Item 1.01
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Entry into a Material Definitive Agreement.
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On August 1, 2017 American Electric
Technologies, Inc. (the Company) entered into an agreement (the Repricing Agreement) with JCH Crenshaw Holdings, LLC (the Investor), repricing the initial conversion price of the Series A Convertible
Preferred Stock (the Series A Preferred Stock) and the initial exercise price of the Common Stock Purchase Warrants (the Warrants) which were sold to the Investor in 2012. As previously disclosed in the Companys
Current Report on Form
8-K
filed March 27, 2017 and Quarterly Report on Form
10-Q
filed May 15, 2017, the Company and the Investor entered into an agreement
restricting payment of cash dividends on and redemption of the Series A Preferred Stock to facilitate the sale of the Companys senior secured Term Note in March 2017. In consideration of the Investors consent to the foregoing
restrictions the Company and the Investor agreed to an adjustment to the initial conversion price of the Common Stock issuable upon conversion of the Series A Preferred Stock and the initial exercise price of the Warrants to reflect the current
market value of the Companys common stock.
Casey Crenshaw, a director of the Company, is the beneficial owner of the Investor. The
Repricing Agreement was approved by the conflicts committee of the Companys Board of Directors made up of three independent directors.
The following description of the Repricing Agreement is not complete and is qualified in its entirety by reference to the full text of the
Repricing Agreement, which is filed as Exhibit 10.1 to this Form
8-K
and is incorporated herein by this reference.
Revised Initial Conversion Price of Series A Preferred Stock
Pursuant to the Repricing Agreement each share of Series A Preferred Stock will be initially convertible, at the option of the holder, into one
(1) share of common stock at a conversion price of $2.26 per share of common stock, so that the Series A Preferred Stock sold to the Investor are currently convertible into an aggregate of 2,212,389 shares of common stock.
Revised Initial Exercise Price of the Warrants
Pursuant to the Repricing Agreement, the Series A Warrants sold to the Investor will be exercisable for 125,000 shares of common stock at an
initial exercise price of $2.72 per share and the Series B Warrants sold to the Investor will be exercisable for 200,000 shares of common stock at an initial exercise price of $3.17 per share.
Limitations on Issuance and Voting
In order to comply with the rules of the NASDAQ Stock Market, the Repricing Agreement prohibits the issuance of more than 19.99% of our common
stock or voting power outstanding to the Investor as of the date of the Repricing Agreement without stockholder approval. The Company has agreed to seek the approval of its stockholders as soon as practicable. In the event that stockholder approval
is received and the Investor were to convert all of its Series A Preferred Stock into common stock and exercised all of its Common Stock Purchase Warrants for cash, the Investor would be issued more than 19.99% of our common stock and voting power
as of the date of the Repricing Agreement.
On August 3, 2017 the Company issued a press release which reported that the Company
entered into an agreement repricing the initial conversion price of the Series A Convertible Preferred Stock and the initial exercise price of the Common Stock Purchase Warrants (the Warrants) which were sold to the Investor in
2012.
A copy of the press release is filed as Exhibit 99.1.