,000) shares (excluding
sales and purchases by Investor and affiliates). At that time, Pledgees may
convert into the Pledged Shares until thirty-five (35%) percent of their
investment is converted (whether into Conversion Shares or Pledged Shares) at a
discount calculated as twenty-five (25%) percent multiplied by the number of
days from the Closing Date to the Conversion Date divided by 360. The notice
shall specify the number of Pledged Shares to be released and the manner in
which such number is calculated.
In the event the Company lifts the Blackout Period, which
shall be December 14, 1997 through and including February 1, 1998, conversions
may continue as per the Agreements into the Company's Common Stock, Pledgor
shall notify Pledgees and the Escrow Agent in writing, and no release of Pledged
Shares shall be made under this paragraph 7(b)(iv).
(v) Upon receipt of a notice in writing from each of
the Pledgees confirming that the Debentures have been either (i) fully redeemed
and paid for in full pursuant to its terms, or (ii) fully converted into shares
of Common Stock pursuant to its terms and all certificates representing the
converted shares of Common Stock have been received by the Pledgees in
accordance with the terms of the Agreement and the Debentures, the Escrow Agent
shall deliver the Pledged Shares to the Pledgor in such manner and at such
address as the Pledgor shall designate in writing.
(vi) If by August 12, 2000 the Escrow Agent shall not
have received any written notice for release of the Pledged Shares as provided
above in subparagraphs (i) through (iv) of this Subsection 7(b), then on such
date the Escrow Agent shall promptly and automatically, without the need for any
notice or demand whatever, release and deliver the Pledged Shares together with
the attached stock powers to the Pledgees as provided in subparagraph (i) above.
(vii) Upon receipt of a notice in writing from the
Pledgor and each of the Pledgees, Escrow Agent shall immediately transfer such
Pledged Shares and fully executed stock powers to Skadden Arps, the successor
Escrow Agent.
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Upon release or transfer of the Pledged Shares as herein
provided, this escrow and the duties of the Escrow Agent shall terminate.
(c) All of the terms and conditions in connection with the
Escrow Agent's duties and responsibilities, and the rights of the parties hereto
or anyone else are contained in this instrument, and the Escrow Agent is not
expected or required to be familiar with the provisions or any other instrument
or agreement, and shall not be charged with any responsibility or liability in
connection with the observance or non-observance by any one of the provisions of
any such other instrument or agreement. The Escrow Agent shall have no
responsibility to determine that any of the events specified in Section 3 have
occurred and shall have no obligation to enforce the parties' obligations
hereunder.
(d) The Escrow Agent may rely on, and shall be protected in
acting upon, any paper or other document which may be submitted to the Escrow
Agent in connection with its duties hereunder and which is believed by the
Escrow Agent to be genuine and to have been signed or presented by the proper
party or parties and shall have no liability or responsibility with respect to
the form, execution or validity thereof.
(e) The Escrow Agent shall not be required to institute or
defend any action or legal process involving any matter referred to herein
which, in any manner, affects the Escrow Agent or its duties or liabilities
hereunder unless or until requested to do so by both the Pledgor and Pledgees,
and then only upon receiving full indemnity from the Pledgor in an amount and of
such character as the Escrow Agent shall require, against any and all claims,
liabilities, judgments, attorneys' fees and other expenses of every kind in
relation thereto, except in the case of the Escrow Agent's own willful
misconduct or gross negligence.
(f) The Escrow Agent shall not be bound or in any way affected
by any notice of any modification, cancellation, abrogation or rescission of the
Pledge Agreement, or any fact or circumstance affecting or alleged to affect the
rights or liabilities of any other person, unless the Escrow Agent shall have
received written notice satisfactory to it, signed by the Pledgor and each of
the Pledgees.
(g) The Escrow Agent may resign upon thirty (30) days written
notice to the parties hereto and a successor escrow agent shall be mutually
agreed upon and appointed.
(h) If any party shall be in disagreement about the
interpretation of the duties and obligations of the Escrow Agent under this
Pledge Agreement, or about the rights and obligations, or the propriety of any
action contemplated by the Escrow Agent hereunder, the Escrow Agent may at its
sole discretion, file an action in interpleader to resolve said disagreement.
The Escrow Agent shall be indemnified by the Pledgor for all costs, including
reasonable attorneys' fees, in connection with the aforesaid interpleader action
and shall be fully protected in suspending all or part of its activities under
this Pledge Agreement.
(i) The Escrow Agent is not to be held liable for
authenticity, sufficiency or correctness as to form, manner or execution, or
validity or any instrument deposited in this escrow, or as to the identity,
authority or rights of any person executing the same, or for failure to comply
with any of the provisions of any agreement or other instrument filed herein or
referred to herein, and the Escrow Agent's duties hereunder shall be limited to
the safekeeping of such instruments or other documents received by it as escrow
agent and for the disposition of same in accordance with the written
instructions set forth herein.
(j) Any notice which the Escrow Agent or any other party to
this Pledge Agreement is required to or desires to give to another party hereto
shall be in writing and shall be given, unless otherwise explicitly provided for
herein, by mailing the same to the address for such other party set forth in
Section 10 herein (or to such other address as said party may have theretofore
substituted therefor by written notification to the Escrow Agent and the other
parties hereto). Except as otherwise set forth in the next sentence below, for
all purposes hereof any notice so mailed shall be as effectual as though served
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upon the party to whom it was mailed at the time it was deposited in the United
States Mail by the Escrow Agent and/or any other party hereto, whether or not
such party thereafter actually received such notice. Notices in writing to the
Escrow Agent shall be acceptable upon facsimile transmission and shall not be
deemed to be given until actually received. Whenever under the terms hereof the
time for giving a notice or performing an act falls upon a Saturday, Sunday or
holiday, such time shall be extended to the next business day.
(k) The duties of the Escrow Agent under the terms hereunder
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of Ohio and any dispute concerning such duties shall
be resolved by and be brought through the American Arbitration Association at
the designated locale of Cleveland, Ohio.
(l) Unless specifically set forth herein, Pledgor agrees to
pay Escrow Agent reasonable compensation for the services to be rendered
hereunder and will pay or reimburse Escrow Agent upon request for all expenses,
disbursements and advances, including reasonable attorney's fees, incurred or
made by it in connection with carrying out its duties hereunder.
8. So long as the Pledged Shares are held by the Escrow Agent
as aforesaid, the Pledgor shall have the right to vote such Shares on all
matters.
9. As a party to this Pledge Agreement, the Pledgor agrees (i)
to the terms and conditions hereof and to be bound by the provisions hereof that
in any way require the action or inaction of the Pledgor with respect thereto,
and (ii) that the execution and delivery of this Pledge Agreement by the Pledgor
has been authorized by the Board of Directors of the Pledgor and by the taking
all other actions required by the Pledgor with respect thereto.
10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
NetMed, Inc.
425 Metro Place North, Suite 140
Dublin, OH 43017
Attn: Kenneth Leachman and William J. Kelly, Esq.
(tele) (614) 793-9356
(fax) (614) 793-9376
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Pledgees, to
CPR (USA) Inc.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
(tele) (201) 200-9115
(fax) (201) 200-1140
LibertyView Fund LLC
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
(tele)(201) 200-9115
(fax) (201) 200-1140
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LibertyView Plus Fund
Hemisphere House
9 Church Street
Hamilton, Bermuda HM DX
copy to:
Sheldon E. Goldstein, P.C.
65 Broadway, 10th Fl.
New York, NY 10006
(tele) (212) 809-4220
(fax) (212) 809-4228
(c) If to the Escrow Agent:
National City Bank
629 Euclid Avenue, Suite 635
Cleveland, OH 44114
Attn: Deborah A. Zopkovich
Corporate Trust Administrator, Loc. #3116
(tele) (216) 575-9225
(fax) (216) 420-1844
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a Pledgee,
at such address or addresses as shall have been furnished to the Pledgor and
Escrow Agent at the time of the transfer or transfers, or at such other address
or addresses as may have been furnished by such transferee or transferees to the
Company in writing.
(d) If such notice concerns any release of Pledged
Shares pursuant to Section 7(b), a copy of such notice shall be transmitted by
facsimile to each of the other parties on the date of mailing of such notice.
11. In the event of a default of breach of a Pledgor
Obligation or a Pledgor Obligation and the Subsequent release of the Pledges
Shares to the Pledgees in accordance with the terms hereunder, the obligations
of the Pledgor under this Pledge Agreement shall be deemed satisfied; provided,
however, that the obligations of the Pledgor to fully satisfy and cure such
default or breach and to otherwise perform and comply fully with the terms of
the Purchase Agreement and the Debentures shall remain and be unaffected by the
same.
12. In the event that the bank acting as Escrow Agent merges
or consolidates with another bank or sells or transfers all or substantially all
of its assets or trust business, then the successor or resulting bank shall be
the Escrow Agent hereunder without the necessity of further action or the
execution of any document, so long as such successor or resulting bank meets the
requirements of a successor escrow agent hereunder.
13. Except as otherwise provided above with respect to the
duties of the Escrow Agent, (i) this Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to principles governing the conflicts of law, and (ii) any action brought
in connection with this Pledge Agreement shall be brought only in the United
States District Court for the Southern District of Ohio.
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14. This Pledge Agreement shall be binding upon and inure to
the benefit of the parties hereto and to each of their respective heirs,
beneficiaries, executors, successors, nominees and assigns.
15. This Pledge Agreement may be executed in counterparts,
each of which shall be an original, and such counterparts together shall
constitute one and the same instrument.
NETMED, INC., Pledgor
By /s/Kenneth B. Leachman
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Kenneth B. Leachman
Vice President - Finance
CPR (USA) INC., Pledgee
By /s/George T. Hartigan
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LIBERTYVIEW FUND LLC, Pledgee
By /s/George T. Hartigan
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LIBERTYVIEW PLUS FUND, Pledgee
By /s/Stuart Drake
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NATIONAL CITY BANK,
Escrow Agent
By /s/D. A. Zupkovich
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