AMERICAN ELECTROMEDICS CORP.
WARRANT TO PURCHASE COMMON STOCK
The Transferability of this Warrant is
Restricted as Provided in Section 2.
Void after May 5, 2001 Right to Purchase 50,000 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,
WEST END CAPITAL LLC, whose address is One World Trade Center,
Suite 4563, New York, New York 10048, 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
May 5, 2001 (such time, the "Expiration Time"), 50,000 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 $4.80 (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 May 5,
1998, 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.
2.1. 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
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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
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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
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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 $.02 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 $.02 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
$.02 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 shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common
Stock shall not be deemed to be a reclassification of the shares
of Common Stock of the Company for the purposes of this
Subsection 5.3.
5.4. Whenever the Purchase Price is adjusted as herein
provided, the Company shall compute 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
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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
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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
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provided in Subsection 6.1, upon any reorganization,
consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 6, this Warrant shall
continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation 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 assets of the Company, whether or not such person
shall have expressly assumed the terms of 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 any 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 May 5, 2001.
IN WITNESS WHEREOF, the undersigned has executed this
Warrant as of May 5, 1998.
AMERICAN ELECTROMEDICS CORP.
By:
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Name:
Title:
Attest:
By:
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Name:
Title:
Annex A
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FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the
right,represented by this Warrant, to purchase shares
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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
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terms hereof. The undersigned requests that a certificate for
such shares of Common Stock be registered in the name of ,
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whose address is and that such
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Certificate be delivered to , whose address
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is .
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Dated:
Name:
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Signature:
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(Signature must conform in all respects to the name of
the Registered Holder, as specified on the face of the
Warrant.)
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(Insert Social Security or Other
Identifying Number of Holder)
Annex B
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FORM OF ASSIGNMENT
(To be executed by the Registered Holder if such Holder
desires to transfer the Warrant.)
FOR VALUE RECEIVED,
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hereby sells, assigns and transfers unto
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(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
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on the books of the within-named Company, with full power of
substitution.
Dated:
Name:
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Signature:
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(Signature must conform in all respects to the name of
the Registered Holder, as specified on the Warrant.)
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(Insert Social Security or Other Identifying Number of
Assignee).