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) February 3, 1999
----------------
AMERICAN ELECTROMEDICS CORP.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9922 04-2608713
---------- -------- -------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
Incorporation)
13 Columbia Drive, Suite 5, Amherst, New Hampshire 03031
-----------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (603) 880-6300
--------------
Not Applicable
-----------------------------------------------------------------
(Former Name or Former Address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
------------
On February 3, 1999, American Electromedics Corp. (the
"Company") entered into a Securities Purchase Agreement with
three purchasers (the "Purchasers") to issue up to 2,000 shares
of Series B 5% Convertible Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), together with Warrants
(the "Warrants") to purchase up to 25,000 shares of the Company's
Common Stock, par value $.10 per share (the "Common Stock"), pro
rata with the purchase of the Series B Preferred Stock. On
February 3, 1999, the Company issued and the Purchasers privately
purchased 1,600 shares of Series B Preferred Stock at a purchase
price of $1,000 per share, or an aggregate purchase price of
$1,600,000, together with the Warrants for 25,000 shares of
Common Stock at an exercise price per share of $3.00 and
exercisable until January 31, 2002. The Company may issue and
sell the remaining 400 shares of Series B Preferred Stock. The
holders of the Series A Convertible Preferred Stock consented to
the sale of the Series B Preferred Stock.
The Series B Preferred Stock is convertible into shares of
the Company's Common Stock at any time after April 30, 1999 at a
conversion ratio equal to $1,000 divided by the lessor of (i)
$2.00 or (ii) 75% of the average closing bid price of the Common
Stock for the five trading days immediately prior to the notice
of conversion. The Company has the right to force conversion of
all outstanding shares of Series B Preferred Stock at any time on
or after the first anniversary of the date the registration
statement filed relating to the shares of Common Stock underlying
the Series B Preferred Stock is declared effective by the
Securities and Exchange Commission (the "SEC") at the then
effective conversion ratio.
The Series B Preferred Stock, the Warrants and the shares
underlying the Series B Preferred Stock were not registered under
the Securities Act of 1933 (the "Securities Act") in reliance
upon the exemptions provided by Regulation D under the Securities
Act. As a condition to the closing of the placement of the
Series B Preferred Stock, the Company entered into a Registration
Rights Agreement with the Purchasers agreeing to file a
registration statement under the Securities Act with the SEC
covering the Common Stock underlying the Series B Preferred Stock
and the Warrants. The Company is to file such registration
statement no later than the later of (i) March 5, 1999 or (ii)
thirty days after the date the Company's Registration Statement
on Form SB-2 (File No. 333-58937) becomes effective, and to use
its best efforts to cause such registration statement to become
effective within 90 days after it is filed. If the registration
statement is not declared effective by the SEC within the specified
time period, the Company would pay the Purchasers for each thirty
day period following such date during which the registration
statment remains ineffective, liquidated damages in the amount of
2% of the face amount of the Series B Preferred Stock, provided
that such total amount of liquidated damages shall not exceed
$100,000.
-2-
<PAGE>
The Company shall use the net proceeds of $1,500,000 (after
offering expenses) for repayment of $650,000 principal amount of
notes and general working corporate purposes, primarily relating
to developing its INJEX TM needle-free injector system.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(c) Exhibits.
3.1 Certificate of Designation for Series B 5% Convertible
Preferred Stock, filed with the Secretary of State of
Delaware on February 3, 1999.
10.1 Form of Securities Purchase Agreement for the sale of
Series B Preferred Stock (without exhibits)
10.2 Form of Warrant Agreement
10.3 Form of Registration Rights Agreement
-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.
----------------------------
(Registrant)
By: /s/ Michael T. Pieniazek
--------------------------
Michael T. Pieniazek,
President
February 4, 1999
-4-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
3.1 Certificate of Designation for Series B 5% Convertible
Preferred Stock, filed with the Secretary of State of
Delaware on February 3, 1999.
10.1 Form of Securities Purchase Agreement for the sale of
Series B Preferred Stock (without exhibits)
10.2 Form of Warrant Agreement
10.3 Form of Registration Rights Agreement
EXHIBIT 3.1
CERTIFICATE OF DESIGNATION OF SERIES
AND DETERMINATION OF RIGHTS AND PREFERENCES
OF
SERIES B 5% CONVERTIBLE PREFERRED STOCK
OF
AMERICAN ELECTROMEDICS CORP.
American Electromedics Corp., a Delaware corporation
(the "Company"), acting pursuant to S 151 of the General
Corporation Law of Delaware, does hereby submit the following
Certificate of Designation of Series and Determination of Rights
and Preferences of its Series B Convertible Preferred Stock.
FIRST: The name of the Company is American
Electromedics Corp.
SECOND: The Board of Directors of the Company
pursuant to a unanimous written consent in
lieu of a meeting, dated as January 25, 1999,
adopted the following resolutions:
WHEREAS the Certificate of Incorporation of the Company
authorizes Preferred Stock consisting of 1,000,000 shares, par
value $.01 per share, issuable from time to time in one or more
series; and
WHEREAS the Board of Directors of the Company is
authorized, subject to limitations prescribed by law and by the
provisions of Article FOUR (4) of the Company's Certificate of
Incorporation, as amended, to establish and fix the number of
shares to be included in any series of Preferred Stock and the
designation, rights, preferences, powers, restrictions and
limitations of the shares of such series; and
WHEREAS it is the desire of the Board of Directors to
establish and fix the number of shares to be included in a new
series of Preferred Stock and the designation, rights,
preferences and limitations of the shares of such new series;
NOW, THEREFORE, BE IT RESOLVED that pursuant to Article
FOUR (4) of the Company's Certificate of Incorporation, as
amended, there is hereby established a new series of 2,000 shares
of Series B 5% Convertible Preferred Stock of the Company (the
"Series B Preferred Stock") to have the designation, rights,
preferences, powers, restrictions and limitations set forth in a
supplement of Article FOUR (4) as follows:
1. Dividends.
---------
(a) The holders of the Series B Preferred Stock shall
be entitled to receive, out of funds legally available therefor,
dividends at an annual rate equal to five percent (5%) (the
"Dividend Rate") of the Liquidation Preference (as hereinafter
defined) (subject to appropriate adjustments in the event of any
stock dividend, stock split, combination or other similar
recapitalization affecting such shares) per share per annum, and
no more, payable in preference and priority to any payment of any
cash dividend on Common Stock or any other shares of capital
stock of the Company ranking junior to the Series B Preferred
Stock in respect of dividends (such Common Stock and other
inferior stock being collectively referred to as "Junior Stock"),
at a date no earlier than the Conversion Date (as hereinafter
defined). No dividends shall be declared or paid on the Series B
Preferred Stock other than a dividend payable on shares of Series
B Preferred Stock then being converted in accordance with Section
4 hereof unless a dividend is also declared and/or paid as may
then be required on the Company's Series A Convertible Preferred
Stock (the "Series A Preferred Stock").
(b) Dividends shall accrue with respect to each share
of Series B Preferred Stock from the date on which such share is
issued and outstanding and thereafter shall be deemed to accrue
from day to day whether or not earned or declared and whether or
not there exists profits, surplus or other funds legally
available for the payment of dividends, and shall be cumulative
so that if such dividends on the Series B Preferred Stock shall
not have been paid, or declared and set apart for payment, the
deficiency shall be fully paid or declared and set apart for
payment before any dividend shall be paid or declared or set
apart for any Junior Stock and before any purchase or acquisition
of any Junior Stock is made by the Company, except the repurchase
of Junior Stock from employees of the Company upon termination of
employment. At the earlier of: (i) the redemption or conversion
of the Series B Preferred Stock or (ii) the liquidation, sale or
merger of the Company, any accrued but undeclared dividends shall
be paid to the holders of record of outstanding shares of Series
B Preferred Stock. No accumulation of dividends on the Series B
Preferred Stock shall bear interest.
(c) At the election of the Company, each dividend may
be paid either in shares of Common Stock or in cash. If
dividends are paid in shares of Common Stock, the number of
shares to be distributed shall be determined based on the average
Closing Bid Price of the shares of Common Stock for the five (5)
Trading Days immediately preceding the date such dividends are
declared and the shares of Common Stock issued in payment of the
dividend must either be subject to an effective registration
statement filed under the Securities Act of 1933, as amended (the
"Securities Act"), or be presently saleable pursuant to an
exemption from registration thereunder. For purposes of this
Certificate of Designations, the term "Closing Bid Price" means,
for the Common Stock as of any date, the closing bid price on the
principal securities exchange or trading market where the
Company's Common Stock is listed or traded as reported by
Bloomberg, L.P. ("Bloomberg"), or, if applicable, the closing bid
price of the 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 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 Common Stock cannot be calculated on such date on any of
the foregoing bases, the Closing Bid Price of the Common Stock on
such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding
shares of Series B Preferred Stock being converted for which the
calculation of the Closing Bid Price is required in order to
determine the Conversion Price of such shares. "Trading Day"
shall mean any day on which the Company'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.
Dividends paid in shares of Common Stock shall be paid in full
shares only, with a cash payment equal to the value of any
fractional shares. Each dividend paid in cash shall be mailed to
the holders of record of the Series B Preferred Stock as their
names and addresses appear on the share register of the Company
or at the office of the transfer agent on the corresponding
dividend payment date.
2. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the
holders of shares of Series B Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders, after and subject
to the payment in full of all amounts required to be distributed
to the holders of any other class or series of stock of the
Company ranking in liquidation prior and in preference to the
Series B Preferred Stock (collectively referred to as "Senior
Preferred Stock"), in pari passu with the holders of the Series A
Preferred Stock and any other class or series of stock of the
Company, but before any payment shall be made to the holders of
Junior Stock by reason of their ownership thereof, an amount
equal to $1,000 per share of Series B Preferred Stock (the
"Liquidation Preference") plus any accrued but unpaid dividends
(whether or not declared). If upon any such liquidation,
dissolution or winding up of the Company the remaining assets of
the Company available for distribution to its stockholders shall
be insufficient to pay the holders of shares of Series B
Preferred Stock (and the holders of any other series of Preferred
Stock with a Liquidation Preference equal to the Liquidation
Preference of the Series B Preferred Stock, including, without
limitation, the holders of the Series A Preferred Stock) the full
amount to which they shall be entitled, the holders of shares of
Series B Preferred Stock (and the holders of any other series of
Preferred Stock with a Liquidation Preference equal to the
Liquidation Preference of the Series B Preferred Stock) shall
share ratably in any distribution of the remaining assets and
funds of the Company in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(b) After the payment of all preferential amounts
required to be paid to the holders of Preferred Stock upon the
dissolution, liquidation or winding up of the Company, all of the
remaining assets and funds of the Company available for
distribution to its stockholders shall be distributed ratably
among the holders of the Series A Preferred Stock, the Series B
Preferred Stock and the Common Stock, with each share of Series A
Preferred Stock and Series B Preferred Stock being deemed, for
such purpose, to be equal to the number of shares of Common
Stock, including fractions of a share, into which such share of
Series A Preferred Stock and Series B Preferred Stock is
convertible immediately prior to the close of business on the
business day fixed for such distribution.
(c) The merger or consolidation of the Company into or
with another corporation which results in the exchange of
outstanding shares of the Company for securities or other
consideration issued or paid or caused to be issued or paid by
such other corporation or an affiliate thereof (except if such
merger or consolidation does not result in the transfer of more
than fifty percent (50%) of the voting securities of the
Company), or the sale of all or substantially all the assets of
the Company, shall be deemed to be a liquidation, dissolution or
winding up of the Company for the purposes of this Section 2,
unless the holders of sixty-six and two-thirds percent (66-2/3%)
of the Series B Preferred Stock then outstanding vote otherwise.
The amount deemed distributed to the holders of Series B
Preferred Stock upon any such merger or consolidation shall be
the cash or the value of the property, rights and/or securities
distributed to such holders by the acquiring person, firm or
other entity. The value of such property, rights or other
securities shall be determined in good faith by the Board of
Directors of the Company.
3. Voting.
------
(a) The holders of the Series B Preferred Stock shall
not have any voting rights except (i) as required by law and (ii)
as provided in Section 4(b) below.
(b) The Company shall not amend, alter or repeal
preferences, rights, powers or other terms of the Series B
Preferred Stock so as to affect adversely the Series B Preferred
Stock, without the written consent or affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of
the then outstanding shares of Series B Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class.
4. Conversion.
----------
The holders of the Series B Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. At any time and from time to
----------------
time after April 30, 1999, each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, into
such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing one thousand dollars ($1,000)
by the Conversion Price (as defined below) in effect at the time
of conversion, provided the conversion must be for not less than
an aggregate $25,000 Liquidation Preference of the Series B
Preferred Stock, or the balance of the holder's certificates for
Series B Preferred Stock if less than $25,000 aggregate
Liquidation Preference. The Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of Series B
Preferred Stock without the payment of additional consideration
by the holder thereof (the "Conversion Price") shall be the lower
of (i) $2.00 or (ii) seventy-five percent (75%) of the average
Closing Bid Price of the shares of Common Stock for the five (5)
Trading Days prior immediately to the Conversion Date (as
hereinafter defined). In the event of a liquidation of the
Company, the Conversion Rights shall terminate at the close of
business on the first full trading day preceding the date fixed
for the payment of any amounts distributable on liquidation to
the holders of Series B Preferred Stock.
(b) Fractional Shares. No fractional shares of Common
-----------------
Stock shall be issued upon conversion of the Series B Preferred
Stock. In lieu of fractional shares, the Company shall pay cash
equal to such fraction multiplied by the then effective
Conversion Price.
(c) Mechanics of Conversion.
-----------------------
(i) The Company shall permit each holder of
Series B Preferred Stock to exercise its right to convert the
Series B Preferred Stock by delivering an executed and completed
notice of conversion (a "Notice of Conversion") to the Company by
facsimile to (603) 880-6390 or such other facsimile number as
designated by the Company, and delivering within five (5)
business days thereafter, the original Notice of Conversion,
together with the certificates representing the related shares of
Series B Preferred Stock, to the Company by hand delivery or by
express courier, duly endorsed. Each date on which a Notice of
Conversion is faxed to and received in accordance with the
provisions hereof shall be deemed a "Conversion Date." The
Company shall, at its expense, transmit the certificates
representing the Common Stock issuable upon conversion of the
Series B Preferred Stock (together with certificates representing
the related shares of Series B Preferred Stock not so converted)
to such holder via express courier, by electronic transfer or
otherwise, within three (3) business days after receipt by the
Company of the date the certificates representing the shares of
Series B Preferred Stock to be converted are duly received by the
Company (the "Delivery Date"). For purposes of this Certificate
of Designations, such conversion of the Series B Preferred Stock
shall be deemed to have been made immediately prior to the close
of business on the Conversion Date.
(ii) The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient
number of shares of Common Stock to provide for the conversion of
the Series B Preferred Stock. The Company shall use its best
efforts at all times to maintain a number of shares of Common
Stock so reserved for issuance that is no less than two (2) times
the number that is then actually issuable upon the conversion of
the Series B Preferred Stock.
(iii) All shares of Series B Preferred Stock which
shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding and all rights with
respect to such shares, including the rights, if any, to receive
dividends, notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the
holders thereof to receive shares of Common Stock in exchange
therefor. Any shares of Series B Preferred Stock so converted
shall be retired and canceled and shall not be reissued, and the
Company may from time to time take such appropriate action as may
be necessary to reduce the number of shares of authorized Series
B Preferred Stock accordingly.
(iv) If the conversion is in connection with an
underwritten offer of securities registered pursuant to the
Securities Act, the conversion may at the option of any holder
tendering Series B Preferred Stock for conversion be conditioned
upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled
to receive the Common Stock issuable upon such conversion of the
Series B Preferred Stock shall not be deemed to have converted
such Series B Preferred Stock until immediately prior to the
closing of the sale of securities.
(v) The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the Delivery Date
could result in economic loss to the holder of the Series B
Preferred Stock being converted (the "Converting Holder"). As
compensation to the Converting Holder for such loss, the Company
agrees to pay late payments to the Converting Holder in the event
that due entirely to the Company's direct or indirect actions or
to its failure to act (the "Company's Actions"). The Company
shall issue and deliver the shares of Common Stock upon
conversion in accordance with the following schedule (where "No.
Business Days Late" is defined as the number of business days
beyond five (5) business days from the Delivery Date):
No. Business Days Late Late Payment for Each $10,000
---------------------- of Preferred Stock Liquidation
Amount Being Converted
----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
The Company shall pay any payments incurred under this Subsection
(c)(v) in immediately available funds upon demand. Nothing
herein shall limit the Converting Holder's right to pursue actual
damages for the Company's Actions resulting in the transfer
agent's failure to issue and deliver the Common Stock to the
Converting Holder. Furthermore, in addition to any other
remedies which may be available to the addition to any other
remedies which may be available to the Converting Holder, in the
event that due to the Company's Actions, the transfer agent fails
to deliver such shares of Common Stock within five (5) business
days after the Delivery Date, the Converting Holder will be
entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the
Company and the Converting Holder shall be restored to its
position immediately prior to delivery of such Notice of
Conversion.
(vi) If, by the relevant Delivery Date, due to the
Company's Actions, and the transfer agent fails for any reason to
deliver the Shares to be issued upon conversion of Series B
Preferred Stock and after such Delivery Date, the Converting
Holder purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") solely in order to
make deliver in satisfaction of a sale of Common Stock by the
Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the shares of Common
Stock to be issued upon such conversion (a "Buy-In"), the Company
shall pay to the Converting Holder, in addition to all other
amounts contemplated in other provisions of the Securities
Purchase Agreement and related Agreements pursuant to which the
Series B Preferred Stock was sold by the Company to the initial
holders, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy In Adjustment Amount" is the amount
equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the
Covered Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Converting Holder in immediately
available funds immediately upon demand by the Converting Holder.
By way of illustration and not in limitation of the foregoing, if
the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000
to cover a Buy-In with respect to shares of Common Stock it sold
for net proceeds of $10,000, the Buy-In Adjustment Amount which
Company will be required to pay to the Converting Holder will be
$1,000.
(vii) Subject to the completeness and accuracy of
the Converting Holder's representations and warranties herein and
in the Securities Purchase Agreement pursuant to which the
Company sold the Series B Preferred Stock, upon the conversion of
any Series B Preferred Stock by a person who is a non-U.S.
Person, and following the expiration of any applicable Restricted
Period (as those terms are defined in Regulation S under the
Securities Act), the Company, shall at its expense, take all
necessary action (including the issuance of an opinion of
counsel) to assure that the Company's transfer agent shall issue
stock certificates without restrictive legend or stop orders in
the name of the Converting Holder (or its nominee (being a non-
U.S. Person) or such non-U.S. persons as may be designated by the
Converting Holder) and in such denominations to be specified at
conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. Nothing in this
Section 4, however, shall affect in any way the Converting
Holder's or such nominee's obligations and agreement to comply
with all applicable securities laws upon resale of the Common
Stock.
(d) Quantity Limitations on Conversion.
----------------------------------
Notwithstanding anything herein to the contrary, no holder of
Series B Preferred Stock shall have the right, and the Company
shall not have the obligation, to convert all or any portion of
the Series B Preferred Stock (and the Company shall not have the
right to pay dividends on the Series B Preferred Stock in shares
of Common Stock) if and to, the extent that the issuance to such
holder of shares of Common Stock upon such conversion (or payment
of dividends) would result in such holder being deemed the
beneficial owner of more than nine and nine-tenths percent (9.9%)
of the then outstanding shares of Common Stock within the meaning
of Section 13 (d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules promulgated
thereunder.
(e) No Impairment. The Company will not, by amendment
-------------
of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the
Series B Preferred Stock against impairment.
(f) Notice of Record Date. In the event:
---------------------
(i) that the Company declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock
or other securities of the Company;
(ii) that the Company subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock
of the Company (other than a subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or stock
distribution thereon);
(iv) of any consolidation or merger of the Company
into or with another corporation, or any exchange of shares,
recapitalization, reorganization or other similar event, as a
result of which shares of Common Stock of the Company shall be
changed into the same or a different number of shares of the same
or another class or classes of stock or securities of the Company
or another entity; or
(v) of the involuntary or voluntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed at its principal
executive offices or at the office of the transfer agent of the
Series B Preferred Stock, and shall cause notice thereof to be
mailed to the holders of the Series B Preferred Stock at least
ten (10) days prior to the record date specified in (A) below or
twenty (20) days before the date specified in (B) below, a notice
stating:
(A) the record date of such dividend, distribution,
subdivision or combination, 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, distribution,
subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, 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 shares of Common
Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
(g) Adjustment to Conversion Price.
------------------------------
(i) If, prior to the conversion of all shares of
Series B Preferred Stock, any of the events specified in Section
4(f)(i) through (iii) hereof occurs, the Board of Directors of
the Company shall make an equitable adjustment in the Conversion
Price, if necessary, to reflect such event in order to preserve
substantially the Conversion Rights of the holders of Series B
Preferred Stock. The Company shall send to each holder of Series
B Preferred Stock written notice of each change in the Conversion
Price.
(ii) If, prior to the conversion of all shares of
Series B Preferred Stock, any of the events specified in Section
4(f)(iv) hereof occurs, then the holders of Series B Preferred
Stock shall thereafter have the right to receive upon conversion
of shares of Series B Preferred Stock, upon the basis and upon
the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon
conversion, such shares of stock and/or securities as may be
issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore receivable upon
the conversion of shares of Series B Preferred Stock held by such
holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place. In any case
subject to this Subsection (g) (ii) appropriate provisions shall
be made with respect to the rights and interests of the holders
of the Series B Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment
of the Conversion Price and of the number or type of shares
issuable upon conversion of the Series B Preferred Stock) shall
thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Company shall not
effect any transaction described in this Subsection (g) (ii)
unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver
to the holders of the Series B Preferred Stock such shares of
stock and/or securities as, in accordance with the foregoing
provisions, the holders of the Series B Preferred Stock may be
entitled to purchase upon conversion, provided that such
resulting successor or acquiring entity has a class of securities
registered under Section 12 of the Exchange Act.
(h) Mandatory Conversion.
--------------------
(i) The Company may, at its option, require all
(and not less than all) holders of shares of Series B Preferred
Stock then outstanding to convert their shares of Series B
Preferred Stock into shares of Common Stock at the then effective
Conversion Price pursuant to this Section 4, at any time on or
after the first anniversary of the date the registration
statement filed under the Securities Act relating to the shares
of Common Stock into which the Series B Preferred Stock is then
convertible was declared effective by the Securities and Exchange
Commission.
(ii) All holders of record of shares of Series B
Preferred Stock then outstanding will be given at least ten (10)
days' prior written notice of the date fixed and the place
designated for mandatory conversion of all such shares of Series
B Preferred Stock pursuant to this Section 4(h). Such notice
will be sent by first class or registered mail, postage prepaid,
to each record holder of Series B Preferred Stock at such
holder's address last shown on the records of the transfer agent
for the Series B Preferred Stock (or the records of the Company,
if it serves as its own transfer agent).
5. Optional Redemption.
-------------------
(a) Redemption Price. At any time, and from time to
----------------
time, the Company may, at its option, redeem any number of shares
of Series B Preferred Stock by paying cash to the holders thereof
equal to: (i) during the first thirty (30) days following the
date the shares are first issued (the "Issue Date"), one hundred
and five percent (105%) of the sum of (A) Liquidation Preference
for such shares plus (B) any accrued but unpaid dividends (such
sum being the "Redemption Amount"), (ii) during the second thirty
(30) day period following the Issue Date at one hundred and ten
percent (110%) of the Redemption Amount, (iii) during the third
thirty (30) day period following the Issue Date at one hundred
and fifteen percent (115%) of the Redemption Amount, (iv) during
the fourth thirty (30) day period following the Issue Date at one
hundred and twenty percent (120%) of the Redemption Amount, and
(v) thereafter at the greater of (X) one hundred and twenty
percent (120%) of the Redemption Amount or (Y) the market price
on an as converted basis of the shares of Series B Preferred
Stock (based on the average Closing Bid Price of the Common Stock
for the five (5) Trading Days immediately preceding the date of
the Company's notice of redemption) plus all accrued and unpaid
dividends. Notwithstanding anything to the contrary contained
herein, so long as any shares of the Series A Preferred Stock
remain outstanding, the Company shall not redeem any shares of
Series B Preferred Stock without the prior written consent of the
holders of sixty-six and two-thirds percent (66 %) of the
outstanding shares of Series A Preferred Stock.
(b) Redemption Procedure. Upon receipt of notice of
--------------------
the Company's election to exercise its redemption rights under
Section 5(a) thereof, each holder of Series B Preferred Stock
shall accept its ratable portion (based on its holdings of Series
B Preferred Stock as compared to the aggregate number of shares
of Series B Preferred Stock then outstanding) of such offer by
tendering such holder's shares to the Company for redemption, at
an address to be set forth in such notice, at any time prior to
5:00 p.m. New York time on the fifth Trading Day (the "Redemption
Date") following receipt of such notice. Within five (5) Trading
Days of the Redemption Date, if notice is sent, the Company shall
remit fifty percent (50%) of the applicable redemption price and
within ten (10) Trading Days of the Redemption Date, if notice is
sent, the Company shall remit the remaining fifty percent (50%)
of the applicable redemption price, calculated pursuant to
Section 5(a) hereof, by check to each holder of the Series B
Preferred Stock, to the most recent address of each holder, as
set forth in the Company's books and records. The failure of the
Company to remit the redemption price within the applicable time
period shall render the Company's notice of redemption void, and
the Company shall thereafter have no right to redeem any shares
of Series B Preferred Stock pursuant to this Section 5.
(c) Cancellation of Redeemed Stock. Any shares of
------------------------------
Series B Preferred Stock redeemed pursuant to this Section 5 or
otherwise acquired by the Company in any manner whatsoever shall
be canceled and shall not under any circumstances be reissued.
The Company may from time to time take such appropriate corporate
action as may be necessary to reduce accordingly the number of
authorized shares of the Company's capital stock.
(d) Restrictions on Purchases. The Company will not,
-------------------------
and will not permit any subsidiary of the Company to, purchase or
acquire any shares of Series B Preferred Stock otherwise than
pursuant to an offer made on the same terms to all holders of
Series B Preferred Stock at the time outstanding.
(e) Conversion Right. Anything contained in this
----------------
Section 5 to the contrary notwithstanding, the holders of shares
of Series B Preferred Stock to be redeemed in accordance with
this Section shall have the right, exercisable at any time up to
the close of business on the Redemption Date (unless the Company
is legally prohibited from redeeming such shares on such date, in
which event such right shall be exercisable until the removal of
such legal disability), to convert all or any part of such shares
to be redeemed as herein provided into shares of Common Stock
pursuant to Section 4 hereof.
6. Sinking Fund. The Company shall not be required to
------------
establish or maintain any sinking fund for the payment of
dividends or liquidation preferences on the Series B Preferred
Stock or the redemption of any shares thereof.
7. Notices. Except as otherwise specifically provided
-------
herein, all notices to be provided hereunder shall be sent by
first class or registered mail, postage prepaid, in the case of
the Company to its principal executive offices, or in the case
each record holder of Series B Preferred Stock, at such holder's
address last shown on the records of the transfer agent for the
Series B Preferred Stock (or the records of the Company, if it
serves as its own transfer agent).
IN WITNESS WHEREOF, the Company has caused this
Certificate to be executed by its President this 2nd day of
February, 1999.
By: /s/ Michael T. Pieniazek
------------------------
Michael T. Pieniazek
President
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of
February 2, 1999 (this "Agreement"), is entered into by and
between AMERICAN ELECTROMEDICS CORP., a Delaware corporation,
with headquarters located at 13 Columbia Drive, Suite 5, Amherst,
New Hampshire 03031 (the "Company"), and the purchasers listed on
Exhibit A attached hereto (each, a "Purchaser," and collectively,
the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers are executing
and delivering this Agreement in reliance upon the exemptions
from registration provided by Regulation D ("Regulation D")
promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Securities Act"), and/or Section 4(2) of the
Securities Act; and
WHEREAS, the Purchasers wish to purchase, and the
Company wishes to issue, upon the terms and subject to the
conditions of this Agreement, up to 2,000 shares of Series B
Convertible Preferred Stock, par value $.01 per share (the"Series
B Preferred Stock"), having the rights, privileges and
preferences set forth in the Certificate of Designations, the
form of which is attached hereto as Exhibit B (the "Certificate
of Designations"), together with Warrants (the "Warrants") to
purchase up to 25,000 shares of the Company's Common Stock, par
value $.10 per share (the "Common Stock"), pro rata with the
purchase of the Series B Preferred Stock. The Series B Preferred
Stock is convertible into shares of the Company's Common Stock on
the terms set forth in the Certificate of Designations, and the
Warrants may be exercised for the purchase of the Company's
Common Stock, on the terms set forth therein. The Series B
Preferred Stock and the Warrants are collectively referred to
herein as the "Securities."
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 parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
A. PURCHASE. Each of the Purchasers hereby agrees to
purchase from the Company up to the number of shares of Series B
Preferred Stock, together with the number of Warrants set forth
next to its name on Exhibit A hereto (the Series B Preferred
Stock and the Warrants sometimes collectively, the "Securities").
The Certificate of Designations, in substantially the form
attached hereto as Exhibit B, shall be filed with the Secretary
of State of the State of Delaware on or prior to the Closing Date
(as defined herein), and the Warrants shall be issued in
substantially the form attached hereto as Exhibit C. The
purchase price for the Securities shall be as set forth on
Exhibit A hereto.
B. CLOSING. Up to 2,000 shares of the Series B
Preferred Stock and associated Warrants to be purchased by the
Purchasers hereunder, in definitive form, and in such
denominations and registered in such names as the Purchasers or
their representative, if any, may request upon at least forty-
eight hours' prior notice to the Company, shall be delivered by
or on behalf of the Company for the account of each such
Purchaser, against payment by such Purchaser or on its behalf of
the purchase price of $2,000,000 therefor by wire transfer to a
separate escrow account maintained by Thelen Reid & Priest LLP
for the benefit of the Company, all at the offices of Thelen Reid
& Priest LLP, 40 West 57th Street, New York, New York 10019 on
February 2, 1999 or at such other time and date as the Purchasers
or their representative, if any, and the Company may agree upon
in writing, such date being referred to herein as the "Closing
Date."
2. PURCHASER REPRESENTATIONS AND WARRANTIES.
Each Purchaser represents and warrants to, and
covenants and agrees with, the Company as follows:
A. INVESTMENT PURPOSES. The Purchaser is purchasing
the Securities for investment purposes only for its own account,
and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any
distribution thereof, except to the extent contemplated in the
Registration Rights Agreement which is Exhibit D to this
Agreement.
B. STATUS. The Purchaser and each of its equity
owners is (i) an "accredited investor," as that term is defined
in Rule 501 of the General Rules and Regulations under the
Securities Act by reason of Rule 501(a), (ii) experienced in
making investments of the kind described in this Agreement and
the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and
professional advisors, to protect its own interests in
connection with the transactions described in this Agreement and
the related documents, (iv) able to afford the entire loss of its
investment in the Series B Preferred Stock, and (v) is fully
aware of the risks of any investment in the Company, including
those set forth in "Risk Factors" in Amendment No. 2, dated
January 19, 1999, to the Company's Registration Statement on Form
SB-2, (Registration No. 333-58937) (the "Form SB-2").
C. RESALES. All subsequent offers and sales of the
Series B Preferred Stock and the Common Stock issuable upon
conversion or exercise of, or in lieu of dividend payments on,
the Series B Preferred Stock, or upon exercise of the Warrants
shall be made pursuant to an effective registration statement
under the Securities Act or pursuant to an applicable exemption
from registration.
D. RELIANCE. The Purchaser understands that the
Series B Preferred Stock is being offered and sold to it in
reliance upon exemptions from the registration requirements of
the United States federal and state securities laws, and that the
Company is relying upon the truth and accuracy of the Purchaser's
representations and warranties, and the Purchaser's compliance
with its agreements, each as set forth herein, in order to
determine the availability of such exemptions and the eligibility
of the Purchaser to acquire the Series B Preferred Stock.
E. INVESTIGATION. The Purchaser acknowledges that in
making its decision to purchase the Series B Preferred Stock, it
has relied upon independent investigations made by it and its
representatives, if any, and the Purchaser and such
representatives, if any, have been provided access and the
opportunity to examine all material, publicly available books and
records of the Company, all material contracts and documents
relating to this offering and have had an opportunity to ask
questions of, and to receive answers from the Company or persons
acting on its behalf concerning the terms and conditions of this
offering. The Purchaser and its advisors, if any, have been
furnished with access to all publicly available materials
relating to the business, finances and operations of the Company
(including, without limitation, the Form SB-2, the Company's Form
10-KSB for the year ended July 31, 1998 (the "1998 Annual
Report") and the Company's Form 10-QSB for the quarter ended
October 31, 1998 ("Form 10-QSB"), and other materials relating to
the offer and sale of the Securities which have been requested.
The Purchaser and its advisors, if any, have received answers to
any such inquiries which they have deemed to be satisfactory.
F. AUTHORITY. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the
Purchaser and is a valid and binding agreement of the Purchaser,
enforceable in accordance with its terms, except to the extent
that enforcement of this Agreement 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.
G. PRIOR TRANSACTIONS. The Purchaser acknowledges
that during the ten (10) business days immediately preceding its
execution of this Agreement neither the Purchaser nor any of its
affiliates has purchased or sold any securities of the Company,
including entered into or closing any puts, calls, future
transactions, short sales or other hedging or arbitrage
transactions involving the securities of the Company.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to each Purchaser
that:
A. ORGANIZATION. The Company is a 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.
B. CAPITALIZATION. On the date hereof, the
authorized capital of the Company consists of 20,000,000 shares
of Common Stock, par value $.10 per share and 1,000,000 shares of
Preferred Stock, par value $.01 per share, of which as of
December 31, 1998, 7,071,136 shares of Common Stock were issued
and outstanding and of which 3,000 shares designated as Series A
Convertible Preferred Stock were issued and outstanding.
Schedule 1 hereto sets forth the options, warrants and
----------
convertible securities of the Company (the "Derivative
Securities") 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 PREFERRED STOCK. On the Closing
Date, the shares of Series B Preferred Stock to be issued to the
Purchasers, upon payment of the purchase price therefore, 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
Securities issuable to the Purchasers hereunder which have not
been waived as of the date hereof.
D. CONCERNING THE COMMON STOCK. The Common Stock
issuable upon conversion of, or in lieu of dividend payments on,
the Series B Preferred Stock, and upon exercise of the Warrants,
when so issued, 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 Common Stock issuable to the Purchasers pursuant
to the terms of the Series B Stock or the Warrants.
E. 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").
F. AUTHORIZED SHARES. The Company has legally
available a sufficient number of authorized and unissued Common
Stock as may be reasonably necessary to effect the conversion of
the Series B Preferred Stock and the exercise of the Warrants.
G. LEGALITY. The Company has the requisite corporate
power and authority to enter into this Agreement and to issue and
deliver the Series B Preferred Stock and the Warrants. The
issuance of the Series B Preferred Stock and the Warrants (and
the Common Stock issuable upon conversion of, or in lieu of
dividend payments on, the Series B Preferred Stock and exercise
of the Warrants) have been duly and validly authorized by all
necessary corporate action by the Company.
H. TRANSACTION AGREEMENTS. This Agreement, the
Registration Rights Agreement, the form of which is attached
hereto as Exhibit D (the "Registration Rights Agreement," and
together with this Agreement and the Warrants, the "Primary
Documents"), and the transactions contemplated thereby (including
the filing of the Certificate of Designations with the Secretary
of State of the State of Delaware), have been duly and validly
authorized by the Company; this Agreement has been duly executed
and delivered by the Company and this Agreement is, and the
Primary 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 Primary 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.
I. NON-CONTRAVENTION. The execution and delivery of
this Agreement, and each of the other Primary Documents, and the
consummation by the Company of the other transactions
contemplated by this Agreement and each of the other Primary
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
Primary Documents.
J. APPROVALS. No authorization, approval or consent
of any court, governmental body, regulatory agency, self-
regulatory organization, stock exchange or market or the
stockholders of the Company is required to be obtained by the
Company for the entry into or the performance of this Agreement
and the other Primary Documents, except (i) such authorizations,
approvals and consents that have been obtained, and, (ii)
authorizations, approvals, consents or orders of the Commission
with respect to the Registration Statements referred to in the
Registration Rights Agreement, which approvals and orders are not
required to be obtained as of the Closing Date and will be
obtained when required.
K. SEC FILINGS. Except to the extent disclosed to
the Purchasers, none of the reports or documents (including
amendments thereto) filed by the Company with the Commission
since July 31, 1996 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.
L. ABSENCE OF CERTAIN CHANGES. Since October 31,
1998, 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 except as disclosed in the Form SB-2,
press releases and discussions between management of the Company
and the Purchasers or their representatives.
M. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The
Company 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 only to mortgages,
pledges, liens, security interests, conditional sale agreements,
encumbrances or charges created in the ordinary course of
business or to existing loan agreements.
N. PATENTS AND OTHER PROPRIETARY RIGHTS. The Company
has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for the
conduct of its business as now conducted, and such business does
not conflict with or constitute an infringement on the rights of
others.
O. PERMITS. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of
its business as now conducted, the lack of which would materially
and adversely affect the business or financial condition of the
Company. The Company is not in default in any material respect
under any of such franchises, permits, licenses or similar
authority.
P. ABSENCE OF LITIGATION. Except as set forth in the
Company's 1998 Annual Report, the Form 10-QSB and the Form SB-2,
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 Primary 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
Primary Documents.
Q. NO DEFAULT. Each of the Company and its
subsidiaries is not 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.
R. TRANSACTIONS WITH AFFILIATES. Except as disclosed
in the 1998 Annual Report and in the Company's reports on Form
10-QSB and the Form SB-2, there are no agreements, understandings
or proposed transactions between the Company and any of its
officers, directors or affiliates that, had they existed October
31, 1998, would have been required to be disclosed in the Form
10-QSB.
S. 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.
T. 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.
U. AGENT FEES. The Company has not incurred any
liability for any finder's or brokerage fees or agent's
commissions in connection with the offer and sale of the Series B
Preferred Stock hereunder, except to the extent set forth in
Section 4. j. hereof.
V. PRIVATE OFFERING. Subject to the accuracy of the
Purchaser's representations and warranties set forth in Section 2
hereof, the offer, sale and issuance of the Series B Preferred
Stock as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act. The Company
agrees that neither the Company nor anyone acting on its behalf
will offer any of the Series B Preferred Stock or the Warrants or
any similar securities for issuance or sale, or solicit any offer
to acquire any of the same from anyone so as to render the
issuance and sale of the Securities subject to the registration
requirements of the Securities Act. The Company has not offered
or sold the Securities by any form of general solicitation or
general advertising, as such terms are used in Rule 502(c) under
the Securities Act.
W. FULL DISCLOSURE. Neither the representations and
warranties of the Company set forth in this Agreement nor any
information supplied to the Purchasers by the Company contains
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.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. Each Purchaser
acknowledges that (1) neither the Series B Preferred Stock,
Common Stock nor the Warrants have been, and are not being,
registered under the Securities Act and, except as provided in
the Registration Rights Agreement, the Common Stock issuable upon
conversion of the Series B Preferred Stock, or in lieu of
dividend payments on, the Series B Preferred Stock, and upon
exercise of the Warrants (the "Underlying Common Stock"), have
not been and are not being registered under the Securities Act,
and may not be transferred unless (A) subsequently registered
thereunder or (B) the Purchaser shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form
and substance to the Company, to the effect that the Securities
or the Underlying Common Stock to be sold or transferred may be
sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities or the Underlying
Common Stock made in reliance upon Rule 144 under the Securities
Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of the
Securities or the Underlying Common Stock under circumstances in
which the seller, or the person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the
Securities Act, may require compliance with another exemption
under the Securities Act and the rules and regulations of the
Commission thereunder; and (3) neither the Company nor any other
person is under any obligation to register the Securities or the
Underlying Common Stock (other than pursuant to the Registration
Rights Agreement) under the Securities Act or to comply with the
terms and conditions of any exemption thereunder. The provisions
of Section 4(a) and 4(b) hereof shall be binding upon any
subsequent transferee of the Series B Preferred Stock or
Warrants.
B. RESTRICTIVE LEGEND. Each Purchaser acknowledges
and agrees that the Series B Preferred Stock or the Warrants,
and, until such time as the Common Stock issuable upon conversion
of the Series B Preferred Stock or upon exercise of the Warrants
shall have been registered under the Securities Act as
contemplated by the Registration Rights Agreement and sold in
accordance with such Registration Statement, such securities may
be subject to a stop-transfer order placed against the transfer
of such securities, and such shares shall bear a restrictive
legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to
make all necessary filings in connection with the sale of the
Series B Preferred Stock to each Purchaser as required by United
States Securities laws and regulations, or by any domestic
securities exchange or trading market, including, if applicable,
the filing of a notice on Form D (at such time and in such manner
as required by the Rules and Regulations of the Commission), and
to provide copies thereof to the Purchaser promptly after such
filing or filings.
D. REPORTING STATUS. So long as any of the
Purchasers beneficially owns any of the Securities, the Company
shall file all reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act, and, except
in connection with an acquisition transaction in which at least
50% of the Company's voting equity securities or substantially
all of the assets of the Company are acquired by another entity,
the Company shall not terminate its status as an issuer required
to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such
termination.
E. SECURITIES FILINGS. The Company shall from time
to time promptly take such action as the Purchasers or any of
their representatives, if applicable, may reasonably request to
qualify (i) the Securities for offering and sale under the
securities laws (other than United States federal securities
laws) of such jurisdictions in the United States as shall be so
identified to the Company and (ii) the Underlying Common Stock on
the Nasdaq OTC Bulletin Board or such other trading system or
exchange on which the Common Stock is then traded or listed, and
to comply with such laws so as to permit the continuance of sales
therein, provided that in connection therewith, the Company shall
not be required to qualify as a foreign corporation or to file a
general consent to the service of process in any jurisdiction.
F. USE OF PROCEEDS. The Company will use the
proceeds from the issuance of the Series B Preferred Stock
(excluding amounts paid by the Company for legal fees and $90,000
in finder's fees in connection with the sale of the Series B
Preferred Stock and $10,000 in legal fees for counsel to the
Purchasers) for general corporate purposes, repayment of $650,000
principal amount of notes from Sovereign Partners LP, and working
capital.
G. RESERVATION OF COMMON STOCK. The Company will at
all times have authorized and reserved for the purpose of
issuance a sufficient number of shares of Common Stock to provide
for the conversion of the Series B Preferred Stock and the
exercise of the Warrants. The Company will use its best efforts
at all times to maintain a number of shares of Common Stock so
reserved for issuance that is no less than the sum of (i) two (2)
times the number that is then actually issuable upon the
conversion of the Series B Preferred Stock and (ii) the number
issuable upon exercise of the Warrants. The number of shares of
Common Stock reserved for issuance by the Company upon conversion
of the Series B Preferred Stock or upon exercise of the Warrants
shall at all times be allocated pro rata among the Purchasers
based upon the aggregate purchase price of the Securities
purchased by each Purchaser, and no Purchaser may at any time
convert its Series B Preferred Stock or exercise Warrants so as
to obtain a greater number of Common Stock than its pro rata
allocation of the Company's reserved Common Stock. In the event
that a Purchaser shall sell or otherwise transfer, in whole or in
part, any of its Securities (except for Common Stock of the
Company subject to an effective registration statement under the
Securities Act or otherwise freely tradable by such Purchaser),
each transferee shall, for purposes of determining such
transferee's allocation of the Company's reserved Common Stock,
be allocated a pro rata portion of the initial purchase price
paid by such Transferor upon its purchase of the Series B
Preferred Stock.
H. DILUTION. The number of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock may
increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to the conversion of the
Series B Preferred Stock. The Company's executive officers and
directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have a
potential dilutive effect. The Board of Directors of the Company
has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the shares
of Common Stock upon conversion of the Series B Preferred Stock
is binding upon the Company and enforceable regardless of the
dilutions such issuance may have on the ownership interests of
other stockholders of the Company.
I. REIMBURSEMENT. If (i) any Purchaser, other than
by reason of its gross negligence or willful misconduct, becomes
involved in any capacity in any action, proceeding or
investigation brought by any stockholder of the Company, in
connection with or as a result of the consummation of the
transactions contemplated by Primary Documents, or if such
Purchaser impleaded in any such action, proceeding or
investigation by any person, or (ii) any Purchaser, other than by
reason of its gross negligence or willful misconduct or by reason
of its trading of the Common Stock in a manner that is illegal
under the federal securities laws, becomes involved in any
capacity in any action, proceeding or investigation brought by
the Commission against the Company or as a result of the
consummation of the transactions contemplated by the Primary
Documents, or is such Purchaser is impleaded in any such action,
proceeding or investigation by any person, then in any such case,
the Company will reimburse such Purchaser for its reasonable
legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to
any matter in which such Purchaser is a named party, the Company
will pay such Purchaser the reasonable charges for the time of
any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation
for hearings, trials or pretrial matters, or other otherwise with
respect to inquiries, hearing, trials and other proceedings
relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this Section shall
be in addition to any liability which the Company under this
Section shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and
conditions to any affiliates of the Purchasers who are actually
named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such affiliate, and
shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the
Purchasers and any such affiliate and any such person. The
Company, also agrees that neither any Purchaser nor any such
affiliate, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Primary
Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the
gross negligence or willful misconduct of such Purchaser, or from
the misstatement of any representations or warranties by the
Purchaser in this Agreement.
5. TRANSFER AGENT INSTRUCTIONS.
A. The Company warrants that no instruction, other
than the instructions referred to in this Section 5 and stop
transfer instructions to give effect to Sections 4(a) and 4(b)
hereof prior to the registration and sale of the Underlying
Common Stock under the Securities Act, will be given by the
Company to the transfer agent and that such Common Stock shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Purchaser's obligations
and agreement to comply with all applicable securities laws upon
resale of the Securities or the Underlying Common Stock. If a
Purchaser provides the Company with an opinion of counsel
reasonably satisfactory (as to both the identity of such counsel
and the content of such opinion) to the Company that registration
of a resale by the Purchaser of any of the Securities or
Underlying Common Stock in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the
Securities Act, the Company shall (except as provided in clause
(2) of Section 4(a) of this Agreement) permit the transfer of the
Securities or the Underlying Common Stock and, in the case of the
Common Stock, promptly instruct the Company's transfer agent to
issue one or more certificates for Common Stock without legend in
such names and in such denominations as specified by the
Purchaser.
B. The Company will permit each Purchaser to exercise
its right to convert the Series B Preferred Stock or to exercise
the Warrants by faxing an executed and completed Notice of
Conversion or Form of Election to Purchase, as applicable, to the
Company, and delivering within five (5) business days thereafter,
the original Notice of Conversion (and the related original
Series B Preferred Stock) or Form of Election to Purchase (and
the related original Warrants) to the Company by hand delivery or
by express courier, duly endorsed. Each date on which a Notice
of Conversion or Form of Election to Purchase is faxed to and
received in accordance with the provisions hereof shall be deemed
a "Conversion Date." The Company (or its transfer agent) will
transmit the certificates representing the Common Stock issuable
upon conversion of the Series B Preferred Stock or upon exercise
of any Warrants (together with the Series B Preferred Stock not
so converted, or the Warrants not so exercised) to such Purchaser
via express courier as soon as practicable, but in all events no
later than the later to occur of (the "Delivery Date") (i) seven
(7) business days after the Conversion Date and (ii) five (5)
business days after receipt by the Company of the original Notice
of Conversion (and the related original Series B Preferred Stock)
or Form of Election to Purchase (and the related original
Warrants), as applicable. For purposes of this Agreement, such
conversion of the Series B Preferred Stock or exercise of the
Warrants shall be deemed to have been made immediately prior to
the close of business on the Conversion Date.
C. In lieu of delivering physical certificates
representing the Common Stock issuable upon the conversion of the
Series B Preferred Stock or exercise of the Warrants, provided
the Company's transfer agent is participating in the Depositary
Trust Company ("DTC") Fast Automated Securities Transfer program,
on the written request of a Purchaser who shall have previously
instructed such Purchaser's prime broker to confirm such request
to the Company's transfer agent, the Company shall use
commercially reasonable efforts to cause its transfer agent to
electronically transmit such Common Stock to the Purchaser by
crediting the account of the Purchaser's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system
no later than the applicable Delivery Date.
D. The Company shall pay any payments incurred under
this Section 5 in immediately available funds upon demand.
Nothing herein shall limit a Purchaser's right to pursue actual
damages for the Company's failure to issue and deliver shares of
Common Stock to such Purchaser. Furthermore, in addition to any
other remedies which may be available to such Purchaser, in the
event that the Company fails for any reason to effect delivery of
such Common Stock within five (5) business days after the
relevant Delivery Date, the Purchaser will be entitled to revoke
the relevant Notice of Conversion or Form of Election to Purchase
by delivering a notice to such effect to the Company, whereupon
the Company and such Purchaser shall each be restored to their
respective positions immediately prior to delivery of such Notice
of Conversion or Form of Election to Purchase. For purposes of
this Section 5, "business day" shall mean any day in which the
financial markets of New York are officially open for the conduct
of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE
SECURITIES.
The Purchaser understands that the Company's obligation to
issue the Securities on the Closing Date to the Purchasers
pursuant to this Agreement is conditioned upon:
A. The accuracy on the Closing Date of the
representations and warranties of the applicable Purchaser
contained in this Agreement and the performance by the Purchasers
on or before such Closing Date of all covenants and agreements of
the applicable Purchasers required to be performed on or before
such Closing Date.
B. The absence or inapplicability of any and all
laws, rules or regulations prohibiting or restricting the
transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE
THE SECURITIES.
The Company understands that each Purchaser's obligation to
purchase the Securities on the Closing Date is conditioned upon:
A. The accuracy on the Closing Date of the
representations and warranties of the Company contained in this
Agreement, and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company
required to be performed on or before the Closing Date.
B. The Company shall have duly filed the Certificate
of Designations, in substantially the form attached hereto as
Exhibit B, with the offices of the Secretary of State of the
State of Delaware in accordance with the Delaware General
Corporation Law.
C. The Company shall have executed and delivered a
signed counterpart to the Registration Rights Agreement.
D. On the Closing Date, the Purchasers shall have
received from the Company such other certificates and documents
as they or their representative, if applicable, shall reasonably
request, and all proceedings taken by the Company in connection
with the Primary Documents contemplated by this Agreement and the
other Primary Documents and all documents and papers relating to
such Primary Documents shall be satisfactory to the Purchasers.
E. On the Closing Date or Additional Closing Date, as
the case may be, the Purchaser shall have received an opinion of
counsel for the Company, dated the Closing Date or Additional
Date, in form, scope, and substance reasonably satisfactory to
the Purchaser, to the effect set forth in Exhibit E attached
hereto.
8. EXPENSES.
The Company covenants and agrees with the Purchasers that
the Company will pay or cause to be paid the following: (a) the
fees, disbursements and expenses of the Company's counsel and
accountants in connection with the issuance of the Securities,
(b) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as
provided in Section 4(e) hereof, and (c) all other costs and
expenses incident to the performance of the Company's obligations
hereunder which are not otherwise specifically provided for in
this Section 8.
9. GOVERNING LAW; MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of Wilmington or the
state courts of the State of Delaware sitting in the City of
Wilmington in connection with any dispute arising under this
Agreement or any of the Primary 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, including any transferees of the Securities. Any Purchaser
of Series B Preferred Stock in a closing taking place following
the Initial Closing Date may become a party to this Agreement by
executing a counterpart to this Agreement on the applicable Closing
Date. 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.
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
ATT: Michael T. Pieniazek, President
Tel: (603) 880-6300
Fax: (603) 880-6390
WITH COPIES TO:
THELEN REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
ATT.: Bruce A. Rich, Esq.
Tel: 212-603-6780
Fax: 212-603-2001
PURCHASERS: At the addresses set forth on the signature
page of this Agreement, as such addresses may
be updated from time to time by each of the
Purchasers.
WITH COPIES TO:
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Tel: 212-689-3322
Fax: 212-213-2077
<PAGE>
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company and
each of the Purchasers shall survive the execution and delivery
of this Agreement and the delivery of the Series B Preferred
Stock for a period of two (2) years.
IN WITNESS WHEREOF, this Agreement has been duly
executed by each of the undersigned.
AMERICAN ELECTROMEDICS CORP.
By:
------------------------
Michael T. Pieniazek
President
"PURCHASERS"
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT A PURCHASERS
EXHIBIT B FORM OF CERTIFICATE OF DESIGNATIONS
EXHIBIT C FORM OF WARRANT
EXHIBIT D REGISTRATION RIGHTS AGREEMENT
EXHIBIT E FORM OF OPINION OF COUNSEL
EXHIBIT 10.2
AMERICAN ELECTROMEDICS CORP.
WARRANT TO PURCHASE COMMON STOCK
The Transferability of this Warrant is
Restricted as Provided in Section 2.
Void after January 31, 2002 Right to Purchase [ ] shares
of Common Stock (subject to
adjustment)
No. 1
PREAMBLE
American Electromedics Corp. ("AEC" or the "Company"), a
Delaware corporation, hereby certifies that, for value received,
____________________________________, whose address is
__________________________________, or its registered assigns
(hereinafter, the "Registered Holder"), is entitled, subject to
the terms set forth below, to purchase from the Company at any
time or from time to time before 5:00 P.M. New York time, on
January 31, 2002 (such time, the "Expiration Time"), 25,000 of
the Company's fully paid and nonassessable shares of common
stock, par value $0.10 per share (the "Common Stock") of the
Company, at the purchase price per share (the "Purchase Price")
of $3.00 (the "Initial Purchase Price"). The number and
character of such Common Stock and the Purchase Price are subject
to adjustment as provided herein.
This Warrant is one of the Warrants to Purchase Common Stock
(the "Warrants"), evidencing the right to purchase Common Stock
of the Company, issued pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement"), dated February
2, 1999, between the Company and the Purchasers identified
therein. The Securities Purchase Agreement contains certain
additional terms that are binding upon the Company and each
Registered Holder of the Warrants. A copy of the Securities
Purchase Agreement may be obtained by any Registered Holder of
the Warrants from the Company upon written request. Capitalized
terms used but not defined herein shall have the meanings set
forth in the Securities Purchase Agreement.
As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all shares of any
class or classes (however designated) of the Company, authorized
on or after the date hereof, the holders of which shall have the
right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall
ordinarily be entitled to vote for the election of directors of
the Company (even though the right so to vote has been suspended
by the happening of a contingency).
(c) The term "Other Securities" refers to any class of
shares (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive,
or shall have received, upon the exercise of the Warrants, in
lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to
Section 6 or otherwise.
(d) The term "Shares" means the Common Stock issued or
issuable upon exercise of the Warrants.
1. REGISTRATION RIGHTS.
The rights of the holders of Warrants to register Warrants
or Shares shall be as stated in the Registration Rights Agreement
of even date herewith.
2. RESTRICTED STOCK.
If, at the time of any transfer or exchange (other than a
transfer or exchange not involving a change in the beneficial
ownership of such Warrant or Shares) of a Warrant or Shares, such
Warrant or Shares shall not be registered under the Securities
Act, the Company's obligation to transfer such Warrant or Shares
shall be subject to the provisions of Section 5 of the Securities
Purchase Agreement.
3. EXERCISE OF WARRANT.
3.1. Exercise in Full. The holder of this Warrant may
----------------
exercise it in full prior to the Expiration Time by surrendering
this Warrant, with the form of Election to Purchase at the end
hereof duly executed by such holder, to the Company in the manner
set forth in Section 5 of the Securities Purchase Agreement. The
surrendered Warrant shall be accompanied by payment, in cash or
by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of
shares of Common Stock called for on the face of this Warrant
(without giving effect to any adjustment therein) by the Initial
Purchase Price.
3.2. Partial Exercise. This Warrant may be exercised in
----------------
part by surrender of this Warrant in the manner provided in
Subsection 3.1, except that the exercise price shall be
calculated by multiplying (a) the number of shares of Common
Stock as shall be designated by the holder in the subscription at
the end hereof by (b) the Initial Purchase Price. On any such
partial exercise, subject to the provisions of Section 2 hereof,
the Company, at its expense will forthwith issue and deliver to
or upon the order of the Registered Holder hereof a new Warrant
or Warrants of like tenor, in the name of the Registered Holder
hereof or as such Registered Holder may request, calling in the
aggregate on the face or faces thereof for the number of shares
of Common Stock (without giving effect to any adjustment therein)
equal to the number of such shares called for on the face of this
Warrant minus the number of such shares designated by the
Registered Holder in the applicable Election to Purchase.
3.3. Company Acknowledgment. The Company will, at the time
----------------------
of the exercise, exchange or transfer of this Warrant, upon the
request of the Registered Holder hereof, acknowledge in writing
its continuing obligation to afford to such Registered Holder or
transferee any rights (including, without limitation, any right
to registration of the Company's shares of Common Stock) to which
such Registered Holder or transferee shall continue to be
entitled after such exercise, exchange or transfer in accordance
with the provisions of this Warrant, provided that if the
Registered Holder of this Warrant shall fail to make any such
request, such failure shall not affect the continuing obligation
of the Company to afford to such Registered Holder or transferee
any such rights.
4. DELIVERY OF SHARE CERTIFICATES UPON EXERCISE. Following the
exercise of this Warrant in full or in part, within the time
periods and in the manner provided by Section 5(b) of the
Securities Purchase Agreement, the Company, at its expense
(including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the Registered
Holder hereof, or as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of fully paid and
nonassessable Common Stock to which such Registered Holder shall
be entitled on such exercise, plus, in lieu of any fractional
Share to which such Registered Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then
current market value of one full share of Common Stock (as
computed in accordance with Subsection 5.1(d) hereof).
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF COMMON
STOCK.
5.1. The Purchase Price hereof shall be subject to
adjustment from time to time as
follows:
(a) In case the Company shall (i) pay a dividend on its
shares of Common Stock in Common Stock, (ii) subdivide its
outstanding shares of Common Stock or (iii) combine its
outstanding shares of Common Stock into a smaller number of
shares, then, in such an event, the Purchase Price in effect
immediately prior thereto shall be adjusted proportionately so
that the adjusted Purchase Price will bear the same relation to
the Purchase Price in effect immediately prior to any such event
as the total number of shares of Common Stock outstanding
immediately prior any such event shall bear to the total number
of shares of Common Stock outstanding immediately after to such
event. An adjustment made pursuant to this Section 5.1(a) shall,
(i) become effective retroactively immediately after the record
date in the case of a dividend and shall (ii) become effective
immediately after the effective date in the case of a subdivision
or combination. The Purchase Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any
successive event or events described herein.
(b) In case the Company shall distribute to all holders of
its shares of Common Stock, Other Securities, evidences of its
indebtedness or assets (excluding cash dividends or
distributions) or purchase rights, options or warrants to
subscribe for or purchase other Securities, then in each such
case, the Purchase Price in effect thereafter shall be determined
by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the total
number of outstanding shares of Common Stock multiplied by the
current market price per share of Common Stock (as determined in
accordance with the provisions of subdivision (c) below) on the
record date mentioned below, less the fair market value as
determined by the Board of Directors (whose determination shall
be conclusive) of the Other Securities, assets or evidences of
indebtedness so distributed or of such rights or warrants, and of
which the denominator shall be the total number of outstanding
shares of Common Stock multiplied by such current market price
per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective
retroactively immediately after the record date for the
determination of shareholders entitled to receive such
distribution.
(c) For the purpose of any computation under subdivision
(b) above, the current market price per share of Common Stock
shall be deemed to be the closing price of the Company's shares
of Common Stock on the date that the computation is made.
(d) No adjustment of the Purchase Price shall be made if
the amount of such adjustment shall be less than $.05 per share,
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 so carried forward, shall amount to
not less than $.05 per share. In case the Company shall at any
time issue shares of Common Stock by way of dividend on any class
of stock of the Company or subdivide or combine the outstanding
shares of Common Stock, said amount of $.05 per share (as
theretofore increased or decreased, if the same amount shall have
been adjusted in accordance with the provisions of this
subparagraph) shall forthwith be proportionately increased in the
case of a combination or decreased in the case of such a
subdivision or stock dividend so as to appropriately reflect the
same.
5.2. Upon each adjustment of the Purchase Price pursuant to
subdivisions (a) and (b) of Section 5.1, the number of shares of
Common Stock purchasable upon exercise of this Warrant shall be
adjusted to the number of shares of Common Stock, calculated to
the nearest one hundredth of a share, obtained by multiplying the
number of shares of Common Stock purchasable immediately prior to
such adjustment upon the exercise of this Warrant Certificate by
the Purchase Price in effect prior to such adjustment and
dividing the product so obtained by the new Purchase Price.
5.3. In the event of any capital reorganization of the
Company, or of any reclassification of the shares of Common
Stock, this Warrant shall be exercisable after such capital
reorganization or reclassification upon the terms and conditions
specified in this Warrant, for the number of shares of stock or
other securities which the shares of Common Stock issuable (at
the time of such capital reorganization or reclassification) upon
exercise of this Warrant would have been entitled to receive upon
such capital reorganization or reclassification if such exercise
had taken place immediately prior to such action. The
subdivision or combination of Common Stock at any time
outstanding into a greater or lesser number of shares of Stock
shall not be deemed to be a reclassification of the shares of
Common Stock of any for the purposes of this Subsection 5.3.
5.4 Whenever the Purchase Price is adjusted as herein
provided, the Company shall the adjusted Purchase Price in
accordance with Subsection 5.1 and shall prepare a certificate
signed by its Chief Financial Officer and any other executive
officer setting forth the adjusted Purchase Price, and showing in
reasonable detail the method of such adjustment and the fact
requiring the adjustment and upon which such calculation is
based, and such certificate shall forthwith be forwarded to the
Registered Holder.
5.5. The form of this Warrant need not be changed because of
any change in the purchase Price pursuant to this Section 5 and
any Warrant issued after such change may state the same Purchase
Price and the same number of shares of Common Stock as are stated
in this Warrant as initially issued.
6. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
6.1. Merger, Etc. In case at any time or from time to time
-----------
after the date of issuance of this Warrant, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any
other person or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or
arrangement contemplating the dissolution of the Company within
three (3) years from the date of such transfer (any such
transaction being hereinafter sometimes referred to as a
"Reorganization"), then, in each such case, the Registered Holder
of this Warrant, upon the exercise hereof as provided in Section
3 at any time after the consummation or effective date of such
Reorganization (the "Effective Date"), shall receive, in lieu of
the shares of Common Stock issuable on such exercise prior to
such consummation or such Effective Date, the stock and other
securities and property (including cash) to which such Registered
Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such
Registered Holder had so exercised this Warrant, immediately
prior thereto (all subject to further adjustment thereafter as
provided in Section 5). The Company shall not effect a
transaction of the type described in clause (b) or (c) above
unless upon or prior to the consummation thereof, the Company's
successor corporation, or if the Company shall be the surviving
company in any such Reorganization but is not the issuer of the
shares of stock, securities or other property to be delivered to
the holders of the Company's outstanding shares of Common Stock
at the effective time thereof, then such issuer, shall assume in
writing the obligation hereunder to deliver to the Registered
Holder of this Warrant such shares of stock, securities, cash or
other property as such holder shall be entitled to purchase in
accordance with the provisions hereof.
6.2. Dissolution. Except as otherwise expressly provided in
-----------
Subsection 6. 1, in the event of any dissolution of the Company
following the transfer of all or substantially all of its
Properties or assets, the Company, prior to such dissolution,
shall at its expense deliver or cause to be delivered the stock
and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this Section 6 to
a bank or trust company having its principal office in New York
City, as trustee for the holder or holders of the Warrants.
6.3. Continuation of Terms. Except as otherwise expressly
---------------------
provided in Subsection 1, upon any reorganization, consolidation,
merger or transfer (and any dissolution following transfer)
referred to in this Section 6, this Warrant shall continue in
full force and effect and hereof shall be applicable to the
shares of stock and other securities and property on the exercise
of this Warrant after the consummation of such reorganization, on
or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or
substantially all of the properties or of the Corn any, whether
or not such person shall have expressly assumed the terms of
assets this Warrant.
7. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its Certificate of Incorporation or By-laws, or
through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the
Warrants, as specified herein and in the Securities Purchase
Agreement, against dilution (to the extent specifically provided
herein) or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of
any shares of stock receivable on the exercise of the Warrants
above the amount payable therefor on such exercise, and (b) will
not effect a subdivision or split up of shares or similar
transaction with respect to any class of the Common Stock without
effecting an equivalent transaction with respect to all other
classes of Common Stock.
8. ACCOUNTANT'S CERTIFICATE AS TO ADJUSTMENTS. In each case of
any adjustment or readjustment in the Common Stock issuable on
the exercise of the Warrants, the Company, at its expense, will
promptly cause the independent certified public accountants of
the Company to compute such adjustment or readjustment in
accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or
sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or
deemed to be outstanding, and (c) the Purchase Price in effect
and number and type of Shares for which the Warrants were
exercisable immediately prior to such issue or sale and as each
is adjusted and readjusted on account thereof. The Company will
forthwith mail a copy of each such certificate to each holder of
a Warrant, and will, on the written request at any time of any
holder of a Warrant, furnish to such holder a like certificate
setting forth the Purchase Price and the number and type of
Shares at the time in effect and showing how it was calculated.
9. NOTICE OF RECORD DATE. In case of
(a) any taking by the Company of a record of the holders of
any class of its securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive y other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or
any voluntary or involuntary dissolution, liquidation or winding
up of the Company, or
(c) events shall have occurred resulting in the voluntary
or involuntary dissolution, liquidation or winding up of the
Company then and in each such event the Company will mail or
cause to be mailed to each holder of a Warrant a notice
specifying (i) the date on which any record is to be taken for
the purpose of any such dividend, distribution or right, and
stating the amount and character of such dividend, distribution
or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is to take place,
and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to
exchange their Common Stock (or Other Securities) for securities
or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights
or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons
or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least thirty
(30) days prior to the date specified in such notice on which any
such action is to be taken.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any
Warrant, properly endorsed, to the Company, the Company, at its
expense, will issue and deliver to or (subject to Section 2) on
the order of the holder thereof a new Warrant or Warrants of like
tenor, in the name of such holder or as such holder (on payment
by such holder or any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss,
theft or destruction of any Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each
holder of a Warrant, appoint an agent having an office in New
York, New York, for the purpose of issuing shares of Common Stock
on the exercise of the Warrants pursuant to Section 3, exchanging
Warrants pursuant to Section 10, and replacing Warrants pursuant
to Section 11, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be
made at such office by such agent.
13. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the
following terms, to all of which each Registered Holder or owner
hereof by the taking hereof consents and agrees:
(a) subject to the terms of Section 4 of the Securities
Purchase Agreement, title to this Warrant may be transferred by
endorsement (by the Registered Holder hereof executing the form
of assignment at the end hereof) and delivery in the same manner
as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof
for value; each prior taker or owner waives and renounces all of
his equities or rights in this Warrant in favor of each such bona
fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the Registered Holder hereof as
the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
15. NOTICES. All notices and other communications from the -
Company to the Registered Holder of this Warrant 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 such address as may have been furnished to the Company in
writing by such Registered Holder or, until any such Registered
Holder furnishes to the Company an address, then to, and at the
address of, the last Registered Holder of this Warrant who has so
furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant
is being delivered in the State of New York and, except for
provisions with respect to internal corporate matters of the
Company which shall be governed by the corporate laws of the
State of Delaware, shall be construed and enforced in accordance
with and governed by the laws of the State of New York, without
regard to principles of conflict of laws. The headings in this
Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. All nouns and
pronouns used herein shall be deemed to refer to the masculine,
feminine or neuter, as the identity of the person or persons to
whom reference is made herein may require.
17. EXPIRATION. The right to exercise this Warrant shall
expire at 5:00 P.M., New York time, on January 31, 2002.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as
of February 2, 1999.
AMERICAN ELECTROMEDICS CORP.
By:
--------------------------
Name: Michael T. Pieniazek
Title: President
<PAGE>
Annex A
-------
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant, to purchase
------------
shares of Common Stock and herewith tenders in payment for such
securities a certified or official bank check payable in New York
Clearing House Funds to the order of AMERICAN ELECTROMEDICS
CORP., in the amount of $ all in accordance with the
-------------
terms hereof. The undersigned requests that a certificate for
such shares of Common Stock be registered in the name
of
---------------, whose address is ------------------------------
and that such Certificate be delivered to
---------------------,
whose address is
-----------------------------------------------
Dated:
Name:
-------------------------
Signature:
-----------------------
(Signature must conform in all respects to the
name of the Registered Holder, as specified on the
face of the Warrant.)
-------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
<PAGE>
Annex B
-------
FORM OF ASSIGNMENT
(To be executed by the Registered Holder if such Holder desires
to transfer the Warrant.)
FOR VALUE RECEIVED,
--------------
hereby sells, assigns and transfers unto
----------------------------------------------
Please print name and address of transferee)
this Warrant, together with all right, title and interest
therein, and does so hereby irrevocably Constitute and
appoint
-----------------------------------------------
Attorney, to transfer the within Warrant on the books of the
within-named Company, with full power of substitution.
Dated:
Name:
---------------------------
Signature:
--------------------------
(Signature must conform in all respects to the
name of the Registered Holder, as specified on the
face of the Warrant.)
------------------------------
(Insert Social Security or Other Identifying
Number of Assignee).
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of
February 2, 1999 (this "Agreement"), is made by and among
AMERICAN ELECTROMEDICS CORP., a Delaware corporation, with
headquarters located at 13 Columbia Drive, Suite 5, Amherst, New
Hampshire 03031 (the "Company"), and the purchasers listed on
Exhibit A attached hereto (each, a "Purchaser," and collectively,
the "Purchasers").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement,
dated as of February 2, 1999, among the Purchasers and the
Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Purchasers up to 2,000 shares of
its Series B Convertible Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), at an aggregate purchase
price of $2,000,000, which Series B Preferred Stock is
convertible into shares of Common Stock, $.10 par value per share
(the "Common Stock"), of the Company, together with warrants to
purchase 25,000 shares of Common Stock (the "Warrants");
WHEREAS, pursuant to the terms of the Certificate of
Designations (as defined in the Securities Purchase Agreement)
and the Warrants, upon the conversion of the Series B Preferred
Stock and upon exercise of the Warrants, the Company will issue
to the Purchasers shares of Common Stock (such shares are
referred to herein as the "Shares"); and
WHEREAS, to induce the Purchasers to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act
of 1933, as amended (the "Securities Act"), and applicable state
securities laws.
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 each of the Purchasers hereby
agrees as follows:
1. Definitions. As used in this Agreement, the following
-----------
terms shall have the following meanings:
(i) "Holders" means Purchasers whose Registrable
Securities are included in a Registration Statement filed
pursuant to this Agreement.
(ii) "Purchaser" means the Purchasers identified
on Exhibit A hereto, or any transferee or assignee who agrees to
become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(iii) "Register," "Registered," and
"Registration" refer to a registration effected by preparing and
filing a Registration Statement or Statements in compliance with
the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "Commission").
(iv) "Registrable Securities" means the Shares.
(v) "Registration Statement" means a registration
statement of the Company under the Securities Act.
Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Securities
Purchase Agreement.
2. Registration.
------------
2.01 Mandatory Registration. By no later than the
----------------------
later of (i) thirty (30) days after the Closing Date and (ii)
thirty (30) days after the date the Company's Registration
Statement on Form SB-2 (File No. 333-58937) becomes effective
(the "Required Filing Date"), the Company shall file with the
Commission a Registration Statement on Form SB-2, or any other
applicable form which the Company is eligible to use to register
its securities, covering at least two (2) times the sum of: (i)
the number of Shares that are issuable upon conversion of the
Series B Preferred Stock on the date of filing, without regard to
any limitation on any holder's ability to convert the Series B
Preferred Stock, and (ii) the 25,000 Shares issuable upon
exercise of the Warrants, or to prevent dilution resulting from
stock splits or stock dividends. The Company shall use its best
efforts to cause such Registration Statement to become effective
within ninety (90) days of the Required Filing Date (or, if the
Commission elects to conduct a review of such Registration
Statement, one hundred and twenty (120) days of the Required
Filing Date) but not later than five (5) business days after the
Commission indicates there are no additional comments to the
Registration Statement (such later date being the "Unrestricted
Date"). If the Registration Statement is not declared effective
by the Commission by the Unrestricted Date, the Company shall pay
the Holders for each full thirty (30) day period following such
date during which the Registration Statement remains ineffective,
liquidated damages in the amount of two percent (2%) of the face
amount of the Series B Preferred Stock, provided, however, that
in no event shall the total amount of liquidated damages paid by
the Company to the Purchasers exceed one hundred thousand dollars
($100,000). No payment shall be due for any portion of any such
period which is less than a full thirty (30) days. All such
payments shall be made, at the Company's election, in cash or
shares of its Common Stock at Closing Bid Price calculated in
accordance with Section 1(c) of the Certificate of Designation
within ten (10) days of the date the Company receives from a
Holder a written request for such payment. The Company shall
keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii)
the date on which the Registrable Securities (in the opinion of
counsel to the Purchasers) may be immediately sold without
restriction (including without limitation as to volume by each
holder thereof) without registration under the Securities Act
(the "Registration Period"). The Company shall not include in
any Registration Statement filed under this Agreement securities
to be offered and sold by the Company or any holders other than
the Purchasers without the prior consent of the Purchasers
holding a majority in interest of the Registrable Securities.
2.02 Eligibility for Form SB-2. The Company represents
-------------------------
and warrants that it meets all of the requirements for the use of
Form SB-2 for the Registration of the sale by the Purchasers and
any transferee who purchases the Registrable Securities, and the
Company shall file all reports required to be filed by the
Company with the Commission in a timely manner, and shall take
such other actions as may be necessary to maintain such
eligibility for the use of Form SB-2.
3. Obligations of the Company. In connection with the
--------------------------
registration of the Registrable Securities, the Company shall do
each of the following:
3.01 Filing. Prepare promptly, and file with the
------
Commission by the Required Filing Date, a Registration Statement
with respect to not less than the number of Registrable
Securities provided in Section 2.01 above, and thereafter use its
reasonable best efforts to cause the Registration Statement
relating to Registrable Securities to become effective by the
Unrestricted Date and keep the Registration Statement effective
at all times until the earliest (the "Registration Period") of
(i) the date that is two (2) years after the Closing Date, (ii)
the date when the Holders may sell all Registrable Securities
under Rule 144 or (iii) the date the Purchasers no longer own any
of the Registrable Securities.
3.02 Amendments. Prepare and file with the Commission
----------
such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus (the
"Prospectus") used in connection with the Registration Statement
as may be necessary to keep the registration effective at all
times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
of the Company covered by the Registration Statement until such
time as the Company has no further obligation under Section 3.01
hereof to cause the Registration Statement to remain effective.
3.03 Purchasers' Counsel. The Company shall permit a
-------------------
single firm of counsel designated by the Purchasers to review the
Registration Statement and all amendments and supplements thereto
a reasonable period of time (but not less than three (3) business
days) prior to their filing with the Commission, and not file any
document in a form to which such counsel reasonably objects.
3.04 Notification. Notify the Holders of Registrable
------------
Securities to be sold, their counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if request by
any such Person) confirm such notice in writing no later than one
(1) business day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) whenever the
Commission notifies the Company whether there will be a review of
such Registration Statement; (C) whenever the Company receives
(or representatives of the Company receive on its behalf) any
oral or written comments from the Commission respect of a
Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the
Company to the Holders); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any
other federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose;
(iv) if at any time any of the representations or warranties of
the Company contained in any agreement (including any
underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; and
(vi) of the occurrence of any event that to the best knowledge of
the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material
respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be,
it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In
addition, the Company shall furnish the Holders with copies of
all intended written responses to the comments contemplated in
clause (C) of this Section 3.04 not later than one (1) business
day in advance of the filing of such responses with the
Commission so that the Holders shall have the opportunity to
comment thereon.
3.05 Furnish Copies. Furnish to each Holder and its
--------------
legal counsel identified to the Company, (i) promptly after the
same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one (1) copy of the
Registration Statement, each preliminary Prospectus and
Prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a Prospectus, and all amendments and
supplements thereto and such other documents, as such Holder may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Holder.
3.06 Future Amendments. As promptly as practicable
-----------------
after becoming aware of such event, notify each Holder of the
happening of any event of which the Company has knowledge, as a
result of which the Prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other
appropriate filing with the Commission to correct such untrue
statement or omission, and deliver a number of copies of such
supplement or amendment to each Holder as such Holder may
reasonably request.
3.07 Stop Orders. As promptly as practicable after
-----------
becoming aware of such event, notify each Holder who holds
Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance
by the Commission of a Notice of Effectiveness or any notice of
effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest
possible time.
3.08 Suspend Sales. Notwithstanding the foregoing, if
-------------
at any time or from time to time after the date of effectiveness
of the Registration Statement, the Company notifies the Holders
in writing of the existence of a potential material event, the
Holders shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice
with respect to a potential material event until such Holder
receives written notice from the Company that such potential
material event either has been disclosed to the public or no
longer constitutes a potential material event; provided, however,
-------- -------
that the Company may not so suspend the right to such Holders of
Registrable Securities for more than two twenty (20) day periods
in the aggregate during any 12-month period (Suspension Period)
with at least a ten (10) business day interval between such
periods, during the Registration Period.
3.09 Transfer Agent. Provide a transfer agent and
--------------
registrar, which may be a single entity, for the Registrable
Securities not later than the effective date of the Registration
Statement.
4. Obligations of the Purchasers. In connection with the
-----------------------------
registration of the Registrable Securities, the Purchasers shall
have the following obligations:
4.01 Take Actions. Take all other reasonable actions
------------
necessary to expedite and facilitate the disposition by the
Purchasers of the Registrable Securities pursuant to the
Registration Statement.
4.02 Furnish Information. It shall be a condition
-------------------
precedent to the obligations of the Company to complete the
registration pursuant to this Agreement of the Registrable
Securities of each Purchaser that such Purchaser shall furnish to
the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of
the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable
Securities, and such Purchaser shall execute such documents in
connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated
filing date of the Registration Statement, the Company shall
notify such Purchaser of the information the Company requires
from such Purchaser (the "Requested Information") if such
Purchaser elects to have any of its Registrable Securities
included in the Registration Statement. If, at least two (2)
business days prior to the filing date, the Company has not
received the Requested Information from a Purchaser, then the
Company may file the Registration Statement without including the
Registrable Securities of such Purchaser.
4.03 Cooperation. The Purchaser, by such Purchaser's
-----------
acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration
Statement hereunder, unless such Purchaser has notified the
Company in writing of such Purchaser's election to exclude all of
such Purchaser's Registrable Securities from such Registration
Statement.
4.04 Suspend Sales. Each Purchaser agrees that, upon
-------------
receipt of any notice from the Company of the happening of any
event of the kind described in Section 3.06 or 3.08 hereof, such
Purchaser will immediately discontinue disposition of its
Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such copies of the
supplemented or amended Prospectus contemplated by Section 3.06
or 3.08 hereof shall be furnished to such Purchaser.
4.05 Underwritten Offering. If the offering covered by
---------------------
the Registration Statement to be underwritten, at the request of
the managing underwriters, each Purchaser or his permitted
assignee holding more than one percent (1%) of the Company's
voting securities shall agree not to sell or otherwise transfer
or dispose of any Registrable Securities of the Company held by
such Purchaser (other than those included in the Registration
Statement) for a period specified by the underwriters not to
exceed ninety (90) days following the effective date of the
Registration Statement, provided that all officers and directors
of the Company enter into similar agreements.
5. Expenses of Registration. All expenses, other than
------------------------
underwriting discounts and commissions and other fees and
expenses of investment bankers and other than brokerage
commissions and counsel of the Holders (to the extent such fees
exceed the amount to be paid by the Company), incurred in
connection with the registration, filings or qualifications
pursuant to Section 3 hereof but including, without limitation,
all registration, listing, and qualifications fees, printing and
accounting fees, the fees and disbursements of counsel and
auditors for the Company, and the fees of counsel to the Holders
not in excess of $2,500, shall be borne by the Company.
6. Indemnification. In the event any Registrable
---------------
Securities are included in a Registration Statement under this
Agreement:
6.01 By the Company. To the extent permitted by law,
--------------
the Company will indemnify and hold harmless each Purchaser who
holds such Registrable Securities, the directors, if any, of such
Purchaser, the officers, if any, of such Purchaser, each person,
if any, who controls any Purchaser within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to
which any of them may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereof or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they
were made, not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
Prospectus if used prior to the effective date of such
Registration Statement, or contained in the final Prospectus (as
amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the Commission) or the
omission or alleged omission to state therein any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading,
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state or foreign securities
law or any rule or regulation under the Securities Act, the
Exchange Act or any state or foreign securities law (the matters
in foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall, subject to the provisions of
Section 6.02 hereof, reimburse each Purchaser or Holder if other
than a Purchaser, promptly as such expenses are incurred and are
due and payable, for any reasonable legal and other costs,
expenses and disbursements in giving testimony or furnishing
documents in response to a subpoena or otherwise, including
without limitation, the reasonable costs, expenses and
disbursements, as and when incurred, of investigating, preparing
or defending any such action, suit, proceeding or investigation
(whether or not in connection with litigation in which such
Purchaser is a party), incurred by it in connection with the
investigation or defense of any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.01 shall not (i) apply to
any Claim arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof supplement
thereto, and the Purchaser or Holder if other than a Purchaser,
furnishing such information shall indemnify and hold harmless the
Company against any such Claims; (ii) with respect to any
preliminary Prospectus, inure to the benefit of any such person
from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the
preliminary Prospectus was corrected in the final Prospectus, as
then amended or supplemented, if such final Prospectus was timely
made available by the Company pursuant to Section 3.02 hereof,
and the Purchaser or Holder if other than a Purchaser, failing to
make such delivery shall indemnify and hold harmless the Company
against any such claim; (iii) be available to the extent that
such Claim is based upon a failure of the Purchaser or Holder if
other than a Purchaser, to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3.02
hereof and the Purchaser or Holder if other than a Purchaser,
failing to make such delivery shall indemnify and hold harmless
the Company against any such claim; or (iv) apply to amounts paid
in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not
be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer
of the Registrable Securities by the Purchaser pursuant to
Section 9.
6.02 By the Purchaser. Each Purchaser will indemnify
----------------
the Company and its officers and directors against any Claims
arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to
the Company, by or on behalf of such Purchaser, expressly for use
in connection with the preparation of the Registration Statement,
subject to such limitations and conditions are applicable to the
Indemnification provided by the Company to this Section 6.
6.03 Notice of Claim. Promptly after receipt by an
---------------
Indemnified Person under this Section 6 of notice of the
commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the
right to participate in, and to the extent that the indemnifying
party so desires, jointly with any other indemnifying party
similarly notified, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person, provided, however, that an Indemnified Person
-------- -------
shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person and
the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person and
any other party represented by such counsel in such proceeding.
In such event, the Company shall pay for only one separate legal
counsel for the Holders, and such legal counsel shall be selected
by the Holders holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the
Claim relates. The failure to deliver written notice to an
indemnifying party within a reasonable time after the
commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person
under this Section 6, except to the extent that the indemnifying
party is materially prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course
of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
6.04 No Consent. No indemnifying party, in the defense
----------
of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Person of an unconditional and
irrevocable release from all liability in respect of such claim
or litigation.
6.05 Underwriting Agreement. Notwithstanding the
----------------------
foregoing, to the extent that any provisions relating to
indemnification or contribution contained in the underwriting
agreements entered into among the Company, the underwriters and
any Holders in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in
such underwriting agreements shall be controlling as to the
Registrable Securities included in the public offering.
7. Contribution. To the extent any indemnification under
------------
Section 6 hereof by an indemnifying party is prohibited or
limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the
Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as
any other relevant equitable considerations. The relative fault
of the indemnifying party and the Indemnified Person shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied
by the indemnifying party or by the Indemnified Person, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the forgoing, (a) no contribution shall be made
under circumstances where the payor would not have been liable
for indemnification under the fault standards set forth in
Section 6 hereof, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and
(c) contribution by any seller of Registrable Securities shall be
limited in amount to the net proceeds received by such seller
from the sale of such Registrable Securities. The Company and
each Purchaser agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro
---
rata allocation (even if the Holders and any underwriters were
----
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable
considerations referred to in this Section.
8. Reports Under Exchange Act. With a view to making
--------------------------
available to the Purchasers the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Purchasers to
sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144;
(b) file with the Commission all reports and other
documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to each Purchaser, so long as such
Purchaser owns Registrable Securities, promptly upon request,
(i) a written statement by the Company that it has complied with
the reporting requirements of the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or periodic report of
the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably
requested to permit the Purchasers to sell such securities
pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to
-------------------------------------
have the Company register Registrable Securities pursuant to this
Agreement shall be automatically assigned by each Purchaser to
any transferee of all or any portion of the Series B Preferred
Stock, Warrants or Registrable Securities held by such Purchaser
if: (a) such Purchaser agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment; (b) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of
(i) the name and address of such transferee or assignee and
(ii) the Securities with respect to which such registration
rights are being transferred or assigned; (c) at or before the
time the Company receives the written notice contemplated by
clause (b) of this sentence, the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions
contained herein; and (d) the transfer of the relevant Securities
complies with the restrictions set forth in Section 4 of the
Securities Purchase Agreement. In the event of any delay in
filing the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such
delay.
10. Amendment of Registration Rights. Any provision of
--------------------------------
this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Purchasers who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each
Purchaser and the Company.
11. Miscellaneous.
-------------
11.01 Deemed Holder. A person or entity is deemed
-------------
to be a holder of Registrable Securities whenever such person or
entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections
from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
the instructions, notice or election received from the registered
owner of such Registrable Securities.
11.02 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 (10) days advance
written notice to each of the other parties hereto.
COMPANY: AMERICAN ELECTROMEDICS CORP.
13 Columbia Drive, Suite 5
Amherst, New Hampshire 03031
ATT: Michael T. Pieniazek, President
Tel: (603) 880-6300
Fax: (603) 880-6390
WITH COPIES TO:
THELEN REID & PRIEST LLP
40 West 57th Street
New York, New York 10019
ATT: Bruce A. Rich, Esq.
Tel: 212-603-6780
Fax: 212-603-2001
PURCHASERS: At the addresses set forth on the signature
page of this Agreement, as such addresses may
be updated from time to time by each of the
Purchasers.
WITH COPIES TO:
KRIEGER & PRAGER, ESQS.
319 Fifth Avenue
New York, New York 10016
Tel: 212-689-3322
Fax: 212-213-2077
11.03 No Waiver. Failure of any party to exercise
---------
any right or remedy under this Agreement or otherwise, or delay
by a party in exercising such right or remedy, shall not operate
as a waiver thereof.
11.04 Governing Law. This Agreement shall be
-------------
governed by and interpreted in accordance with the laws of the
State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any
part of the City of Wilmington or the state courts of the State
of Delaware sitting in the City of Wilmington in connection with
any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
11.05 Validity. If any provision of this Agreement
--------
shall be invalid, illegal or unenforceable in any jurisdiction,
such validity, legality or unenforceability shall not affect the
validity, legality or enforceability of the remainder of this
Agreement or the validity, legality or enforceability of this
Agreement in any other jurisdiction.
11.06 Entire Agreement. This Agreement constitutes
----------------
the entire agreement among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth, or
referred to herein and in the other Primary Documents. This
Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof.
11.07 Benefit. Subject to the requirements of
-------
Section 9 hereof, this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the
parties hereto.
11.08 Construction. All pronouns and any
------------
variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require. The headings of
this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
11.09 Damages. No party to this Agreement shall be
-------
liable to any other for any consequential damages as a result of
any failure or delay in the performance of its obligations
hereunder.
11.10 Counterparts. This Agreement may be executed
------------
in counterparts, any one of which need not contain the signature
of more than one party, and all of which together shall for all
purposes constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed.
AMERICAN ELECTROMEDICS CORP.
By:
------------------------
Michael T. Pieniazek
President
"PURCHASERS"
____________________________
____________________________
____________________________
____________________________
