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Exhibit 10.2
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE
EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING
ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE
OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS
THAN THE PRINCIPAL AMOUNT AND ACCRETED AMOUNTS SET FORTH
BELOW.
7% CONVERTIBLE NOTE DUE DECEMBER 31,
2011
OF
NEXMED, INC.
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Note No.: ___ |
Original Principal Amount: ________
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Issuance Date: June 27, 2008 |
New York, New York
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This
Note (“
Note ”)
is one of a duly authorized issue of Notes of
NEXMED, INC. ,
a corporation duly organized and existing under the laws of the
State of Nevada (
the
“
Company ”),
designated as the Company's 7% Convertible Notes Due December 31,
2011 (
“Maturity Date” )
in
an aggregate principal amount (when taken together with the
original principal amounts of all other Notes) which does not
exceed Five Million Seven Hundred Fifty Thousand U.S. Dollars (U.S.
$5,750,000) (the “
Notes” ).
For
Value Received ,
the Company hereby promises to pay to the order of
[HOLDER] or
its registered assigns or successors-in-interest (
“Holder” )
the principal sum of _____________________________ (U.S.
$________), together with all accrued but unpaid accretions
thereto, if any, on the Maturity Date, to the extent such principal
amount and accretion has not been repaid with or converted into the
Company's Common Stock, $0.001 par value per share (the
“Common Stock” ),
in accordance with the terms hereof. The unpaid principal balance
hereof shall automatically increase daily at the rate of 7% per
annum from the date of original issuance hereof (the
“Issuance Date” )
until the same becomes due and payable on the Maturity Date, or
such earlier date upon acceleration or by conversion or redemption
in accordance with the terms hereof or of the other Agreements.
Such principal accretion under this Note shall occur daily
commencing on the Issuance Date and shall be computed on the basis
of a 360-day year and shall be payable in accordance with Section 2
hereof. Notwithstanding anything contained herein, this Note shall
bear interest on the due and unpaid Principal Amount from and after
the occurrence and during the continuance of an Event of Default
pursuant to Section 5(a), at the rate (the “
Default Rate ”)
equal to the lower of twenty percent (20%) per annum or the highest
rate permitted by law. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid
collection costs, then to unpaid default interest and Accreted
Amounts (as defined below), and fees and any remaining amount to
principal.
All
payments of principal (including accreted principal) and
default interest on this Note which are not paid in shares of
Common Stock as permitted or required hereunder shall be made
in lawful money of the United States of America by wire
transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in
accordance with the provisions of this Note or by Company
check. This Note may not be prepaid in whole or in part except
as otherwise provided herein or in the other Agreements.
Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day (as defined
below), the same shall instead be due on the next succeeding
day which is a Business Day.
The
following terms and conditions shall apply to this
Note:
Section 1.
Definitions
. Capitalized
terms used herein and not otherwise defined shall have the meanings
set forth in the Purchase Agreement dated on or about the Issuance
Date pursuant to which the Notes were originally issued (the
“Purchase Agreement” ).
For purposes hereof the following terms shall have the meanings
ascribed to them below:
“
Bankruptcy Event ”
means any of the following events: (a) the Company or any
subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any subsidiary
thereof; (b) there is commenced against the Company or any
subsidiary any such case or proceeding that is not dismissed within
60 days after commencement; (c) the Company or any subsidiary is
adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) the
Company or any subsidiary suffers any appointment of any custodian
or the like for it or any substantial part of its property that is
not discharged or stayed within 60 days; (e) the Company or any
subsidiary makes a general assignment for the benefit of creditors;
(f) the Company or any subsidiary fails to pay, or states that it
is unable to pay or is unable to pay, its debts generally as they
become due; or (g) the Company or any subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the
foregoing.
“Business Day” shall
mean any day other than a Saturday, Sunday or a day on which
commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.
“
Change in Control Transaction ”
will be deemed to exist if (i) there occurs any consolidation,
merger or other business combination of the Company with or into
any other corporation or other entity or person (whether or not the
Company is the surviving corporation), or any other corporate
reorganization or corporate transaction or series of related
transactions in which in any of such events the voting stockholders
of the Company prior to such event cease to own 50% or more of the
voting power, or corresponding voting equity interests, of the
surviving corporation after such event (including without
limitation any “going private” transaction under Rule
13e-3 promulgated pursuant to the Exchange Act or tender offer by
the Company under Rule 13e-4 promulgated pursuant to the Exchange
Act for 20% or more of the Company's Common Stock), (ii) any person
(as defined in Section 13(d) of the Exchange Act), together with
its affiliates and associates (as such terms are defined in Rule
405 under the Securities Act), beneficially owns or is deemed to
beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of
the Company's voting power, (iii) there is a replacement of more
than one-half of the members of the Company’s Board of
Directors which is not approved by those individuals who are
members of the Company's Board of Directors on the date thereof,
(iv) in one or a series of related transactions, there is a sale or
transfer of all or substantially all of the assets of the Company,
determined on a consolidated basis, (v) the Company enters into an
agreement providing for an event set forth in (i), (ii), (iii) or
(iv) above, or (vi) any of the foregoing occurs with respect to the
Company or the Operating Subsidiary.
“
Conversion Price
” shall
initially equal $2.00 (which Conversion Price shall be subject to
adjustment as set forth herein).
“
Convertible Securities ”
means any convertible securities, warrants, options or other rights
to subscribe for or to purchase or exchange for, shares of Common
Stock.
“
Effective Registration ”
shall
mean (i) the resale of all Registrable Securities (as defined in
the Registration Rights Agreement) is either covered by an
effective registration statement in accordance with the terms of
the Registration Rights Agreement which registration statement is
not subject to any suspension or stop orders or permitted without
registration under the Securities Act and without any limitations
or restrictions pursuant to Rule 144 promulgated under the
Securities Act (provided
that independent counsel for the Company furnishes to the
Company’s transfer agent a written legal opinion confirming
such permitted resale under Rule 144, which counsel and form of
opinion shall be reasonably acceptable to the Holder)
;
(ii) the resale of such Registrable Securities may be effected
either pursuant to a current and deliverable prospectus that is not
subject at the time to any blackout or similar circumstance or
pursuant to Rule 144 promulgated under the Securities Act without
registration and without any limitations or restrictions (provided
that independent counsel for the Company furnishes to the
Company’s transfer agent a written legal opinion confirming
such permitted resale under Rule 144, which counsel and form of
opinion shall be reasonably acceptable to the Holder); (iii) such
Registrable Securities are listed, or approved for listing prior to
issuance, on an Approved Market and are not subject to any trading
suspension (nor shall trading generally have been suspended on such
exchange or market), and the Company shall not have been notified
of any pending or threatened proceeding or other action to delist
or suspend the Common Stock on the Approved Market on which the
Common Stock is then traded or listed; (iv) the requisite number of
shares of Common Stock shall have been duly authorized and reserved
for issuance as required by the terms of the Agreements; (v) the
closing bid price of the Common Stock on the Principal Market shall
be at least $1.00; and (vi) none of the Company or any direct or
indirect subsidiary of the Company is subject to any Bankruptcy
Event.
“
Exchange Act ”
shall mean the Securities Exchange Act of 1934, as
amended.
“
Interim
Conversion Price
” shall
initially equal $1.75 (which Interim Conversion Price shall be
subject to adjustment as set forth herein).
“
Market Price ”
shall equal the average of the daily VWAPs over the five (5)
consecutive Trading Days immediately preceding the date on which
the Market Price is being determined.
“
Per Share Selling Price ”
shall include the amount actually paid by third parties for each
share of Common Stock in a sale or issuance by the Company. In the
event a fee is paid by the Company in connection with such
transaction directly or indirectly to such third party or its
affiliates, any such fee shall be deducted from the selling price
pro rata to all shares sold in the transaction to arrive at the Per
Share Selling Price. A sale of shares of Common Stock shall include
the sale or issuance of Convertible Securities, and in such
circumstances the Per Share Selling Price of the Common Stock
covered thereby shall also include the exercise, exchange or
conversion price thereof (in addition to the consideration received
by the Company upon such sale or issuance less the fee amount as
provided above). In case of any such security issued in a Variable
Rate Transaction, the Per Share Selling Price shall be deemed to be
the lowest conversion or exercise price at which such securities
are converted or exercised or might have been converted or
exercised, or the lowest adjustment price, as the case may be, over
the life of such securities. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be
the fair value of such consideration as determined in good faith by
independent certified public accountants mutually acceptable to the
Company and the Holder. In the event the Company directly or
indirectly effectively reduces the conversion, exercise or exchange
price for any Convertible Securities which are currently
outstanding, then the Per Share Selling Price shall equal such
effectively reduced conversion, exercise or exchange
price.
“
Principal Amount ”
shall refer to the sum of (i) the original principal amount of this
Note, (ii) all accrued but unpaid Accreted Amounts hereunder, and
(iii) any default payments (including default interest) owing under
the Agreements but not previously paid or added to the Principal
Amount.
“Principal Market”
shall mean the NASDAQ Capital Market or such other principal market
or exchange on which the Common Stock is then listed for
trading.
“
Registration Statement ”
shall have the meaning set forth in the Registration Rights
Agreement.
“
Securities Act ”
shall mean the Securities Act of 1933, as amended.
“
Stock Payment Price ”
on any particular day shall mean the lesser of (a) 95% of the
Market Price as of such day, or (b) the Market Price as of such day
less $0.08.
“Trading Day” shall
mean a day on which there is trading on the Principal
Market.
“
VWAP
” shall
mean the daily dollar volume-weighted average sale price for the
Common Stock on the Principal Market on any particular Trading Day
during the period beginning at 9:30 a.m., New York City Time (or
such other time as the Principal Market publicly announces is the
official open of trading), and ending at 4:00 p.m., New York City
Time (or such other time as the Principal Market publicly announces
is the official close of trading), as reported by Bloomberg through
its "Volume at Price" functions or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in
the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30 a.m., New York
City Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00
p.m., New York City Time (or such other time as the Principal
Market publicly announces is the official close of trading), as
reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If the
VWAP cannot be calculated for such security on such date on any of
the foregoing bases, the VWAP of such security on such date shall
be the fair market value as mutually determined by the Company and
the holders of at least a majority of the principal amount of the
Notes then outstanding. All such determinations of VWAP shall to be
appropriately and equitably adjusted in accordance with the
provisions set forth herein for any stock dividend, stock split,
stock combination or other similar transaction occurring during any
period used to determine the Market Price (or other period
utilizing VWAPs).
Section 2.
Accretion
.
(a)
Payment Dates .
On
the first day of each calendar quarter after the Issuance Date
beginning on October 1, 2008 (each an “
Accretion Payment Date ”),
the Company shall either pay in cash the dollar amount accrued and
accreted to the principal amount hereunder since the prior
Accretion Payment Date (or Issuance Date if no such Accretion
Payment Date has yet to occur) (“
Accreted Amount ”)
or effect the automatic conversion of such Accreted Amount as
provided in this Section 2.
(b)
Payment or Automatic Conversion .
Subject to the terms hereof, the Company shall either (i) pay the
Accreted Amount in full in cash on each Accretion Payment Date or
(ii) effect an automatic conversion of such Accreted Amount into
shares of Common Stock in accordance with the terms hereof, but not
both, at the Company’s option. Prior to each Accretion
Payment Date the Company shall deliver to all the holders of Notes
a written irrevocable notice electing to pay such Accreted Amount
in cash or effect such automatic conversion on such Accretion
Payment Date. Such notice shall be delivered at least five (5)
Trading Days prior to the applicable Accretion Payment Date but no
more than twenty (20) days prior to such Accretion Payment Date. If
such notice is not delivered within the prescribed period set forth
in the preceding sentence, then the Accreted Amount shall be paid
in cash. If the Company elects to pay any Accreted Amount in cash
on an Accretion Payment Date, then on such date the Company shall
pay to the Holder an amount equal to the Accreted Amount due in
satisfaction of such obligation. If the Company elects to effect an
automatic conversion of such Accreted Amount into shares of Common
Stock, the number of such shares to be issued for such Accretion
Payment Date shall be the number determined by dividing (x) the
Accreted Amount due, by (y) the Stock Payment Price as of such
Accretion Payment Date. Such shares shall be issued and delivered
within three (3) Trading Days following such Accretion Payment Date
and shall be duly authorized, validly issued, fully paid,
non-assessable and free and clear of all encumbrances, restrictions
and legends. If any Holder does not receive the requisite number of
shares of Common Stock in the form required above within such three
Trading Day period, the Holder shall have the option of either (a)
requiring the Company to issue and deliver all or a portion of such
shares or (b) canceling such election to effect such automatic
conversion of the Accreted Amount (in whole or in part), in which
case the Company shall immediately pay in cash the Accreted Amount
due hereunder or such portion as the Holder specifies is to be paid
in cash instead of being converted. Except as otherwise provided in
this Section 2, all holders of Notes must be treated equally with
respect to such payment and conversion of Accreted Amounts. Any
conversion of the Accreted Amount hereunder into shares of Common
Stock pursuant to the terms hereof shall constitute and be deemed a
conversion of such portion of the Principal Amount of this Note for
all purposes under this Note and the other Agreements (except that
such conversion shall be at the Stock Payment Price and except as
otherwise provided herein).
(c)
Limitations to Automatic Conversion into Common Stock
.
Notwithstanding anything to the contrary herein, the Company shall
be prohibited from exercising its right to effect an automatic
conversion of any Accreted Amount hereunder (and must deliver cash
in respect thereof) on the applicable Accretion Payment Date (1) if
at any time within ten (10) Trading Days prior to the Accretion
Payment Date there fails to exist Effective Registration or
an Event
of Default hereunder exists or occurs, unless
otherwise waived in writing by the Holder in whole or in part at
the Holder’s option, (2) if the Company’s net cash on
hand (including cash equivalents) as of such Accretion Payment Date
is greater than $3 million (any conversion election by the Company
under this Section 2 shall constitute a representation by the
Company that such net cash amount is below $3 million), and (3) to
the extent, and only to the extent, that such conversion into
shares of Common Stock would result in the Holder hereof exceeding
the limitations contained in Section 3(i) below.
Section 3.
Conversion .
(a)
Conversion Right .
Subject to the terms hereof and restrictions and limitations
contained herein, the Holder shall have the right, at such Holder's
option, at any time and from time to time to convert the
outstanding Principal Amount under this Note in whole or in part by
delivering to the Company a fully executed notice of conversion in
the form of conversion notice attached hereto as
Exhibit A (the
“Conversion Notice” ),
which may be transmitted by facsimile. Notwithstanding anything to
the contrary herein, this Note and the outstanding Principal Amount
hereunder shall not be convertible into Common Stock to the extent
that such conversion would result in the Holder hereof exceeding
the limitations contained in, or otherwise violating the provisions
of, Section 3(i) below.
(b)
Common Stock Issuance Upon Conversion .
(i)
Conversion Date Procedures .
Upon conversion of this Note pursuant to Section 3(a) above, the
outstanding Principal Amount hereunder shall be converted into such
number of fully paid, validly issued and non-assessable shares of
Common Stock, free of any liens, claims and encumbrances, as is
determined by dividing the outstanding Principal Amount being
converted by the then applicable Conversion Price. The date of any
Conversion Notice hereunder shall be referred to herein as
the
“Conversion Date” .
If a conversion under this Note cannot be effected in full for any
reason, or if the Holder is converting less than all of the
outstanding Principal Amount hereunder pursuant to a Conversion
Notice, the Company shall promptly deliver to the Holder (but no
later than five Trading Days after the Conversion Date) a Note for
such outstanding Principal Amount as has not been converted if this
Note has been surrendered to the Company for partial conversion.
The Holder shall not be required to physically surrender this Note
to the Company upon any conversion hereunder unless the full
outstanding Principal Amount represented by this Note is being
converted. The Holder and the Company shall maintain records
showing the outstanding Principal Amount so converted and the dates
of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon each such
conversion.
(ii)
Stock Certificates or DWAC .
The Company will deliver to the Holder not
later than three (3) Trading Days after the Conversion Date, a
certificate or certificates, which shall be free of restrictive
legends and trading restrictions if the Registration Statement has
been declared effective, representing the number of shares of
Common Stock being acquired upon the conversion of this Note. In
lieu of delivering physical certificates representing the shares of
Common Stock issuable upon conversion of this Note, provided the
Company's transfer agent is participating in the Depository Trust
Company (“
DTC ”)
Fast Automated Securities Transfer (“
FAST ”)
program, upon request of the Holder, the Company shall use
commercially reasonable efforts to cause its transfer agent to
electronically transmit such shares issuable upon conversion to the
Holder (or its designee), by crediting the account of the
Holder’s (or such designee’s) prime broker with DTC
through its Deposit Withdrawal Agent Commission system (provided
that the same time periods herein as for stock certificates shall
apply). If in the case of any conversion hereunder, such
certificate or certificates are not delivered to or as directed by
the Holder by the fifth Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company
shall immediately return this Note tendered for conversion. If the
conversion has not been rescinded in accordance with the previous
sentence and the Company fails to deliver to the Holder such
certificate or certificates (or shares through DTC) pursuant to
this Section 3(b) (free of any restrictions on transfer or legends,
if such shares have been registered) in accordance herewith, prior
to the seventh Trading Day after the Conversion Date, the Company
shall pay to the Holder, in cash, an amount equal to 2% of the
Principal Amount per month until such delivery takes place (pro
rated for partial months).
(c)
Conversion Price Adjustments .
(i)
Stock Dividends, Splits and Combinations .
If the Company or any of its subsidiaries, at any time while the
Notes are outstanding (A
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