Exhibit 10.2
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT, made this 17th day of
November 1999, between Jubilee Investors LLC (the "Investor"), a
Delaware limited liability company, located at One World Trade
Center, Suite 4563, New York, New York 10048 and American
Electromedics Corp. (the "Company"), a Delaware corporation,
located at 13 Columbia Drive, Suite 5, Amherst, New Hampshire
0303 1.
WITNESSETH:
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WHEREAS, the Investor is the holder of 2,400 shares of
Convertible Preferred Stock, Series A of the Company (the
"Preferred Shares");
WHEREAS, the Company wishes to exchange a promissory
note and security agreement (the "Note") attached hereto as
Exhibit A, in the principal amount of $1,050,000 (subject to
adjustment as specified in such Note) maturing on April 30, 2000
and secured by certain intellectual property rights of the
Company (the "Collateral"), for 350 Preferred Shares (the
"Exchange Shares") held by the Investor with an aggregate stated
value of $350,000-,
WHEREAS, the Investor wishes to convert 1,000 Preferred
Shares (the "Initial Conversion Preferred Shares"), plus accrued
dividends on all 2,400 Preferred Shares in the amount of
$400,000, into a number of shares of common stock (the "Common
Stock"), par value $. 10, of the Company (the "Initial Conversion
Shares") pursuant to terms of the Certificate of Designation of
Series and Determination of Rights and Preferences of Convertible
Preferred Stock, Series A of the Company (the "Certificate of
Designation");
WHEREAS, the Investor wishes to convert an additional
350 Preferred Shares (the "Additional Conversion Preferred
Shares" and together with the Initial Conversion Preferred
Shares, the "Conversion Preferred Shares), into 350,000 shares of
Common Stock (the "Additional Conversion Shares" and together
with the Initial Conversion Shares, the "Conversion Shares")
pursuant to terms of the Certificate of Designation; and
WHEREAS, the Company wishes to redeem and the Investor
agrees to sell to the Company 700 Preferred Shares (the
"Redemption Shares") for an aggregate price of $840,000 in cash
(the "Redemption Price").
NOW, THEREFORE, in consideration of the premises,
agreements, representations, warranties and covenants herein
contained, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
1. Exchange of Securities, Redemption Shares. Subject to
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the terms and conditions of this Agreement, the Company and the
Investor each agree to simultaneously deliver to the other the Note,
in the case of the Company, and the Exchange Shares, in the case of
the Investor, on November 17, 1999 (the "Closing"). Subject to the
terms and conditions of this Agreement, each of the Company and the
Investor agrees to simultaneously deliver to the other, the
Redemption Price and the Conversion Shares, in the case of the
Company, and the Redemption Shares, in the case of the Investor
on date of the Closing.
2. Conversion of Preferred Shares. Subject to the terms
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and conditions of this Agreement and the Certificate of Designation,
the Investor agrees to convert the Conversion Preferred Shares into
Conversion Shares and, upon conversion, the Company shall deliver
such freely transferable Conversion Shares via DWAC to an account
specified by the Investor.
3. Restriction on Sales of Additional Shares. The Company
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shall not, directly or indirectly, without the prior written consent
of the Investor, offer, sell, offer to sell, contract to sell or
otherwise dispose of any of its securities, issued or sold at a
discount to the market value of such securities or securities
exchangeable for or convertible into shares of Common Stock at a
price per share less than the market price per share at the time of
such exchange, conversion or issuance, for a period of time beginning
on the date of this Agreement and ending on the Maturity Date (as such
term is defined in the Note) (the "Lock-Up Period"); provided,
however, that notwithstanding the restrictions in this Section 3
the Company may offer, sell or issue its Common Stock at a fixed
price per share equal to at least fifty percent (500/o) of the
market price of the Common Stock at the time of any such offer,
sell or issuance.
4. Representations and Warranties of the Company.
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The Company represents and warrants to the Investor that:
a. Organization, Authorization. The Company is a
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corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
Each of the Company's subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws
of its respective jurisdiction. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken
as a whole. Each of the Company's subsidiaries is a direct or
indirect wholly-owned subsidiary of the Company, except for those
subsidiaries listed on Schedule 4(a), which schedule includes the
Company's ownership interest (as a percentage) in each such non-
wholly owned subsidiary. The Company has full corporate power
and authority to enter into this Agreement and the other
documents contemplated hereby and to carry out the transactions
contemplated hereby and thereby. The Company has taken all
required action by law to authorize the execution and delivery of
this Agreement and the other documents contemplated hereby and
the transactions contemplated hereby and thereby, and this
Agreement and the other documents contemplated hereby is a valid
and binding obligation of the Company enforceable against it in
accordance with its terms, subject as to enforcement only- (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (ii) to general
principles of equity.
b. Capitalization. On the date hereof, the authorized
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capital of the Company consists of 20,000,000 shares of Common
Stock, par value $.10 per share, of which 10,630,955 shares of
Common Stock are issued and outstanding and 1,000,000 shares of
Preferred Stock, par value $.0l per share of which 2,400 shares
of Series A Convertible Preferred Stock and 1, 170 shares of
Series B Convertible Preferred Stock are issued and outstanding.
Schedule 4(b) hereto sets forth all of the options, warrants and
convertible securities of the Company (the "Derivative
Securities") owned by persons who are neither officers or
directors of the Company which are outstanding on the date
hereof, for which the holder (together with any affiliates) has
the right to receive (in the aggregate) 100,000 or more shares of
Common Stock, including in each case (i) the name and class of
such Derivative Securities, (ii) the issue date of such
Derivative Securities, (iii) the number of shares of Common Stock
of the Company into which such Derivative Securities are
convertible as of the date hereof, (iv) the conversion or
exercise price or prices of such Derivative Securities as of the
date hereof and (v) the expiration date of any conversion or
exercise rights held by the owners of such Derivative Securities.
c. Concerning the Conversion Shares. When issued the
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Conversion Shares shall be duly and validly issued, fully paid
and non-assessable, and will not subject the holder thereof to
personal liability by reason of being such a holder. There are
no preemptive rights of any stockholder of the Company, as such,
to acquire the Conversion Shares.
d. Reporting Company Status. The Company's Common Stock
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is registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
e. Transaction Documents. This Agreement and the Note
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(collectively, the "Transaction Documents"), and the transactions
contemplated hereby and thereby, have been duly and validly
authorized by the Company- each of the Transaction Documents when
executed and delivered by the Company will each be a valid and
binding agreement of the Company, enforceable in accordance with
their respective terms, except to the extent that enforcement of
each of the Transaction Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
f. Non-contravention. The execution and delivery of this
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Agreement, and each of the other Transaction Documents, and the
consummation by the Company of the other transactions
contemplated by this Agreement and each of the other Transaction
Documents, does not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation of
the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company or any of
its subsidiaries is a party or by which they or any of their
properties or assets are bound, or any material existing
applicable law, rule, or regulation or any applicable decree,
judgment or order of any court, or United States federal or state
regulatory body, administrative agency, or any other governmental
body having jurisdiction over the Company, its subsidiaries, or
any of their properties or assets, except such conflict, breach
or default which would not have a material adverse effect on the
transactions contemplated by this Agreement or by the other
Transaction Documents.
g. Approvals. No authorization, approval or consent of
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any court, governmental body, regulatory agency, self-regulatory
organization, stock exchange or market or the shareholders of the
Company is required to be obtained by the Company for the entry
into or the performance of this Agreement and the other
Transaction Documents, except such authorizations, approvals and
consents that have been obtained, copies of which have been
furnished to the Investor.
h. SEC Filings. None of the reports or documents filed by
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the Company with the Commission since January 1, 1999 contained,
at the time they were filed, any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein, or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
i. Absence of Certain Changes. Except as set forth in the
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Company's Annual Report on Form 10-KSB for the year ended July
31, 1999 (the "1999 Annual Report") and herein, there has been no
material adverse change and no material adverse development in
the business, properties, operations, financial condition,
outstanding securities or results of operations of the Company.
j. Full Disclosure. There is no fact known to the Company
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(other than general economic conditions known to the public
generally) that has not been disclosed to the Investor that (i)
could reasonably be expected to have a material adverse effect
upon the condition (financial or otherwise) or the earnings,
business affairs, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to
the Transaction Documents.
k. Title to Properties, Liens and Encumbrances. The
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Company and its subsidiaries has good and marketable title to all
of its properties and assets, both real and personal, and has
good title to all its leasehold interests, in each case subject
to the following exceptions: (i) mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or
charges created in the ordinary course of business and (ii) the
encumbrances created pursuant to the Note.
1. Patents and Other Proprietary Rights. The Company and
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its subsidiaries own outright, free and clear of all liens,
claims and other encumbrances, except liens created by the Note,
the following patents and trademarks: (i) United States Patent
No. 5,704,91 1, "Needleless Hypodermic Injection System", (ii)
United States Patent No. 5,569,189, "Needleless Hypodermic
Injector", and (iii) INJEX SYSTEM (unregistered trademark)
(collectively, the "Intellectual Property"). The Intellectual
Property is all of the material intellectual property owned by
the Company and its subsidiaries. The only intellectual property
that the Company or any of its subsidiaries has sold, assigned,
licensed or otherwise transferred to Rosch GmbH Medizentechnik
("Rosch") is the European Patent Application No. 96936299.5
"Hypodermic Jet Injector". The Company and its subsidiaries have
sufficient title, ownership or license to use all patents,
trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes free and
clear of all liens (except liens created by the Note), necessary
for the conduct of their respective businesses as now conducted,
and such business does not conflict with or constitute an
infringement on the rights of others.
m. Permits. The Company and its subsidiaries have all
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franchises, permits, licenses and any similar authority necessary
for the conduct of their respective businesses as now conducted,
the lack of which would materially and adversely affect the
business or financial condition of the Company or any of its
subsidiaries. The Company is not in default in any material
respect under any of such Franchises, permits, licenses or
similar authority.
n. Absence of Litigation. Except as set forth in the
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Company's 1999 Annual Report and as disclosed in Schedule 4(n),
there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, in
which an unfavorable decision, ruling or finding would have a
material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and
its subsidiaries, taken as a whole, or the transactions
contemplated by the Transaction Documents, or which would
adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations
under, the Transaction Documents.
o. No Default. Neither the Company nor any of its
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subsidiaries is in default in the performance or observance of
any material obligation, covenant or condition contained in any
material indenture, mortgage, deed of trust or other instrument
or agreement to which it is a party or by which it or its
property may be bound.
p. Transactions with Affiliates. Except as disclosed in
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the 1999 Annual Report and the Company's Preliminary Proxy
Statement for the 1999 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission on November 5, 1999 (the
"1999 Preliminary Proxy Statement"), there are no agreements,
understandings or proposed transactions between the Company and
any of its officers, directors or affiliates that, had they
existed on July 31, 1999, would have been required to be
disclosed in the 1999 Annual Report other than the sale of 5% of
Rosch GmbH Medizintechnik, 800,000 shares of Common Stock and a
warrant to purchase 300,000 shares of Common Stock sold to a
director of the Company for $2,000,000.
q. Taxes. All applicable tax returns required to be filed
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by the Company and each of its subsidiaries have been filed, or
if not yet filed have been granted extensions of the filing dates
which extensions have not expired, and all taxes, assessments,
fees and other governmental charges upon the Company, its
subsidiaries, or upon any of their respective properties, income
or franchises, shown in such returns and on assessments received
by the Company or its subsidiaries to be due and payable have
been paid, or adequate reserves therefor have been set up if any
of such taxes are being contested in good faith; or if any of
such tax returns have not been filed or if any such taxes have
not been paid or so reserved for, the failure to so file or to
pay would not in the aggregate have a material adverse effect on
the business or financial condition of the Company and its
subsidiaries, taken as a whole.
r. Investment Company Act. The Company is not conducting,
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and does not intend to conduct its business in a manner which it
would become, an "investment company" as defined in Section 3(a)
of the Investment Company Act of 1940, as amended.
s. Validity, Perfection and Priority of Security Interest.
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By complying with Section 5 of the Note and by delivery all
certificates or instruments, if any, representing or evidencing
the Collateral to the Investor, the Company and its subsidiaries
will have created a valid and duly perfected security interest,
in favor of the Investor for the benefit of the Investor as
security for the due and punctual payment of the full principal
amount due under the Note, in all Collateral and proceeds of such
Collateral, which security interest may be perfected by filing
UCC financing statements. Upon the Company's execution and
delivery of the Note and the related instruments and upon the
filing of related UCC financing statements, the security interest
of the Investor in the Collateral shall rank first in priority.
Other than financing statements or other similar documents
perfecting the security interests of the Investor, no financing
statements or similar documents covering all or any part of the
Collateral are on file or of record in any government office in
any jurisdiction in which such filing or recording would be
effective to perfect a security interest in such Collateral.
t. Full Disclosure. The representations and warranties of
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the Company and its subsidiaries set forth in the Transaction
Documents do not contain any untrue statement of a material fact
or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they
were made, not misleading.
5. Representations and Warranties of the Investor.
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The Investor represents and warrants to the Company that:
a. Organization, Authorization. The Investor is a limited
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liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Investor
has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
The Investor has taken all required action by law to authorize
the execution and delivery of this Agreement and the transactions
contemplated hereby, and this Agreement is a valid and binding
obligation of the Investor enforceable against it in accordance
with its terms, subject as to enforcement only: (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights generally-, and (ii) to general
principles of equity.
b. Title to Exchange Shares; Liens and Encumbrances. The
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Investor has good and marketable title to the Exchange Shares and
the Redemption Shares, and upon transfer will be free and clear
from any pledge, lien or other encumbrance.
c. Company Information. The Investor is aware of the
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business affairs of the Company and has received the 1999 Annual
Report and 1999 Preliminary Proxy Statement and has had the
opportunity to discuss the Company's present business and future
plans with the executive officers of the Company.
6. Conditions to the Investor's Obligations to Exchange
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the Exchange Shares.
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(a) The Company shall have redeemed, purchased or acquired
and cancelled all outstanding shares (1, 170) of its Series B
Preferred Stock for a price of $1,170,000 and 369,000 shares of
Common Stock.
(b) The Company and its subsidiaries shall have executed
the Note and the UCC financing statements and, further, the
Company agrees to deliver the UCC financing statements to
Investor's Counsel within two (2) business days following the
date hereof.
(c) The Company shall have paid the legal fees and other
expenses of the Investor incurred in connection with the
documentation and negotiation of the Transaction Documents, which
amount shall not exceed $20,060.
(e) The Company shall have delivered an Officer's
Certificate certifying that the representations and warranties
made by the Company in Section 4 of this Agreement are true and
correct.
7. Governing Law, Miscellaneous. This Agreement shall be
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governed by and interpreted in accordance with the laws of the
State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the Transaction
Documents, and hereby waives, to the maximum extent permitted by
law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such
jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The
headings of this Agreement are for convenience of reference only
and shall not form part of, or affect the interpretation of this
Agreement. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or
enforceability shall not affect the validity or enforceability of
the remainder of this Agreement or the validity or enforceability
of this Agreement in any other jurisdiction. This Agreement
shall inure to the benefit of, and be binding upon the successors
and assigns of each of the parties hereto. This Agreement may be
amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior
agreements and understandings among the parties hereto with
respect to the subject matter hereof
8. Further Assurances. Each party shall do and perform,
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or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and
accomplish the purposes of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby,
9. Releases. (a) Upon payment in full to the Investor, or
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with respect to legal fees, Investor's counsel, of all amounts
owing under this Agreement (not including payment due under the
Note), the Investor shall release and forever discharge the
Company, its subsidiaries and its directors, officers,
shareholders, agents, employees and affiliates and their
successors, assigns, heirs and administrators (collectively, the
"Releasees") from all actions, causes of action, claims and
demands whatsoever, whether known or unknown, in law or equity,
whether statutory or common law, whether federal, state, local,
foreign or otherwise related to or arising out of the Securities
Purchase Agreement and all other agreements related to the
Investor's purchase of the Preferred Shares and investment in the
Company, and any and all fees and expenses related thereto, which
against the Company and its Releasees the Investor ever had, now
has or hereafter may have, by reason of any matter, cause or
thing whatsoever; provided, however, that the foregoing
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release shall not, in any way, release the Company or any
Releasee from any actions, causes of action, claims and demands
whatsoever, whether known or unknown, in law or equity, whether
statutory or common law, whether federal, state, local, foreign
or otherwise that the Investor may have or assert as (i) a holder
of the Company's common stock as to matters arising subsequent to
the date hereof or (ii) as a holder of the Note, against the
Company or any such Releasee from the date hereof.
(b) Upon execution of this Agreement and delivery of the
Redemption Shares, the Company shall release and forever
discharge the Investor, its subsidiaries and its directors,
managers, officers, shareholders, agents, employees and
affiliates and their successors, assigns, heirs and
administrators (collectively, the "Investor Releasees") from all
actions, causes of action, claims and demands whatsoever, whether
known or unknown, in law or equity, whether statutory or common
law, whether federal, state, local, foreign or otherwise related
to or arising out of the Securities Purchase Agreement and all
other agreements, which against the Investor and the Investor
Releasees the Company ever had, now has or hereafter may have, by
reason of any matter, cause or thing whatsoever.
10. Notices. Any notice required or permitted hereunder
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shall be given in writing (unless otherwise specified herein) and
shall be effective upon personal delivery, via facsimile (upon
receipt of confirmation of error-free transmission) or two
business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid
and addressed to each of the other parties thereunto entitled at
the following addresses, or at such other addresses as a party
may designate by ten days advance written notice to each of the
other parties hereto.
COMPANY: AMERICAN ELECTROMEDICS CORP.
13 Columbia Drive
Suite 5
Amherst, New Hampshire 03031
ATTN.: Michael Pieniazek
Tel.: (603) 880-6300
Fax: (603) 880-6390
with copies to:
THELEN, REID & PRIEST LLP
40 West 57th Street
New York, NY 10019
ATTN.: Bruce Rich
Tel.: 212-603-6780
Fax: 212-603-2001
INVESTOR: JUBILEE INVESTORS LLC
c/o WEC ASSET MANAGEMENT LLC
One World Trade Center
Suite 4563
New York, New York 10048
ATTN.: Daniel Saks
Tel.: 212-775-9299
Fax: 212-775-9311
with copies to:
MORRISON & FOERSTER LLP
1290 Avenue of the Americas
New York, New York 10104
ATTN.: Jeffrey S. Marcus, Esq.
Tel.: 212-468-8000
Fax: 212-468-7900
IN WITNESS WHEREOF, this Agreement has been duly executed by
each of the undersigned as of the date first written above.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
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Name: Michael T. Pieniazek
Title: President
EQUIDYNE SYSTEMS, INC.
By: /s/ Michael T. Pieniazek
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Name: Michael T. Pieniazek
Title: Secretary
JUBILEE INVESTORS LLC
By: /s/ Daniel Saks
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Name: Daniel Saks
Title: Managing Director