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
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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
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:
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