SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) October 25, 1996
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AMERICAN ELECTROMEDICS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-9922 04-2608713
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
Incorporation)
13 Columbia Drive, Suite 18, Amherst, New Hampshire 03031
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (603) 880 6300
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N/A
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(Former Name or Former Address, if changed since last report)
Page 1 of __ Pages
Exhibit Index on Page 3
[PAGE BREAK]
ITEM 5. OTHER EVENTS.
On October 25, 1996, American Electromedics Corp. ("the
Registrant") completed a private placement (the "Placement") of 12 units
(the "Units") at a price of $75,000 per Unit, or an aggregate Placement of
$900,000, and received a $500,000 term loan (the "Term Loan"). Each Unit
consisted of a $60,000 principal amount 14% Convertible Subordinated
Debenture due October 31, 1999 (the "Debentures") and 20,000 shares of
Common Stock, $.10 par value, or an aggregate of $720,000 principal amount
of Debentures and 240,000 shares of Common Stock.
The Debentures are convertible into Common Stock at $.75 per
share upon or after the Debentures are called for redemption or the
effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Act"), covering the underlying shares of Common Stock,
subject to customary anti-dilution provisions. The Company may call all or
part of the Debentures at par, plus accrued interest, at any time after
October 31, 1997. The Company is obligated to file a registration
statement under the Act after the earlier of (i) March 31, 1997 or (ii) the
Common Stock first being traded on the Nasdaq Small Cap Market. The
Debentures contain various covenants upon the Registrant, including a
restriction on the payment of cash dividends on its Common Stock.
The net proceeds of the Placement and the Term Loan of
approximately $1,210,000 will be used for general working capital
purposes, including possible acquisitions and marketing.
The Units were sold in a private placement under Regulation D of
the Act to persons who represented that they are "accredited investors", as
defined in Regulation D. The Debentures and the Common Stock included in
the Units were not registered under the Act, and may not be offered or sold
in the United States absent registration or an applicable exemption from
the registration requirements of the Act.
Simultaneously with the closing of the Placement, pursuant to a
Loan Agreement, dated October 4, 1996, the Registrant received the Term
Loan from Citizens Bank New Hampshire (the "Bank"). The Bank had
conditioned the closing of the Term Loan on the Registrant receiving at
least $700,000 from the issuance of subordinated debentures and/or capital
stock. The Term Loan is repayable over five years, bears interest at an
annual rate of prime plus 1/2%, and is guaranteed by the New Hampshire
Business Finance Authority. The Bank had separately increased the
Registrant's revolving line of credit to $400,000 from $300,000. The Term
Loan and the credit line are secured by a lien on the Company's assets.
The loan documents were filed as Exhibits 10.9.1-10.9.4 to the Registrant's
Form 10-KSB for the fiscal year ended July 27, 1996.
Item 7. Financial Statements and Exhibits
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Page
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(c) 4. Form of 14% Convertible Subordinated Debentures,
due October 31, 1999. 5
10. Form of Unit Purchase Agreement (without exhibits
or schedules) 37
99. Press Release dated October 28, 1996 48
[PAGE BREAK]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
American Electromedics Corp.
----------------------------
(Registrant)
By: /s/ Noel A. Wren
---------------------------------
Noel A. Wren,
President
October 29, 1996
EXHIBIT 4
NEITHER THIS DEBENTURE NOR THE UNDERLYING SHARES OF COMMON STOCK
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
NOR UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT IS
EFFECTIVE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR (ii) THE COMPANY RECEIVES AN OPINION OF ITS COUNSEL THAT THE
DEBENTURE OR THE UNDERLYING SHARES MAY BE SOLD, PLEDGED, ASSIGNED
OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION PURSUANT TO AN
APPLICABLE EXEMPTION UNDER SAID ACT.
AMERICAN ELECTROMEDICS CORP.
Form of 14% Convertible Subordinated Debenture,
Due October 31, 1999
No. __________, 1996
$
AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to the
order of (the "Holder"), in lawful moneys
of the United States of America, the principal sum of
________________________ Dollars, on October 31, 1999, with
interest on the unpaid balance thereof at the rate of fourteen
percent (14%) per annum from the date hereof until the entire
outstanding principal amount hereof shall be paid, payable,
quarterly, on the first days of February, May, August and
November in each year, beginning on February 1, 1997. Principal
and interest shall be paid at the office of the Company at 13
Columbia Drive, Suite 18, Amherst, New Hampshire, or at such
other location as the Company and the Holder may agree upon in
writing.
This Debenture is one of a series of duly authorized issue
of debentures of the Company designated as its 14% Convertible
Subordinated Debentures, due October 31, 1999 (hereinafter
referred to as the "Debentures"), all of like tenor except as to
principal amount, in an aggregate initial principal amount of up
to $720,000, issued under and pursuant to a Unit Purchase
Agreement (hereinafter referred to as the "Purchase Agreement"),
among the Company, the Holder and the holders of the other
Debentures pursuant to which the Company is selling the
Debentures and shares of its Common Stock, $.10 par value (the
"Common Stock"). This Debenture is issued upon the following
terms, to which the Holder assents and the Company, for itself
and it successors, agrees as follows:
1. Ranking.
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All Debentures shall rank equally and ratably without
priority over one another.
2. Senior Priority. 2.01 Senior Indebtedness.
--------------- -------------------
The Company hereby covenants and agrees that the
indebtedness evidenced by this Debenture shall be senior in right
of payment, to the extent and in the manner hereinafter provided,
to all indebtedness of the Company to present and future
creditors, but shall be subordinate and junior in right of
payment to the prior payment of the principal of, interest on and
costs, expenses and charges with respect to all existing or
future obligations of the Company for money borrowed from
Citizens Bank New Hampshire, or any substitute bank or other
financial institution, in an amount not to exceed $1,500,000 (the
"Senior Indebtedness"):
(a) In the event of any insolvency or bankruptcy
proceeding, and any receivership, liquidation, reorganization or
other similar proceeding in connection therewith, with respect to
the Company, its creditors, as such, or its property, or in the
event of any proceeding for voluntary liquidation, dissolution or
other winding up of the Company, whether or not involving
insolvency or bankruptcy, the holders of Senior Indebtedness
shall be entitled to receive payment in full of all principal of,
and premium, if any, and interest on, all Senior Indebtedness
before the Holder is entitled to receive any payment on account
of principal of, and premium, if any, or interest on, this
Debenture, and to that end (but subject to the power of a court
of competent jurisdiction to make other equitable provisions
reflecting the rights conferred in this Debenture upon the Senior
Indebtedness and the holders thereof with respect to the
subordinate indebtedness represented by the Debentures and the
holders thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of Senior Indebtedness
shall be entitled to receive for application in payment on all
principal of, and premium, if any, and interest on, all Senior
Indebtedness any payment or distribution of any kind or
character, whether in cash or property or securities, which may
be payable or deliverable in any such proceeding in respect of
this Debenture, except securities which are subordinate and
junior in right of payment to the payment of all Senior
Indebtedness then outstanding, and the Holder irrevocably
authorizes, empowers and directs the Company and any receiver,
trustee or other person to effect any such payment or
distribution. The Holder irrevocably authorizes and empowers
(without imposing any obligation on) each holder of Senior
Indebtedness to demand, sue for, collect and receive the Holder's
share of all such payments and distributions, to file and prove
all claims therefor and to take all such other action, in the
name of the Holder or otherwise, as such holder of Senior
Indebtedness may determine to be necessary or appropriate for the
enforcement of the provisions of this Subsection 2.01(a). The
Holder will execute and deliver to each holder of Senior
Indebtedness all such further instruments confirming such
authorization, such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all
such other action, as may be requested by such holder in order to
enable such holder to enforce all claims upon or in respect of
such Holder's share of all such payments and distributions.
(b) In the event that this Debenture is declared payable
before its expressed maturity because of the occurrence of an
Event of Default (under circumstances when the provisions of
Subsection 2.01(a) hereof shall not be applicable), the holders
of the Senior Indebtedness outstanding at the time this Debenture
so becomes payable shall be entitled to receive payment in full
of all principal of, and premium, if any, and interest on, all
Senior Indebtedness before the Holder is entitled to receive any
payment on account of the principal of and interest on this
Debenture or to take any action to collect the same. Until an
Event of Default has occurred under this Debenture the Company
may pay any principal and interest when and as payable according
to the terms hereunder.
2.02 Subordination.
--------------
No present or future holder of Senior Indebtedness
shall be prejudiced in its right to enforce subordination of this
Debenture by any act or failure to act on the part of the
Company. The provisions of Section 2.01 hereof and this Section
2.02 with respect to subordination are solely for the purpose of
defining the relative rights of the holders of Senior
Indebtedness, on the one hand, and the Holder, on the other hand,
and nothing herein shall impair, as between the Company and the
Holder, the obligation of the Company, which is unconditional and
absolute, to pay to the Holder the principal of and interest on
this Debenture in accordance with its terms, nor shall anything
herein prevent the Holder from exercising all remedies otherwise
permitted by applicable law or hereunder upon the occurrence of
any Event of Default, subject to the rights, if any, under these
provisions, of holders of Senior Indebtedness to receive cash,
property or securities otherwise payable or deliverable to the
Holder.
2.03 Subrogation.
-----------
In the event cash, securities or other property
otherwise payable or deliverable to the Holder shall have been
applied pursuant to Section 2.01 hereof to the discharge of
Senior Indebtedness, then, and in such event, the Holder (i)
shall be entitled to receive from the holders of Senior
Indebtedness then outstanding any payments or distributions
received by such holders of Senior Indebtedness in excess of the
amount sufficient to discharge all Senior Indebtedness, and (ii)
shall be subrogated to any rights of any holders of Senior
Indebtedness to receive any further payments or distributions
then applicable to Senior Indebtedness until this Debenture shall
have been paid in full. No such payments or distributions
received by the Holder, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or
distributed to the holders of Senior Indebtedness shall, as
between the Company and its creditors other than the holders of
Senior Indebtedness, on the one hand, and the Holder, on the
other hand, be deemed to be a payment by the Company on account
of the Debenture.
2.04 Other Indebtedness.
-------------------
Nothing herein shall be construed to restrict or limit
the ability of the Company to incur indebtedness which shall be
(i) subordinate in right of payment to the indebtedness evidenced
by this Debenture and the other Debentures, (ii) Senior
Indebtedness as defined in Subsection 2.01(a) hereof or (iii)
secured by assets of the Company or any of its subsidiaries and
which assets were acquired as a result of or in connection with
such indebtedness and have a collateral value equal to at least
fifty (50%) percent of the outstanding principal amount thereof.
3. Redemption by the Company. 3.01 Optional Right of
------------------------- -----------------
Redemption. At any time after October 31, 1997 and upon notice to
-----------
the Holder as provided in Section 3.03 hereof, the Company, at
its option, may redeem the Debentures as a whole, or from time to
time in part, at a redemption price equal to one hundred (100%)
percent of the principal amount thereof, plus accrued interest to
the redemption date. Notwithstanding the foregoing, any such
redemption shall be subject to the right of the Holder to convert
this Debenture or any portion hereof into shares of Common Stock
of the Company pursuant to Section 6 hereof.
3.02 Allocation.
-----------
If the Company shall elect to redeem less than all of
the Debentures outstanding at any time pursuant to Section 3.01
hereof, the Company will allocate the principal amount to be
redeemed among the Holders in proportion, as nearly as may be
practicable, to the respective principal amounts of the
Debentures outstanding.
3.03 Notice and Place of Redemption.
--------------------------------
Notice of redemption shall be mailed to the Holders,
not less than twenty (20) days nor more than thirty (30) days
prior to the date fixed for redemption (the "Redemption Date"),
to their respective last addresses as they shall appear upon the
books of the Company. The place for redemption shall be the then
principal office of the Company. If less than all of the
outstanding Debentures are to be redeemed, the notice shall set
forth the principal amount of the Debentures to be redeemed from
each holder.
3.04 Redemption at Option of Holder.
--------------------------------
In the event of (i) a Change in Control (as defined
below) of the Company or (ii) the election by the Company to
permit redemption at the request of the Holder
pursuant to Subsection 6.05(c) hereof, the Holder shall have the
option to require the Company to redeem this Debenture, in whole
or in part, upon written request to the Company given within
thirty (30) days after notice of the occurrence of an event
specified in (i) or (ii) is first mailed to such Holder by the
Company at the address of the Holder as it shall appear on the
books of the Company. The Debenture or portion hereof so to be
redeemed shall be redeemed at the principal office of the Company
twenty (20) days after receipt of notice by the Holder of the
election to redeem.
A "Change in Control" shall be deemed to have occurred if:
(a) any "person" or "group" (as such terms are defined
in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), other than (i) a
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (ii) a person or group
by reason of a transaction with the Company approved by the
Company's Board of Directors as constituted in accordance
with clause (b) below, or (iii) a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing twenty (20%) percent or more or the
combined voting power of the Company's then outstanding
securities; or
(b) individuals elected as members of the Board of
Directors at the Annual Meeting of Stockholders of the
Company held on October 8, 1996, or successors chosen by
such individuals, shall cease for any reason to constitute a
majority of the whole Board of Directors.
3.05 Notation of Redemption.
-----------------------
If this Debenture shall be redeemed in part, the
Holder shall surrender this Debenture, at the office of the
Company, on the date fixed for redemption and the Company shall,
at its option and without charge to the Holder, either (i)
execute and deliver to the Holder a Debenture (having the same
form and having the same terms as this Debenture) for the
unredeemed part of the original principal amount of this
Debenture or (ii) make note on this Debenture of the part of the
original principal amount of this Debenture so called for
redemption and redeemed. In such latter case, from and after
such redemption, for the purposes of this Debenture, the original
principal amount of this Debenture shall be deemed to be reduced
by the part of the original principal amount of this Debenture so
called for redemption and redeemed.
4. Registration of Debentures. 4.01 Registry Book and
-------------------------- -----------------
Right of Inspection.
--------------------
The Company shall permit any Holder, or his duly
authorized attorney, upon written request received by the Company
at least two (2) business days prior to the requested inspection
date, during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of the
Debentures. Such books shall be maintained at the then principal
office of the Company.
4.02 Transfer.
----------
This Debenture is transferable only upon the books of
the Company which it shall cause to be maintained for the
purpose, and the Company may treat the registered holder of this
Debenture as appears on such books at any time as the Holder for
all purposes. In order to transfer this Debenture, the Holder,
or his duly authorized attorney, shall surrender this Debenture
at the then principal office of the Company, with the Assignment
form at the end hereof (or accompanied by an assignment, in form
reasonably satisfactory to the Company) duly executed. Upon such
surrender, the Company, at its expense, shall execute and deliver
to or on the order of the person to whom this Debenture has been
assigned a Debenture for the same principal amount of this
Debenture, or such lesser amount as provided for in the
Assignment.
4.03 Exchange of Debentures.
------------------------
In order to exchange this Debenture, the Holder, or
his duly authorized attorney, shall surrender this Debenture for
exchange at the then principal office of the Company. Upon such
surrender, the Holder, without expense, shall be entitled to
receive in exchange Debentures, each in the principal amount of
$1,000 or a multiple thereof (except that, if this Debenture
shall not be in the principal amount of $1,000 or a multiple
thereof, one of the Debentures received in exchange thereof need
not be in the principal amount of $1,000 or a multiple thereof),
payable to the Holder for the same aggregate principal amount as
the then unpaid principal amount of this Debenture. All
Debentures issued pursuant to this Section 4.03 and Sections
3.04, 4.02, 4.03 and 6.04 hereof shall be dated the date of this
Debenture and shall in all other respects be in the same form and
have the same terms as this Debenture.
4.04 Loss, etc., of Debenture.
--------------------------
Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Debenture,
and of indemnity bond or agreement satisfactory to the Company,
if lost, stolen or destroyed, and upon surrender and cancellation
of this Debenture, if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder a new Debenture of like tenor
and denomination.
4.05 Debenture Holder Not Stockholder.
---------------------------------
This Debenture does not confer upon the Holder any
right to vote or to consent or to receive notice as a stockholder
of the Company, as such, in respect of any matters whatsoever, or
any other rights or liabilities as a stockholder, prior to the
conversion hereof.
5. Covenants.
---------
The Company agrees that until such time as this
Debenture is paid in full, the Company shall comply with the
following covenants:
5.01 Payment of Principal and Interest.
---------------------------------
Duly and punctually pay the principal of and interest
on this Debentures and the other Debentures in accordance with
the terms hereof and thereof.
5.02 Corporate Existence.
--------------------
Do all things necessary to preserve and keep in full
force and effect its corporate existence, franchises and rights;
provided, however, that nothing in this Section 5.02 shall
prevent a consolidation, merger, sale or transfer permitted by
Section 5.07 hereof;
5.03 Payment of Taxes and Other Claims.
----------------------------------
Pay and discharge, all sums which become payable by it
as taxes, assessments and governmental charges, for services and
materials and for any other reason prior to the date on which
penalties attach thereto; provided, however, that the Company
shall have the right, in good faith, to contest its obligation to
pay any such sum, and, pending such contest, to delay or refuse
payment, if it sets aside on its books an adequate reserve to
cover any such sum so contested.
5.04 Compliance With Law.
--------------------
Comply with all applicable laws, rules, regulations and
requirements of all governmental authorities, noncompliance with
which could materially adversely effect its business or
condition, financial or otherwise.
5.05 Maintenance of Properties.
-------------------------
Maintain its properties necessary or useful for the
proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
5.06 Insurance.
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Maintain, with insurance companies of recognized
standing, insurance against such risks and in such amounts as are
customarily insured by persons engaged in similar businesses and
owning similar properties in the same general area in which the
Company operates.
5.07 Consolidation, Merger and Sale.
-------------------------------
Shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless:
(a) the corporation formed by such consolidation into
which the Company is merged or the person which acquires by
conveyance or transfer the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any
state or the District of Columbia, and shall expressly assume the
due and punctual payment of the principal of and interest on this
Debenture and the other Debentures and the performance of every
covenant of the Purchase Agreement on the part of the Company to
be performed or observed; and
(b) immediately after giving effect to such
transaction, no Event of Default (as defined in Section 8), and
no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be
continuing; provided that the foregoing shall not affect the
right, if any, of the Holder under Section 3.04 hereof.
5.08 1934 Act Reports.
----------------
File all reports and any definitive proxy or
information statements required to be filed by the Company with
the Securities and Exchange Commission (the "SEC") pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.
5.09 Financial Statements and Information.
------------------------------------
Mail or deliver to the Holder:
(a) within fifty (50) days after the close of each of
the three interim quarterly accounting periods of the Company, a
copy of its Form 10-QSB (or Form 10-Q, if applicable) for such
fiscal quarter;
(b) within one-hundred (100) days after the close of
each fiscal year of the Company, a copy of its Form 10-KSB (or
Form 10-K, if applicable) for such fiscal year; and
(c) copies of all such other financial statements,
reports and proxy statements as the Company shall file with the
SEC or shall send to or make available to its stockholders.
5.10 Maintenance of Interest Coverage Ratios.
----------------------------------------
Maintain the interest coverage ratios in effect from
time to time in the agreements with holders of Senior
Indebtedness.
5.11 Access to Books and Records.
---------------------------
Upon the occurrence of an Event of Default specified in
Section 8 hereof, permit the Holders of an aggregate of at least
$400,000 principal amount then outstanding of Debentures access
to the books and records of the Company at reasonable times and
upon request of such Holders.
5.12 Use of Proceeds.
----------------
Use the proceeds from the sale of the Units for (i)
acquisitions, (ii) significant investments in other companies,
(iii) purchasing and licensing of technology and/or (iv) general
working capital purposes.
5.13 Distribution.
------------
Shall not declare or pay any dividends or purchase,
redeem, retire or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares)
now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its
stockholders as such, or permit any subsidiary of the Company to
do any of the foregoing, except that the subsidiaries may declare
and make payment of cash and stock dividends, return capital and
make distribution of assets to the Company and except that
nothing herein contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any
dividend consisting of shares of any class of capital stock to
the holders of shares of such class of capital stock; or
(ii) purchasing, redeeming, retiring or otherwise
acquiring for value any of its capital stock (or rights, options
or warrants to purchase such shares) in an amount not exceeding
an aggregate of $50,000 in any twelve month period.
5.14 Dealings with Affiliates.
-------------------------
Shall not enter into any transaction with any officer
or director of the Company or any subsidiary or holder of more
than five (5%) percent of the outstanding shares of any class of
capital stock of the Company, or any member of their respective
immediate families or any corporation or other entity directly or
indirectly controlled by one or more such officers, directors or
stockholders or members of their immediate families, unless the
interest of such person is disclosed in advance to the Board of
Directors, such transaction is on arm's-length terms which are no
less favorable to the Company or any subsidiary as those which
could have been obtained from an unaffiliated third party, and
such transaction is approved by a disinterested majority of the
Board of Directors of the Company or such subsidiary.
6. Conversion of the Debentures. 6.01 Right of
---------------------------- --------
Conversion.
-----------
Subject to and upon compliance with the provisions of
this Section 6, at the option of the Holder, (i) at such time as
this Debenture shall be called for redemption pursuant to Section
3.01 hereof, and in lieu of such redemption, (ii) at such time
that a registration statement (the "Registration Statement")
filed by the Company which includes shares of Common Stock
beneficially owned, directly or indirectly, by the Holder has
been declared effective by the SEC under the Securities Act or
(iii) upon the stated maturity of the Debenture, and in lieu of
payment of principal upon maturity, all or any portion of the
unpaid principal amount of this Debenture may be converted into
fully paid and non-assessable shares of Common Stock, at the
conversion price, determined as hereinafter provided, in effect
at the time of conversion. Unpaid accrued interest on the
principal amount of this Debenture being converted shall not be
convertible into shares of Common Stock of the Company, and the
first $1,000 of any such unpaid accrued interest shall be deemed
waived by the Holder at the time of conversion, and the amount
remaining, if any, of unpaid accrued interest of the principal
amount being converted shall be paid in cash by the Company
within ten (10) days after its receipt of the Conversion Form.
6.02 Initial Conversion Price.
--------------------------
The price at which Common Stock shall be delivered upon
conversion (herein referred to as the "Conversion Price") shall
be initially Seventy-Five cents ($0.75) per share. The shares of
Common Stock issuable upon the conversion of this Debenture shall
be referred to as the "Conversion Shares". Upon any adjustment
of the Conversion Price as hereinafter provided, the number of
Conversion Shares shall equal the unpaid principal amount of this
Debenture presented for conversion divided by the Conversion
Price resulting from such adjustment.
6.03 Surrender for Conversion.
-------------------------
In order to exercise the conversion right referred to
in Section 6.01 hereof, the Holder shall surrender this Debenture
to the Company at its then principal office, with the Conversion
Form at the end hereof duly executed (a) within ten (10) days
after receipt of notice of such redemption, in the case of a
conversion pursuant to clause (i) of Section 6.01 hereof, (b) at
any time after receipt of notice that the Registration Statement
mentioned in clause (ii) of Section 6.01 hereof is to become
effective, or (c) at least ten (10) days prior to the stated
maturity of this Debenture, in the case of a conversion pursuant
to clause (iii) of Section 6.01 hereof. As promptly as shall be
practicable, but not more than twenty (20) days after such
surrender, the Company shall issue and deliver to the Holder, on
his written order, a certificate or certificates for the number
of whole shares of Common Stock issuable upon such conversion.
To the extent permitted by law, such conversion shall be deemed
to have been effected and the Conversion Price shall be
determined immediately prior to the close of business on the date
of such surrender, and at such time the rights of the Holder of
this Debenture (or, if only a part hereof shall be converted, of
such part) shall cease, and the person or persons in whose name
or names any certificate or certificates for Common Stock shall
be issuable upon such conversion shall be deemed to have become
the holder or holders or record of the shares represented
thereby.
6.04 No Fractional Shares; Partial Conversion.
------------------------------------------
No fractional shares shall be issuable upon conversion
of this Debenture. Instead of any fractional Common Shares which
would otherwise be issuable upon the conversion of this Debenture
or a specified portion hereof, the number of shares of Common
Stock issuable upon such conversion shall be rounded up or down
to the nearest whole share. In case this Debenture is converted
in part only, upon such conversion the Company shall execute and
deliver to the Holder, at the expense of the Company, a new
Debenture, dated the date of this Debenture, in the principal
amount equal to the unconverted portion of this Debenture in
accordance with Section 4.04 hereof.
6.05 Adjustment of Conversion Price; Special Provisions on
-----------------------------------------------------
Adjustment of Conversion Price.
-------------------------------
The above provisions of this Section 6 are subject to
the following provisions:
(a) If the Company at any time shall consolidate with or
merge into or sell or convey all or substantially all of its
assets to any other corporation, this Debenture shall thereafter
be convertible into such number and kind of securities and
property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance upon or with
respect to the securities into which this Debenture would have
been convertible immediately prior to such consolidation, merger,
sale or conveyance. The foregoing provision shall similarly
apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the
foregoing, the anti-dilution provisions of this Debenture shall
apply to such securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.
(b) If the Company at any time shall, by subdivision,
combination or reclassification of securities or otherwise,
change any of the securities into which this Debenture is
convertible into the same or a different number of securities of
any class or classes, this Debenture shall thereafter be
convertible into such number and kind of securities as would have
been issuable as the result of such change with respect to the
securities into which this Debenture would have been convertible
immediately prior to such subdivision, combination,
reclassification or other change. If shares of Common Stock are
subdivided or combined into a greater or smaller number of shares
of Common Stock, the Conversion Price shall be proportionately
reduced in case of subdivision of shares or proportionately
increased in the case of combination of shares, in both cases by
the ratio which the total number of shares of Common Stock
outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately
after such event. If the Company at any time shall declare a
dividend or make a distribution on the outstanding shares of its
Common Stock, in shares of its Common Stock, the Conversion Price
in effect at the time of the record date for such dividend or
distribution shall be proportionately reduced by the ratio which
the total number of shares of Common Stock outstanding
immediately prior to such event bears to the total number of
shares of Common Stock to be outstanding immediately after such
event.
(c) Subject to the last sentence of this Subsection
6.05(c), if the Company shall at any time sell any Common Stock
(including upon the exercise of options [other than options
granted under a stock option plan of the Company], warrants or
other rights or upon the conversion of any instrument granted or
issued after August 31, 1996) for (A) a per share consideration
which is less than the Conversion Price in effect at the close of
business on the business day next preceding the day of such sale
and (B) more than eighty (80%) percent of the total consideration
shall consist of cash, then, at the option of the Company, either
(i) the Holder shall have the right to require the Company to
redeem this Debenture or any portion hereof or (ii)
notwithstanding Subsection 6.05(d), the Conversion Price in
effect at the close of business on such next preceding business
day shall be decreased to equal the per share consideration
received by the Company in connection with such sale of the
Common Stock. In the event that the Company elects to permit the
redemption specified in clause (i) above, it shall promptly
prepare and mail a notice to the Holder at the address of the
Holder as it shall appear on the books of the Company.
Notwithstanding anything in this Subsection 6.05(c) to the
contrary, the provisions of this Subsection 6.05(c) shall not
apply in connection with the issuance (the "Capital Issuance") by
the Company of shares of Common Stock for proceeds of up to
$300,000 required to meet the minimum capital requirements for
listing on NASDAQ; provided, however, that should the Company
desire to effect a Capital Issuance, it shall give the Holder the
right to participate therein in an amount equal to the dollar
amount of the Capital Issuance multiplied by a fraction, the
numerator of which shall be the principal amount of this
Debenture and the denominator of which shall be the aggregate
principal amount of all Debentures then outstanding. The Company
shall give the Holder written notice of a proposed Capital
Issuance and the amount which the Holder may purchase, and the
Holder shall have ten (10) days from the date the Company sends
the notice to accept the offer to participate. The failure of
the Holder to respond timely to any offer to participate in a
Capital Issuance shall be deemed a rejection of such offer.
(d) No adjustment of the Conversion Price pursuant to this
Section 6.05 shall be made if the amount of such adjustment would
be less than $.05, but in such case any adjustment that would
otherwise be required then to be made shall be carried forward
and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or
adjustments so carried forward, shall amount to not less than
$.05.
(e) Whenever the Conversion Price is adjusted as provided
in this Section 6.05:
(i) The Company shall compute the adjusted Conversion
Price in accordance with this Section 6.05 and shall prepare
a certificate signed by the Treasurer of the Company setting
forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is
based; and
(ii) As promptly as practicable, the Company shall
cause a copy of the certificate referred to in the foregoing
clause (i) to be mailed to the Holder at the address of the
Holder as it shall appear on the books of the Company.
(f) In case (i) the Company shall declare a dividend or any
other distribution on its Common Stock payable otherwise than in
cash out of its earned surplus or (ii) of any reclassification or
reorganization of the Common Stock of the Company other than a
subdivision or combination of the outstanding Common Stock, or of
any consolidation or merger to which the Company is a party and
for which approval of stockholders of the Company is required or
of the sale or transfer of all or substantially all of the assets
of the Company or (iii) of the voluntary or involuntary
dissolution, liquidation or winding upon of the Company, the
Company shall cause to be mailed to the Holder, at least ten (10)
days prior to the applicable record date hereinafter specified, a
notice stating (A) the date on which a record is to be taken for
the purpose of such dividend or distribution or, if a record is
not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend or distribution are to
be determined, or (B) the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their
Common Stocks for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up.
6.06 Reservation of Shares.
---------------------
The Company will at all times reserve and keep
available out of its authorized Common Stock, solely for the
purpose of issue upon the conversion of the Debentures, such
number of shares of Common Stock (or other security) as shall
then be issuable upon the conversion of all outstanding
Debentures. The Company covenants that all shares of Common
Stock (or other security) which shall be so issuable shall, upon
issuance, be duly and validly issued and fully paid and non-
assessable.
6.07 Listing.
---------
The Company shall, at its expense, cause the Conversion
Shares before issuance, to be duly listed on any national
securities exchange or automated quotation system on which the
Common Stock of the Company is then listed.
7. Registration Rights. 7.01 Registration Statement.
-------------------- -----------------------
The rights of the Holder to have his Conversion Shares
included in a Registration Statement filed by the Company under
the Securities Act shall be as set forth in the Purchase
Agreement.
7.02 Compliance.
-----------
If, at the time of conversion of this Debenture a
Registration Statement is not in effect covering the Conversion
Shares issuable upon such conversion, the certificate for such
Conversion Shares shall bear a restrictive legend similar to the
legend set forth at the head of this Debenture and stop transfer
orders may be placed against such certificate, subject to the
then applicable provisions of the Securities Act and the rules
thereunder.
8. Default. 8.01 Event of Default.
-------- ----------------
The existence of any of the following conditions shall
constitute an event of default ("Event of Default"):
(a) If the Company defaults in the payment of any principal
of or interest on, this Debenture when the same becomes due and
payable, and the default continues for five (5) business days.
(b) If the Company defaults in complying with any other
provision of this Debenture and the default continues for thirty
(30) days after notice by the Holder to the Company, specifying
the default.
(c) If an Event of Default shall occur and be continuing
under any of the other Debentures or under any Senior
Indebtedness.
(d) If the Company makes an assignment for the benefit of
its creditors or admits in writing its inability to pay its debts
as they become due.
(e) If, under any bankruptcy or insolvency law or similar
law for the reorganization, arrangement, composition or other
relief or aid of debtors or creditors:
(i) the Company is adjudicated a bankrupt, or
takes or seeks to take or to have taken, or consents to
the taking of, any action with respect to it or a
substantial part of its property or affairs, or
(ii) without the consent of the Company, a court
or other governmental authority of competent
jurisdiction
(A) approves a petition seeking any such
relief or aid with respect to the Company,
(B) appoints a trustee, receiver or
liquidator of the Company or of a substantial part
of its property or affairs, or
(C) assumes custody or control of a
substantial part of the property or affairs of the
Company for operation to the exclusion of the
management,
and the approval or appointment is not vacated, or the
custody or control is not terminated, within 60 days or
stayed on appeal.
(f) a final judgment shall be rendered against the Company
for the payment of money with respect to which an amount in
excess of $250,000 is not covered by insurance and the same shall
remain undischarged for a period of thirty (30) consecutive days
during which execution shall not be effectively stayed.
8.02 Rights and Remedies.
--------------------
If an Event of Default occurs, then, and such Event of
Default is continuing and unless the same shall have been waived
by the Holder or by the holders of a majority of principal amount
then outstanding on the Debentures (including this Debenture) (a
"Majority of the Holders"), the Holder may, at any time, at his
election, and by notice to the Company, declare this Debenture
payable immediately, and thereupon this Debenture shall become
payable on the date to which payment has been accelerated
anything in this Debenture to the contrary notwithstanding, and,
at any time thereafter, but subject to the provisions of Section
2 of this Debenture, the Holder may proceed to collect the
principal of and interest on, this Debenture, together with the
costs and expenses (including reasonable attorneys' fees)
incurred by the Holder in connection with a default under, or the
enforcement of any provision of this Debenture.
8.03 Additional Rights and Remedies; Waivers.
-----------------------------------------
In addition to the rights and remedies provided in
Section 8.02 hereof, all other rights and remedies provided by
law shall be available to the Holder and all rights and remedies
shall be cumulative. A delay by the Holder in exercising any
right or remedy shall not constitute a waiver hereof.
9. Restrictions on Transfer.
------------------------
Any transfer or other distribution by the Holder of
this Debenture or by any holder of any or all of the Conversion
Shares (other than pursuant to an effective Registration
Statement pursuant to Section 7 hereof) may be made only if the
transferee of such Debentures or Conversion Shares (i) represents
and warrants to the Company that he is acquiring all of the
Debentures and Conversion Shares to be acquired by him for his
own account for the purposes of investment and not with a view
to, or for sale in connection with, any distribution thereof,
(ii) agrees that he will not at any time sell or otherwise
transfer, or permit the sale or other transfer of, such
Debentures and Conversion Shares other than in transactions which
are not in violation of the Securities Act, or the provisions of
any other applicable securities laws, rules or regulations and
(iii) agrees that he will indemnify the Company against any
liabilities or damages resulting from a resale of such Debentures
or Common Shares by him in violation of the Securities Act or the
provisions of any other applicable securities laws, rules or
regulations. Each certificate representing such Conversion
Shares and each certificate issued in exchange therefor may bear
an appropriate legend that such Conversion Shares are not
registered under the Securities Act.
10. Waiver of Covenants.
--------------------
Any act or thing which the Company does or omits to do
with the written consent of a Majority of the Holders, which
consent, whether given before or after the commission or omission
of any act or thing, shall be binding upon the Holders of all of
the Debentures and shall not constitute a violation of any of the
provisions of Sections 5 or 6 hereof or an Event of Default.
11. Amendments.
-----------
This Debenture may be amended by a written instrument
executed by the Company and the Holder; provided, however, that
except as set forth below, the written consent of a Majority of
Holders shall be binding upon the Holders of all of the
Debentures. Notwithstanding the foregoing, without the consent
of the Holder of this Debenture, no such amendment shall be
effective which will change the stated maturity of this
Debenture, or reduce the principal hereof or the rate of interest
hereon or otherwise modify the terms of payment of principal
hereof or interest hereon.
12. Communications.
---------------
No notice or other communication under this Debenture
shall be effective unless, but any notice or other communication
shall be effective and shall be deemed to have been given if, the
same is in writing and is mailed by first-class mail or express
courier, postage prepaid, addressed to
(a) the Company at 13 Columbia Drive, Suite 18, Amherst,
New Hampshire 03031 Attention: Noel Wren, President, or such
other address or person as the Company has designated in writing
to the Holder,
or
(b) the Holder at the address of the Holder as it appears
on the books of the Company.
13. Construction.
-------------
The headings of this Debenture have been inserted as a
matter of convenience, and shall not effect the construction
hereof. The use of a particular pronoun herein shall not be
restrictive as to gender or number but shall be interpreted in
all cases as the context may require.
14. Benefits.
---------
This Debenture shall be binding upon the Company and
its successors and assigns, and shall inure to the benefit of the
Holder and his heirs, administrators, successors and assigns.
15. Applicable Law.
---------------
This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, AMERICAN ELECTROMEDICS CORP. has caused
this Debenture to be signed in its name by the signature of its
President and attested by the signature of its Secretary.
AMERICAN ELECTROMEDICS CORP.
By ________________________________
Noel A. Wren, President
ATTEST:
BY____________________________________
Michael T. Pieniazek, Secretary
[PAGE BREAK]
ASSIGNMENT
FOR VALUE RECEIVED hereby
sells, assigns and transfers unto ,
whose Social Security or Identification No. is ,
the within Debenture and all rights evidenced thereby and does
irrevocably constitute and appoint ,
attorney, to transfer said Debenture on the books of AMERICAN
ELECTROMEDICS CORP. with full powers of substitution in the
premises.
Dated:
Signature ______________________________
Address ______________________________
______________________________
[PAGE BREAK]
CONVERSION FORM
AMERICAN ELECTROMEDICS CORP.
The undersigned, ,
pursuant to the provisions of the within Debenture, hereby
irrevocably elects to convert $ principal amount of
the unpaid principal amount of said Debenture into the number of
shares of Common Stock of AMERICAN ELECTROMEDICS CORP. into which
such unpaid principal amount (or if this is a partial conversion,
the amount set forth above) is convertible.
I hereby acknowledge and agree that, unless a registration
statement with respect to the Conversion Shares has become
effective under the Securities Act of 1933, as amended (the
"Act"):
(i) the certificate for the Common Shares may bear an
appropriate legend that such shares are not registered under the
Securities Act of 1933, as amended (the "Act"),
(ii) the Company may place a stop order on such shares, and
(iii) that I will indemnify the Company against any
liabilities or damages resulting from a resale of such shares by
the holder in violation of the provisions of the Act or the
provisions of any other applicable securities laws, rules or
regulations.
Dated:
Signature ______________________________
Address ______________________________
______________________________
Social Security or
Identification No. ___________________
--------------------
1. This amount must be for $1,000 or multiples thereof.
[PAGE BREAK]
ENDORSEMENT FOR REDEMPTION
(No writing on the Debenture except by
an officer or agent of the Company)
-------------------------------------
Original
Principal
Original Amount
Principal of this
Amount Date of Debenture Authorized
Redeemed Redemption Unpaid Officer
---------- ------------ --------- --------
1.
2.
3.
4.
5.
6.
7.
8.
UNIT PURCHASE AGREEMENT
AGREEMENT, dated as of October 25, 1996, by and among
AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the
"Company"), and each of the persons severally listed on the
Schedule of Purchasers attached hereto. The persons listed on
the Schedule of Purchasers are sometimes hereinafter collectively
referred to as the "Purchasers" and individually as a
"Purchaser."
WHEREAS, the Company desires to issue and sell, and the
Purchasers desire to purchase, up to 12 units (the "Units"), each
Unit consisting of $60,000 principal amount of the Company's 14%
Convertible Subordinated Debentures, due October 31, 1999 (the
"Debentures"), and 20,000 shares of the Company's Common Stock,
$.10 par value (the "Common Stock"), subject to the terms and
conditions herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and conditions herein contained, the Company
and each Purchaser, severally and not jointly, hereby agree as
follows:
SECTION 1.
Sale and Purchase of the Units
-------------------------------
At each Closing (as defined in Section 2.1 hereof), and
subject to the terms and conditions hereof and in reliance upon
the representations and warranties contained herein, the Company
is issuing and selling to the Purchasers and each Purchaser is
purchasing from the Company the number of Units set forth
opposite such Purchaser's name in the column labelled "Units" in
the Schedule of Purchasers attached hereto. The Debentures shall
be in, or substantially in, the form of Exhibit A annexed hereto.
SECTION 2
Closing, Payment and Delivery
----------------------------
2.01 Closing Date and Place of Closing. The purchase
---------------------------------
and sale of the Units hereunder shall be consummated pursuant to
one or more closings (each a "Closing") to be held at the offices
of Reid & Priest LLP, 40 West 57th Street, New York, New York.
The initial Closing of the Debentures shall be held on October
24, 1996 or on such other date as the parties may agree but not
later than December 2, 1996 (the "Initial Closing"); provided
that at least 10 Units are purchased at the Initial Closing.
Subsequent Closings, if any, shall be held no later than December
2, 1996. Each Closing of the purchase and sale of the Units
shall take place on or about the dates, shall be in the amounts,
and shall be made to the persons, specified in the Schedule of
Purchasers attached hereto.
2.02 Payment and Delivery. At each Closing each
--------------------
Purchaser scheduled to consummate the purchase and sale on such
date shall pay to the Company by wire transfer of immediately
available funds or such other form of payment as shall be
mutually agreed upon by the Company and that Purchaser, the
purchase price equal to the amount set forth opposite his name in
the column labelled "Purchase Price" on the Schedule of
Purchasers, and the Company shall deliver to each Purchaser a
Debenture in such principal amount and shares of Common Stock in
the amounts set forth under in the appropriate columns in such
table.
SECTION 3
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to each
Purchaser as follows:
3.01 Organization, Qualification, Certificate and By-
-------------------------------------------------
laws. The Company is a corporation duly organized, validly
-----
existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in every
jurisdiction where the character of its properties, owned or
leased, or the nature of its activities make such qualification
necessary.
3.02 Corporate Power. The Company has all requisite
---------------
corporate power to enter into this Agreement, to sell the Units
(and the underlying Debentures and shares of Common Stock) and to
carry out and perform its obligations under the terms of this
Agreement, and also to own properties owned by it and to conduct
business as being conducted by it.
3.03 Authorization. All corporate action on the part of
-------------
the Company necessary for the authorization, execution, delivery
and performance by the Company of this Agreement and for the
authorization, issuance and delivery of the Units (and the
underlying Debentures and shares of Common Stock) issuable upon
payment therefor has been taken. This Agreement and the
Debentures constitute valid and binding agreements of the Company
enforceable in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity.
3.04 Common Stock. The shares of Common Stock included
------------
in the Units as well as the shares of Common Stock issuable upon
conversion of the Debentures upon issuance pursuant to this
Agreement or the Debentures will be validly issued, fully paid
and non-assessable shares of Common Stock. The Company has
received stockholder approval to effect a reverse split of its
Common Stock within a range between and including a one-for-one
and one-half and a one-for-five basis, and management is
contemplating implementing the stock split.
3.05 Financial Information. The Company's Annual Report
-----------------------
on Form 10-KSB for the fiscal year ended July 27, 1996 (the
"Company's Reports") present fairly the financial position and
results of operations of the Company at the dates and for the
periods to which they relate. The audited financial statements
contained in the Company's Reports have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods involved (except as
may be otherwise indicated in the notes thereto).
3.06 Absence of Certain Changes. At all times since
--------------------------
July 27, 1996, there has not been any event or condition of any
character which has adversely affected, or may be expected to
adversely affect, the Company's business or prospects, including
but not limited to:
(a) any material adverse change in the condition,
assets, liabilities (existing or contingent) or business of the
Company from that shown in the Company's Reports and in other
public reports by the Company;
(b) any damage, destruction or loss of any of the
properties or assets of the Company (whether or not covered by
insurance) materially adversely affecting the business or plans
of the Company;
(c) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or
any direct or indirect redemption, purchase or other acquisition
of any of such stock by the Company;
(d) any actual or threatened cancellation or adverse
modification of any material agreement to which the Company is a
party; or
(e) any labor trouble, or any other event or condition
of any character, materially adversely affecting the business or
plans of the Company.
3.07 Taxes. The Company has filed or will file within
-----
the time prescribed by law (including extensions of time approved
by the appropriate taxing authority) all tax returns and reports
required to be filed with the United States Internal Revenue
Service and with the States of Delaware and New Hampshire and
(except to the extent that the failure to file would not have a
material adverse effect on the condition or operations of the
Company) with all other jurisdictions where such filing is
required by law. The Company has paid, or made adequate
provision for the payment of, all taxes, interest, penalties,
assessments or deficiencies shown to be due or claimed to be due
on or in respect of such tax returns and reports. The Company's
federal income tax returns have not, to the best of the Company's
knowledge and belief, been audited by the Internal Revenue
Service.
3.08 Litigation. Except as otherwise disclosed in the
-----------
Company's Reports, there is neither pending nor, to the Company's
knowledge, threatened, any action, suit, proceeding or claim to
which the Company is or may be named as a party or its property
is or may be subject and in which an unfavorable outcome, ruling
or finding in any such matter or for all such matters taken as a
whole might have a material adverse effect on the condition,
financial or otherwise, and operations or prospects of the
Company. The Company has no knowledge of any unasserted claim
which, if asserted and granted might have a material adverse
effect on the condition, financial or otherwise, operations or
prospects of the Company.
3.09 Consents. No consent, approval, qualification,
--------
order or authorization of, or filing with, any governmental
authority is required in connection with the Company's execution,
delivery or performance of this Agreement, or the offer, sale or
issuance of the Debentures by the Company other than "Blue Sky"
filings which have been made based upon the addresses of the
Purchasers as set forth on the Schedule of Purchasers.
3.10 Compliance. The execution, delivery and
-----------
performance of this Agreement by the Company does not conflict
with or cause a breach under any of the terms or conditions of
(i) its Certificate of Incorporation or By-Laws or (ii) any
mortgage, indenture, contract, agreement, instrument, judgment,
decree, order, statute, rule or regulation to which the Company
is subject and a breach or violation of which might have a
material adverse effect on the condition, financial or otherwise,
operations or prospects of the Company. To the best knowledge of
the Company, the operations of the Company have complied and are
in compliance in all material respects with all applicable
federal, state and local laws, and where appropriate, foreign
laws, except to the extent any failure to so comply would not
have a material adverse effect on the condition, financial or
otherwise, operations or prospects of the Company. The Company
possesses all permits, licenses and approvals of governmental
authorities which are required in the operation of its business,
except for those the failure of which to hold would not have a
material adverse effect on the Company's business and prospects.
To the best knowledge of the Company, the Company is in
compliance in all material respects with the terms and conditions
of such permits, licenses and approvals and all material
agreements to which it is a party.
3.11 Company Reports. The Company Reports, taken as a
----------------
whole as of the date hereof, do not contain any untrue statement
of material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading.
3.12 Intellectual Property. The Company owns or has
----------------------
valid, adequate and subsisting rights to use and exploit all
patents, patent licenses, trade secrets, copyrights, trademarks
and service marks necessary for the conduct of the business of
the Company as described in the Company's Reports (collectively,
the "Intellectual Property") free and clear of any pledge, lien,
charge, claim or option. Such Intellectual Property is valid and
in full force and effect. None of the processes currently used
by the Company or any of the properties or products currently
sold by the Company, to the best knowledge of the Company,
infringes the patent, industrial property, trademark, trade name,
other mark, right or copyright of any other person or entity.
The Company has not received any written notice of adverse claim
with respect to any of the Intellectual Property, and, to the
Company's best knowledge, no basis exists for any such claim.
3.13 Registration Rights. No person owning shares of
--------------------
Common Stock of the Company or holding options or other
securities exercisable or convertible into Common Stock of the
Company has any right to require the Company to file a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), to register shares of Common
Stock of the Company.
3.14 Real Property. The Company does not own any real
---------------
property.
3.15 Offering of the Units. Subject to the accuracy of
---------------------
the representations of the Purchasers, the offering and sale of
the Units (including the underlying Debentures and shares of
Common Stock) would be exempt from the registration requirements
of Section 5 of the Securities Act and, subject to making
necessary notice filings, would be exempt from the provisions of
any securities, "blue sky" or similar law of any applicable
jurisdiction.
SECTION 4
Representations and Warranties of Purchasers
---------------------------------------------
Each Purchaser represents and warrants to the Company,
severally and not jointly, and only as to himself, as follows:
4.01 Experience. He is experienced in evaluating and
----------
investing in companies such as the Company, and has such
knowledge and experience in evaluating the merits and risks of
his investment, and has the ability to bear the economic risks of
his investment. He is an "accredited investor", as such term is
defined in Regulation D under the Securities Act.
4.02 Investment. He is acquiring the Units for
----------
investment for his own account and not with the view to, or for
resale in connection with, any distribution thereof. He
understands that the Units have not been registered under the
Securities Act by reason of specified exemption from the
registration provisions of the Securities Act which depends upon,
among other things, the bona fide nature of his investment intent
as expressed herein, and that the resale of the Units is
restricted under the Securities Act.
4.03 Rule 144. He acknowledges that the Debentures and
---------
the Common Stock included in the Units and underlying the
Debentures must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. He is aware of the Company's
obligation to register the Common Stock as set forth in Section 5
of this Agreement. He has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act,
which permits limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions.
4.04 Authority. He has full power and authority under
---------
all applicable laws to enter into this Agreement and to
consummate the transactions herein and has taken all action
necessary to authorize his execution and performance of this
Agreement. This Agreement when executed and delivered will be
duly executed and will constitute his legal, valid and binding
obligation, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement or
creditors' rights generally and general principles of equity.
4.05 Access to Data. He is fully familiar with the
---------------
Company's business, operations and financial history as set forth
in the Company Reports and Proxy Statement, dated September 9,
1996, and has read and understands the provisions of the
Debentures. He, or his financial advisor, has had an opportunity
to discuss the Company's business, operations and financial
affairs with its management and has had the opportunity to review
the Company's facilities.
4.06 Purchaser's Questionnaire. He has completed a
-------------------------
Purchaser's Questionnaire in the form annexed hereto as Exhibit
B. As of the Closing, all information contained in the
Purchaser's Questionnaire shall remain true and correct.
SECTION 5
Registration Rights
--------------------
5.01 Registration. Promptly after the earlier of (i)
------------
March 31, 1997 or (ii) the Common Stock first being traded on the
Nasdaq Small Cap Market, the Company shall file a registration
statement (the "Registration Statement") on Form S-3 or such
other applicable form under the Securities Act with the
Securities and Exchange Commission (the "Commission") for the
sale of shares of Common Stock included in the Units and also
underlying the Debentures (the "Registered Shares") and use its
best efforts to maintain the Registration Statement current under
the Securities Act from its effective date until the earlier of
(A) two (2) years after the Initial Closing or (B) all Registered
Shares included therein have been sold. The Company may include
the Registered Shares in a registration statement being filed by
the Company with respect to other securities of the Company. The
Company shall give written notice to the Purchasers at least
twenty (20) days prior to filing the Registration Statement
asking each Purchaser how many of his shares of Common Stock he
wants to include in the Registration Statement. A Purchaser who
fails to timely advise the Company in writing of the number of
shares of Common Stock he wants to include in the Registration
Statement shall have no further rights to have his shares
included therein. The obligation of the Company under this
Section 5 shall be limited to one Registration Statement which
becomes effective under the Securities Act.
5.02 Registration Procedures. (a) The Company shall pay
------------------------
all expenses of the Registration Statement filed pursuant to this
Section 5, including, without limitation, all registration,
filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company, accounting fees
incidental to or required by such registration; provided, however
-------- --------
that the Purchaser shall pay all underwriting discounts and
commissions applicable to his Registered Shares and fees and
disbursements of his own attorney. The Company shall furnish the
Purchaser such number of copies of a prospectus, including
a preliminary prospectus, to the Registration Statement as the
Purchaser may reasonably request.
(b) In connection with any Registration Statement
filed pursuant to this Section 5, the Company shall file any
post-effective amendment or amendments to the Registration
Statement which may be required under the Securities Act during
the period reasonably required to effect the distribution
contemplated thereby.
(c) The Company shall notify the Purchaser during the
period the Registration Statement is required to remain
effective, or at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the
happening of any event as a result of which the Registration
Statement or the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing. The
Purchaser agrees, upon receipt of such notice, forthwith to cease
making offers and sales of his Registered Shares pursuant to the
Registration Statement or deliveries of the prospectus contained
therein for any purpose and to return to the Company the copies
of such prospectus not theretofore delivered by him. The Company
shall prepare and furnish to the Purchaser a reasonable number of
copies of any supplement to or an amendment of such prospectus
that may be necessary for delivery to any purchaser of such
Shares. The Company shall promptly notify the Purchaser of any
stop order or similar proceeding initiated by state or Federal
regulatory bodies and use its best efforts to take all necessary
steps expeditiously to remove such stop order or similar
proceeding.
(d) The Company shall not be required to include in
any Registration Statement any Registered Shares if in the
opinion of counsel to the Company, registration of the Registered
Shares proposed to be included is not required under the
Securities Act as such Registered Shares may then be publicly
sold in accordance with Section 4(1) thereof and Rule 144
thereunder.
5.03 State Securities Laws. In connection with the
---------------------
offering of any Registered Shares pursuant to this Section 5, the
Company shall use its best efforts to qualify or register the
Registered Shares under the securities or "Blue Sky" laws of such
jurisdictions as may be reasonably requested by the Purchaser;
provided, however, that the Company shall not be obligated to
-------- -------
qualify as a foreign corporation to do business under the laws of
any such jurisdiction in which it is not then qualified or to
file any general consent to service of process.
5.04 Indemnification. In connection with any
----------------
registration or qualification of Registered Shares hereunder, to
the extent permitted by law, the Company shall indemnify the
Purchasers, and each Purchaser shall severally indemnify the
Company with respect to written information furnished by such
Purchaser for inclusion in the Registration Statement, all
according to ordinary and customary procedures then in effect for
such indemnification; provided, however, that if the offering is to
-------- -------
be underwritten, the Company and the Purchasers shall also
indemnify each underwriter and each underwriter shall indemnify
the Company and the Purchaser according to ordinary and customary
procedures then in effect for such indemnification.
5.05 Purchaser Obligations. The Purchaser agrees that
----------------------
as a condition to the Company's obligation under this Section 5,
the Purchaser shall provide such information (in writing) and
execute such documents (including any agreement or undertaking
relating to any underwriting or other method of sale or
distribution, indemnification or other matters contemplated
hereby) as may reasonably be required by the Company in
connection with any registration, qualification or listing of his
Registered Shares. Information so furnished, and each document
so executed, shall state that it can be used in or in connection
with the Registration Statement under which the Registered Shares
are registered.
SECTION 6
Miscellaneous
--------------
6.01 Governing Law. This Agreement shall be governed by
-------------
and construed with the laws of the State of Delaware, without
giving effect to conflicts of law.
6.02 Survival. The representations and warranties made
--------
in Sections 3 and 4 hereof shall survive the Closing for so long
as any of the Purchaser's Debentures remain outstanding. The
obligations of Section 5 hereof shall survive the Closing.
6.03 Successors and Assigns. This Agreement shall inure
----------------------
to the benefit of, and be binding upon, the parties hereto and
their respective successors, assigns, heirs, executors and
administrators.
6.04 Entire Agreement; Amendment. This Agreement and
---------------------------
the Debentures delivered pursuant hereto constitute the full and
entire understanding and agreement among the parties with regard
to the subjects hereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated except by
a written instrument signed by the Company and the Purchasers of
a majority in amount of the Units.
6.05 Notices, etc. All notices ad other communications
--------------
required or permitted hereunder shall be in writing and shall be
mailed by first-class mail, postage prepaid, by facsimile, or by
express courier, or delivered either by hand or by messenger,
addressed (i) if to a Purchaser, as indicated on the Schedule of
Purchasers attached hereto, or at such facsimile number or other
address as such Purchaser shall have furnished to the Company in
writing, or (ii) if to the Company, at 13 Columbia Drive, Suite
18, Amherst, New Hampshire 03031, Attention: Noel A. Wren,
President, (FAX: 603-880-8977) or at such other address as the
Company shall have furnished to the Purchasers in writing.
6.06 Rights; Separability. Unless otherwise expressly
--------------------
provided herein, the rights of the Purchasers hereunder are
several rights, not rights jointly held with any of the other
Purchasers. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
6.07 Broker. Each Purchaser hereby acknowledges that
------
the Company may pay fees to persons who are finders and/or
registered SEC and NASD broker-dealers to assist with the
execution and delivery of this Agreement and the offering and
sale of the Units, and that the Company is responsible for the
payment of such fees or commissions in amounts up to 7% of the
aggregate principal amount of Units purchased by a Purchaser for
whom any such finder or broker-dealer had acted.
6.08 Information Confidential. Each Purchaser
------------------------
acknowledges that the information received by him in connection
with the offer of the Units pursuant to this Agreement may be
confidential and is for the Purchaser's use only. He will not
use such confidential information in violation of the Exchange
Act or otherwise, or reproduce, disclose or disseminate such
information to any other person (other than its employees or
agents having a need to know the contents of such information,
and its attorneys and financial advisors), except in connection
with the exercise of rights under this Agreement, unless the
Company has made such information available to the public
generally or such Purchaser is required to disclose such
information by a governmental body.
6.09 Expenses. The Company and the Purchasers shall
--------
bear their own expenses and legal fees incurred on their behalf
with respect to this Agreement and the transactions contemplated
hereby; provided, however, that the Company shall pay $15,000 of
the expenses, including legal fees, incurred by Mr. Marcus Rowan,
exclusive of any consulting fee to him.
6.10 Titles and Gender. The titles of the Sections and
-----------------
Subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
Whenever used herein, the singular member includes the plural,
the plural includes the singular, and the use of any gender shall
include all genders.
6.11 Counterparts. This Agreement may be executed in
------------
any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered by their respective
proper and duly authorized officers as of the day and year first
above written.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Noel Wren
------------------------------
Noel Wren, President
PURCHASERS:
Harvey H. Conger Trust No. 2
By:/s/ Blake C. Davenport, Trustee
------------------------------
Blake C. Davenport, Trustee
Robert M. Davenport
By: /s/ Blake C. Davenport
------------------------------
Blake C. Davenport,
Attorney-in-fact
Wall Street Consultants, Inc.
By: /s/ Donald Kirsch
------------------------------
Donald Kirsch, President
/s/ Thomas A. Slamecka
--------------------------------
Thomas A. Slamecka
/s/ Alan Feldman
---------------------------------
Alan Feldman
Alden Foundation
By: /s/ Alan Gelband
------------------------------
Alan Gelband, Vice President
Alan Gelband Co. Defined
Contribution Pension Plan
By: /s/ Alan Gelband, TTEE
------------------------------
Alan Gelband, Trustee
/s/ John McMahon
-----------------------------------
John McMahon
/s/ Jonathan F. Boucher
---------------------------------
Jonathan F. Boucher
JBR Trust No. 4
By:/s/ Marshall E. Eisenberg, Trustee
---------------------------------
Marshall E. Eisenberg, Trustee
LGD Corporation
By: Brian J. Richmand, President
-------------------------------
Brian J. Richmand, President
/s/ Mark C. Mamolen
--------------------------------
Mark C. Mamolen
/s/ Marcus R. Rowan
----------------------------------
Marcus R. Rowan
Marcus Rowan Smith Barney Inc.
Keogh P.S. Cust.
By: /s/ Marcus R. Rowan
------------------------------
Marcus R. Rowan
/s/ James B. Metzger
----------------------------------
James B. Metzger
/s/ John M. Camp III
----------------------------------
John M. Camp III
/s/ Thomas C. Hardy
-----------------------------------
Thomas C. Hardy
/s/ Stanley I. Aber
-----------------------------------
Stanley I. Aber
<PAGE>
SCHEDULE OF PURCHASERS
-----------------------
PRINCIPAL
NAME AND ADDRESS NUMBER PURCHASE AMOUNT OF
OF PURCHASER OF UNITS PRICE DEBENTURES
------------------------------- -------- --------- ----------
Harvey H. Conger Trust No. 2 2 150,000 120,000
1700 Commerce Street, 19th Fl.
Dallas, Texas 75201
Blake Davenport, Trustee
Robert M. Davenport 2 150,000 120,000
P.O. Box 3511
Midland, Texas 79702
Wall Street Consultants, Inc. 1.33 100,000 80,000
32 East 57th Street
New York, New York 10022
Donald Kirsch, President
Thomas A. Slamecka 1 75,000 60,000
305 Mossy Pointe
Duluth, Georgia 30155
Alan Feldman 0.67 50,000 40,000
c/o Smith Barney
767 Fifth Avenue. 7th Floor
New York, New York 10153
Alden Foundation 0.325 24,375 19,500
c/o Alan Gelband
30 Lincoln Plaza
New York, N.Y. 10023
Alan Gelband Co. Defined
Contribution Pension Plan 0.3 22,500 18,000
575 Madison Avenue
New York, New York 10022
John McMahon 0.5 37,500 30,000
West Lake Road
Tuxedo Park, New York 10987
Jonathan F. Boucher 0.5 37,500 30,000
536 North Street
Harrison, New York 10528
JBR Trust No. 4 0.5 37,500 30,000
c/o Diversified Financial
Management Corp.
200 West Madison St., Suite 300
Chicago, Illinois 60606-3414
LGD Corporation 0.5 37,500 30,000
6 Trails End
Chappaqua, New York 10514
Mark Mamolen 0.5 37,500 30,000
c/o Caristreet Partners
1758 West 28th Street
Sunset Island No. 1
Miami Beach, Florida 33140
Marcus Rowan 0.34 25,500 20,400
3525 Turtle Creek, Apt. 5B
Dallas, Texas 75219
Marcus Rowan Smith Barney Inc.
Keogh P.S. Cust. 0.16 12,000 9,600
40 West 57th St
New York, New York 10019
James B. Metzger 0.5 37,500 30,000
888 Park Avenue
New York, N. Y. 10021-0235
John M. Camp III 0.34 25,500 20,400
8300 Boone Blvd., Suite 500
Vienna, Virginia 22182
Thomas Hardy 0.335 25,125 20,100
935 Park Avenue
New York, New York 10028
Stanley I. Aber 0.2 15,000 12,000
145 East 92nd Street
New York, N. Y. 10128
-------------------------------- ------- --------- -----------
TOTALS: 12.0 900,000 720,000
NAME AND ADDRESS SHARES OF CLOSING
OF PURCHASER COMMON STOCK DATE
---------------------- --------------- ---------------
Harvey H. Conger Trust No. 2 40,000 October 25, 1996
1700 Commerce Street, 19th
Fl.
Dallas, Texas 75201
Blake Davenport, Trustee
Robert M. Davenport 40,000 October 25, 1996
P.O. Box 3511
Midland, Texas 79702
Wall Street Consultants, 26,667 October 25, 1996
Inc.
32 East 57th Street
New York, New York 10022
Donald Kirsch, President
Thomas A. Slamecka 20,000 October 25, 1996
305 Mossy Pointe
Duluth, Georgia 30155
Alan Feldman 13,333 October 25, 1996
c/o Smith Barney
767 Fifth Avenue. 7th Floor
New York, New York 10153
Alden Foundation 6,500 October 25, 1996
c/o Alan Gelband
30 Lincoln Plaza
New York, N.Y. 10023
Alan Gelband Co. Defined
Contribution Pension Plan 6,000 October 25, 1996
575 Madison Avenue
New York, New York 10022
John McMahon 10,000 October 25, 1996
West Lake Road
Tuxedo Park, New York 10987
Jonathan F. Boucher 10,000 October 25, 1996
536 North Street
Harrison, New York 10528
JBR Trust No. 4 10,000 October 25, 1996
c/o Diversified Financial
Management Corp.
200 West Madison St., Suite
300
Chicago, Illinois 60606-3414
LGD Corporation 10,000 October 25, 1996
6 Trails End
Chappaqua, New York 10514
Mark Mamolen 10,000 October 25, 1996
c/o Caristreet Partners
1758 West 28th Street
Sunset Island No. 1
Miami Beach, Florida 33140
Marcus Rowan 6,800 October 25, 1996
3525 Turtle Creek, Apt. 5B
Dallas, Texas 75219
Marcus Rowan Smith Barney
Inc. Keogh P.S. Cust. 3,200 October 25, 1996
40 West 57th St
New York, New York 10019
James B. Metzger 10,000 October 25, 1996
888 Park Avenue
New York, N. Y. 10021-0235
John M. Camp III 6,800 October 25, 1996
8300 Boone Blvd., Suite 500
Vienna, Virginia 22182
Thomas Hardy 6,700 October 25, 1996
935 Park Avenue
New York, New York 10028
Stanley I. Aber 4,000 October 25, 1996
145 East 92nd Street
New York, N. Y. 10128
---------------------- ---------------
TOTALS: 240,000
AMERICAN
ELECTROMEDICS CORPORATION
THE WALL STREET GROUP, INC. SUMMARY: AMERICAN ELECTROMEDICS CORP.
32 EAST 57TH STREET (OTC:AECO) COMPLETES $1.4
NEW YORK, NEW YORK 10022 MILLION (212) 888-4848
FINANCING CONSISTING OF A
$900,000 PRIVATE PLACEMENT
AND A 5-YEAR, $500,000
TERM NOTE.
COMPANY CONTACT:
MICHAEL T. PIENIAZEK
CHIEF FINANCIAL OFFICER
(603) 880-6300
FOR IMMEDIATE RELEASE:
----------------------
AMHERST, NEW HAMPSHIRE, OCTOBER 28, 1996...AMERICAN ELECTROMEDICS
CORP. (OTC:AECO) announced today that it had completed a $1.4 million
financing consisting of a $900,000 private placement and a five-year,
$500,000 term note with the company's bank. "Combined, these proceeds
enable the Company to expand its acquisition program and provide general
working capital for its growth," according to Noel A. Wren, President.
The $900,000 private placement consisted of 12 units, each $75,000
unit including 20,000 shares of common stock and $60,000 principal amount
of a 14% Convertible Subordinated Debenture, due October 31, 1999. The
debenture is convertible into common stock at a price of $.75 per share.
Mr. Wren said that "the proceeds will be useful as we seek additional
opportunities for rapid growth and profitability and support of our
expanded marketing thrust for all our products including those under
development."
For the fiscal year ended July 27, 1996, AECO reported revenues of
$3.3 million, and earnings of $.04 per share, compared to revenues of $2.4
million, and earnings of $.02 per share, in the year prior.
American Electromedics Corp. manufactures and markets Tympanometers
which detect middle ear diseases and Audiometers which are used in hearing
screening. The Company's goal is to create, acquire and develop products
and services which serve to eliminate anxiety of children in the medical
setting. These new products and services provide solutions to current
healthcare needs.
# # #
