Exhibit 10.4
AGREEMENT
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THIS AGREEMENT, dated as of November 1, 1999, is entered
into by and between American Electromedics Corp. (the "Company"),
Sovereign Partners LP ("Sovereign"), Dominion Capital Fund LTD.
("Dominion"), and Canadian Advantage L.P. ("Canadian", and
together with Sovereign and Dominion, hereinafter the "Preferred
Holder").
WHEREAS, the Company and the Preferred Holder have entered
into a Securities Purchase Agreement, dated as of February 2,
1999 (the "Securities Purchase Agreement"), and a Registration
Rights Agreement, dated as of February 2, 1999 (the "Registration
Rights Agreement"), pursuant to which the Preferred Holder
purchased 1,600 shares of the Company Series B Convertible
Preferred Stock (the "Preferred Stock");
WHEREAS, the Company and the Preferred Holder desire to
agree to terms pursuant to which the Company will redeem the
Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Preferred Holder hereby agree
as follows:
1. The Preferred Holder currently holds 1, 170 shares of
Preferred Stock (the "Holders Preferred Stock"), as set forth on
Schedule I hereto, and shall not issue any conversion notices to
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convert any shares of Preferred Stock and shall not sell any
shares of the Company s Common Stock (the "Common Stock") until
November 15, 1999.
2. Upon the earlier of (a) closing by the Company of a
financing that raises in excess of $2,500,000, or (b) November
15, 1999, (the "Financing Closing Date"), the Company shall
redeem the Preferred Holders Preferred Stock for the
consideration set forth in Paragraph 3 herein.
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3. Within 5 business days of the Financing Closing Date ,
the Company shall pay the Preferred Holder the sum consisting of
$801,000 in liquidation preference and $369,000 in accrued and
unpaid dividends, penalties and redemption premium on the
Preferred Stock, payable by wire transfer to the account of the
Preferred Holder in the amounts set forth on Schedule I hereto,
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and shall issue to the Preferred Holder, in proportion to the
amounts set forth on Schedule I hereto, 369,000 shares of Common
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Stock (the "Additional Shares"), at a conversion price of $1.00
per share, pursuant to the annexed Conversion Notices dated as of
November 15, 1999. Me Preferred Holder shall accept payment of
the above as full and final payment of all accrued and unpaid
dividends, penalties and the redemption premium on the Preferred
Stock.
4. Except with respect to the provisions of 16 and 7
hereof, upon payment of the amounts and delivery of the
Additional Shares stated in Paragraph 3, each party hereto, on
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behalf of itself and its respective directors, officers, employees,
agents, shareholders, partners, affiliates, attorneys and their
successors and assigns (collectively "Releasor") shall hereby
release and forever discharge every other party, and its directors,
officers, shareholders, agents, employees and affiliates and their
successors, assigns, heirs and administrators (collectively, the
"Releasees") from all actions, causes of actions, claims and
demands whatsoever, whether known or unknown, in law or equity,
whether statutory or common law, whether federal, state, local,
foreign or otherwise related to or arising out of the Securities
Purchase Agreement and all other agreements related to the
Preferred Holder s purchase of the Preferred Stock and investment
in the Company, and any and all fees and expenses relating
thereto, which against Releasor ever had, now has, or hereafter
may have, by reason of any matter, cause or thing whatsoever
against the Releasee.
5. The Preferred Holder shall not sell any of the
Additional Shares for a period of 80 days from the Financing
Closing Date.
6. The Company agrees that, in the event any Additional
Shares are issued with a legend, it will, within three (3)
Trading Days after request therefore by the Preferred Holder and
the surrender by the Preferred Holder of the certificate
representing the Additional Shares, together with such reasonable
documentation as may be required by the provisions of Rule 144
under the Securities Act of 1933, provide such Preferred Holder
with a certificate or certificates representing such Additional
Shares, free from such legend for purposes of a sale in
accordance with Rule 144 until a complete exemption is available
pursuant to Rule 144(k). The Company may not make any notation
on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in
this Section. The Company agrees that with respect to the
removal of any restrictive legend or stop transfer order
regarding the Additional Shares pursuant to a sale under Rule 144
of the Securities Act of 1933, it will cause its counsel, at the
Company s expense, to deliver any necessary legal opinions in
respect thereof.
7. As long as the Company is subject to Sections 13(a) and
15(d) of the Exchange Act, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d)
of the Exchange Act. So long as any of the Preferred Holders
owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to such
Preferred Holder and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required
to be included in reports required by Section 13(a) or 15(d) of
the Exchange Act, as well as any other information required
thereby, in the time period that such filings would have been
required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell
Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act. Upon the request of any such Person,
the Company shall deliver to such Person a written certification
of a duly authorized officer as to whether it has complied with
such requirements.
8. The Preferred Holder represents and warrants to the
Company that the Preferred Holder owns the Holders Preferred
Stock in the amounts set forth on Schedule I hereto free and
clear of any and all claims, liens or other encumbrances, and has
not entered into any agreement or understanding to sell,
hypothecate, dispose or otherwise transfer any or all of the
Holders Preferred Stock. Upon the sale of the Holders Preferred
Stock as provided herein, the Company will receive such Stock
free and clear of any claim, lien or encumbrance of any third
party.
9. The Preferred Holder agrees that notwithstanding the
provisions of Section 2.01 of the Registration Rights Agreement,
(a) the penalty provision shall no longer be in effect, and (b)
the Company shall be permitted to include, without the consent of
the Preferred Holder, in any registration statement filed under
the Registration Rights Agreement, securities to be offered and
sold by the Company or any other holders of the Company s
securities.
10. The Preferred Holder or the Company shall have the
right to terminate this Agreement on November 16, 1999, if the
Company has not closed its planned financing by the close of
business on November 15, 1999.
11. This Agreement sets forth the entire agreement among
the parties hereto with respect to the subject matter herein, and
supersedes any prior agreements except to the extent provided
herein, and cannot be amended, modified or terminated except by
an agreement in writing executed by the parties hereto.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving
effect to conflicts of law.
13. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall
constitute a single instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by each
of the undersigned.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Michael T. Pieniazek
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Name: Michael T. Pieniazek
Title: President
SOVEREIGN PARTNERS LP
By: Southridge Capital Management
L.L.C., Gen. Prtn.
By: /s/ Stephen Hicks
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Name: Stephen Hicks
Title: President
DOMINION CAPITAL FUND LTD.
By: /s/ Illegible
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Name: INTER CARIBBEAN SERVICES
(BAHAMAS) LIMITED
Title: Director
CANADIAN ADVANTAGE L.P.
By: /s/ Mark Valentine
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Name: Mark Valentine
Title: Pres. VMH Management, GP
SCHEDULE I
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Name of Holder Number of Shares
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Sovereign Partners LP 555
Dominion Capital Fund LTD 415
Canadian Advantage L.P. 200