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) -- November 15, 1999.
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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 5, 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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Not Applicable
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(Former Name or Former Address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
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American Electromedics Corp. (the "Company") recently consummated several
agreements described below whereby it eliminated all outstanding shares of its
Series A Convertible Preferred Stock (the "Series A Preferred Stock") and Series
B Convertible Preferred Stock (the "Series B Preferred Stock").
Effective November 15, 1999, the Company closed an agreement (the
"Fukushima Agreement") with Jim Fukushima, a director and Vice Chairman of the
Company, whereby Mr. Fukushima purchased 800,000 shares of the Company's Common
Stock, par value $.10 per share (the "Common Stock"), a three-year warrant to
purchase up to 300,000 additional shares of the Common Stock at an exercise
price of $2.00 per share and a 5% ownership interest in Rosch GmbH
Medizintechnik ("Rosch"), the Company's German subsidiary, through a
sub-participation contract with Andy Rosch, the general manager of such
subsidiary, in exchange for a payment of $2,000,000. The proceeds were used
principally for the cash payments described in the following paragraphs. For
further information on the Fukushima Agreement, see Exhibit 10.1 hereto.
Effective November 17, 1999, pursuant to a Securities Exchange Agreement
(the "Exchange Agreement") with the holder (the "Series A Holder") of the
Company's outstanding 2,400 shares of Series A Preferred Stock, the Company made
a cash payment of $840,000, issued 2,228,312 shares of Common Stock and issued a
Promissory Note and Security Agreement (the "Secured Note") in the principal
amount of $1,050,000 in exchange for (i) the conversion of 1,350 shares of
Series A Preferred Stock and the accrued dividends on all outstanding Series A
Preferred Stock, (ii) the redemption of 700 shares of Series A Preferred Stock
and (iii) the exchange of 350 shares of Series A Preferred Stock for the Secured
Note. The Secured Note is non-interest bearing, due in full on the earlier to
occur of (i) five business days of the closing date of the initial public
offering in Germany of Rosch or (ii) April 30, 2000, secured by certain
intellectual property rights of the Company, and the principal amount may be
reduced to $700,000 if the average closing bid price of the Company's Common
Stock for the five trading days prior to maturity exceeds $3.00 per share. For
further information on the Exchange Agreement and the Secured Note, see
Exhibits 10.2 and 10.3 hereto.
Effective November 16, 1999, pursuant to an agreement (the "Preferred B
Agreement") with the holders of the Company's outstanding 1,170 shares of Series
B Preferred Stock, the Company redeemed all such shares, together with all
accrued and unpaid dividends, penalties and redemption premiums, for the payment
of $1,170,000 and the issuance of 369,000 shares of Common Stock. For further
information on the Preferred B Agreement, see Exhibit 10.4 hereto.
Also effective November 18, 1999, pursuant to an agreement (the "Concord
Agreement") with Concord Effekten AG ("Concord"), the Company sold 1,333,333
shares of Common Stock to Concord for a purchase price of $1,000,000. For
further information on the Concord Agreement, see Exhibits 10.5 and 99.2 hereto.
As a result of the above transactions, as of November 22, 1999, the Company
had no shares of its Preferred Stock outstanding and 14,561,600 shares of Common
Stock outstanding.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits.
10.1 Letter Agreement, dated October 21, 1999, between the Company and Jim
Fukushima.
10.2 Securities Exchange Agreement, dated November 17, 1999, between Jubilee
Investors LLC and the Company.
10.3 Promissory Note and Security Agreement, dated November 17, 1999, between
the Company and Jubilee Investors LLC.
10.4 Agreement, dated as of November 1, 1999, among the Company, Sovereign
Partners LP, Dominion Capital Fund LTD and Canadian Advantage L.P.
10.5 Letter Agreement, dated November 15, 1999, between the Company and Concord
Effekten AG.
99.1 Press Release, dated November 30, 1999.
99.2 Press Release, dated December 2, 1999.
3
<PAGE>
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.
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(Registrant)
By: /s/ Michael T. Pieniazek
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Michael T. Pieniazek,
President
December 2, 1999
4
<PAGE>
EXHIBIT INDEX
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EXHIBIT
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10.1 Letter Agreement, dated October 21, 1999 between the Company and Jim
Fukushima.
10.2 Securities Exchange Agreement, dated November 17, 1999, between
Jubilee Investors LLC and the Company.
10.3 Promissory Note and Security Agreement, dated November 17, 1999,
between the Company and Jubilee Investors LLC.
10.4 Agreement, dated as of November 1, 1999, among the Company, Sovereign
Partners LP, Dominion Capital Fund LTD and Canadian Advantage L.P.
10.5 Letter Agreement, dated November 15, 1999, between the Company and
Concord Effekten AG.
99.1 Press Release, dated November 30, 1999.
99.2 Press Release, dated December 2, 1999.
5
Exhibit 10.1
October 21, 1999
American Electromedics Corp.
13 Columbia Drive, Suite 5
Amherst, NH 03031
Attn: Michael T. Pieniazek, President
Gentlemen:
This letter sets forth the terms and conditions of the agreement
relating to the purchase by Jim Fukushima (the "Purchaser") from
American Electromedics Corp., a Delaware Corporation (the
"Corporation"), of a 5% (percent) interest of the Corporation s
subsidiary. Rosch GmbH Medizintechnik ("Rosch GmbH") and 800,000
shares (the "Shares") of common stock, par value $.10 per share,
of the Corporation.
1. The Purchaser hereby purchases from the Corporation, and the
Corporation hereby sells to the Purchaser, the 5% (percent)
interest of Rosch GmbH and the Shares, for an aggregate
purchase price of two million dollars ($2,000,000.00), (the
"Purchase Price"), subject to the terms and conditions
herein. The Purchaser is hereby delivering via a wire
transfer to the Corporation for the Purchase Price, payment
to be received by November 12, 1999, and upon receipt
thereof the Corporation is delivering to the Purchaser a
certificate representing the Shares and an ownership of 5%
(percent) of Rosch GmbH effected through a Sub-Participation
Contract executed between the Purchaser and Mr. Andy Rosch
(Exhibit 1). The Corporation shall also issue, to the
Purchaser, a three-year Warrant to purchase of 300,000
shares of its common stock, par value $.10 per share, at an
exercise price of $2.00 share.
2. The Purchaser represents and warrants to the Corporation
that:
2.1 The Purchaser is aware that the Shares and the
common stock underlying the Warrant have not been
registered under the Securities Act of 1933, as
amended (the "Securities Act"), is aware of the
restrictions on sale or transfer thereunder, and
acknowledges that an appropriate restrictive
legend will be set forth on, and a stop transfer
order will be placed against, the certificate
evidencing the Shares to be issued to the
Purchaser. However, the Corporation agrees that
it shall include the Shares and the common stock
underlying the Warrant in a pre-effective
amendment to the registration statement filed by
the Corporation on Form SB-2 on March 31, 1999
(File No. 333-75399).
2.2 The Purchaser has received and reviewed the
Corporation s Form 10-KSB for the fiscal year
ended July 31, 1999 and Forms 10-KSB for the
fiscal quarters ended October 31. 1998, January
31, 1999 and April 30, 1999, has been advised of
the Corporation s recent sale of 4r-).990/o of its
interest in Rosch GmbH Medizintechnik, and has had
the opportunity to discuss the business, affairs
and financial prospects of the Corporation with
management of the Corporation and ha,-, made an
informed decision regarding the purchase of 5%
(percent) of Rosch GmbH and the Shares.
2.3 The Purchaser is an "accredited investor" as such
term s defined in Regulation D under the
Securities Act. The Purchaser is also a Director
of the Corporation.
2.4 The Purchaser acknowledges that an investment in
the Corporation is highly speculative, that such
investment is consistent with his investment
objectives and income prospects, and that he has
adequate means for providing for his current
financial needs, has no need for liquidity in the
investment herein, and is able to bear the risk of
loss of his entire investment in the Shares.
3. The Corporation represents and warrants to the
Purchaser that:
3.1 The Corporation is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Delaware. The authorized
capital stock of the Corporation is 20,000,000
shares of Common Stock, of which 9-830,955 are
issued and outstanding, and 1,000,000 shares of
Preferred Stock, $.0l par value, of which 2,400
shares of Series A Preferred Stock and 1. 170
shares of Series B Preferred Stock are issued and
outstanding. Shares of ( common Stock are
reserved for stock options and warrants and
conversion of the Series A and Series B Preferred
Stock.
3.2 The Corporation has the full power and authority
to enter into this Agreement and to sell the 5%
(percent) of Rosch GmbH and Shares, and that the
Corporation s execution. delivery and performance
under this Agreement has been duly authorized by
all necessary action.
3.3 The Shares has been duly authorized, and upon
receipt of the Purchase Price will be fully paid
and nonassessable.
4. This letter sets forth the entire agreement between the
parties hereto as to the subject matter herein, and cannot
be amended, modified or terminated except by an agreement in
writing executed by the parties hereto. In the event any
provision of this letter is invalid or unenforceable. the
remainder of this letter shall be construed without taking
into effect such invalid or unenforceable provision. This
letter shall be governed by the laws of the State of
Delaware.
5. The Purchaser does hereby release and forever discharge the
Corporation, and its directors, officers, shareholders,
agents, employees and affiliates and their successors,
assigns. heirs and administrators from all actions, causes
of actions, claims and demands whatsoever, whether known or
unknown, in law or equity, whether statutory or common law-
whether federal, state, local, foreign or other-wise related
to or arising out of the Sub-Participation Contract between
the Purchaser and Mr. Andy Rosch and all other agreements
related to the Sub-Participation Contract, and any and all
fees and expenses relating thereto, which against the
Corporation ever had, now has, or hereafter may have, by
reason of any matter, cause or thing whatsoever.
Please signify your agreement to the foregoing by executing and
returning the original of this letter.
Very truly yours,
By: /s/ Jim Fukushima
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Jim Fukushima
17662 Irvine Blvd.
Suite #20
Tustin, CA 92780
954695826
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(Tax Identification No,)
Agreed to this 11th
day of November, 1999
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
---------------------------------
Michael T. Pieniazek, President
*Subject to approval of
the Corporation's Board of Directors
Exhibit 10.2
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT, made this 17th day of
November 1999, between Jubilee Investors LLC (the "Investor"), a
Delaware limited liability company, located at One World Trade
Center, Suite 4563, New York, New York 10048 and American
Electromedics Corp. (the "Company"), a Delaware corporation,
located at 13 Columbia Drive, Suite 5, Amherst, New Hampshire
0303 1.
WITNESSETH:
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WHEREAS, the Investor is the holder of 2,400 shares of
Convertible Preferred Stock, Series A of the Company (the
"Preferred Shares");
WHEREAS, the Company wishes to exchange a promissory
note and security agreement (the "Note") attached hereto as
Exhibit A, in the principal amount of $1,050,000 (subject to
adjustment as specified in such Note) maturing on April 30, 2000
and secured by certain intellectual property rights of the
Company (the "Collateral"), for 350 Preferred Shares (the
"Exchange Shares") held by the Investor with an aggregate stated
value of $350,000-,
WHEREAS, the Investor wishes to convert 1,000 Preferred
Shares (the "Initial Conversion Preferred Shares"), plus accrued
dividends on all 2,400 Preferred Shares in the amount of
$400,000, into a number of shares of common stock (the "Common
Stock"), par value $. 10, of the Company (the "Initial Conversion
Shares") pursuant to terms of the Certificate of Designation of
Series and Determination of Rights and Preferences of Convertible
Preferred Stock, Series A of the Company (the "Certificate of
Designation");
WHEREAS, the Investor wishes to convert an additional
350 Preferred Shares (the "Additional Conversion Preferred
Shares" and together with the Initial Conversion Preferred
Shares, the "Conversion Preferred Shares), into 350,000 shares of
Common Stock (the "Additional Conversion Shares" and together
with the Initial Conversion Shares, the "Conversion Shares")
pursuant to terms of the Certificate of Designation; and
WHEREAS, the Company wishes to redeem and the Investor
agrees to sell to the Company 700 Preferred Shares (the
"Redemption Shares") for an aggregate price of $840,000 in cash
(the "Redemption Price").
NOW, THEREFORE, in consideration of the premises,
agreements, representations, warranties and covenants herein
contained, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
1. Exchange of Securities, Redemption Shares. Subject to
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the terms and conditions of this Agreement, the Company and the
Investor each agree to simultaneously deliver to the other the Note,
in the case of the Company, and the Exchange Shares, in the case of
the Investor, on November 17, 1999 (the "Closing"). Subject to the
terms and conditions of this Agreement, each of the Company and the
Investor agrees to simultaneously deliver to the other, the
Redemption Price and the Conversion Shares, in the case of the
Company, and the Redemption Shares, in the case of the Investor
on date of the Closing.
2. Conversion of Preferred Shares. Subject to the terms
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and conditions of this Agreement and the Certificate of Designation,
the Investor agrees to convert the Conversion Preferred Shares into
Conversion Shares and, upon conversion, the Company shall deliver
such freely transferable Conversion Shares via DWAC to an account
specified by the Investor.
3. Restriction on Sales of Additional Shares. The Company
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shall not, directly or indirectly, without the prior written consent
of the Investor, offer, sell, offer to sell, contract to sell or
otherwise dispose of any of its securities, issued or sold at a
discount to the market value of such securities or securities
exchangeable for or convertible into shares of Common Stock at a
price per share less than the market price per share at the time of
such exchange, conversion or issuance, for a period of time beginning
on the date of this Agreement and ending on the Maturity Date (as such
term is defined in the Note) (the "Lock-Up Period"); provided,
however, that notwithstanding the restrictions in this Section 3
the Company may offer, sell or issue its Common Stock at a fixed
price per share equal to at least fifty percent (500/o) of the
market price of the Common Stock at the time of any such offer,
sell or issuance.
4. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Investor that:
a. Organization, Authorization. The Company is a
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corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
Each of the Company's subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws
of its respective jurisdiction. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken
as a whole. Each of the Company's subsidiaries is a direct or
indirect wholly-owned subsidiary of the Company, except for those
subsidiaries listed on Schedule 4(a), which schedule includes the
Company's ownership interest (as a percentage) in each such non-
wholly owned subsidiary. The Company has full corporate power
and authority to enter into this Agreement and the other
documents contemplated hereby and to carry out the transactions
contemplated hereby and thereby. The Company has taken all
required action by law to authorize the execution and delivery of
this Agreement and the other documents contemplated hereby and
the transactions contemplated hereby and thereby, and this
Agreement and the other documents contemplated hereby is a valid
and binding obligation of the Company enforceable against it in
accordance with its terms, subject as to enforcement only- (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (ii) to general
principles of equity.
b. Capitalization. On the date hereof, the authorized
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capital of the Company consists of 20,000,000 shares of Common
Stock, par value $.10 per share, of which 10,630,955 shares of
Common Stock are issued and outstanding and 1,000,000 shares of
Preferred Stock, par value $.0l per share of which 2,400 shares
of Series A Convertible Preferred Stock and 1, 170 shares of
Series B Convertible Preferred Stock are issued and outstanding.
Schedule 4(b) hereto sets forth all of the options, warrants and
convertible securities of the Company (the "Derivative
Securities") owned by persons who are neither officers or
directors of the Company which are outstanding on the date
hereof, for which the holder (together with any affiliates) has
the right to receive (in the aggregate) 100,000 or more shares of
Common Stock, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such
Derivative Securities, (iii) the number of shares of Common Stock
of the Company into which such Derivative Securities are
convertible as of the date hereof, (iv) the conversion or
exercise price or prices of such Derivative Securities as of the
date hereof and (v) the expiration date of any conversion or
exercise rights held by the owners of such Derivative Securities.
c. Concerning the Conversion Shares. When issued the
---------------------------------
Conversion Shares shall be duly and validly issued, fully paid
and non-assessable, and will not subject the holder thereof to
personal liability by reason of being such a holder. There are
no preemptive rights of any stockholder of the Company, as such,
to acquire the Conversion Shares.
d. Reporting Company Status. The Company's Common Stock
------------------------
is registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
e. Transaction Documents. This Agreement and the Note
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(collectively, the "Transaction Documents"), and the transactions
contemplated hereby and thereby, have been duly and validly
authorized by the Company- each of the Transaction Documents when
executed and delivered by the Company will each be a valid and
binding agreement of the Company, enforceable in accordance with
their respective terms, except to the extent that enforcement of
each of the Transaction Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
f. Non-contravention. The execution and delivery of this
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Agreement, and each of the other Transaction Documents, and the
consummation by the Company of the other transactions
contemplated by this Agreement and each of the other Transaction
Documents, does not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation of
the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company or any of
its subsidiaries is a party or by which they or any of their
properties or assets are bound, or any material existing
applicable law, rule, or regulation or any applicable decree,
judgment or order of any court, or United States federal or state
regulatory body, administrative agency, or any other governmental
body having jurisdiction over the Company, its subsidiaries, or
any of their properties or assets, except such conflict, breach
or default which would not have a material adverse effect on the
transactions contemplated by this Agreement or by the other
Transaction Documents.
g. Approvals. No authorization, approval or consent of
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any court, governmental body, regulatory agency, self-regulatory
organization, stock exchange or market or the shareholders of the
Company is required to be obtained by the Company for the entry
into or the performance of this Agreement and the other
Transaction Documents, except such authorizations, approvals and
consents that have been obtained, copies of which have been
furnished to the Investor.
h. SEC Filings. None of the reports or documents filed by
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the Company with the Commission since January 1, 1999 contained,
at the time they were filed, any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein, or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
i. Absence of Certain Changes. Except as set forth in the
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Company's Annual Report on Form 10-KSB for the year ended July
31, 1999 (the "1999 Annual Report") and herein, there has been no
material adverse change and no material adverse development in
the business, properties, operations, financial condition,
outstanding securities or results of operations of the Company.
j. Full Disclosure. There is no fact known to the Company
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(other than general economic conditions known to the public
generally) that has not been disclosed to the Investor that (i)
could reasonably be expected to have a material adverse effect
upon the condition (financial or otherwise) or the earnings,
business affairs, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to
the Transaction Documents.
k. Title to Properties, Liens and Encumbrances. The
-------------------------------------------
Company and its subsidiaries has good and marketable title to all
of its properties and assets, both real and personal, and has
good title to all its leasehold interests, in each case subject
to the following exceptions: (i) mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or
charges created in the ordinary course of business and (ii) the
encumbrances created pursuant to the Note.
1. Patents and Other Proprietary Rights. The Company and
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its subsidiaries own outright, free and clear of all liens,
claims and other encumbrances, except liens created by the Note,
the following patents and trademarks: (i) United States Patent
No. 5,704,91 1, "Needleless Hypodermic Injection System", (ii)
United States Patent No. 5,569,189, "Needleless Hypodermic
Injector", and (iii) INJEX SYSTEM (unregistered trademark)
(collectively, the "Intellectual Property"). The Intellectual
Property is all of the material intellectual property owned by
the Company and its subsidiaries. The only intellectual property
that the Company or any of its subsidiaries has sold, assigned,
licensed or otherwise transferred to Rosch GmbH Medizentechnik
("Rosch") is the European Patent Application No. 96936299.5
"Hypodermic Jet Injector". The Company and its subsidiaries have
sufficient title, ownership or license to use all patents,
trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes free and
clear of all liens (except liens created by the Note), necessary
for the conduct of their respective businesses as now conducted,
and such business does not conflict with or constitute an
infringement on the rights of others.
m. Permits. The Company and its subsidiaries have all
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franchises, permits, licenses and any similar authority necessary
for the conduct of their respective businesses as now conducted,
the lack of which would materially and adversely affect the
business or financial condition of the Company or any of its
subsidiaries. The Company is not in default in any material
respect under any of such Franchises, permits, licenses or
similar authority.
n. Absence of Litigation. Except as set forth in the
---------------------
Company's 1999 Annual Report and as disclosed in Schedule 4(n),
there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, in
which an unfavorable decision, ruling or finding would have a
material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and
its subsidiaries, taken as a whole, or the transactions
contemplated by the Transaction Documents, or which would
adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations
under, the Transaction Documents.
o. No Default. Neither the Company nor any of its
----------
subsidiaries is in default in the performance or observance of
any material obligation, covenant or condition contained in any
material indenture, mortgage, deed of trust or other instrument
or agreement to which it is a party or by which it or its
property may be bound.
p. Transactions with Affiliates. Except as disclosed in
----------------------------
the 1999 Annual Report and the Company's Preliminary Proxy
Statement for the 1999 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission on November 5, 1999 (the
"1999 Preliminary Proxy Statement"), there are no agreements,
understandings or proposed transactions between the Company and
any of its officers, directors or affiliates that, had they
existed on July 31, 1999, would have been required to be
disclosed in the 1999 Annual Report other than the sale of 5% of
Rosch GmbH Medizintechnik, 800,000 shares of Common Stock and a
warrant to purchase 300,000 shares of Common Stock sold to a
director of the Company for $2,000,000.
q. Taxes. All applicable tax returns required to be filed
-----
by the Company and each of its subsidiaries have been filed, or
if not yet filed have been granted extensions of the filing dates
which extensions have not expired, and all taxes, assessments,
fees and other governmental charges upon the Company, its
subsidiaries, or upon any of their respective properties, income
or franchises, shown in such returns and on assessments received
by the Company or its subsidiaries to be due and payable have
been paid, or adequate reserves therefor have been set up if any
of such taxes are being contested in good faith; or if any of
such tax returns have not been filed or if any such taxes have
not been paid or so reserved for, the failure to so file or to
pay would not in the aggregate have a material adverse effect on
the business or financial condition of the Company and its
subsidiaries, taken as a whole.
r. Investment Company Act. The Company is not conducting,
----------------------
and does not intend to conduct its business in a manner which it
would become, an "investment company" as defined in Section 3(a)
of the Investment Company Act of 1940, as amended.
s. Validity, Perfection and Priority of Security Interest.
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By complying with Section 5 of the Note and by delivery all
certificates or instruments, if any, representing or evidencing
the Collateral to the Investor, the Company and its subsidiaries
will have created a valid and duly perfected security interest,
in favor of the Investor for the benefit of the Investor as
security for the due and punctual payment of the full principal
amount due under the Note, in all Collateral and proceeds of such
Collateral, which security interest may be perfected by filing
UCC financing statements. Upon the Company's execution and
delivery of the Note and the related instruments and upon the
filing of related UCC financing statements, the security interest
of the Investor in the Collateral shall rank first in priority.
Other than financing statements or other similar documents
perfecting the security interests of the Investor, no financing
statements or similar documents covering all or any part of the
Collateral are on file or of record in any government office in
any jurisdiction in which such filing or recording would be
effective to perfect a security interest in such Collateral.
t. Full Disclosure. The representations and warranties of
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the Company and its subsidiaries set forth in the Transaction
Documents do not contain any untrue statement of a material fact
or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they
were made, not misleading.
5. Representations and Warranties of the Investor.
----------------------------------------------
The Investor represents and warrants to the Company that:
a. Organization, Authorization. The Investor is a limited
---------------------------
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Investor
has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
The Investor has taken all required action by law to authorize
the execution and delivery of this Agreement and the transactions
contemplated hereby, and this Agreement is a valid and binding
obligation of the Investor enforceable against it in accordance
with its terms, subject as to enforcement only: (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights generally-, and (ii) to general
principles of equity.
b. Title to Exchange Shares; Liens and Encumbrances. The
------------------------------------------------
Investor has good and marketable title to the Exchange Shares and
the Redemption Shares, and upon transfer will be free and clear
from any pledge, lien or other encumbrance.
c. Company Information. The Investor is aware of the
-------------------
business affairs of the Company and has received the 1999 Annual
Report and 1999 Preliminary Proxy Statement and has had the
opportunity to discuss the Company's present business and future
plans with the executive officers of the Company.
6. Conditions to the Investor's Obligations to Exchange
----------------------------------------------------
the Exchange Shares.
-------------------
(a) The Company shall have redeemed, purchased or acquired
and cancelled all outstanding shares (1, 170) of its Series B
Preferred Stock for a price of $1,170,000 and 369,000 shares of
Common Stock.
(b) The Company and its subsidiaries shall have executed
the Note and the UCC financing statements and, further, the
Company agrees to deliver the UCC financing statements to
Investor's Counsel within two (2) business days following the
date hereof.
(c) The Company shall have paid the legal fees and other
expenses of the Investor incurred in connection with the
documentation and negotiation of the Transaction Documents, which
amount shall not exceed $20,060.
(e) The Company shall have delivered an Officer's
Certificate certifying that the representations and warranties
made by the Company in Section 4 of this Agreement are true and
correct.
7. Governing Law, Miscellaneous. This Agreement shall be
----------------------------
governed by and interpreted in accordance with the laws of the
State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the Transaction
Documents, and hereby waives, to the maximum extent permitted by
law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such
jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The
headings of this Agreement are for convenience of reference only
and shall not form part of, or affect the interpretation of this
Agreement. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or
enforceability shall not affect the validity or enforceability of
the remainder of this Agreement or the validity or enforceability
of this Agreement in any other jurisdiction. This Agreement
shall inure to the benefit of, and be binding upon the successors
and assigns of each of the parties hereto. This Agreement may be
amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior
agreements and understandings among the parties hereto with
respect to the subject matter hereof
8. Further Assurances. Each party shall do and perform,
------------------
or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and
accomplish the purposes of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby,
9. Releases. (a) Upon payment in full to the Investor, or
--------
with respect to legal fees, Investor's counsel, of all amounts
owing under this Agreement (not including payment due under the
Note), the Investor shall release and forever discharge the
Company, its subsidiaries and its directors, officers,
shareholders, agents, employees and affiliates and their
successors, assigns, heirs and administrators (collectively, the
"Releasees") from all actions, causes of action, claims and
demands whatsoever, whether known or unknown, in law or equity,
whether statutory or common law, whether federal, state, local,
foreign or otherwise related to or arising out of the Securities
Purchase Agreement and all other agreements related to the
Investor's purchase of the Preferred Shares and investment in the
Company, and any and all fees and expenses related thereto, which
against the Company and its Releasees the Investor ever had, now
has or hereafter may have, by reason of any matter, cause or
thing whatsoever; provided, however, that the foregoing
--------
release shall not, in any way, release the Company or any
Releasee from any actions, causes of action, claims and demands
whatsoever, whether known or unknown, in law or equity, whether
statutory or common law, whether federal, state, local, foreign
or otherwise that the Investor may have or assert as (i) a holder
of the Company's common stock as to matters arising subsequent to
the date hereof or (ii) as a holder of the Note, against the
Company or any such Releasee from the date hereof.
(b) Upon execution of this Agreement and delivery of the
Redemption Shares, the Company shall release and forever
discharge the Investor, its subsidiaries and its directors,
managers, officers, shareholders, agents, employees and
affiliates and their successors, assigns, heirs and
administrators (collectively, the "Investor Releasees") from all
actions, causes of action, claims and demands whatsoever, whether
known or unknown, in law or equity, whether statutory or common
law, whether federal, state, local, foreign or otherwise related
to or arising out of the Securities Purchase Agreement and all
other agreements, which against the Investor and the Investor
Releasees the Company ever had, now has or hereafter may have, by
reason of any matter, cause or thing whatsoever.
10. Notices. Any notice required or permitted hereunder
-------
shall be given in writing (unless otherwise specified herein) and
shall be effective upon personal delivery, via facsimile (upon
receipt of confirmation of error-free transmission) or two
business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid
and addressed to each of the other parties thereunto entitled at
the following addresses, or at such other addresses as a party
may designate by ten days advance written notice to each of the
other parties hereto.
COMPANY: AMERICAN ELECTROMEDICS CORP.
13 Columbia Drive
Suite 5
Amherst, New Hampshire 03031
ATTN.: Michael Pieniazek
Tel.: (603) 880-6300
Fax: (603) 880-6390
with copies to:
THELEN, REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
ATTN.: Bruce Rich
Tel.: 212-603-6780
Fax: 212-603-2001
INVESTOR: JUBILEE INVESTORS LLC
c/o WEC ASSET MANAGEMENT LLC
One World Trade Center
Suite 4563
New York, New York 10048
ATTN.: Daniel Saks
Tel.: 212-775-9299
Fax: 212-775-9311
with copies to:
MORRISON & FOERSTER LLP
1290 Avenue of the Americas
New York, New York 10104
ATTN.: Jeffrey S. Marcus, Esq.
Tel.: 212-468-8000
Fax: 212-468-7900
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
each of the undersigned as of the date first written above.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
---------------------------
Name: Michael T. Pieniazek
Title: President
EQUIDYNE SYSTEMS, INC.
By: /s/ Michael T. Pieniazek
---------------------------
Name: Michael T. Pieniazek
Title: Secretary
JUBILEE INVESTORS LLC
By: /s/ Daniel Saks
----------------------------
Name: Daniel Saks
Title: Managing Director
Exhibit 10.3
PROMISSORY NOTE AND
SECURITY AGREEMENT
$1,050,000.00 November 17, 1999
FOR VALUE RECEIVED, AMERICAN ELECTROMEDICS CORP., a Delaware
corporation ("Maker"), hereby promises to pay to the order of
JUBILEE INVESTORS LLC, a Delaware limited liability company
(hereinafter called "Payee"), the principal sum of ONE MILLION
FIFTY THOUSAND DOLLARS ($1,050,000) (the "Principal Amount") in
lawful money of the United States of America.
The Principal Amount shall be payable in full on the earlier
to occur of (i) within five business days of the closing date of
the initial public offering of the Maker's German subsidiary,
Rosch GmbH Medizintechnik ("Rosch"), out of proceeds raised in
such financing or (ii) April 30, 2000 (the "Maturity Date"). If
the average Closing Bid Price for the shares of common stock of
the Maker exceeds $3.00 per share for the five (5) trading days
prior to the Maturity Date, then the Principal Amount payable
hereunder shall be reduced to $700,000. The term "Closing Bid
Price" means, for the Maker's common stock as of any date, the
closing bid price on the principal securities exchange or trading
market where the Maker's common stock is listed or traded as
reported by Bloomberg, L.P. ("Bloomberg"), or, if applicable, the
closing bid price of the Maker's common stock in the over-the-
counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported
for the Maker's common stock by Bloomberg, then the average of
the bid prices of any market makers for such security as reported
in the "pink sheets" by the National Quotation Bureau, Inc. If
the Closing Bid Price of the Maker's common stock cannot be
calculated on such date on any of the foregoing bases, the
Closing Bid Price of the Maker's common stock on such date shall
be the fair market value as mutually determined by the Maker and
Payee. "Trading day" shall mean any day on which the Maker's
common stock is traded for any period on the principal securities
exchange or other securities market on which the common stock is
then being traded.
The following additional terms shall govern this Promissory
Note and Security Agreement (this "Note"):
1. This Note is executed and delivered to Payee by Maker
in exchange for 350 shares of Convertible Preferred Stock, Series
A of the Maker held by Payee as more fully set forth in the
Securities Exchange Agreement, dated November 17, 1999, between
Maker and Payee (the "Securities Exchange Agreement").
2. This Note may be prepaid in part from time to time or
in full at any time in cash without penalty. All prepayments
shall be applied to the reduction of principal. The parties
agree that imputed interest is included in the principal amount
of this Note.
3. All cash distributions, license fees, royalties and
other revenue or consideration received in respect of, or cash
proceeds received on the sale or license of, the Collateral (as
hereinafter defined) shall be applied, at the option of the
Payee, to the prepayment of the entire unpaid Principal Amount of
this Note and Maker shall deliver to Payee all such amounts
promptly upon receipt thereof, provided, however, that for every
$2 of the Principal Amount that is repaid pursuant to this
section there shall be a reduction to the Principal Amount of an
additional $ 1.
4. Principal shall be paid in lawful currency of the
United States, in immediately available funds via wire transfer
to an account designated by Payee, or at such other place or to
such other person as Payee may designate in a written notice to
Maker.
5. As security for the full, prompt and complete payment
of all principal on this Note, Maker hereby pledges, assigns and
grants to Payee a continuing first priority security interest
valid throughout the world, except as expressly limited, in the
intellectual property listed on Schedule A (the "Collateral").
Until all amounts secured thereby shall have been repaid in full,
the Maker shall execute such further documents and instruments
and take such further steps as may be required by Payee to
perfect and protect such security interest. Maker shall bear any
costs related to the perfection and protection of such security
interest.
6. Each of the following shall constitute an "Event of
Default" within the meaning of this Note:
(a) Maker shall fail or refuse to make payment in full of the
Principal Amount due hereunder on the Maturity Date;
(b) Maker or any subsidiary of Maker (as principal,
guarantor or other surety) shall default in the payment when due
of any debt or obligation when due or within any applicable
period of grace of any amount of principal, premium or interest
on a debt or obligation that is outstanding in a principal amount
in the aggregate of at least $250,000;
(c) Maker shall default in the performance of any
material covenant in this Note or in the Securities Exchange
Agreement or if any material representation or warranty made in
this Note or in the Securities Exchange Agreement shall have
proved to have been false or incorrect in any respect on the date
as of which made or shall omit to state any material fact
necessary to make the representation and warranty not misleading;
provided that before any such event shall become an Event of
Default, the Payee shall give written notice to the Maker and the
Maker shall have ten (10) days from the receipt of such notice to
cure any such event or condition; or
(d) (i) Maker or any of its subsidiaries shall make a
general assignment for the benefit of its creditors, (ii) entry
of a final order adjudicating Maker or any of its subsidiaries
bankrupt, (iii) the filing of a voluntary petition by Maker or
any of its subsidiaries under any of the provisions of the United
States bankruptcy code or similar laws of any jurisdiction, (iv)
the filing of any answer or other pleading admitting the material
allegations of any petition filed against Maker or any of its
subsidiaries in any bankruptcy, insolvency or other such
proceeding, (v) the filing of a petition against Maker or any of
its subsidiaries under any of the provisions of any bankruptcy
laws of the United States or similar laws of any jurisdiction and
the failure of such petition to be dismissed within sixty (60)
calendar days, (vi) the petition for, or the appointment of, or
possession by, a custodian, receiver, liquidator, trustee or
sequestrator (or other similar official) of Maker or any of its
subsidiaries or any substantial part of its or any such
subsidiary's properties or assets, (vii) Maker or any of its
subsidiaries shall take any corporate action in furtherance of
any of the foregoing, (viii) Maker or any of its subsidiaries
shall be generally unable to pay its debts as they mature; or
(ix) a final judgment shall be rendered against Maker or any of
its subsidiaries for the payment of money at least $250,000 in
the aggregate and such judgment shall not be discharged or
execution thereon stayed pending appeal within 60 calendar days
of entry of such judgment, or, in the event of such a stay, such
judgment shall not be discharged within 60 calendar days after
such stay expires.
7. Upon the occurrence and during the continuance of an
Event of Default, the unpaid Principal Amount of this Note shall
automatically, without any action on the part of Payee, become
immediately due and payable, in each case without presentment,
demand, protest or any notice of any kind, all of which are
hereby waived. Upon the occurrence of an Event of Default,
Payee, in addition to any other rights it may have, shall have
the right at any time and from time to time to sell, resell,
assign, license, sublicense and deliver, in its discretion, all
or any of the Collateral in one or more parcels at the same or
different times, and all right, title and interest, claim and
demand therein. Payee may purchase all or any of the Collateral
being sold. Payee shall give Maker at least ten (10) calendar
days' prior notice of the time and place of any public or private
sale and of the time after which any private sale or other
disposition is to be made, which notice Maker agrees is
reasonable. Payee may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. Maker shall
pay all reasonable out-of-pocket costs and expenses of every kind
for sale or delivery, including reasonable attorneys' fees, and
after deducting such costs and expenses from the proceeds of
sale, Payee shall apply any remainder to the payment of the
indebtedness or obligations of Maker under or in respect of this
Note. The balance, if any, remaining after payment in full of
all of such expenses and indebtedness shall be paid to Maker,
subject to any duty of Payee imposed by law to the holder of any
subordinate security interest in the Collateral known to Payee.
Payee, in addition to all other rights or remedies which it may
have, shall have all of the rights and remedies of a secured
party upon default under the Uniform Commercial Code of the State
of New Hampshire and under any other applicable law. Payee may
exercise any or all of the rights which it may have in the
Collateral in any order, from time to time, and shall not be
obligated to exercise any of such rights. No failure to exercise
any right shall operate as a waiver and no waiver, consent or
agreement given in any instance shall adversely affect the rights
of Payee in any other instance.
8. Maker shall pay to Payee all costs and expenses
incurred by Payee (including reasonable attorney's fees and
expenses) in connection with the enforcement hereof. The payment
of all such amounts shall constitute additional indebtedness of
Maker hereunder, and payment thereof shall be secured by the
Collateral.
9. The remedies provided herein in favor of Payee shall
not be deemed exclusive, but shall be cumulative, and shall be in
addition to all other remedies in favor of Payee existing at law
or in equity. Payee shall have no duty as to the collection or
protection of the Collateral or any income thereon or as to the
preservation of any rights pertaining thereto, beyond the safe
custody thereof of any securities representing such Collateral
that are actually in its possession.
10. Upon payment in full of all indebtedness of Maker
hereunder, Maker shall be entitled to the return of all of the
Collateral which has not been used or applied as provided herein
and Payee shall return this Note to Maker.
11. This Note shall be governed by the laws of the State of
New York applicable to contracts made and to be performed
entirely in such State , except to the extent that the laws of
the State of New Hampshire shall govern the security interest
created hereby, and any proceeding relating to this Note or any
other indebtedness secured may be brought only in the federal or
state courts sitting in New York, to the jurisdiction and venue
of which the parties hereby submit. The parties waive trial by
jury in any such proceeding. This Note may not be altered or
amended, except by a writing duly signed by the party against
whom such alteration or amendment is sought to be enforced.
12. Maker hereby waives presentment for payment, demand,
notice of dishonor, notice of protest and protest and diligence
in taking any action to collect amounts due hereunder.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Promissory Note and Security
Agreement is executed by the parties as of the date first
appearing above.
AMERICAN ELECTROMEDICS CORP.
By /s/ Michael T. Pieniazek
--------------------------
Name: Michael T. Pieniazek
Title: President
EQUIDYNE SYSTEMS, INC.
By /s/ Michael T. Pieniazek
--------------------------
Name: Michael T. Pieniazek
Time: Secretary
ACKNOWLEDGED AND AGREED:
------------------------
JUBILEE INVESTORS LLC
By: WEC ASSET MANAGEMENT LLC, Manager
By /s/ Daniel Saks
---------------------------------
Name: Daniel Saks
Time: Managing Director
<PAGE>
SCHEDULE A
----------
The security interest granted herein shall extend to all
intellectual property of the Maker and its subsidiaries,
excluding Rosch GmbH Medizintechnik, but otherwise including
without limitation the following:
1. PATENTS
-------
(a) United States Patent No. 5,704,91 1, "Needleless
Hypodermic Injection System" and any other related existing or
future letters patent and applications for letters patent,
including all patent applications in preparation for filing
anywhere in the world owned by or assigned to the Maker or its
subsidiaries throughout the world
(b) United States Patent No. 5,569,189, "Needleless
Hypodermic Injector" and any other related existing or future
letters patent and applications for letters patent, including all
patent applications in preparation for filing anywhere in the
world owned by or assigned to the Maker or its subsidiaries
throughout the world.
(c) Any other existing or future letters patent and
applications for letters patent, including all patent
applications in preparation for filing anywhere in the world
owned by or assigned to the Maker or its subsidiaries throughout
the world.
(d) All patent licenses.
(e) All reissues, divisions, continuations, continuations-
in-part, extensions, renewals, and reexaminations of any of the
items described in items (c) and (d) above.
(f) All proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of
infringement suits), the right to sue third parties for past,
present or future infringements of any patent or patent
application, including any patent or patent application referred
to above and for breach or enforcement of any patent license.
II. TRADEMARKS, SERVICE MARKS AND TRADENAMES
----------------------------------------
(a) INJEX SYSTEM (unregistered trademark)
DYNACAM (unregistered trademark)
(b) All trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles,
service marks or logos (collectively, "Trademarks") now existing
anywhere in the world or hereafter adopted or acquired, whether
currently in use or not, all registrations and recordings
thereof, and all applications in connection therewith, whether
pending or in preparation for filing, including registrations,
recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States
of America or any State thereof or any foreign country.
(c) All licenses of Trademarks to or by Maker or its
subsidiaries.
(d) All reissues, extensions or renewals of any of the
items described in clauses (b) or (c) above
(e) All goodwill of the business connected with the use of,
and symbolized by the items described in, clauses (a), (b) and
(c) above.
(f) All proceeds of, and rights associated with, the
foregoing, including any claim by the Maker or its subsidiaries
against third parties for past, present or future infringement or
dilution of any Trademark, including for registrations and
licenses in connection with any Trademark or for injury to the
goodwill associated with the use of any such Trademark or for
breach or enforcement of any Trademark license.
III COPYRIGHTS
----------
All of the Maker's or the Maker's subsidiaries' right title
and interest in and to the following: all copyrights, whether
statutory or common law, registered or unregistered, now or
hereafter in force throughout the world, including all of the
Maker's or the Maker's subsidiaries' right, title and interest in
any United States Copyrights registered in the United States
Copyright Office or any other registered copyrights registered
anywhere else in the world and including all applications for
registration of, whether pending or in preparation, all copyright
licenses, including all rights to sue for past, present and
future infringements of any such license, all rights
corresponding thereto throughout the world, all extensions and
renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages
and proceeds of any suits related to the above.
IV. TRADE SECRETS
-------------
All of the Maker's or the Maker's subsidiaries' right, title
and interest in and to the following: common law and statutory
trade secrets and all other confidential or proprietary
information and know-how, now or hereafter owned or licensed or
used in or contemplated at any time for use in the business of
the Maker or the Maker's subsidiaries (collectively, "Trade
Secrets"), whether or not such Trade Secret has been reduced to a
writing or other tangible form, including all documents and
things embodying, incorporating, or referring in any way to such
Trade Secret, all Trade Secret licenses, and the right to collect
damages for the actual or threatened misappropriation of any
Trade Secret and for the breach or enforcement of any such Trade
Secret license.
Exhibit 10.4
AGREEMENT
---------
THIS AGREEMENT, dated as of November 1, 1999, is entered
into by and between American Electromedics Corp. (the "Company"),
Sovereign Partners LP ("Sovereign"), Dominion Capital Fund LTD.
("Dominion"), and Canadian Advantage L.P. ("Canadian", and
together with Sovereign and Dominion, hereinafter the "Preferred
Holder").
WHEREAS, the Company and the Preferred Holder have entered
into a Securities Purchase Agreement, dated as of February 2,
1999 (the "Securities Purchase Agreement"), and a Registration
Rights Agreement, dated as of February 2, 1999 (the "Registration
Rights Agreement"), pursuant to which the Preferred Holder
purchased 1,600 shares of the Company Series B Convertible
Preferred Stock (the "Preferred Stock");
WHEREAS, the Company and the Preferred Holder desire to
agree to terms pursuant to which the Company will redeem the
Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Preferred Holder hereby agree
as follows:
1. The Preferred Holder currently holds 1, 170 shares of
Preferred Stock (the "Holders Preferred Stock"), as set forth on
Schedule I hereto, and shall not issue any conversion notices to
----------
convert any shares of Preferred Stock and shall not sell any
shares of the Company s Common Stock (the "Common Stock") until
November 15, 1999.
2. Upon the earlier of (a) closing by the Company of a
financing that raises in excess of $2,500,000, or (b) November
15, 1999, (the "Financing Closing Date"), the Company shall
redeem the Preferred Holders Preferred Stock for the
consideration set forth in Paragraph 3 herein.
-----------
3. Within 5 business days of the Financing Closing Date ,
the Company shall pay the Preferred Holder the sum consisting of
$801,000 in liquidation preference and $369,000 in accrued and
unpaid dividends, penalties and redemption premium on the
Preferred Stock, payable by wire transfer to the account of the
Preferred Holder in the amounts set forth on Schedule I hereto,
----------
and shall issue to the Preferred Holder, in proportion to the
amounts set forth on Schedule I hereto, 369,000 shares of Common
----------
Stock (the "Additional Shares"), at a conversion price of $1.00
per share, pursuant to the annexed Conversion Notices dated as of
November 15, 1999. Me Preferred Holder shall accept payment of
the above as full and final payment of all accrued and unpaid
dividends, penalties and the redemption premium on the Preferred
Stock.
4. Except with respect to the provisions of 16 and 7
hereof, upon payment of the amounts and delivery of the
Additional Shares stated in Paragraph 3, each party hereto, on
-----------
behalf of itself and its respective directors, officers, employees,
agents, shareholders, partners, affiliates, attorneys and their
successors and assigns (collectively "Releasor") shall hereby
release and forever discharge every other party, and its directors,
officers, shareholders, agents, employees and affiliates and their
successors, assigns, heirs and administrators (collectively, the
"Releasees") from all actions, causes of actions, claims and
demands whatsoever, whether known or unknown, in law or equity,
whether statutory or common law, whether federal, state, local,
foreign or otherwise related to or arising out of the Securities
Purchase Agreement and all other agreements related to the
Preferred Holder s purchase of the Preferred Stock and investment
in the Company, and any and all fees and expenses relating
thereto, which against Releasor ever had, now has, or hereafter
may have, by reason of any matter, cause or thing whatsoever
against the Releasee.
5. The Preferred Holder shall not sell any of the
Additional Shares for a period of 80 days from the Financing
Closing Date.
6. The Company agrees that, in the event any Additional
Shares are issued with a legend, it will, within three (3)
Trading Days after request therefore by the Preferred Holder and
the surrender by the Preferred Holder of the certificate
representing the Additional Shares, together with such reasonable
documentation as may be required by the provisions of Rule 144
under the Securities Act of 1933, provide such Preferred Holder
with a certificate or certificates representing such Additional
Shares, free from such legend for purposes of a sale in
accordance with Rule 144 until a complete exemption is available
pursuant to Rule 144(k). The Company may not make any notation
on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in
this Section. The Company agrees that with respect to the
removal of any restrictive legend or stop transfer order
regarding the Additional Shares pursuant to a sale under Rule 144
of the Securities Act of 1933, it will cause its counsel, at the
Company s expense, to deliver any necessary legal opinions in
respect thereof.
7. As long as the Company is subject to Sections 13(a) and
15(d) of the Exchange Act, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d)
of the Exchange Act. So long as any of the Preferred Holders
owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to such
Preferred Holder and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required
to be included in reports required by Section 13(a) or 15(d) of
the Exchange Act, as well as any other information required
thereby, in the time period that such filings would have been
required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell
Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act. Upon the request of any such Person,
the Company shall deliver to such Person a written certification
of a duly authorized officer as to whether it has complied with
such requirements.
8. The Preferred Holder represents and warrants to the
Company that the Preferred Holder owns the Holders Preferred
Stock in the amounts set forth on Schedule I hereto free and
clear of any and all claims, liens or other encumbrances, and has
not entered into any agreement or understanding to sell,
hypothecate, dispose or otherwise transfer any or all of the
Holders Preferred Stock. Upon the sale of the Holders Preferred
Stock as provided herein, the Company will receive such Stock
free and clear of any claim, lien or encumbrance of any third
party.
9. The Preferred Holder agrees that notwithstanding the
provisions of Section 2.01 of the Registration Rights Agreement,
(a) the penalty provision shall no longer be in effect, and (b)
the Company shall be permitted to include, without the consent of
the Preferred Holder, in any registration statement filed under
the Registration Rights Agreement, securities to be offered and
sold by the Company or any other holders of the Company s
securities.
10. The Preferred Holder or the Company shall have the
right to terminate this Agreement on November 16, 1999, if the
Company has not closed its planned financing by the close of
business on November 15, 1999.
11. This Agreement sets forth the entire agreement among
the parties hereto with respect to the subject matter herein, and
supersedes any prior agreements except to the extent provided
herein, and cannot be amended, modified or terminated except by
an agreement in writing executed by the parties hereto.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving
effect to conflicts of law.
13. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall
constitute a single instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by each
of the undersigned.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
--------------------------
Name: Michael T. Pieniazek
Title: President
SOVEREIGN PARTNERS LP
By: Southridge Capital Management
L.L.C., Gen. Prtn.
By: /s/ Stephen Hicks
---------------------------
Name: Stephen Hicks
Title: President
DOMINION CAPITAL FUND LTD.
By: /s/ Illegible
----------------------------
Name: INTER CARIBBEAN SERVICES
(BAHAMAS) LIMITED
Title: Director
CANADIAN ADVANTAGE L.P.
By: /s/ Mark Valentine
----------------------------
Name: Mark Valentine
Title: Pres. VMH Management, GP
<PAGE>
SCHEDULE I
----------
Name of Holder Number of Shares
-------------- ----------------
Sovereign Partners LP 555
Dominion Capital Fund LTD 415
Canadian Advantage L.P. 200
Exhibit 10.5
November 15, 1999
American Electromedics Corp.
13 Columbia Drive, Suite 5
Amherst, NH 03031
Gentleman:
This letter sets forth the terms and conditions of the agreement
relating to the purchase by Concord Effekten AG (the "purchaser")
from American Electromedica Corp., a Delaware Corporation (the
"Corporation"), of 1,333,333 shares (the "Shares") of common
stock, par value $.10 per share of the Corporation.
The Purchaser hereby purchases from the Corporation, and the
Corporation hereby sells to the Purchaser, the Shares at a price
of $.75 per Share, or an aggregate purchase price of $1,000,000
(the "Purchase Price"), subject to the terms and conditions
herein. The Purchaser is hererby delivering a wire transfer to
the Corporation for the Purchase Price, payment to be received by
November 18, 1999, and upon receipt thereof the Corporation is
delivering to the Purchaser a certificate representing the
Shares.
2. The Purchaser represents and warrants to the Corporation
that:
2.1 The purchaser is aware that the Share have
not been registered under the Securities Act
of 1933, as amended (the "Securities Act"),
is aware of the restrictions on sale or
transfer thereunder, and acknowledges that an
appropriate restrictive legend will be set
forth on, and a stop transfer order will be
placed against, the certificate evidencing
the Shares to be issued to the Purchaser.
However, the Corporation agrees that it shall
include the Shares in a pre-effective
amendment to the registration statement filed
by the Corporation on Form SB-2 on March 31,
1999 (File No. 333-75399).
2.2 The Purchaser has received and reviewed the
Corporation s Form 10-KSB for the fiscal year
ended July 31, 1999 and Preliminary Proxy
Statement for the 1999 Annual Meeting of
Stockholders, and has had the opportunity to
discuss the business, affairs and financial
prospects of the Corporation with management
of the Corporation and has made an informed
decision regarding the purchase of the
Shares.
2.3 The Purchaser is an "accredited investor" as such term
is defined in Regulation D under the Securities Act.
2.4 The Purchaser acknowledges that an investment in the
Corporation is highly speculative, that such investment
is consistent with his investment objectives and income
prospects, and that he has adequate means for providing
for his current financial needs, has no need for
liquidity in the investment herein, and is able to bear
the risk of loss of his entire investment in the
Shares.
3. The Corporation represents and warrants to the Purchaser
that:
3.1 The Corporation is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Delaware. The authorized capital stock of
the Corporation is 20,000,000 shares of
Common Stock, of which 10,630,955 are issued
and outstanding, and 1,000,000 shares of
Preferred Stock, $.01 par value, of which
2,400 shares of Series A Preferred Stock and
1,170 shares of Series B Preferred Stock are
issued and outstanding. Shares of Common
Stock are reserved for stock options and
warrants and conversion of the Series A and
Series B Preferred Stock.
3.2 The Corporation has the full power and
authority to enter into this Agreement and to
sell the Shares, and that the Corporation s
execution, delivery and performance under
this Agreement has been duly authorized by
all necessary action.
3.3 The Shares has been duly authorized, and upon
receipt of the Purchase Price will be fully
paid and nonassessable.
3.4 The Corporation will be able to remove all
outstanding convertible preferred stock
within 3 business days of receipt of the
Purchase Price.
3.5 The Corporation will send the Purchaser a
copy of the certificate representing the
Shares issued to the Purchaser by November
18, 1999.
3.6 The Corporation is not aware of any reason
that would cause a significant delay in the
filing and acceptance by the SEC of the
pre-effective amendment to the registration
statement on Form SB-2, discussed in Section
2.1 of this agreement.
4. This letter sets forth the entire agreement between the
parties hereto as to the subject matter herein, and
cannot be amended, modified or terminated except by an
agreement in writing executed by the parties hereto.
In the event any provision of this letter is invalid or
unenforceable, the remainder of this letter shall be
construed without taking into effect such invalid or
unenforceable provisions. This letter shall be
governed by the laws of the State of Delaware.
Please signify your agreement to the foregoing by executing,
faxing and returning the original of this letter.
Very truly yours,
CONCORD EFFEKTEN AG
By: /s/ Illegible
----------------------
Name: Illegible
--------------------
Nibelungenplatz 3
60318 Frankfurt am Main
Germany
Agreed to this 17th
day of November, 1999
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
-----------------------------------
Michael T. Pieniazek, President
[AMERICAN ELECTROMEDICS CORPORATION LOGO]
FOR IMMEDIATE RELEASE
- ---------------------
CONTACT: Michael T. Pieniazek, Jeffery Lamberson or Richard Carpenter
President American Financial Communications
American Electromedics Corp. (415) 380-3880
(603) 880-6300
AMERICAN ELECTROMEDICS CORP. ANNOUNCES REDEMPTION/CONVERSION OF ALL
SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK
AMHERST, NEW HAMPSHIRE, November 30, 1999...AMERICAN ELECTROMEDICS CORP.
(OTCBB:AMER) announced today that it has closed on agreements with the holders
of its Series A and Series B Convertible Preferred Stock ("Preferred Stock"),
whereby all outstanding shares of Preferred Stock, plus accrued dividends, were
either converted into AMER common stock or redeemed. As a result of the
elimination of the Preferred Stock, AMER paid $2,010,000 in cash, and issued
2,597,312 shares of common stock along with a note for $1,050,000.
In order to fund the elimination of the Preferred Stock, AMER entered into an
agreement with a director of the company, whereby it sold 800,000 shares of
common stock, a warrant to purchase 300,000 shares of common stock at an
exercise price of $2.00 per share and a 5% interest in its subsidiary, Rosch
GmbH Medizintechnik ("Rosch GmbH"), for an aggregate of $2,000,000.
Michael Pieniazek, President, stated, "We are extremely pleased to be able to
terminate the outstanding Preferred Stock, which had a discount from market
price conversion feature, as we believe this had a negative impact on the common
stock. In the past, a shortage of capital has, at times, slowed our development
activities. We believe this redemption and canceling of all our Preferred Stock
will clear the way for us to raise additional working capital sufficient to
develop automated production systems for the INJEX(TM) System. The automated
systems will allow us to serve a larger market, reduce costs, and work towards
improved financial condition and profitability."
Rosch GmbH, a partially-owned subsidiary based in Berlin, Germany, and Equidyne
Systems, Inc., a wholly-owned subsidiary based in San Diego, CA, are focused on
becoming leaders in needle-free drug delivery systems for subcutaneous and
intramuscular injections, with Rosch GmbH being responsible for the European
market, and Equidyne being responsible for the U.S., Canada, South America and
Asia markets. The INJEX(TM) Needle-Free Injector is a spring actuated system
that propels a drug, with little or no pain, through the skin in a fraction of a
second. INJEX(TM) administered drugs have very effective absorption rates
compared to hypodermic needle injections. The System is user friendly,
economical and eliminates needle stick and disposal problems.
THE STATEMENTS CONTAINED IN THIS NEWS RELEASE THAT ARE NOT PURELY HISTORICAL ARE
FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS CONTAINED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THE EFFECT OF LOSSES AND OTHER FACTORS ON THE
COMPANY'S CREDIT FACILITIES, BUSINESS AND RESULTS OF OPERATIONS; THE COMPANY'S
LIMITED CAPITAL RESOURCES AND ITS ABILITY TO FULFILL ITS EXISTING OBLIGATIONS
AND ONGOING CAPITAL NEEDS; RISKS ASSOCIATED WITH EXCESS OR OBSOLETE INVENTORY;
THE POTENTIAL IMPAIRMENT OF ASSETS; THE COMPANY'S DEPENDENCE ON KEY CUSTOMERS
AND THEIR FINANCIAL VIABILITY; THE IMPACT OF COMPETITION; AND THE COMPANY'S
ABILITIES TO EFFECTIVELY MANAGE GROWTH. THESE AND OTHER RISK FACTORS ARE
DISCUSSED IN THE COMPANY'S FILINGS ON FORMS 8-K, 10-QSB AND 10-KSB.
# # #
[AMERICAN ELECTROMEDICS CORPORATION LOGO]
FOR IMMEDIATE RELEASE
- ---------------------
CONTACT: Michael T. Pieniazek, Jeffery Lamberson or Richard Carpenter
President American Financial Communications
American Electromedics Corp. (415) 380-3880
(603) 880-6300
AMERICAN ELECTROMEDICS CORP. ANNOUNCES INVESTMENT BY A GERMAN
INVESTMENT BANK
AMHERST, NEW HAMPSHIRE, December 2, 1999...AMERICAN ELECTROMEDICS CORP.
(OTCBB:AMER) announced today that Concord Effekten AG (Concord), an investment
banking firm based in Frankfurt, Germany has made a $1 million investment in
American Electromedics Corp. (AMER) which resulted in the issuance of 1,333,333
shares of AMER's common stock. Under an agreement announced earlier, Concord
plans to bring Rosch GmbH Medizintechnik ("Rosch GmbH") to the Frankfurt New
Market Exchange through an initial public offering (IPO) of its shares in the
first quarter of 2000.
Michael Pieniazek, President, stated, "We are pleased that Concord has made this
additional investment in AMER. We believe that this investment along with their
commitment to an IPO for Rosch GmbH clearly demonstrates Concord's belief in the
successful future of the INJEX(TM) System worldwide. This additional capital
will accelerate our activities to install automated production systems for the
INJEX(TM) System which will allow us to serve a larger market, reduce costs, and
work towards improved financial condition and profitability."
Rosch GmbH, a partially-owned subsidiary based in Berlin, Germany, and Equidyne
Systems, Inc., a wholly-owned subsidiary based in San Diego, CA, are focused on
becoming leaders in needle-free drug delivery systems for subcutaneous and
intramuscular injections, with Rosch GmbH being responsible for the European
market, and Equidyne being responsible for the U.S., Canada, South America and
Asia markets. The INJEX(TM) Needle-Free Injector is a spring actuated system
that propels a drug, with little or no pain, through the skin In a fraction of a
second. INJEX(TM) administered drugs have very effective absorption rates
compared to hypodermic needle injections. THe System is user friendly,
economical and eliminates needle stick and disposal problems.
THE STATEMENTS CONTAINED IN THIS NEWS RELEASE THAT ARE NOT PURELY HISTORICAL ARE
FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS CONTAINED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THE EFFECT OF LOSSES AND OTHER FACTORS ON THE
COMPANY'S CREDIT FACILITIES, BUSINESS AND RESULTS OF OPERATIONS; THE COMPANY'S
LIMITED CAPITAL RESOURCES AND ITS ABILITY TO FULFILL ITS EXISTING OBLIGATIONS
AND ONGOING CAPITAL NEEDS; RISKS ASSOCIATED WITH EXCESS OR OBSOLETE INVENTORY;
THE POTENTIAL IMPAIRMENT OF ASSETS; THE COMPANY'S DEPENDENCE ON KEY CUSTOMERS
AND THEIR FINANCIAL VIABILITY; THE IMPACT OF COMPETITION; AND THE COMPANY'S
ABILITIES TO EFFECTIVELY MANAGE GROWTH. THESE AND OTHER RISK FACTORS ARE
DISCUSSED IN THE COMPANY'S FILINGS ON FORMS 8-K, 10-QSB AND 10-KSB.
# # #