WARRANT
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE REPRESENTATIONS AND AGREEMENTS MADE BY THE RECORD HOLDER HEREOF SET FORTH IN
THIS WARRANT.
AMBIENT CORPORATION
No.:
Number of Shares: ___ Date of Issuance: July 20, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Ambient Corporation, a Delaware corporation (together with its
successors and assigns, the "Issuer" or the "Company"), hereby certifies that
________________, or its registered permitted assigns is entitled to subscribe
for and purchase, during the period specified in this Warrant, up to __________
shares (subject to adjustment as hereinafter provided) of the duly authorized,
validly issued, fully paid and non-assessable Convertible Preferred Stock of the
Issuer or, in lieu of such shares of Convertible Preferred Stock, if at the
annual 2000 stockholders meeting (the "Annual 2000 Meeting") the Company
stockholders adopt a resolution increasing the authorized common shares that the
Company is authorized to issue from time to time to at least such figure as
shall provide a sufficient pool of common shares from which to issue shares of
Common Stock upon the exercise in full of this Warrant (hereafter, the "Increase
in Authorized Common"), then this Warrant shall be exercisable for up to
__________ shares of the duly authorized, validly issued and fully paid,
non-assessable Common Stock of the Company (in each such case, the "Warrant
Shares"), at an exercise price per share equal to $3.50 ("Per Share Warrant
Price"); subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
A. Conversion of the Convertible Preferred Shares. Immediately following (and
subject to) the approval by the Company's stockholders, at the Annual 2000
Meeting, of a proposal to increase the authorized shares of Common Stock that
the Company may issue from time to time, the Shares of Convertible Preferred
Stock issued or issuable hereunder shall automatically, without notice, convert
to an equal number of shares of Common Stock of the Company. Upon such
conversion, the term "Warrant Shares" shall be deemed to refer solely to the
Company's Common Stock and all terms and conditions of this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of Common Stock and the form of this Warrant need not be changed or
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exchanged.
B. Redemption of Warrants. Commencing at the end of the six months following the
issuance of the Warrant and upon delivery of a notice of redemption to the
holder hereof (hereafter, the "Notice of Redemption"), the Company may redeem
(to the extent not then exercised) the Warrant for $.10 per Warrant Share if the
underlying capital stock issuable upon exercise thereof is covered by an
effective and current registration statement on Form SB-2 (or any other
appropriate form) under the Securities Act of 1933, as amended (the "Securities
Act") and the Average Share Price of the Company's shares is equal to or above
200% of the Warrant exercise price for a period of twenty consecutive trading
days immediately preceding the delivery or transmission of the Notice of
Redemption; provided, that, the provisions relating to such redemption shall
apply only upon (and following) the approval by the Company's stockholders at
the Annual 2000 Meeting of a resolution relating to the Increase in Authorized
Common; and provided, further, that, notwithstanding the foregoing, the Holder
may exercise the Warrant (in part or in full) within seven (7) business days
following delivery to the Holder of the Notice of Redemption by payment in
immediately available funds of the amount reflecting such exercise of the
Warrant.
`Average Share Price' as used herein means the average of the closing bid prices
of shares of the Common Stock of the Issuer (as reported by Bloomberg Financial
Markets) on the stock exchange or public market on which the Common Stock
trades.
1. Warrant Period; Exercise of Warrant
1.1 This Warrant may be exercised in whole or part at any time commencing
9:00 a.m., New York City time, on any business day on or after the issuance
thereof and continuing up to the fourth anniversary thereof (the "Warrant
Period"), by the surrender of this Warrant (with a duly executed exercise form
in the form attached at the end hereof as Exhibit A) at the principal office of
the Company, together with the proper payment of the Per Share Warrant Price
times the applicable number of Warrant Shares.
1.2 Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of Holder for the Warrant Shares to
which the Holder shall be entitled and (b) if the Warrant is exercised in part,
deliver to the Holder certificates evidencing the balance, if any, of the
Warrant Shares to be issuable pursuant to the provisions of this Warrant.
1.3 Any stamp tax attributable to the issuance of the Warrant Shares shall
be borne solely by Holder.
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2. Representations and Warranties
The Holder (i) represents, warrants, covenants and agrees that the Warrant
and the underlying Warrant Shares are being acquired by the Holder for the
Holder's own account, for investment purposes only, and not with a view to any
public distribution thereof or with any present intention of so distributing all
or any part of the Warrant or the Warrant Shares; (ii) understands (x) that if
it should thereafter decide to dispose of such Warrant or Warrant Shares (which
it does not contemplate at such time) it may do so only in compliance with the
Securities Act, including any exemption therefrom, (y) this Warrant and the
Warrant Shares are not registered under the Securities Act; and (iii)
acknowledges that, as of the date hereof, it has been given a full opportunity
to ask questions of and to receive answers from the Company concerning this
Warrant and the Warrant Shares and the business of the Company and to obtain
such information as it desired in order to evaluate the acquisition of this
Warrant and the Warrant Shares, and all questions have been answered to its full
satisfaction.
3. Reservation of Shares
The Company covenants that at all times during the Warrant Period it shall
have authorized and in reserve, and will keep available solely for issuance or
delivery upon exercise of the Warrant, the Warrant Shares and other securities
and properties as from time to time shall be receivable upon the exercise of
this Warrant, free and clear of preemptive rights and restrictions on sale or
transfer except as otherwise set forth herein or in the Company By-Laws.
4. Adjustment
4.1 In case of any consolidation or merger of the Company with or into
another corporation (other than a merger or consolidation in which the Company
is the surviving or the continuing corporation) or in the case of any sale or
conveyance to another corporation or other entity of the property, assets or
business of the Company as an entirety or substantially as an entirety, in any
such case, the Company or such successor or purchasing corporation or entity, as
the case may be, shall (i) execute with the Holder an agreement that the Holder
shall have the right thereafter to receive upon the exercise of the Warrant the
kind and amount of shares and/or other securities or other property which he
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Warrant been exercised
immediately prior to such action, (ii) make effective provision in its
certificate of its incorporation or otherwise, if necessary, in order to effect
such agreement, and (iii) set aside or reserve for the benefit of the Holder,
the stock, securities, property and cash to which the Holder would be entitled
to upon exercise of this Warrant.
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4.2 In case the Company shall (A) pay a dividend or make a distribution on
its shares of Capital Stock (B) subdivide or reclassify its outstanding Capital
Stock into a greater number of shares, or (C) combine or reclassify its
outstanding Capital Stock into a smaller number of shares or otherwise effect a
reverse split, (other than a change in par value or from no par value to a
specific par value), the Exercise Price shall be proportionately adjusted so
that the Holder shall have the right thereafter to receive upon exercise of this
Warrant solely the kind and amount of shares, the Holder would have owned had
this Warrant been exercised immediately prior to such dividend, subdivision,
combination or reclassification.
4.3 The above provisions of this paragraph 4 shall similarly apply to
successive reclassifications and changes of shares of capital stock of the
Company and to successive consolidations.
4.4 In case the Company shall, subsequent to the date hereof, issue rights
or warrants to all holders of its Capital Stock entitling them to subscribe for
or purchase shares of Capital Stock (or securities convertible into Capital
Stock) at a price (or having a conversion price per share) less than the current
market price of the Capital Stock, the Exercise Price shall be adjusted so that
the same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, of which
the numerator shall be the number of shares of Capital Stock outstanding on the
record date mentioned below plus the number of additional shares of Capital
Stock which the aggregate offering price of the total number of shares of
Capital Stock so offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price per share of
the Capital Stock, and of which the denominator shall be the number of shares of
Capital Stock outstanding on such record date plus the number of additional
shares of Capital Stock offered for subscription or purchased (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants; and to the extent that
shares of Capital Stock or securities convertible into Capital Stock are not
delivered after the expiration of such rights or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Capital Stock (or securities
convertible into Capital Stock) actually delivered.
4.5 In case the Company shall, subsequent to the date hereof, distribute
to all holders of Capital Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions paid out of current earnings or
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subscription rights or warrants (excluding those referred to in Paragraph 4.4 of
this Warrant), then in each such case the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, of which the numerator shall be the total number of
shares of capital Stock outstanding multiplied by the current market price per
share of capital Stock, less the fair market value (as determined by the
Company's Board of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and of which the denominator shall be
the total number of shares of Capital Stock outstanding multiplied by such
current market price per share of Capital Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such distribution.
4.6 If, for any reason, prior to the exercise of this Warrant in full, the
Company spins off or otherwise divests itself of a part of its business or
operations or disposes all or of a part of its assets in a transaction (the
"Spin Off") in which the Company does not receive compensation (other than
nominal non-material compensation) for such business, operations or assets, but
causes securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (a) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (b) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (i) the Reserved
Spin Off Shares multiplied by (ii) a fraction, of which (x) the numerator is the
amount of the Outstanding Warrants then being exercised, and (y) the denominator
is the amount of the Outstanding Warrants.
5. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated by
the Holder unless and until the capital stock for the purchase of which such
Warrant is exercisable shall then be covered by an effective and current
registration statement on Form SB-2 (or any other appropriate form) under the
Securities Act of 1933, as amended (the "Act") and all applicable state
securities laws or the Company shall have received an opinion of counsel (which
counsel is reasonably acceptable to the Company) to the effect that the proposed
sale or transfer is exempt from the registration provisions of the Act and all
applicable state securities laws. The Company may treat the registered holder of
record as the Holder for all purposes. The Company shall permit any holder of a
Warrant
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or his duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants.
(b) Unless covered by an effective and current registration statement, the
Warrant Shares issued upon exercise of the Warrants shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT.
ACCORDINGLY, SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
6. Registration Rights
(a) The Holder of the Warrant shall have the right for a period of four
years commencing from the date of this warrant to include the Warrant Shares as
part of any other registration of securities filed by Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8 or any equivalent form).
(b) The Holder shall pay any and all underwriting commissions, if any, in
connection with the sale of the Warrant Shares , but the Company shall bear all
fees and expenses attendant to registering the Warrant Shares under federal,
state and any other securities laws, including, without limitation, all printing
costs. In the event of such a proposed registration, the Company shall furnish
the Holder of the Warrant or Warrant Shares with not less than 30 days written
notice prior to the proposed date of filing of such registration statement. The
Holder of the Warrant or Warrant Shares may exercise the piggyback rights
provided for herein by giving written notice, within fifteen days of the
Holder's receipt of the Company's notice of intention to file a registration
statement. Except as otherwise herein provided, the Company shall cause any
registration filed pursuant to the above piggyback registration rights to remain
effective and current in the case of a registration statement on form S-3, until
all the Warrant Shares covered by such registration statement have been sold and
in the case of a registration statement on a Form other than S-3, for a period
of one year.
(c) With respect to any registration statement,
(i) The Company shall use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
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effective as promptly as practicable. The Company shall keep effective and
current any registration or qualification contemplated by this Warrant and shall
from time to time amend or supplement each applicable registration statement,
preliminary prospectus, final prospectus, application, document, and
communication for so long as the Warrant Shares are not transferable under Rule
144(k) under the Act; provided, however, that, if the Company is required to
keep any such registration or qualification in effect with respect to securities
other than the Warrant Shares beyond such period, the Company shall keep such
registration or qualification in effect and current as it relates to the Warrant
Shares for so long as such registration or qualification remains or is required
to remain in effect in respect of such other securities;
(ii) The Company shall use its best efforts to cause the Warrant
Shares to be registered or qualified for sale under the securities or blue sky
laws of such jurisdictions as the Holder(s) may reasonably request; provided,
however, that the Company shall not by reason hereof be required to qualify to
do business in any state in which it is not otherwise required to qualify to do
business or to file a general consent to service of process in such
jurisdiction;
(iii) Upon request, the Company shall furnish the Holder and its
counsel copies of all registration statements and amendments and supplements
thereto, each preliminary and final prospectus and amendment and supplement
thereto, comment letters from the Commission, the National Association of
Securities Dealers ("NASD") and state securities commissions, and such other
documents as the Holder shall reasonably request to facilitate the disposition
of the Warrant Shares included in such registration;
(d) (i) The Company will indemnify and hold harmless each Holder,
and each partner, officer, director, and controlling person of such Holder, with
respect to which registration, qualification or compliance has been effected
pursuant to this Warrant against all claims, losses, damages and liabilities (or
actions in respect thereof under the Act, the Exchange Act, common law or
otherwise arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like as amended and supplemented) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of any
rule or regulation promulgated under the Act or any state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the Company in connection with any such registration, qualification or
compliance, and will promptly reimburse each such Holder, and each partner,
officer, director, and each controlling person of such Holder, for any legal and
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action; provided, that the
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Company will not be liable to any Holder or any partner, officer, director and
controlling person of any Holder, to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission contained in information furnished to the Company by any Holder in
writing specifically for use therein.
(ii) In connection with any registration statement in which a Holder
of Warrant Shares is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company and any
underwriter reasonably requests for use in connection with any such registration
statement or prospectus and shall indemnify the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
such holder.
(iii) Each Holder will indemnify and hold harmless each other Holder
(the "Indemnitee"), and each partner, officer, director, and controlling person
of such Indemnitee against all claims, losses, damages and liabilities (or
actions in respect thereof under the Act, the Exchange Act, common law or
otherwise) arising out of or based on any untrue statement or omission contained
in information furnished by such Holder in writing specifically for use by the
Company in connection with this offering and relied on by the Company and the
Indemnitee; provided, however, that the indemnification set forth in this
subparagraph (vii)) shall be limited to the amount, with respect to each Holder,
equal to the gross proceeds realized by such Holder from the sale of such
securities registered pursuant to such registration statement.
(iv) If the indemnification provided for in subparagraphs d(i) and
d( iii) above is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such of loss,
liability, claim, damage, expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of competent
jurisdiction by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material
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fact relates to information supplied by the indemnifying party or by the
indemnified party and the party's relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this subparagraph (iv), a Holder shall not be
required to contribute any amounts in excess of the amount equal to the gross
proceeds realized by such Holder from the sale of the securities registered
pursuant to such registration statement.
(e) With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
(as that term is used in Rule 144 under the Act) to the public without
registration, the Company agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144 under the Act;
(ii) use its reasonable efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(iii) so long as a Holder owns any restricted securities, furnish to
the Holder promptly upon a written request by the Holder as to the Company's
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety days following the effective date of the first registration
statement filed by the Company for an offering of securities to the general
public), and of the Act and Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as the Holder may reasonably request in availing himself, herself or itself of
any rule or regulation of the Commission allowing the Holder to sell any such
securities without registration.
(f) Notwithstanding the forgoing, if at any time or from time to time
after the date of effectiveness of such registration statement, the Company
notifies the Holder in writing of the existence of a Potential Material Event,
the Holder shall not offer or sell any Warrant Shares, or engage in any other
transaction involving or relating to the Warrant Shares, from the time of the
giving of notice with respect to a Potential Material Event until either the
events or circumstances comprising such Potential Material Event have been
disclosed to the public or no longer constitute a Potential Material Event;
provided however, that the Company may not so suspend the right to such Holder
of Warrant Shares during the periods the registration statement is required to
be in effect other than during a Permitted Suspension Period. The term
"Permitted Suspension Period" means one or more suspension periods during any
consecutive 12-month period
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which suspension periods, in the aggregate, do not exceed fifty (50) days,
provided, however, that no one such suspension period shall either (i) be for
more than twenty (20) days or (ii) begin less than ten (10) business days after
the last day of the preceding suspension (whether or not such last day was
during or after a Permitted Suspension Period) and the term "Potential Material
Event" shall mean any of the following: (i) the possession by the Company of
material information not ripe for disclosure in a registration statement, which
shall be evidenced by determinations in good faith by the Board of Directors of
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company; or (ii) any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination. Notwithstanding anything to the
contrary contained herein, the provisions hereof shall not apply to the extent
that any of the Securities then included in such Registration Statement may be
sold or otherwise transferred under Rule 144 under the Act or are transferred in
a private non-brokerage transaction.
7. Loss, etc. of Warrant
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder a new Warrant of like date, tenor and denomination.
8. Warrant Holder Not Shareholder
Except as otherwise provided herein, this Warrant does not confer upon the
Holder any right to vote or to consent or to receive notice as a shareholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a shareholder, prior to the exercise hereof.
9. Headings
The headings of this Warrant have been inserted as a matter of convenience and
shall not affect the construction hereof.
10. Notices.
Unless otherwise provided, any notice required or permitted under this Warrant
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or seven (7) days after deposit with a
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National Post Office, for dispatch by registered or certified mail, postage
prepaid and addressed to the Holder at the address set forth in the Company's
books and to the Company at the address of its principal offices set forth
above.
11. Governing Law
This Warrant shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware applicable to contracts made and performed
within such State.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as
of the date first written above.
AMBIENT CORPORATION
By: __________________________
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EXHIBIT A
WARRANT EXERCISE FORM
_________________, 199_
TO: Ambient Corporation
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ shares of Capital Stock of Ambient Corporation
then issuable according to the terms thereof at the per share price of $___.
Payment to the Company of the total purchase price for such shares has been made
simultaneously with the delivery of this exercise of warrant.
By: ___________________
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