UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report for the fiscal year ended December 31, 1999
Ambient Corporation
(Exact name of registrant as specified in its chapter)
Delaware 0-23723 98-0166007
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
Jerusalem Technological Park, Building 9, Malha, Jerusalem, Israel.
(Address of Principal Executive Offices)
888-861-0205
(Registrant's Telephone Number, including Area Code)
[Mark One]
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 1999
|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$.001 Par Value Common Stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not be contained, to the best
of the Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
The Issuer did not report any revenues for the year ended December 31,
1999.
As of April 14, 2000, there were 9,656,611 outstanding shares of the
issuer's Common Stock. The aggregate market value of the shares of the issuer's
Common Stock on April 11, 2000 held by non-affiliates was approximately
$34,631,375.
<PAGE>
ITEM 1. BUSINESS
We are engaged in the design and development of products and services in
the fields of electronic commerce, Internet access and advanced telephony
applications. All of our design and development activities are conducted within
the State of Israel.
Our activities are currently centered in two distinct areas: (i) the
completion of the design and development of a unique technology that facilitates
the provision of rapid power line telecommunication services to ordinary
business and personal consumers and (ii) the establishment, initially in Israel,
of a nationwide screen phone network that is designed to enable e-commerce and
Internet browsing for consumers who do not have access to, or are unable or
unwilling to use, personal computers.
Since our founding in June 1996, we have been engaged primarily in the
design and development of smart card based technologies and products. Owing to a
fundamental reassessment of general market developments in the field of smart
card based technologies, we elected to leverage our experience and expertise
acquired in the area of smart card based technologies to the design, development
and commercialization of our proprietary technologies in the field of
power-line- telecommunications (PLT) and screen phones. We have ceased all
research and design efforts in the smart card area.
We have recently established a wholly-owned subsidiary, PLT Solutions,
Inc. to promote a unique technology designed to facilitate the use of existing
electricity power lines and grids in the United States and Japan for Internet,
telephone and data transfer to ordinary business and personal users. Existing
electrical power grids are not currently in use for high speed data transmission
due to certain power utility infrastructure limitations. We have designed and
developed proprietary technology that overcome these infrastructure limitations.
We believe that our technology will be especially attractive to Internet
providers/integrators (AOL, Cisco, IBM etc.).
We also have a 40% interest in a newly established Israeli company,
Kliks.com Ltd., which is engaged in designing and attempting to establish a
nationwide Screen Phone network in Israel. The network will enable Internet
access for a wide segment of the population which is less familiar with the use
of personal computers (PC's), or belongs to the large segment of populace which
does not have a PC. Our Vice-President, Mr. Bernie Wolff, holds the remaining
60% interest in Kliks.
A discussion of each of power line transmission, the screen-phone network
follows:
ELECTRICAL POWER-LINE TRANSMISSION
General Background Relating To Internet Access
Worldwide Internet communications can be divided into the "backbone"
network and the "access" network. The backbone network is carried over optical
fibers between cities and continents, and we believe, provides essentially
unlimited capacity for sending relatively large amounts of data over long
distances. However, the optical fiber technology used for the backbone network
is too expensive to extend to each
<PAGE>
individual user. Accordingly, distributing the data from the backbone network to
homes and business is done via an "access" network, also referred to as the
"last mile" network.
To date, traditional Access networks have included modems connected to
conventional telephone lines, higher speed digital subscriber telephone lines
(ADSL), cable TV with data modems in set-top boxes and, more recently, wireless
networks. However, we believe that the traditional access methods have certain
drawbacks. The ADSL method typically requires high implementation costs. Cable
TV modems are characterized by loss of rapidity of service when the number of
subscribers reaches a critical mass and wireless networks are unreliable, as is
generally the case in the use of cell phones.
One of the more rapid and affordable methods of access utilizes
conventional electrical power grids, also known as power-line communication, to
transmit data to individual users. The use of electrical power grids as an
access method is, in our view, an especially attractive proposition given the
widespread infrastructure "wiring" already in place. The same electrical wiring
that carries electrical power to individual homes and business can also transmit
high speed data. However, there are certain infra-structural limitations that
have, until recently, effectively precluded the use of conventional electrical
power grids as an affordable access method.
Electrical power is generated at a power station and furnished to an urban
or rural substation which services a neighborhood, typically extending over
several square miles. The electrical power generated at the power station is
sent over relatively high voltage lines and needs to be reduced to a lower
voltage for further distribution within the neighborhood. At the neighborhood
substation level, a "stepdown transformer" reduces the high voltage electrical
power generated to "medium" voltage for further distribution within the
neighborhood. The medium voltage needs to be further reduced to familiar 120
volts by "distribution transformers" located near the neighborhood homes and
businesses.
However, the distribution transformers were designed for 60 Hz power, and
completely fail to transmit the high frequency, data-carrying signals arriving
over the grid from the substation. Therefore, to ensure that data can get from
the neighborhood lines to the 120 volt outlets, a "bypass coupler" is needed as
a bridge around the distribution transformer. These couplers need to be
physically (and therefore electrically) connected directly to the high voltage
lines. To achieve the electrical connection the coupler needs to withstand high
voltage, and is therefore very expensive to manufacture.
Our proprietary technology enables coupling the data to and from the
neighborhood distribution lines without the need to establish an electrical
connection. Our propietary coupler, a prototype of which is ready for
feasibility demonstation, either uses the existing insulation of underground
cables or is easily insulated to slip around overhead medium voltage
distribution wires. Accordingly, the manufacturing costs are significantly
reduced in comparison to the conventional bypass coupler.
<PAGE>
Advantages of Utilizing Existing Power lines for High Speed Data Transmission
The use of electricity power lines to connect homes and businesses to the
Internet, for telephony or for any other form of data transmission provides both
consumers and suppliers with a range of compelling economic and practical
benefits.
The advantages in employing power line communication include:
o Coverage - the power grid is the most extensive "wire" network in the
world. More individuals and businesses have access to the electrical grid
than any other "wire" network, including telephone lines. The low voltage
wiring extends to every room in the business and home, and obviates expensive
and disruptive wiring.
o Modernity - the electric grid in most areas of the world is more modern and
better maintained than any other wired communication network.
o Simplicity - power line communications are not burdened by telephony's
conventional technologies, including outdated routers, bridges, gateways,
legacy switches and software, which slow down traditional communications.
Fueled by recognition of the overwhelming financial and practical
benefits, interest in high speed power-line telecommunication has expanded.
Technical conferences on the subject are frequent, and attended by power
companies, as well those from other relevant fields including telecommunications
and networking companies such as 3COM, Nortel, Cisco, Cinergy and others. PLT
chips and modems for in-house networking are maturing, and a large number of
companies are vying for this market. Network speeds of data transmission are
rapidly increasing. To realize maximum benefit from the in-home network, users
are looking to connect it to a high speed Internet feed. So an initial group of
users who already use PLT and trust the technology is emerging, with a built-in
demand for access connectivity to the Internet backbone.
Europe's 230 volt line voltage allows a large number of customers to be
fed by each distribution transformer. Most of the trials of neighborhood PLT
have taken place in Europe, but have usually limited themselves to sending data
over the 230 volt feed lines, and have not attempted to establish
substation-to-home neighborhood Access networks.
Comparison of Power-Line Communication with other High Speed Access Solutions
o Digital Subscriber Line (DSL) - subscribers need to be within approximately
5.5 km of the telephone company's central office. It is a point-to-point
connection, so the one time installation cost to the end user is high. Users
report that installation times are long, and availability is sparse. Phone
companies need to invest considerably to beef up their networks, which were
never designed for high speed data and very long session times.
In contrast, our networks can be deployed in entire neighborhoods in a
matter of days, and their direct connection to the backbone means no
bottlenecks or heavy investments. Also, telephone outlets typically exist in
only one to three locations within a premise, while power outlets are already
installed in every room.
<PAGE>
o T1 Trunks - T1 (1.544 Mbps) is a digital telephony trunk, typically used by
phone companies to provide telephone service to large organizations. It
provides high speed in both directions, the equivalent of 24 telephone
conversations. But, its $250 monthly tariff prices it out of the market for
most home and small business users.
Satellite - Some satellites serve as data relay stations, and some of these
are connected to the Internet backbone to provide high speed data to users.
The user needs to buy, mount and aim a fairly large dish, he needs a
microwave transmitter/receiver, and a special modem. Since the ground-based
antennae cannot beam a strong signal back to the satellite, only low speeds
of 56 kilobits per second can be sent from the user to the Web, the same data
speed as is available over dialup modems.
o Cable Modems - TV cable networks have been designed and constructed as
one-way feed systems, providing a large number of channels to a large user
base. Subscribers to cable companies share their cable lines with other
subscribers, sometimes a very large number of them, so even the high promised
data speeds (up to 36Mbps) may not guarantee good service during peak usage.
Sending data back from the user to the network is problematic over cable TV
lines, due to the accumulation of noise generated by the television sets and
other devices, from all of the connected customers, reaching the TV cable.
Cable companies must invest substantially in upgrading their equipment to be
able to send data upstream, and in laying cables outside of urban areas. Data
service is available to only a small percentage of Internet users.
In contrast, PLT exploits the natural segmentation of the neighborhood
power grid, to keep the number of users sharing the data stream within
reasonable limits. Typically, only 50 - 200 premises share a common phase
line in the US, and the number of users demanding simultaneous downloads of
large files is likely to be very small. PLT Solutions expects the typical
user to enjoy data rates from 1 - 10 megabits per second, usually enough to
pass the maximum data rate available from the Web site being accessed, for
the foreseeable future.
In addition, cable TV outlets typically exist in only one or two locations
within a premise, while power outlets are already installed in every room.
This saves expensive and disruptive rewiring, when data users include PCs,
Internet telephones, and eventually many intelligent appliances.
o Wireless Local Loop - Similar to cellular telephone network deployment,
microwave relay stations may be deployed in neighborhoods to provide last
mile Access for Internet data to homes and businesses. The same problems of
communications reliability that beset cellular telephones are likely to
affect wireless local loop systems. These include need for near line of sight
between hub and user, multiple reflections of signals in dense residential
areas, the blocking effects of the metal building materials, and seasonal
variation of foliage and effects of precipitation on radio transmission
quality.
<PAGE>
Another inherent limitation is the frequency bandwidth available in the
shared domain of radio frequencies, and the difficulty of providing
significant future upgrades in data speeds without regulatory permission and
massive retrofitting of equipment.
Our Solution
PLT Solutions proposes utilization of conventional electrical power lines
as its access channel. The data path is as follows: (i) high speed data arrives
over the optical fiber backbone cable, routed to the neighborhood utility
substation, (ii) the specific data intended for the subscribers of a particular
neighborhood is selected from the general data stream by a standard network
device called a router, (iii) the digital data is turned into a high frequency
signal using a modem, and (iv) the high frequency, data-carrying signal is
carried onto the neighborhood power distribution line using our proprietary
coupler.
At each distribution transformer, serving typically two to six premises,
the data is received, as follows: (i) the high frequency, data-carrying signal
is coupled from the neighborhood power distribution line onto the customers' 120
volt feed lines using our proprietary coupler, (ii) the high frequency signal is
converted back to data using a modem, and (iii) the PC or other user device
listens to the neighborhood data, and accepts that data which is addressed to
itself.
The process of sending data from the user device to its destination uses
the above pathway in the reverse direction.
Integrating Our Coupler into a Complete Access Network
In order to provide a comprehensive power line access solution to the end
user, our coupler is required to be integrated with the following technologies:
o a spread spectrum modem
o a media access control processor
o a network control system
o user interface devices
The spread spectrum modem is the device which turns the digital data into
a high frequency signal, and its spread spectrum character both minimizes radio
interference and provides tolerance for the noise interference to be found on
power lines. The media access control processor is the "traffic cop" which
coordinates packaging of data into "packets," and who sends listens. The network
control system provides overall control of traffic. And the user interface
devices translate the high frequency signals coming over the power line into
useable data for their computers and other devices.
<PAGE>
In order to provide a comprehensive solution in an expeditious manner, we
need to coordinate our efforts with companies experienced in the modem and
networking fields. We are currently examining options respecting alliances with
such companies. We cannot provide any assurance that we will be successful in
concluding such alliances.
Our solution seeks to provide an initial system data rate of 10 megabits
per second, and we believe that this can be upgraded to several times this
speed, with future developments in hardware and software. For example, current
modems use relatively simple "modulation" techniques that turn data bits into
high frequency energy. Future modems are expected to use more sophisticated
modulation techniques which allow the same frequency band to carry at least
three times more data.
Our Coupler Product
We believe that we have completed the design and development of a unique
coupling method with very low projected manufacturing costs and that does not
materially impact on power grid reliability. Our prototype product has passed
high voltage testing at a lab in the US and has been field tested for
communications between two transformers at a power company site.
Our coupler features:
o Low cost (25% cost of an existing solution)
o Capacity for very high data rates, exceeding 10 megabits per second, which
is 200 times faster than dialup modems can provide.
o Installation without interruption of service to customers
o No material impact on reliability of electrical grid
o Works even during power outage
o Installation without exposure to high voltages
o Virtually unlimited life of service
We are currently in the process of arranging for the pilot testing of our
proposed product with potential commercial partners. Further productization
steps will include Standards testing and certification, mechanical package
design and tooling for mass production.
To provide a end to end data distribution network, we need to collaborate
with a modem and media access control processor chip manufacturer, and a data
network equipment manufacturer.
<PAGE>
It will be necessary for us to obtain the cooperation of a utility company
in order to progress with full pilot testing and commercialization.
Production & Supplies
Our proprietary couplers utilize special magnetic materials and high
voltage weatherproof plastics, as well as standard components that are
obtainable from local sources. We have identified potential suppliers who can
supply the special magnetic materials and high voltage weatherproof plastics. We
have held meetings with these suppliers, and initial estimates have been made
for one time tooling costs. We do not regard any one supplier as essential to
our operations since equivalent replacements for the components are either
available from one or more sources at competitive prices. We believe that
approximate cost to the Company of the components for the couplers should not
exceed $20 per unit. The Company currently does not have a written contract with
any supplier for any of the components.
Subject to successful completion of pilot testing, we intend to initially
assemble the couplers at our facilities. We anticipate that we will need to
retain appropriate professionals to assemble and test the couplers. We estimate
that with 5 assemblers and 3 testers we can fill orders of up to eight thousand
units per month. As quantities grow, offshore assembly facilities may be
selected, to increase production capabilities and reduce cost.
We anticipate that all of future suppliers and the assemblers will be
certified to recognized international quality assurance standards.
Competition
The Internet Access market is highly competitive. We face competition from
many Internet access and service providers with significantly greater financial
resources, well-established brand names and large, existing customer bases.
Moreover, we expect the level of competition to intensify in the future. We
expect significant competition from:
I. (ISPs) Internet Service Providers
ISPs provide Internet access to residential and business customers. These
companies provide Internet access over existing networks. They have nationwide
marketing presences and strategic or commercial alliances with telecom carriers.
Significant ISPs include Concentric Network Corporation, Mindspring Enterprises,
Inc., PSINet Inc. and Verio, Inc. Incumbent Local Exchange Carriers, ILECs, such
as SBC Communications, Inc.,GTE Corp., Ameritech Corp. and US WEST, Inc.
II. Wireless and Satellite Service Providers.
We also face competition from other fixed-wireless services, such as
Teligent, Inc., NEXTLINK Communications, Inc. Winstar Communications, Inc. AT&T
has also announced plans to expand its fixed-wireless network to compete for
voice and high-speed data customers in businesses and residences. We also may
face competition from satellite-based systems. Motorola Satellite Systems, Inc.,
Hughes Communications, Inc. (a subsidiary of General Motors Corporation),
Teledesic LLC and others have filed applications with the FCC for global
satellite networks that can be used to provide ubiquitous two-way broadband
voice and data services to fixed locations. Many of these competitors are
offering, or may soon offer, technologies and services that will directly
compete with some or all of our service offerings.
III. Other Telephony Services
We also face intense competition from other providers of telephony
transmission services. Many of the existing providers of telephony services,
such as regional Bell operating companies and other local exchange carriers,
have significantly greater financial and other resources than us and better
established brand awareness in their service areas.
IV. Subscription Television Competition Hardwire Cable.
Our principal subscription television competitors are traditional hardwire
cable operators such as AT&T Broadband & Internet Services (formerly
TeleCommunications, Inc.), and Time Warner Entertainment. Hardwire cable
companies generally are well established and known to our potential customers
and have significantly greater financial and other resources than we have. In
addition, these competitors are also bundling additional services with their
cable TV services, such as high-speed Internet access, to enhance their
products. Direct Broadcast
<PAGE>
Satellite ("DBS"). DBS service is available from DirecTV,Inc., which is a
subsidiary of the Hughes Electronic unit of General Motors Corporation and
Echostar Communications Corporation. We compete with many retail distributors of
DirecTV and other DBS service.
SCREEN PHONES
Through Kliks.com Ltd., an Israeli company, we intend to serve as the
vehicle in Israel to offer the screen phone as an effective tool for offering a
full range of Internet and e-commerce services to the business (B-to-B) and
public consumers. Kliks has developed a concept that offers all the elements
essential for capitalizing on current consumer interest in the Internet and e-
commerce, while overcoming most of the shortcomings of a PC-based market
approach by the on-line services industry.
The means to deliver services to the end-user will be through
screen-enhanced telephones phones supporting enhanced telephony services that
are now commercially available. The screen phones are Internet enabled with an
integrated alphanumeric keyboard, and a reader capable of handling smart cards
for electronic payments. The model relies on using Internet enhanced screen
phones instead of the personal computer (PC) as the conduit for electronic
commerce.
Kliks is proposing a staged approach for this opportunity by which
consumers will initially be offered standard applications (e-mail, advanced
telephony, and Internet browsing/access) through the screen phone with the
opportunity at a second stage to expand the services to include a full suite of
e-commerce activities. The user being able to order consumer items/services at
home via the screen phone in the comfort of the home creates a very attractive
and friendly environment for enhancing e-commerce activities.
Kliks success will be dependant on its ability to obtain the exclusive
distribution rights in Israel for a screen phone. Kliks is currently negotiating
such rights for a screen phone which it believes to be a superior product. In
addition, Kliks will need to enter into strategic relationships with
well-established providers, such as the national telecommunication carrier
(Bezeq), and a platform operator, who together will launch a portfolio of screen
telephony and electronic services to both business and the consumer.
Customer Profile
The screen phone which Kliks intends to offer in the Israeli market, is a
conventional telephone. For the implementation plan, the screen phone deployment
will start in upscale communities with a high percentage of families with
children, business seniors and professional people. Once the business is
established, deployment can proceed to the wider community, with a goal of
achieving high penetration in the minimum period of time.
In addition to revenues from home-based services, we believe that Kliks
will be
<PAGE>
able to generate revenues from large organizations whose business depends on
establishing and maintaining long-term account relationships with customers.
This will include banks and other financial service companies, telephone and
utility companies, consumer orientated services (supermarkets, travel agencies,
etc.) and leisure organizations (cable, pay per view, lottery etc.). Within a
community, sponsors will use this channel to deliver local content services,
thereby developing sustainable long-term relationships. Community services
organizations (schools, local authorities, libraries etc.) will have a direct
electronic link into the homes in their community, in order to promote local
services. This will be achieved through conventional e-mail messaging through
the server.
Competition
Kliks will face competition primarily from two different avenues.
Alternative Screen phones - there are other Internet Screen phones
available on the market, but so far none are being marketed in Israel. Kliks
believes that the screen phone for which it is currently negotiating the
exclusive Israeli distributions rights is a superior product in the market and
that it will provide a high entry barrier for potential competitors.
Other Communication Media - there are several media which do, or are
expected, to provide services which overlap with the Kliks portal:
ISPs (Internet Service Providers) - offer online portals. However, the
screen phone is well positioned against the PC, since it is a more user-friendly
device, always switched on and is more cost-effective. Moreover the US and UK
experience has shown widespread acceptance of screen phones in communities with
higher than average PC penetration.
Web TV is expected to enter the market with similar services using the TV
as interface. The TV is currently seen primarily as an entertainment device,
while the screen phone will be easier and quicker to access.
Cellular - operators in Israel are establishing portals that will enable
their subscribers to access the web and information services. Wireless Access
Protocol (WAP) services are under development which will be delivered to mobile
phones. Although these services will also be suited to screen phones, they are
primarily for
<PAGE>
mobile use. They do not, in our view, represent a threat to the screen phone in
the home due to differences in communication costs and size of the screen among
other factors.
Online Banking Services - Existing commerce systems (telephone/home
banking services) are being offered by financial institutions. Most Israeli
banks offer this service to their customers, and the current number of
subscribers per bank is approaching 150,000. Apart from cash withdrawals and
cash deposits, all teller services can be activated. Similar services exist for
commercial banking, with additional services in wholesale banking such as L/C,
Foreign Exchange, etc. Citigroup has announced that within the next few months,
it will enter the local market, and concentrate on offering electronic banking
services to high net-worth customers.
PATENTS AND TRADE SECRETS
A provisional application, with a 1999 priority date, which has been
assigned to PLT Solutions, Inc., has been submitted to the United States Patent
& Trademark Office. Our Israeli subsidiary, Ambient Ltd., has two smart card
patent applications pending in Israel which were filed in 1996, for one of which
a corresponding application was filed in the United States in 1997. The United
States Patent and Trademark Office ("PTO") has allowed one patent application,
which was filed in the United States in 1996, for which a corresponding
application was filed under the international Patent Cooperation Treaty in 1997.
There is currently one US patent pending in the field of contactless smart
cards. The smart card technology is not currently being exploited nor do we
foresee that it will be exploited in the near future.
There can be no assurance that any of our future patent applications will
be granted, that any current or future patent or patent application will provide
significant protection for our products or technology, be of commercial benefit
to us, or that the validity of such patents or patent applications will not be
challenged. Furthermore, there can be no assurance that any patent underlying
licensed technology will not be challenged. Moreover, there can be no assurance
that foreign patent, trade secret or copyright laws will protect our
technologies or that we will not be vulnerable to competitors who attempt to
copy or use our Smart Card products or processes.
RESEARCH & DEVELOPMENT
A wholly owned subsidiary of the Company in Israel, Insulated Connections
Corporation Ltd., provides research and development work for PLT Solutions Inc.
The Company does not undertake any research and development activities
EMPLOYEES
As of March 30, 2000, we have two full-time employees employed at Ambient
Corporation and one at Ambient Ltd. PLT Solutions Inc. employs five employees,
two of which are also employed by Ambient Corporation. Kliks.com employs four
employees, one of which is employed by Ambient Corporation. In all, there are 5
different individuals employed by these companies.
ITEM 2. PROPERTIES
<PAGE>
Our Israeli subsidiary, Ambient Ltd., leases 180 square meter office space
in Jerusalem Israel. We sublease approximately 135 square meters to unrelated
companies. The Company is looking for substitute space.
Ambient Israel's corporate offices are located at Jerusalem Technological
Park, Building 9, Malha, Jerusalem, Israel and its telephone number is
972-2648-2993. Kliks corporate offices are located at 3 Gavish St., Kfar Saba,
Israel. PLT Solutions Inc.'s and Ambient Corporation's offices in the United
States are located at 1285 Avenue of the Americas, New York 10019 and its
telephone number is (888) 861-0205.
ITEM 3. LEGAL PROCEEDINGS
Our Israeli subsidiary is party to various litigation matters involving
ordinary and routine claims incidental to our business. We cannot estimate with
certainty its ultimate legal and financial liability with respect to such
pending litigation matters. However, the Company believes, based on its
examination of such matters, that the Company's ultimate liability will not have
a material adverse effect on its financial position, results of operations or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Shareholders on December 29, 1999 and the
shareholders voted as to the following: (a) election of Michael Braunold and
Aryeh Weinberg as directors to serve for a term of one (i) year or until their
respective successors are elected and (b) the approval of Brightman Almagor &
Co. (a member of Deloitte Touche Tohmatsu), as independent public accountants of
the Company for the year ending December 31, 1999. All of these matters were
approved.
Voting Results were as follows:
FOR AGAINST ABSTAIN
1. Directors 1,691,152 20,500 0
2. Auditors 1,689,152 22,500 0
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on OTCBB under the symbol "ABTG". The
following table sets forth, for the periods indicated the range of high and low
sales prices per share of the Company's Common Stock, as reported on OTCBB.
<PAGE>
HIGH LOW
By Quarter End
1999
First Quarter 8.5 2.625
Second Quarter 5.5 0.8125
Third Quarter 1.1875 0.625
Fourth Quarter 2.1875 0.75
1998
First Quarter 10.75 3.25
Second Quarter 9.5 4
Third Quarter 10.5 4
Fourth Quarter 8 3.5
As of April 10, 2000, there were approximately 68 holders of record of our
Common Stock. We believe that there are a significant number of shares of our
common stock held either in nominee name or street name brokerage accounts and
consequently, we are unable to determine the number of beneficial owners of our
common stock.
We have not declared or paid dividends on the Common Stock since our
formation, and we does not anticipate paying dividends in the foreseeable
future. Declaration or payment of dividends, if any, in the future, will be at
the discretion of the Board of Directors and will depend on our then current
financial condition, results of operations, capital requirements and other
factors deemed relevant by the Board of Directors.
ITEM 6. PLAN OF OPERATIONS
The following discussion and expositions should be read in conjunction
with the Financial Statements and related Notes contained elsewhere in this Form
10-KSB.
We are engaged in the design and development of products and services in
the fields of electronic commerce, Internet access and advanced telephony
applications. All of our design and development activities are conducted within
the State of Israel.
Our activities are currently centered in two distinct areas: (i) the
completion of the design and development of a unique technology designed to
facilitate the provision of rapid power line telecommunication services to
ordinary business and personal consumers and (ii) the establishment, initially
in Israel, of a nationwide screen phone network that is designed to enable
e-commerce and Internet browsing for consumers who do not have access to, or are
unable or unwilling to use, personal computers.
Since our founding in June 1996, we have been engaged primarily in the
design and development of smart card based technologies and products. Owing to a
fundamental reassessment of general market developments in the field of smart
card based technologies, we elected to leverage our experience and expertise
acquired in the area of smart card based technologies to the design, development
and commercialization of our proprietary technologies in the field of
power-line- telecommunications (PLT) and screen phones. We have effectively
ceased all research and design efforts in the smart card area.
<PAGE>
We have recently established a wholly-owned subsidiary, PLT Solutions,
Inc. to promote a unique technology designed to facilitate the use of existing
electricity power lines and grids in the United States and Japan for Internet,
telephone and data transfer to ordinary business and personal users. Existing
electrical power grids are not currently in use for high speed data transmission
due to certain power utility infrastructure limitations. We have designed and
developed proprietary technology that overcome these infrastructure limitations.
We believe that our technology will be especially attractive to Internet
providers/integrators (AOL, Cisco, IBM etc.).
We also have a 40% interest in a newly established Israeli company,
Kliks.com Ltd. ("Kliks"), which is engaged in designing and attempting to
establish a nationwide Screen Phone network in Israel. The remaining 60%
interest in Kliks is held by our Vice-President, Mr. Bernie Wolff. The network
will enable Internet access for a wide segment of the population which is less
familiar with the use of personal computers (PC's), or belongs to the large
segment of populace which does not have a PC.We are engaged in the design and
development of products and services in the fields of electronic commerce,
internet and telephony activities. All of our design and development activities
are conducted within the State of Israel.
As a development stage company, We have a limited operating history upon
which an evaluation of our prospects can be made. Our prospects must therefore
be evaluated in light of the problems, expenses, delays and complications
associated with a new business.
To date, we have incurred net losses aggregating $6,078,528, reflecting
principally research and development expenses and general and administrative
expenses. We expect to incur significant up-front expenditures in connection
with the new focus of our operations, and operating losses are expected to
continue for the foreseeable future. There can be no assurance that we can be
operated profitably in the future. Our continuation as a going-concern is
dependent upon, among other things, our ability to obtain additional financing
when and as needed, and to generate sufficient cash flow to meet its obligations
on a timely basis. We may also explore other business options including
strategic joint ventures and business combinations, including investments in
other companies, or mergers.
As of December 31, 1999, we have expended $1,721,837 on our research and
development activities (including $558,195 received from the Office of Chief
Scientist of the Israeli Ministry of Industry and Trade).
In February 2000, we issued $1,000,000 of our 10% Convertible Debentures
to private investors. The Debentures were issued pursuant to the terms of an
agreement which further provides that, subject to certain conditions, the
investors will purchase an additional $1,000,000 of Debentures no later than
five days after the effective date of a registration statement covering the
Common Stock into which the Debentures may be converted. In January 2000, the
investors pre-funded $250,000 of this obligation. The Debentures mature on
February 28, 2002. The Debentures are convertible into shares of the Company's
Common Stock at a conversion rate $0.40 per share, subject to adjustment under
certain conditions.
<PAGE>
In connection with the issuance of the 10% Convertible Debentures, we
issued to Debenture holders warrants to purchase, in the aggregate, 625,000 of
our Common Shares at an exercise price per share of $1. The warrants expire in
April 2003.
In connection with the sale of our Debentures, we issued to an independent
consultant warrants, exercisable through February 2002, to purchase up to 1.3
million shares of our common stock, at an exercise price per share of $1.00. As
a result of the issuance of these warrants, we recognized a significant non-cash
financing costs, and recorded approximately $2.4 million as deferred financing
costs and charged the entire balance to operations.
In February 2000 we converted outstanding debts of approximately $700,000
in principal and accrued interest into common stock of the Company.
We anticipate that cash on hand, as well as the $1.0 million (before
deducting approximately $137,500 in fees and commissions) due to be invested
upon purchase of the additional Convertible Debentures, will allow us to
maintain operations through December 31, 2000. Thereafter, we will need
additional financing to maintain operations. We are currently reviewing possible
private sales of equity or debt with equity features. We have no commitments for
any such financing and there can be no assurance that we will obtain additional
capital when needed or that any such additional capital will not have a dilutive
effect on current stockholders.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements are included in this report following the "Index
to Financial Statements".
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages and positions of our directors, executive officers and key
employees are as follows:
Name Age Position
Michael Braunold 40 Chairman of the Board and Director; Chief
Executive Officer and Director of PLT Solutions, Inc.,
Director of Kliks.com Ltd.
Aryeh Weinberg 42 Chief Financial Officer and Director;
Chief Financial Officer of Kliks.com Ltd.; Chief
Financial officer of PLT Solutions Inc.
Bernie Wolff 54 Vice-President; Chief Executive Officer and
Director of Kliks.com Ltd.
The business experience, principal occupations and employment, as well as
the periods of service, of each of our directors and executive officers during
at least the last five years are set forth below.
<PAGE>
Michael Braunold has been the Chairman of our Board since November 1999
and Chief Executive Officer and Director of PLT Solutions, Inc. since March,
2000 and Director of Kliks.com Ltd. since January, 2000. Mr. Braunold
concurrently serves as Chief Executive Officer and Chairman of the Board of SPO
Medical Equipment Ltd., an Israeli company that specializes in medical
technology related to pulse oximetry techniques, a position which he has held
since March, 1998. Prior to this assignment, Mr. Braunold was Senior Director of
Business Development at Scitex Corporation Ltd., a multinational corporation
specializing in visual information communication. As part of his corporate role,
Mr. Braunold played a strategic role in managing a team of professionals
assigned to M&A activities. During his 12-year tenure at Scitex, he held various
positions within the worldwide organization including a period in the US as Vice
President of a Scitex US subsidiary company specializing in medical imaging. Mr.
Braunold originates from the UK where he obtained a B.Sc. in Management Sciences
and a Master of Business Administration from Imperial College Business School,
London.
Aryeh Weinberg has been our Chief Financial Officer and of Ambient Israel
since January 1997. Concurrently from January 1997 through January 1998, Mr.
Weinberg has served as Chief Financial Officer of Delta Three.Com., Inc., a
global internet telecommunications company. From 1980 to 1996, Mr. Weinberg, a
certified public accountant, worked at Schiller Holinsky & Garolyn P.A., a
public accounting firm in the United States, becoming the audit and accounting
partner there in 1991. Mr. Weinberg earned a Bachelor's degree in business
administration from Towson State University in Baltimore, Maryland.
Bernie Wolff has been our Vice President since March, 2000 and Chief
Executive Officer and Director of our subsidiary Kliks.com Ltd. since January
2000. Previously he held the post of Executive Vice President of Strategic
Alliances and Business Development for a software development company in Israel,
specializing in wholesale banking FX and MM trading systems for financial
institutions. From 1982, he held senior international corporate positions in 5
countries for Philips Electronics in a career spanning almost 25 years. Prior to
moving to Israel in 1997, he served for seven years as Senior Vice President of
Sales and Marketing for Philips Home Services in the US. In this capacity he was
responsible for the investigation of the on-line services industry in the US.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors currently do
not receive cash compensation for serving on the Board of Directors. Officers
are elected annually by the Board of Directors and serve at the discretion of
the Board. Roan Capital Partners, L.P., the underwriter of the Company's initial
public offering, is entitled to designate one director to the Board during the
three (3) year period ending February 12, 2001. Roan Capital Partners, L.P. has
not identified any director designee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers, directors and persons
<PAGE>
who beneficially own more than 10% of a registered class of the Company's equity
securities to file certain reports regarding ownership of, and transactions in,
the Company's securities with the Securities and Exchange Commission (the
"SEC"). These officers, directors and stockholders are also required by SEC
rules to furnish the Company with copies of all Section 16(a) reports that they
file with the SEC. During the year ended December 31, 1998, the Company's
executive officers and directors and beneficial owners of more than 10% of the
Company's Common Stock filed timely reports.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during the Company's fiscal years
ended December 31, 1999, 1998 and 1997 by the Company's Chief Executive Officer
and other named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Year Annual Compensation Long-Term Compensation
Principal Position (1)
------------------------------------- ---------------------------------------------------------
Salary Bonus Other Awards Pay-outs
($) ($) ($)
---------------------------------------------------------
Restricted Securities LTIP All Other
Stock Underlying Pay-outs ($) Compen-
Award(s) Options/SARs sation
($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Braunold, 1999 --- --- --- - - -
Chairman of the Board ---------------------------------------------------------------------------------------------------------
and President 1998 --- ---
---------------------------------------------------------------------------------------------------------
1997 --- --- --- - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Aryeh Weinberg, Chief 1999 65,666 --- (1) 51,000(2)
Executive Officer and ---------------------------------------------------------------------------------------------------------
Chief Financial Officer 1998 52,484 --- (1)
---------------------------------------------------------------------------------------------------------
1997 16,250 --- (1) 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Yehuda Cern 1999 115,139 --- (1) - - -
Former Chief Technical ---------------------------------------------------------------------------------------------------------
Officer(3) 1998 120,017 --- (1) - - -
---------------------------------------------------------------------------------------------------------
1997 29,537 84,167
- ------------------------------------------------------------------------------------------------------------------------------------
Jacob Davidson, Former 1999 23,991 --- (1) 119,000(5)
Chief Executive ---------------------------------------------------------------------------------------------------------
Office(4) 1998 83,244 --- (1)
---------------------------------------------------------------------------------------------------------
1997 61,085
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The above compensation figures do not include the cost to the Company of the
use of a Company automobile.
(2) Represents 51,000 vested options issued in May 1999 under the Company's 1998
Stock Option Plan. See "Certain Relationships and Related Transactions."
(3) Dr. Cern resigned from the position of our Chief Technology Officer in
January 2000. Dr. Cern has held the position of Chief Technology Officer of our
affiliate Insulated Connections Corporation Ltd. since March 2000.
<PAGE>
(4) Jacob Davidson resigned from our employ in September 1999.
(5) Represents 119,000 vested options issued in May 1999 under the Company's
1998 Stock Option Plan. See Item 13.
Options Granted In 1999
The following table sets forth certain information concerning options
granted during 1999 to the executive officers named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
Market
Percentage Price of
Number of of Total Common
Securities Options Stock on
Underlying Granted to Exercise Date of
Name Options Employees Price Grant Expiration
Granted (#) in 1999 ($/Share) ($/Share) Date
<S> <C> <C> <C> <C> <C>
Jacob Davidson 119,000 70% 0.81(1) 0.81(1) 2009
Aryeh Weinberg 51,000 30% 0.81(1) 0.81(1) 2009
</TABLE>
(1) Based on the closing price of the common stock ($0.81) on May 24, 1999, as
reported on the OTC Electronic Bulleting Board.
Aggregate Options Exercised in 1999
And Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of
Shares Value of Unexercised
Acquired on Value Number of Un-Exercised in-the-money Options
Exercise Realized Options at December 31, 1999(4) at December 31, 1999
(#) ($) Exercisable/Unexercisable Exercisable/unexercisable(1)
<S> <C> <C> <C> <C>
Jacob Davidson 0 0 119,000/0 $134,470/0
Aryeh Weinberg 0 0 51,000/0 $ 57,630/0
</TABLE>
(1) Based on the difference between the exercise price of such options ($0.81)
and the closing price of the common stock on December 31, 1999 ($1.94), as
reported on the OTC Electronic Bulleting Board.
1998 Stock Incentive Option Plan. The Company's current policy is that all
full time key employees be considered annually for the possible grant of stock
options, depending upon employee performance. The criteria for the awards are
experience, uniqueness of contribution and level of performance shown during the
year. Stock options are intended to improve loyalty to the company and help make
each employee aware of the importance of our business success.
The Company has adopted the 1998 Incentive and Non-Qualified Stock Option
Plan (the "1998 Option Plan"). The 1998 Option Plan provides for the grant to
qualified employees (including officers and directors) of options to purchase
shares of common stock.
<PAGE>
The 1998 Option Plan is administered by the Board of Directors. The Board
has discretion to select the optionee and to establish the terms and conditions
of each option, subject to the provisions of the 1998 Option Plan. Options
granted under the 1998 Option Plan may be non-qualified stock options or
Incentive Stock Options (an option which qualifies under Section 422 of the
Internal Revenue Code) but in any case the exercise price of options granted may
not be less than 100% of the fair market value of the common stock as of the
date of grant (110% of the fair market value if the grant is an Incentive Stock
Option to an employee who owns more than 10% of the outstanding common stock),
unless the Board decides otherwise. Options may not be exercised more than 10
years after the grant (five years if the grant is an Incentive Stock Option to
any employee who owns more than 10% of the outstanding common stock). The Board
may, in its discretion (i) accelerate the date or dates on which all or any
particular option or options granted under the 1998 Stock Plan may be exercised,
or (ii) extend the dates during which all, or any particular, option or options
granted under the 1998 Stock Plan may be exercised, provided, that no such
extension will be permitted if it would cause the 1998 Option Plan to fail to
comply with Section 422 of the Code or with Rule 16b-3 of the Securities and
Exchange Act of 1934, as amended. Except as otherwise determined by the Board at
the date of the grant of the option, and subject to the provisions of the 1998
Option Plan, an optionee may exercise an option at any time within one year (or
within such lesser period as may be specified in the applicable option
agreement) following termination of the optionee's employment or other
relationship with the Company if such termination was due to the death or
Disability (as defined) of the optionee but in no event later than the
expiration date of the Option. Except as otherwise determined by the Board at
the date of the grant of an Option, if the termination of the optionee's
employment or other relationship is for any other reason the Option will expire
immediately upon such termination. Options granted under the 1998 Option Plan
are not transferable and may be exercised only by the respective grantees during
their lifetimes or by their heirs, executors or administrators in the event of
death. Under the 1998 Option Plan, shares subject to canceled or terminated
options are reserved for subsequently granted options. The number of options
outstanding and the exercise price thereof are subject to adjustment in the case
of certain transactions such as mergers, recapitalizations, stock splits or
stock dividends.
As of March 30, 2000, 230,000 options to purchase shares of common stock
were outstanding under the 1998 Option Plan.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement in March 2000 with Aryeh
Weinberg pursuant to which Mr. Weinberg is employed as the Company's Chief
Financial Officer for a one year term which is automatically renewable from year
to year unless either party gives notice of termination at least 90 days prior
to the expiration date. Mr. Weinberg currently receives an annual salary of
$72,000 and, subject to (and upon) the adoption of a new Company stock option
plan at the Company's Annual Stockholders Meeting to be held in 2000, will be
granted 50,000 options to purchase, at a nominal price, shares of Common Stock
of the Company. Mr. Weinberg has agreed to certain customary confidentiality and
non-compete provisions that prohibit him from competing with the Company for one
year, or soliciting employees for one year, following the termination of his
employment.
<PAGE>
Michael Braunold entered into an employment contract with our subsidiary,
PLT Solutions Inc. He receives $3000 per month in salary and, subject to (and
upon) the adoption of a new Company stock option plan at the Company's Annual
Stockholders Meeting to be held in 2000, will be granted 100,000 options to
purchase, at a nominal price, shares of Common Stock of the Company. The
employment agreement is for one year beginning March 2000 and will renew
automatically for additional one year terms unless terminated by either party
upon three months prior written notice. Mr. Braunold has agreed to certain
customary confidentiality and non-compete provisions that prohibit him from
competing with the Company for one year, or soliciting employees for one year,
following the termination of his employment.
Bernie Wolff serves as our Vice President pursuant to a letter appointment
between us. Mr. Wolf is employed by Kliks.com Ltd. as Chief Executive Officer
pursuant to an employment agreement entered into in February 2000. Mr. Wolff
receives $5,000 per month and owns 60% of the outstanding capital of Kliks. We
issued to Mr. Wolff, 10,000 options from the 1998 Option Plan, to vest as
follows: (i) 5,000 options following 12 months of employment with PLT Solutions
Inc. and (ii) an additional 5,000 options following 24 months of employment with
PLT Solutions Inc. Mr. Wolff has agreed to certain customary confidentiality and
non-compete provisions that prohibit him from competing with the Company for one
year, or soliciting employees for one year, following the termination of his
employment.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 30, 2000, certain information
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding Common
Stock, (ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all directors and executive officers as a group:
Name of Shares of Common Stock Percent of Class (1)
Beneficial Owner Beneficially Owned
Englewood Industries Ltd. 1,300,000(2) 11.86
Grove Industries Ltd. 700,000 7.25
Clearview International
Investment 625,000(3) 6.08
Ashfield Investment 625,000(3) 6.08
Econor Investment
Corporation 625,000(3) 6.08
Mantle International
Investment 625,000(3) 6.08
Trax Investments Ltd. 589,750 6.11
Howard Weiss 500,000 5.18
Aryeh Weinberg(4) 71,000(5) *
Michael Braunold(4) *(6) *(6)
Bernie Wolff(4) *(7) *
<PAGE>
Directors and executive officers
as a group (3 persons) 71,000(5)(6)
* Less than 1%
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days from the date
hereof upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants that are
held by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof have been exercised.
(2) Represents shares issuable upon exercise of warrants. Warrants held by
Englewood have a nominal exercise price.
(3) Represents (i) shares issuable upon conversion of the entire $200,000 in
aggregate principal amount of 10% Convertible Debentures due February 28, 2002,
based on an assumed conversion price of $0.40, and (ii) 125,000 shares issuable
upon exercise of outstanding warrants, which warrants are exercisable at an
exercise price per share of $1.00
(4) The address of such beneficial owner is c/o Ambient Israel, Jerusalem
Technological Park, Building Nine, Malha, Jerusalem, Israel.
(5) Includes 51,000 fully vested options issued under the Company's 1998 Stock
Option Plan.
(6) We have undertaken to issue to Mr. Braunold 100,000 options at an
exercise price of $0.01 per share upon and subject to the adoption of a new
Company employee stock option plan at the Company annual stockholders meeting to
be held in 2000.
(7) We issued to Mr. Wolff 10,000 options to vest as follows: (i) 5,000 options
following 12 months of employment with the Company and (ii) an additional 5,000
options following 24 months of employment with the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1999, we granted to Aryeh Weinberg, the Company's Chief Financial
Officer, 51,000 vested options under the Company's 1998 Stock Option Plan with a
per share exercise price of $0.81. Subject to (and upon) the adoption of a new
Company employee stock option plan at the Company's Annual stockholders meeting
to be held in 2000, we undertook to issue to Mr. Weinberg, from any such newly
adopted plan, 50,000 options at an exercise price of $0.01 per share.
Michael Braunold, a director, is paid $7,500 annually for serving on the
Company's Board. Subject to (and upon) the adoption of a new Company employee
stock option plan at the Company's Annual stockholders meeting to be held in
2000, we undertook to issue to Mr. Braunold, from any such newly adopted plan,
100,000 options at an exercise price of $0.01 per share.
<PAGE>
In March 2000 we undertook to issue to Yehuda Cern, chief technology
officer of a Company subsidiary, subject to (and upon) the adoption of a new
Company employee stock option plan at the Company's Annual stockholders meeting
to be held in 2000, (i) 50,000 options from such any newly adopted plan, such
options to vest following 12 months of continuous employment with PLT Solutions
Inc. and (ii) an additional 50,000 options vesting following 24 months of
continuous employment with PLT Solutions Inc., in each case at an exercise price
per share to be agreed upon at a future date.
Pursuant to the letter appointment, dated March 28, 2000, of Bernie Wolff
as Vice President, we issued to Mr. Wolff, 10,000 options from the Company's
1998 Option Plan as follows: (i) 5,000 options to vest following 12 months of
employment with the Company as Vice President, and (ii) an additional 5,000
options to vest following 24 months of employment with the Company as Vice
President.
Mr. Wolff, our Vice-President, currently owns 60% of the issued capital of
our affiliate Kliks.com Ltd. We and Mr. Wolff entered into a shareholders
agreement dated December 31, 1999 respecting the operations of Kliks. We hold an
option to acquire an additional 10% of the equity of Kliks, exercisable until
the second anniversary of the shareholders agreement, upon payment to Kliks of
$250,000. The members of the board of Kliks are Mr. Wolff and Michael Braunold.
In February 12, 1998, the Company entered into a two-year employment
agreement with Mr. Davidson as President and Chief Executive Officer of Ambient
Corporation and Ambient Israel. Under the agreement, Mr. Davidson received an
annual salary of $60,000. As of December 31, 1998, Mr. Davidson loaned the
Company $53,367, bearing 10% interest. The Company used $30,000 from such loans
for general working capital purposes. The remaining $23,367 was loaned in the
form of unpaid accrued salaries. Mr. Davidson resigned from his position with
the Company in September 1999. In connection with his resignation, the Company
agreed to (i) remit to Mr. Davidson, upon the completion of public offering of
the Company's stock, $20,000, plus interest at a per annum rate of 10%, as
reimbursement for amounts owed him (ii) maintain on the Company's records unpaid
salary owed to Mr. Davidson in the amount of $75,329 until such time as the per
share closing price of the Company's Common Stock is at least $2.00, as reported
on the OTC Electronic Bulletin Board, for a consecutive 10 day period. Mr.
Davidson received 119,000 vested options in May 1999 under the Company's 1998
Stock Option Plan, at an exercise price per share of $0.81.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
3.1 Certificate of Incorporation of the Company, as amended (1)
3.2 By-Laws of the Company, as amended (1)
3.3 Memorandum of Association of Ambient Israel (1)
3.4 Articles of Association of Ambient Ltd. (1)
3.5 Certificate of Incorporation of PLT Solutions, Inc. *
3.6 By-Laws of PLT Solutions, Inc. *
3.7 Memorandum of Kliks.com Ltd. *
3.8 Articles of Association of Kliks.com Ltd. *
3.9 Memorandum of Insulated Connections Corporation Ltd.*
<PAGE>
3.10 Articles of Association of Insulated Connections Corporation Ltd.*
4.1 Specimen Stock Certificate (1)
4.2 Form of 10% Promissory Note due January __, 2000 *
4.2.1 Form of 10% Convertible Debenture due February 28, 2002 *
4.2.2 Form of Common Stock Purchase Warrant *
4.2.3 Warrant Agreement dated as of February 17, 2000 between Ambient and
Englewood Holding Inc. *
10.1 Form of the Company's 1998 Stock Option Plan. (1)
10.2 Form of Employment Agreement between the Company and Jacob Davidson(1)
10.3 Employment Agreement between Ambient Ltd. and Dr. Yehuda Cern (1)
10.4 Summary (in English) of principal terms of lease between Ambient Israel and
Jerusalem Technological Park (1)
10.5 Employment Agreement dated March 27, 2000 between PLT solutions, Inc. and
Michael Braunold *
10.6 Employment Agreement dated April 10, 2000 between Ambient Corporation and
Aryeh Weinberg *
10.7 Employment Agreement dated December 31, 1999 between Kliks.com Ltd. and
Bernie Wolff *
10.8 Marketing Agreement dated as of February 25, 2000 between Ambient
Corporation and Hamilton Trading Ltd. *
10.9 Consulting Agreement dated as of March 29, 2000 between Ambient Corporation
and Cabus Ltd. *
10.10 Consulting Agreement dated as of March 27, 2000 between Ambient
Corporation and Rivermill Ltd. *
10.11 Consulting Agreement dated as of February 15, 2000 between Ambient
Corporation and Limekiln Ltd. *
10.12 Consulting Agreement dated as of February 17, 2000 between Ambient
Corporation and Gershon Tokayer *
10.13 Consulting Agreement dated as of February 14, 2000 between Ambient
Corporation and Grove Industries Ltd.*
10.14Amendment Agreement dated as of March 19, 2000 between Grove Industries
Ltd. and Ambient Corporation.*
10.15 Consulting Agreement dated as of March 27, 2000 between Lingfield Ltd. and
Ambient Corporation.*
10.16 Consulting Agreement dated as of February 19, 2000 between Trax
Investments Ltd. and Ambient Corporation.*
10.17 Consulting Agreement dated as of March 20, 2000 between Nina Fischman and
Ambient Corporation.*
10.18 Shareholders Agreement dated as of December 31, 1999 between Bernie Wolff
and Ambient Corporation concerning Kliks.com Ltd.*
10.19 Form of Securities Purchase Agreement between Ambient and certain
securityholders dated as of February 17, 2000 *
10.20 Form of Registration Rights Agreement dated as of February 17, 2000
between Ambient and certain investors *
21.1 Subsidiaries of the Company *
27.1 Financial Data Schedule *
* Filed Herewith
<PAGE>
(1) Filed as an Exhibit to Ambient's Registration Statement on Form SB-2, No.
33-40045, and incorporated herein by reference
(b) Reports on Form 8-K
(i) Report on Form 8-K filed on November 15, 1999
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act the registrant
caused this report to be signed by the undersigned thereunto duly authorized.
Date: April 14, 2000 /s/ Aryeh Weinberg
--------------------------------------------
Aryeh Weinberg,
Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following person on behalf of the Company and in
the capacities and on the date indicated.
Signature Title Date
/s/ Michael Braunold Chairman April 14, 2000
<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
<PAGE>
AMBIENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheets 2
Statements of Operations 3
Statement of Changes in Shareholders Deficiency 4
Statements of Cash Flows 5
Notes to Financial Statements 6-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Ambient Corporation
We have audited the accompanying consolidated balance sheets of Ambient
Corporation (a development stage company) and subsidiary (collectively, "the
Company") as of December 31, 1999 and 1998, and the related consolidated
statements of operations, changes in shareholders' deficiency and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ambient
Corporation and subsidiary as of December 31, 1999 and 1998, and the results of
their operations, changes in shareholders' deficiency and cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company incurred a net loss in 1999 of
approximately $1.1 million (and approximately $6.1 million since inception) and
anticipates that it will continue to incur losses for some time. In addition,
the Company had a working capital deficit of approximately $0.7 million and a
shareholders' deficiency of approximately $1million as of December 31, 1999.
Although the Company raised net proceeds of approximately $3.4 million from an
initial public offering in February 1998, it has substantially utilized all of
such proceeds, primarily for product development. The Company's continued
existence as going concern is dependent on obtaining additional financing for
product development and commercialization. After the balance sheet date, the
Company raised debt financing, through convertible debenture in the amount of $1
million. The Company continues to seek out other potential sources of equity
capital, but there can be no assurance that it will be able to do so in the
foreseeable future. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu
Tel Aviv, Israel
April 13, 2000
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
---------------------------
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
As of December 31,
------------------
Note 1 9 9 9 1 9 9 8
---- ------- -------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 8,071 16,138
Restricted cash 3 84,820 131,259
Receivables and prepaid expenses 34,628 334,983
---------- ----------
Total current assets 127,519 482,380
---------- ----------
LONG TERM INVESTMENT 4 170,000 350,000
---------- ----------
PROPERTY AND EQUIPMENT 5
Cost 264,928 328,320
Less - accumulated depreciation 129,630 92,057
---------- ----------
Property and equipment, net 135,298 236,263
---------- ----------
DEPOSITS FOR SEVERANCE PAY 9 193 6,587
========== ==========
Total assets 433,010 1,075,230
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Short-term credit 6A 140,903 144,006
Accounts payable 212,967 337,105
Other current liabilities 8 491,713 175,264
---------- ----------
Total current liabilities 845,583 656,375
---------- ----------
LONG-TERM LIABILITIES
Long-term bank credit 6B 9,958 37,886
Notes payable 7 600,000 585,900
Liability for severance pay 9 15,334 37,613
---------- ----------
Total long-term liabilities 625,292 661,399
========== ==========
Total liabilities 1,470,875 1,317,774
---------- ----------
CONTINGENT LIABILITIES AND COMMITMENTS 10
SHAREHOLDERS' DEFICIENCY 11
Common stock $0.001 par value; authorized - 20,000,000 shares; issued and
outstanding - 3,130,833 and 3,074,333 shares, respectively 3,131 3,074
Additional paid-in capital 5,041,595 4,941,189
Deferred stock - based compensation (4,063) (239,683)
Deficit accumulated during the development stage (6,078,528) (4,947,124)
---------- ----------
Total shareholders' deficiency (1,037,865) (242,544)
========== ==========
Total liabilities and shareholders' deficiency 433,010 1,075,230
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
Cumulative from
Year ended inception to
December 31, December 31,
------------------------------ -----------------
Note 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Research and development expenses 340,287 726,479 1,721,837
Less - participation by the Office of the Chief
Scientist of the State of Israel 10A 231,767 230,452 558,195
---------- ---------- ----------
108,520 496,027 1,163,642
Operating, general and administrative expenses 13 684,234 1,904,273 3,875,308
---------- ---------- ----------
Operating loss (792,754) (2,400,300) (5,038,950)
Financing expenses, net 332,546 416,427 1,029,887
Other expenses, net 6,104 3,587 9,691
---------- ---------- ----------
Net loss (1,131,404) (2,820,314) (6,078,528)
========== ========== ==========
Basic and diluted loss per share (0.36) (0.95)
========== ==========
Weighted average number of shares outstanding 3,121,479 2,979,541
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIENCY
-------------------------------------------------------------
(in U.S. dollars, except share data)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional Deferred during the
Number of Share paid-in stock - based development
shares capital capital Compensation stage Total
------ ------- ------- ------------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 2,419,333 2,419 730,582 (241,112) (2,126,810) (1,634,921)
Stock issued pursuant to consulting
agreement 75,000 75 654,925 (655,000) - -
Initial public offering in February
1998 525,000 525 3,432,502 - - 3,433,027
Stock issued in connection with
short-term debt financing 20,000 20 99,980 - - 100,000
Additional stock pursuant to founders
agreement for nominal consideration 35,000 35 - - - 35
Warrants issued pursuant to private
placement of units - - 21,600 - - 21,600
Options granted pursuant to
consulting agreement - - 1,600 (1,600) - -
Amortization of unearned compensation - - - 658,029 - 658,029
Net loss - - - - (2,820,314) (2,820,314)
--------- ----- --------- -------- ---------- ----------
Balance - December 31, 1998 3,074,333 3,074 4,941,189 (239,683) (4,947,124) (242,544)
Stock issued pursuant to consulting
agreement - January 1999 4,000 4 7,996 (8,000) - -
Stock issued pursuant to consulting
agreement - February 1999 15,000 15 - - 15
Stock issued pursuant to consulting
agreement - February 1999 22,500 23 69,977 (70,000) - -
Stock issued pursuant to consulting
agreement - April 1999 15,000 15 12,173 (12,188) - -
Warrants issued pursuant to
consulting agreement - April 1999 - - 10,260 - - 10,260
Amortization of deferred stock -
based compensation - - - 325,808 - 325,808
Net loss - - - - (1,131,404) (1,131,404)
--------- ----- --------- -------- ---------- ----------
Balance - December 31, 1999 3,130,833 3,131 5,041,595 (4,063) (6,078,528) (1,037,865)
========= ===== ========= ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative from
inception
Year ended to
CASH FLOWS - OPERATING ACTIVITIES December 31, December 31,
------------------------ ---------------
1999 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net loss (1,131,404) (2,820,314) (6,078,528)
Adjustments to reconcile net loss to net cash used in operating
activities -
Items not involving cash flows:
Depreciation and amortization 397,058 950,009 1,884,672
Loss on sale of fixed assets 13,817 -- 13,817
Financing expenses paid via the issuance of common stock -- 100,000 100,000
Consulting expenses paid via the issuance of common stock
and warrants 10,275 -- 10,275
Increase (decrease) in net liability for severance pay (15,885) 11,026 15,141
Accrued interest on loans and notes payable -- -- 210,016
Write-down of long term investment 180,000 485,000 665,000
Write-off of leasehold improvements -- 20,453 20,453
Changes in operating assets and liabilities:
Decrease (increase) in receivables and prepaid expenses 300,355 (295,061) (7,866)
Increase (decrease) in accounts payable (124,138) 90,343 (16,280)
Increase (decrease) in other current liabilities 316,449 (64,691) 303,158
---------- ---------- ----------
Net cash provided by (used in) operating activities (53,473) (1,523,235) (2,880,142)
---------- ---------- ----------
CASH FLOWS - INVESTING ACTIVITIES
Loan provided to another company -- (835,000) (835,000)
Additions to property and equipment (12,102) (112,317) (371,819)
Proceeds from disposal of fixed assets 42,100 -- 42,100
Decrease (increase) in restricted cash 46,439 (101,259) (84,820)
---------- ---------- ----------
Net cash used in investing activities 76,437 (1,048,576) (1,249,539)
---------- ---------- ----------
CASH FLOWS - FINANCING ACTIVITIES
Proceeds from issuance of share capital -- 35 2,264
Proceeds from issuance of notes payable -- 600,000 1,000,000
Repayment of notes payable -- (400,000) (400,000)
Proceeds of loans from shareholders, net -- -- 919,600
Repayment of loans from shareholders -- (968,000) (968,000)
Repayment of loan from related party -- (13,947) --
Repayment of long-term loan -- (120,000) --
Proceeds from long-term bank credit -- 58,859 95,969
Repayment of long-term bank credit (40,935) (37,110) (78,045)
Increase in bank short term credit 9,904 11,047 108,899
Public offering of common stock -- 3,433,027 3,433,027
Proceeds from short-term bank loan -- 24,038 24,038
---------- ---------- ----------
Net cash provided by (used in) financing activities (31,031) 2,587,949 4,137,752
========== ========== ==========
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (8,067) 16,138 8,071
CASH AND CASH EQUIVALENTS - BEGINNING
OF PERIOD 16,138 -- --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD 8,071 16,138 8,071
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL
A. Description of business
Ambient Corporation ("Ambient"), a development stage company, was
founded in June 1996 to design and develop advanced smart card
interface technology. A smart card is a credit card-sized plastic
card equipped with an integrated circuit that can store and transfer
information in electronic form.
In August 1996, Ambient purchased substantially all of the assets
and assumed substantially all of the liabilities of Gen
Technologies, Inc., a smart card research and development company,
at their approximate book value, including the capital stock of its
subsidiary, Gen Tec Ltd. (which subsequently changed its name to
Ambient Ltd.). The results of operations of Gen Technologies, Inc.
prior to the acquisition were not material. Ambient and its
subsidiary are collectively referred to herein as "the Company."
The Company has recently commenced the design and development of
products and services in the field of electronics commerce, internet
and telephony activities.
The Company's activities are currently centered in two distinct
areas; the completion of the design and development of a unique
technology designed to facilitate the provision of rapid power line
telecommunication (PLT) services to ordinary business and personal
consumers and the establishment, initially in Israel, of nationwide
screen phone network that design to enable internet access for
consumers who do not have access to, or unable, or unwilling to use,
personal computers.
The Company has not generated any revenues since inception.
B. Going concern assumption
The Company incurred a net loss in 1999 of approximately $1.1million
(and approximately $6.1 million since inception) and anticipates
that it will continue to incur losses for some time. In addition,
the Company had a working capital deficit of approximately
$0.7million and a shareholders' deficiency of approximately
$1.1million as of December 31, 1999. Although the Company raised net
proceeds of approximately $3.4 million from an initial public
offering in February 1998, it has substantially utilized all of such
proceeds, primarily for product development. The Company's continued
existence is dependent on obtaining additional financing for product
development and commercialization.
In February 2000, the Company issued $1,000,000, 10% convertible
debentures to private investors. The debentures mature on February
28, 2002 (see Note 15).
Management's plans to continue operations in the normal course of
business include the following: (i) continuing to seek out potential
sources of equity capital; (ii) seeking out strategic partnerships;
(iii) negotiating with a number of companies to install pilot
projects; and (iv) diversification through establishment of new
subsidiaries in the fields of internet technology and
communications. In management's estimation, the above measures, if
substantially realized, should enable the Company to continue
operating through at least December 31, 2000, although there can be
no assurance of this.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL (cont.)
B. Going concern assumption (cont.)
In order to reduce its fixed costs until the above measures are
partially or fully realized, during 1999, the Company terminated the
employment of most of its employees. The Company has also undertaken
other cost-cutting measures, such as reducing its lease space. In
addition, due to the Company's adverse liquidity position, the
Company did not pay salaries and salaries related amount to its
remaining employees and to related institutions for several months.
The above matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
C. Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
D. Nature of industry
The industries in which Company conducts business is characterized
by rapid changes. Internet and internet related products quickly
become out of date because of technological and other advances.
Accordingly, the industry is typified by the constant need to
develop and introduce new and enhanced products, which may result in
substantial costs without any guarantee that such new products or
enhancements will produce significant revenues.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. The
significant accounting policies followed in the preparation of the
financial statements, on a basis consistent with prior years, are as
follows:
A. Cash and cash equivalents
Cash and cash equivalents consist of cash and demand deposits in
banks and other financial institutions, and other short-term, highly
liquid investments (primarily interest-bearing time deposits) with
maturity dates not exceeding three months from the date of deposit.
B. Functional currency and foreign currency translation
The currency of the primary economic environment in which the
operations of the Company are conducted is the U.S. dollar
("dollar"). Therefore, the Company uses the dollar as its functional
and reporting currency. Certain of the dollar amounts in the
financial statements may represent the dollar equivalent of other
currencies, and may not necessarily be exchangeable for dollars.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Transactions and balances denominated in dollars are presented at
their dollar amounts. Non-dollar transactions and balances are
remeasured into dollars in accordance with the principles set forth
in Statement No. 52, "Foreign Currency Translation," of the
Financial Accounting Standards Board of the United States ("FASB").
Transaction gains and losses are reflected in net financing
expenses.
C. Consolidation
The consolidated financial statements include those of Ambient and
its 95%-owned subsidiary. Material intercompany transactions and
balances have been eliminated in consolidation. The Company has
recorded 100% of the subsidiary's losses since acquisition and,
accordingly, no minority interest has been recorded in the financial
statements.
D. Property and equipment
Property and equipment are presented at cost, less accumulated
depreciation. Depreciation is calculated based on the straight-line
method over the estimated useful lives of the assets, as follows:
Years
-----
Computers 4 (primarily)
Motor vehicles 7
Machinery and equipment 7
Furniture and office equipment 14 (primarily)
Management reviews property and equipment and other long-lived
assets on a periodic basis to determine whether events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable.
E. Research and development
Research and development costs, net of participation by the
Government of Israel through the Ministry of Industry and Trade's
Office of the Chief Scientist ( "Office of the Chief Scientist"),
are charged to operations as incurred.
F. Stock-based compensation
The Company accounts for employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Pursuant to this
accounting standard, the Company records compensation for stock and
stock options granted to employees at the date of grant based on the
difference, if any, between the cost to the employee of the stock or
options (including exercise price) and the market value of the
Company's stock at that date. Deferred compensation is amortized to
compensation expense over the vesting period of the stock or
options. Grants to non-employees are accounted for at fair value as
of the date of grant in accordance with Statement No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") of the FASB.
The pro forma effects of the application of SFAS 123 with respect to
grants to employees are presented in Note 16.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
G. Loss per share
Loss per share is presented in accordance with Statement No. 128
("SFAS 128") of the FASB, "Earnings per Share." Pursuant to this
standard, basic earnings (loss) per share exclude the dilutive
effects of convertible securities and are computed by dividing
income (loss) available to common shareholders by the
weighted-average number of common shares outstanding for the period.
Diluted earnings (loss) per share reflect the potential dilutive
effect of all convertible securities and are presented in the
financial statements with the same prominence as basic earnings per
share. Diluted loss per share information has not been separately
presented herein since the Company has recorded a net loss for all
years presented and, accordingly, the effect of potentially dilutive
securities is antidilutive. Retroactive recognition has been given
in the calculation of basic loss per share to shares issued for
nominal consideration prior to the Company's initial public
offering.
H. Fair value of financial instruments
The Company's financial instruments are principally non-derivative
assets and non-derivative liabilities, such as cash and cash
equivalents, deposits in banks, receivables, loan receivable,
short-term and long-term credit, accounts payable and other current
liabilities. Because of the nature of these financial instruments,
fair value generally equals or approximates the amounts presented in
these financial statements.
NOTE 3 - RESTRICTED CASH
In connection with a line of credit and short-term loan from a bank
(see Note 6), the Company is required to maintain a compensating
balance which is restricted for a period of up to one year. The
restricted balance amounted to $ 84,820 as of December 31, 1999
(December 31, 1998 - $131,259).
NOTE 4 - LONG TERM INVESTMENT
On May 20, 1998, a letter of intent was signed between the Company
and Ordacard Hi-Tech Industries (1995) Ltd. ("Ordacard"), an Israeli
manufacturer of plastic ID and bank cards, relating to a proposed
merger with Ordacard, which was to be consummated by December 31,
1998.
Pursuant to the letter of intent, the Company was to provide
$1,000,000 of loans to Ordacard - $350,000 upon execution of the
letter of intent and $650,000 by July 1, 1998. The loans were to be
evidenced by two convertible promissory notes, secured by Ordacard's
assets and subordinated to Ordacard's secured bank loans in
existence as of the date of payment. The notes were to bear interest
at an annual rate of 6%. In addition, the Company was to carry out a
private or public offering of equity securities with minimum net
proceeds (after commissions and expenses) of $7.5 million by
December 31, 1998. Since the merger and the equity financing were
not consummated by December 31, 1998, the Company had the option to
demand full payment of the aggregate outstanding principal and
accrued interest on the notes through the date of payment, or
convert, at its sole option, the aggregate outstanding principal and
interest into 50,000 shares of Ordacard.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 4 - LONG TERM INVESTMENT (cont.)
The Company provided the $350,000 loan upon execution of the letter
of intent and provided additional cash advances during the third
quarter of 1998 in the total amount of $485,000, such that the
amounts provided to Ordacard by the Company aggregated $835,000.
During 1999 the Company has elected to convert the loan into 36,490
shares of Ordacard common stock, and has written down the investment
to its estimated fair value of $170,000 (1998, Loan Term Receivable
- $350,000).
NOTE 5 - PROPERTY AND EQUIPMENT
December 31
--------------------------
1999 1998
--------- ---------
Computers 104,437 104,437
Machinery and equipment 63,164 63,164
Furniture and office equipment 40,346 40,346
Leasehold improvements 12,102 -
Motor vehicles (*) 44,879 120,373
--------- ---------
264,928 328,320
Less - accumulated depreciation 129,630 92,057
--------- ---------
135,298 236,263
========= =========
(*) The motor vehicles are pledged as collateral for a long-term bank loan.
NOTE 6 - CREDITS
A. Short-term credit
<TABLE>
<CAPTION>
Interest rate December 31
------------- ---------------------------
At December 1999 1998
----------- ---------- --------
31, 1999
---------------
<S> <C> <C> <C>
Current maturities of long-term bank credit 14%-16% 7,966 20,973
Bank overdraft line of credit 18% 132,937 98,995
Short-term bank loan 14% - 24,038
---------- --------
140,903 144,006
========== ========
</TABLE>
B. Long-term bank credit
Consists of vehicle financing loans in the aggregate amount of
$17,924, payable in monthly installments through 2002, including
interest at various market rates. Current maturities in 2000 amount
to $7,966.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 7 - NOTES PAYABLE
In June 1998, the Company conducted a private placement of units.
Each unit consisted of: (i) a promissory note in the principal
amount of $50,000 and (ii) warrants to purchase 10,000 shares of the
Company's common stock. The Company sold 12 units in the private
placement for aggregate consideration of $600,000. The aggregate
fair value of the consideration allocated to the warrants was
$21,600, which was credited to additional paid-in capital.
The notes bear interest at an annual rate of 10% and are repayable
at the earlier of: (i) 12 months from the date of issuance or (ii)
consummation by the Company of any public or private equity or debt
financing in excess of $1,500,000 (as well as certain other
conditions).
The purchase price for each share pursuant to the warrants is equal
to the lower of: (i) $8.00 and (ii) the offering price of the
Company's common stock in a subsequent public offering with
aggregate proceeds to the Company of at least $1,500,000. The
warrants are exercisable for a period of four years from the date of
issuance.
In February 2000 the Company entered into an agreement to convert
these notes to equity. Principal and interest of approximately
$700,000 were converted into 3,490,000 shares of the Company's
common stock.
NOTE 8 - OTHER CURRENT LIABILITIES
As of December 31
--------------------------
1999 1998
--------- ---------
Accrued vacation 23,560 27,125
Employees and officers 99,797 1,472
Accrued liabilities 190,930 72,312
Related parties 177,426 74,355
--------- ---------
491,713 175,264
========= =========
NOTE 9 - LIABILITY FOR SEVERANCE PAY
Israeli law and labor agreements determine the obligations of the
Company to make severance payments to dismissed employees and to
employees leaving employment under certain other circumstances. The
obligation for severance pay benefits, as determined by Israeli Law,
is based upon length of service and the employee's most recent
salary. This obligation is partially funded by the purchase from
outside insurance companies of managers' insurance policies, which
are controlled by the insurance companies and are not under the
control and management of the Company.
Expenses relating to severance pay benefits were $22,560 and $23,564
in 1999 and 1998, respectively.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 10 - CONTINGENT LIABILITIES AND COMMITMENTS
A. In connection with its research and development, the Company
received participation payments from the Office of the Chief
Scientist of $231,767, $230,452 and $95,976 for the years 1999, 1998
and 1996, respectively. In return for such participation, the
Company is committed to pay royalties at a rate of 3%-5% of sales of
the product, up to 100% of the amount of grants received (1998 -
$220,364 included in receivables and prepaid expenses).
B. The Company is committed to pay royalties to a shareholder of its
subsidiary, in connection with technology transferred by him to the
Company, at rates of between 15% and 20% of the net proceeds from
all sales, less the cost of components, as defined in an agreement
with the shareholder.
C. The Company is obligated to pay to an affiliated company up to
$1,000,000 to meet its financing needs (see Note 15).
D. The Company's Israeli subsidiary is party to various litigation
matters, in most cases involving ordinary and routine claims
incidental to our business. We cannot estimate with certainty its
ultimate legal and financial liability with respect to such pending
litigation matters. However, the Company believes, based on its
examination of such matters, that the Company's ultimate liability
will not have a material adverse effect on its financial position,
results of operations or cash flows.
NOTE 11 - SHAREHOLDERS DEFICIENCY
A. General
As of December 31, 1999 and 1998, Ambient's authorized share capital
consisted of 20,000,000 shares of common stock and 5,000,000 shares
of preferred stock of $0.001 par value per share. 3,130,833 and
3,074,333 shares of common stock were issued and outstanding as of
December 31, 1999 and 1998, respectively. Holders of common stock
are entitled to participate equally in the payment of cash dividends
and in stock dividend distributions and, in the event of the
liquidation of the Company, in the distribution of assets after
satisfaction of liabilities to creditors. Each share of common stock
is entitled to one vote on all matters to be voted on by
shareholders. As of december 31, 1999 no preferred shares were
issued.
B. Stock option plan
In February 1998, the Company's shareholders approved a stock option
plan for the issuance of stock options to employees and consultants
of the Company. Pursuant to the plan, 250,000 common shares were
reserved for issuance. Options under the plan may be either
incentive stock options under the Internal Revenue Code or
non-qualified options. For incentive stock options, the exercise
price may not be less than 110% of the fair market value of the
Company's common stock at the date of grant and are exercisable for
a period not exceeding five years from the date of grant. For
non-qualified options, the exercise may not be less than 100% of the
fair market value of the Company's common stock at the date of grant
and are exercisable for a period not exceeding ten years from the
date of grant.
During 1998, 80,000 stock options were granted under the plan to a
consultant of the Company. The exercise price of the options was $6
and the options were exercisable until August 1, 1999. Compensation
expense of $1,600 was recorded in respect of this grant. The stock
options expired on August 1, 1999.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 11 - SHAREHOLDERS EQUITY (DEFICIENCY) (contd.)
During 1999, 170,000 stock options were granted to the Chief
Financing Officer (51,000 stock options) and to the former Chief
Executive Officer (119,000 stock options) under the "1998 Stock
Option Plan". To date, a total of 220,000 shares of common stock
have been reserved for issuance upon exercise of stock options
granted under the 1998 Option Plan.
Since the Company accounts for employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and since the exercise
prices were set at no less than 100% of the share's price no
compensation expenses were recorded in respect of theses grants. For
pro - forma effect see Note 16.
The total number of stock options as of December 31, 1999 is
170,000.
C. Stock issuances to consultants
During 1999, the Company issued to certain consultants 56,500 shares
of common stock for their services. The Company recorded deferred
compensation of $90,188 in respect of these issuances, based on the
fair value of the shares at the date of issuance. The deferred
compensation was amortized over the period of the service.
D. Warrants issuance to consultant
During 1999, the Company issued to a certain consultant 18,000
warrants for past services. The exercise price of the warrants was
$1.88 and the warrants are exercisable until April 2006. The Company
recorded expenses of $10,260 in respect of this issuance, based on
the fair value of the warrants at the date of issuance.
The total number of warrants outstanding as of December 31, 1999 is
138,000 (see Note 7).
E. Commitments for stock options issuance
(1) In March 2000 the Company undertook to issue to Company's C.F.O
additional options (see Note 14A).
(2) Pursuant to the letter appointment, dated March 2000, of the
Vice President, the Company undertook to issue to him upon and
subject to the adoption of a new Company stock option plan (i)
options for 5,000 shares of common stock of the Company following 12
months of employment with the Company as Vice President, and (ii) an
additional 5,000 options to vest following 24 months of employment
with the Company as Vice President.
(3) In March 2000 The Company undertook to issue to the, chief
technology officer of a Company subsidiary, subject to (and upon)
the adoption of a new Company employee stock option plan at the
Company's Annual stockholders meeting to be held in 2000, (i) 50,000
options from such any newly adopted plan, such options to vest
following 12 months of continuous employment with PLT Solutions Inc.
and (ii) an additional 50,000 options vesting following 24 months of
continuous employment with PLT Solutions Inc., in each case at an
exercise price per share to be agreed upon at a future date.
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
NOTE 12 - INCOME TAXES
A. Tax loss carryforwards
Due to the uncertainty of realizing the benefit of the Company's tax
loss carryforwards of approximately $6 million, a valuation
allowance for the entire amount of related deferred tax asset has
been recorded.
B. Inflation adjustment for tax purposes
The Company's Israeli subsidiary is subject to the Income Tax Law
(Inflationary Adjustments) - 1985, pursuant to which taxable income
is measured on the basis of changes in the Israeli Consumer Price
Index.
C. Approved investment program
The Company's Israeli subsidiary received "approved enterprise"
status for an investment plan of $180,000 under the Israeli Law for
the Encouragement of Capital Investments - 1959. The Company has
elected to receive benefits through the "alternative benefits"
program. The benefits under this program include a tax exemption on
income derived from the approved enterprise for a period of six
years and a reduced tax rate for a period of up to four years
commencing with the date on which taxable income is first earned.
The benefits are subjected to certain conditions, that some of them
have not been fulfilled as of the balance sheet date.
NOTE 13 - OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating, general and administrative expenses in 1999 include
approximately $96,000 of marketing advisory and other consulting
fees (1998 - approximately $518,000), which were primarily paid via
the issuance of common shares.
NOTE 14 - TRANSACTIONS WITH RELATED PARTIES
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
-------- ---------
<S> <C> <C>
Rent - $62,400
======== =========
Salary $89,657 *$135,728
======== =========
Proceeds from disposal of vehicles $42,100 -
======== =========
Restricted stock awards 170,000 -
======== =========
</TABLE>
* Including $52,484 salary to the Chief Finance Officer, who serves as a
Director since 1999.
<PAGE>
A. The Company entered into an employment agreement in March 2000 with
the Chief Finance Officer ("C.F.O") pursuant to which he is employed
as the Company's Chief Financial Officer for a one year term which
is automatically renewable from year to year unless either party
gives notice of termination at least 90 days prior to the expiration
date. The C.F.O. currently receives an annual salary of $72,000.
Subject to the adoption of a new stock option plan, the C.F.O. was
granted 50,000 options to purchase, at a nominal price, shares of
common stock of the Company. The C.F.O. has agreed to certain
customary confidentiality and non-compete provisions that prohibit
him from competing with the Company for one year, or soliciting
employees for one year, following the termination of his employment.
B. During March 2000 the Chairman entered into an employment contract
with the Company's subsidiary, PLT Solutions Inc. He receives $3,000
per month in salary and $7,500 annually for serving on the Company's
Board, and subject to the adoption of a new stock option plan, the
Chairman was granted 100,000 options to purchase, at a nominal
price, shares of common stock of the Company at an exercise price of
$0.01 per share. The employment agreement is for one year beginning
March 2000 and will renew automatically for additional one year
terms unless terminated by either party upon three months prior
written notice. The Chairman has agreed to certain customary
confidentiality and non-compete provisions that prohibit him from
competing with the Company for one year, or soliciting employees for
one year, following the termination of his employment.
C. In February 12, 1998, the Company entered into a two-year employment
agreement with the former President and Chief Executive Officer of
the Company. Under the agreement, the former President received an
annual salary of $60,000. As of December 31, 1998, former President
loaned the Company $53,367, bearing 10% interest. The Company used
$30,000 from such loans for general working capital purposes. The
remaining $23,367 was loaned in the form of unpaid accrued salaries.
The former President resigned from his position with the Company in
September 1999. In connection with his resignation, the Company
agreed to (i) remit to the former President, upon the completion of
public offering of the Company's stock, $20,000, plus interest at a
per annum rate of 10%, as reimbursement for amounts owed him (ii)
maintain on the Company's records unpaid salary owed to the former
President in the amount of $75,329 until such time as the per share
closing price of the Company's common stock is at least $2.00, for a
consecutive 10 day period. The former President received 119,000
vested options in May 1999 under the Company's 1998 Stock Option
Plan.
NOTE 15 - POST - BALANCE SHEET EVENTS
A. The Company has established wholly owned subsidiaries, PLT Solutions
Inc. ("PSI"), registered in United States, and Insulated Connections
Corporation Limited ("ICC"), registered in Israel, to promote and
develop a unique technology designed to facilitate the take - off of
Power Line Telecommunication ("PLT") in the United States and Japan.
PLT enables existing electricity power lines to be used for
Internet, telephone and data transfer to all homes and offices. In
practice PLT is not currently in use due to power utility
infrastructure limitations. PSI provides patented technology for
transmitting data over the power lines with, the Company believes,
compelling economic and
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
practical benefits for power companies, telecommunication, and
Internet providers/integrators to incorporate PSI's product and
technology offering in their product and services repertoire.
B. The Company acquired a 40% interest in a newly established Israeli
company, Kliks.com Ltd. ("Kliks"), which is engaged in designing and
establishing a nationwide Screen Phone network in Israel. The
network will enable Internet access for a wide spread of the
population who are less familiar with the use of personal computers
(PC's).
Top management has been recruited.
The Company shall be entitled, but not obligated, to purchase up to
10% of Kliks' share capital upon the payment of $250,000 to Kliks.
The Company shall pay (by way of equity investment) to Kliks up to
$1,000,000 to meet the financing needs of Kliks. The Company shall
not be issued any additional shares or securities of any kind for
such payments.
From the period January 2000 to April 2000, the Company paid
$150,000 as part of this commitment.
C. In February 2000, the Company issued $1,000,000, 10% convertible
debentures to private investors. The debentures were issued pursuant
to the terms of an agreement which further provides that, subject to
certain conditions, the investors will purchase an additional
$1,000,000 of debentures no later than five days after the effective
date of a registration statement covering the common stock into
which the debentures may be converted. In January 2000, the
investors pre-funded $250,000 of this obligation. The debentures
mature on February 28, 2002.
The debentures are convertible into shares of the Company's common
stock at a conversion rate $0.40 per share.
In connection with the issuance of the 10% convertible debentures,
the Company issued to debenture holders warrants to purchase, in the
aggregate, 625,000 of the Company's common shares at an exercise
price per share of $1. The warrants expire in April 2003. In
connection with the sale of the convertible debentures the company
also issued to a consultant warrants to purchase 1.3 million shares
of common stock. The warrants are exercisable at a price of $1 per
share and expire in February 2002. The related deferred compensation
costs of $2.4 million will be amortized over the life of the
convertible debentures.
D. In February 2000 the Company entered into an agreement with a
certain lender to convert a loan to equity. Principle and interest
of approximately $700,000 were converted into 3,490,000 shares of
the Company's common stock.
E. The Company entered into various marketing and financial consulting
agreements in February and March 2000. Under these agreements the
Company will issue 2,691,000 shares of common stock and pay $8,000
per month as compensation. The agreements terminate on or before
March 2001.
The related compensation costs of $11 million will be allocated to
the statement of operations in parallel to attainment of the
service.
NOTE 16 - PRO FORMA EFECT OF SFAS 123
Had compensation cost for the Company's stock compensation plan been
determined based on fair value as of the date of grants for awards
made in 1999 under such plan in accordance with SFAS
<PAGE>
AMBIENT CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in U.S. dollars)
No. 123, instead of APB No. 25, the Company's pro forma net loss and
loss per share for the year ended December 31, 1999, would have been
as follows:
Pro forma net loss (1,186,340)
==========
Pro forma loss per share (0.38)
==========
Exhibit 3.5
Certificate of Incorporation
of
PLT Solutions Inc.
The undersigned, by its authorized officer, for purposes of forming a
corporation pursuant to the General Corporation Law of the State of Delaware,
does hereby certify:
1. The name of the corporation is PLT Solutions Inc.
2. The address of the corporation's registered office in the State of Delaware
is 1209 Orange St., Wilmington, County of New Castle, Delaware, 19801. The name
of the corporation's registered agent at such address is The Corporation Trust
Company.
3. The purpose of the corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
4. The aggregate number of shares of common stock which the corporation shall
have authority to issue is 20,000,000 shares of common stock, each with a par
value of $0.01.
5. The name and mailing address of the incorporator is Ambient Corporation 285
Avenue of the Americas, 35th Fl., NY.
6. To the fullest extent that the General Corporation Law of the State of
Delaware, as the same exists or may be hereafter amended, permits elimination or
limitation of the liability of the directors, a director of a corporation shall
not be personally liable to the corporation or any of its shareholders for any
breach of duty in his capacity as a director. Any repeal or modification of the
foregoing sentence by the shareholders of the corporation shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification.
7. The directors and officers of the corporation shall be entitled to such
rights of indemnification and advancement of expenses, including attorney's
fees, in the defense of any action or threatened action in which a director or
officer is or may be a party as the Board of Directors may by resolution
prescribe.
IN WITNESS WHEREOF, I have made and signed this certificate this 27th day of
March, 2000, and I affirm the statements contained herein are true.
Ambient Corporation
S/Michael Braunold
------------------
By: Michael Braunold
Director
Exhibit 3.6
BY-LAWS
of
PLT Solutions Inc.
(a Delaware corporation)
Article I
Offices
1.1 The Board of Directors (the "Board") of the corporation shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of Delaware.
1.2 The Board may at any time establish branch or subordinate offices at
any place or places.
Article II
Meetings of Stockholders
2.1 All meetings of the stockholders for the election of directors shall
be held at the principal office of the corporation, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
2.2 Annual Meeting. Annual meetings of stockholders shall be held at such
other date and time as shall be designated from time to time by the Board and
stated in the notice of the meeting, at which they shall elect by a Board, and
transact such other business as may properly be brought before the meetings.
2.3 Special Meetings. Special meetings of the stockholders may be called
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, at the request of the Board, the Chairman of the
Board, the Chief Executive Officer or the stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
meeting.
2.4 Notice of Meetings. Written notice of stockholders' meetings, stating
the place, date and time of the meeting and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting on not less than ten (10) nor more than sixty (60) days prior to
the meeting.
When a meeting is adjourned to another place, date or time, written notice
need not be furnished of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken,
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was
<PAGE>
2
originally noticed, or if a new record date is fixed for the adjourned meeting,
written notice of the place, date and time of the adjourned meeting shall be
furnished in conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at a special
meeting of stockholders shall be limited to the purposes stated in the notice.
2.6 List of Stockholders. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place, if other than the place of the meeting,
shall be specified in the notice of the meeting. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
2.7 Organization and Conduct of Business. The Chairman of the Board, or in
his or her absence, the Chief Executive Officer of the corporation or, in their
absence, such person as the Board may have designated or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order any
meeting of the stockholders and act as Chairman of the meeting. In the absence
of the Secretary of the corporation, the Secretary of the meeting shall be such
person as the Chairman appoints.
The chairman of any meeting of the stockholders shall determine the order
of the business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of the discussion as seems to him or her in
order.
2.8 Quorum and Adjournments. Except where otherwise provided by law or by
the Certificate of Incorporation or these By-Laws, the holders of a majority of
the stock issued and outstanding and entitled to vote thereto, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented.
2.9 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
2.10 Majority Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by
<PAGE>
3
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or the Certificate of
Incorporation or these By-Laws, a different vote is required in which case such
express provision shall govern and control the decision of such question.
2.11 Record Date for Stockholder Notice and Meeting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any divided or other distribution, or entitled to
exercise any right in respect of any change, conversion or exchange of stock for
the purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days before
any other action.
If the Board does not fix a record date, the record date of determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of the business on the
business day next preceding the day on which the meeting is held.
2.12 Proxies. Every person entitled to vote for directors or any other
matter shall have the right to do so either in person or by one or more agents
authorized by written proxy signed by the person and filed with the Secretary of
the corporation. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telecopier
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy, by a writing
delivered to the corporation stating that such proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of the proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven months from the date of the proxy,
unless otherwise provided in the proxy.
2.13 Action Without a Meeting by Written Consent. All actions required to
be taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the corporation by delivery to its registered office,
its principal place of business, or an officer of the corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Article III
Directors
3.1 Number; Qualification. The number of directors shall be determined
from time to time by resolution of the Board and the initial Board shall consist
of one (1) director. All directors shall be elected et the annual meeting or any
special meeting of the stockholders, except as provided in Section 3.2 of this
Article, and each director so elected
<PAGE>
4
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal. Directors need not be stockholders.
3.2 Resignation and Vacancies. A vacancy or vacancies in the Board shall be
deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by the affirmative vote of a majority of the directors then in office,
though less than a quorum, or by a sole remaining director, unless otherwise
provided in the Certificate of Incorporation. The stockholders may elect a
director or directors at any time to fill a vacancy not filled by the Directors.
If the Board accepts the resignation of a director tendered to take effect at a
future time, the Board shall have the power to elect a successor to take office
when the resignation is to become effective. If there are no directors in
office, then an election of the directors may be held in the manner provided by
law.
3.3 Removal of Directors. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire board
of directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors. In addition, an
employee-director whose employment with the Company is terminated for whatsoever
reason shall, automatically and without any further action, cease to be a
director.
3.4 Powers. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these By-Laws directed or required to
be exercised or done by the stockholders.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to
(a) Select and remove all officers, agents and employees of the corporation;
prescribe any powers and duties for them that are consistent with law, with the
Certificate of Incorporation and with these By-Laws; fix their compensation; and
require from them security for faithful service;
(b) Confer upon any office the power to appoint, remove and suspend
subordinate officers, employees and agents;
(c) Change the location of the principal executive office or the
principal business office; cause the corporation to be qualified to do business
in any state, territory, dependency or country and conduct business within or
without the State of Delaware for the holding of any stockholder meetings,
including annual meetings;
(d) Adopt, make and use a corporate seal; prescribe the forms of
certificate of stock; and alter the form of the seal and certificate;
(e) Authorize the issuance of shares of stock of the corporation on any
lawful terms, in consideration of money paid, labor done, service actually
rendered, debt or securities canceled, tangible or intangible property actually
received;
(f) Borrow money and incur indebtedness on behalf of the corporation, and
cause to be executed and delivered for the corporation's purposes, in the
corporate name, promissory
<PAGE>
5
notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecation and
other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with law;
(h) Adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
corporation and its subsidiaries as it may determine; and
(i) Adopt from time to time regulations not inconsistent with these
By-Laws for the management of the corporation's business and affairs.
3.5 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.6 Annual Meetings. The annual meeting of the Board shall be held
immediately following the annual meeting of the stockholders and no notice of
such meeting shall be necessary to the Board, provided, a quorum shall be
present. The annual meeting shall be the purposes of organization, and an
election of officers and the transaction of other business.
3.7 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
3.8 Special Meetings. Special meetings of the Board may be called by the
Chairman of the Board or the Chief Executive Officer, or a majority of the Board
upon one (1) day's notice to each director.
3.9 Quorum and Adjournments. At all meetings of the Board, a majority of
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board, except as may be otherwise specifically
provided by statute or by the Certificate of Incorporation. If a quorum is not
present at any meeting of the Board, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action is approved by at least a majority of the
required quorum for that meeting.
3.10 Action Without a Meeting. Unless otherwise restricted by the
Certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
3.11 Telephone Meetings. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, members of the Board, or any committee
designated by the Board, may participate in a meeting of the Board, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
<PAGE>
6
3.12 Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or its commencement. All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting.
3.13 Fees and Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board and may be paid a
fixed for attendance at each meeting of the Board or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 Rights of Inspection. Every director shall have the absolute right at
any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation and also of
its subsidiary corporations, domestic or foreign. Such inspection by a director
may be made in person or by agent or attorney and includes the right to copy and
obtain abstracts.
Article IV
Committees of Directors
4.1 Selection. The Board may, by resolution passed by a majority of the
entire board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
4.2 Powers. Any such committee, to the extent provided in the resolution
of the Board, shall have and may exercise all the powers and authority of the
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall
<PAGE>
7
have the power or authority to declare a dividend or to authorize the issuance
of stock or to adopt a certificate of ownership and merger. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board.
4.3 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
Article V
Officers
5.1 Officers Designated. The officers of the corporation shall be chosen
by the Board and shall be a Chief Executive Officer, and a Secretary. The Board
may also choose a Chairman of the Board, one or more vice-presidents, and one or
more assistant Secretaries and Treasurers. Any number of offices may be held by
the same person, unless the Certificate of Incorporation or these By-Laws
otherwise provide.
5.2 Appointment of Officers. The Officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 5.3 or
5.5 of this Article, shall be appointed by the Board, and each shall serve at
the pleasure of the Board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 Subordinate Officers. The Board may appoint, and may empower the Chief
Executive Officer to appoint, such other officers and agents as the business of
the corporation may require, each of whom shall hold for such period, have such
authority and perform such duties as are provided in the By-Laws or as the Board
may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any, of
any officer under any contract or employment, any officer may be removed, either
with or without cause, by an affirmative vote of the majority of the Board, at a
special meeting of the Board, or, except in the case of an officer chosen by the
Board, by any officer upon whom power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Office. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
5.6 Compensation. The salaries of all officers of the corporation shall be
fixed from time to time by the Board and no officer shall be prevented from
receiving a salary because he or she is also a director of the corporation.
5.7 Chairman of the Board. The Chairman of the Board, if such an officer
be elected, shall, if present, perform such other powers and duties as may be
assigned to him from time to time by the Board,. If there is no Chief Executive
Officer, the Chairman of the Board shall also be the Chief Executive Officer of
the corporation and shall have the power and duties prescribed in Section 5.8 of
this Article.
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8
5.8 The Chief Executive Officer. Subject to such supervisory powers, if
any, as may be given to the Chairman of the Board, if there be such an officer,
the Chief Executive Officer shall be the Chief Executive Officer of the
corporation, shall preside at all meetings of the stockholders and the Board,
shall have general and active management of the business of the corporation and
shall see that all orders and resolutions of the board of directors are carried
into effect. The Chief Executive Officer shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board to some other officer or agent of the corporation.
5.9 The Vice President. The Vice-President (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall, in the absence of the Chief Executive Officer or in the event
of his disability or refusal to act, perform the duties of the Chief Executive
Officer, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer. The vice-presidents shall
perform such other duties and have such other powers as may from time to time be
prescribed for them by the Board, the Chief Executive Officer, the Chairman of
the Board or these By-Laws.
5.10 The Secretary. The Secretary shall attend all meetings of the Board and all
meetings of the stockholders and record all the proceedings of the meetings of
the corporation and of the Board in a book to be kept for that purpose and shall
perform like duties for the standing committee when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board, and shall perform such other duties as may be
prescribed by the Board, the Chairman of the Board or the Chief Executive
Officer, under whose supervision he or she shall act. The Secretary shall have
custody of the corporate seal of the corporation and he or she, or an assistant
secretary, shall have authority to affix the same to any instrument requiring
it, and when so affixed, the seal may be attested by his or her signature or by
the signature of such assistant secretary. The Secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the corporation's
transfer agent or registrar, as determined by a resolution of the Board, a share
register, or a duplicate share register, showing the names of all the
stockholders and their addresses, the number and classes of shares held by each,
the number and date of the certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.
5.11 The Assistant Secretary. The assistant Secretary, or if there be more
than one, the assistant secretaries in the order determined by the Board (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board may from time
to time prescribe.
5.12 The Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board. The Secretary shall
disburse the funds of the corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the Chief
<PAGE>
9
Executive Officer and the Board, at its regular meetings, or when the Board so
requires, an account of all his or her transactions as Treasurer and of the
financial condition of the corporation.
5.13 The Assistant Treasurer. The assistant Treasurer, or if there shall
be more than one, the assistant Treasurers in the order determined by the Board
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
Article VI
Certificates for Shares
6.1 Certificates for Shares. The shares of the corporation shall be represented
by a certificate or shall be uncertificated. Certificates shall be signed by, or
in the name of the corporation by, the Chairman of the board of directors, or
the Chief Executive Officer, or the Secretary of the corporation.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required by the General Corporation Law of the
State of Delaware or a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
6.2 Signature on Certificates. Any of or all the signatures on a
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 Transfer of Stock. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the corporation.
6.4 Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividend, and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
<PAGE>
10
6.5 Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the Board may fix a new record date for the adjourned meeting.
6.6 Lost Certificates. The Board may direct a new certificate or
certificates be issued to replace any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that face by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such isue of a new
certificate or certificates or uncertificated shares, the Board may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Article VII
Notices
7.1 Notices. Whenever, under the provisions of the statutes or the
Certificate of Incorporation or these By-Laws, notice is required to be given to
any director or stockholder it shall be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
corporation, with the postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram, telephone or facsimile.
7.2 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or the Certificate of Incorporation or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Article VIII
General Provision
8.1 Dividends. Dividends upon the outstanding shares of stock of the
Corporation, subject to the provisions of the statute and of the Certificate of
Incorporation, may be declared by the Board of Directors at any annual, regular
or special meeting and may be paid in cash, in property or in shares of stock of
the Corporation or in any combination thereof. The Board of Directors may fix in
advance a record date for the purpose of determining shareholders entitled to
receive payment of any dividend, the record date to be not less than ten (10)
nor more than sixty (60) days prior to the payment date of such
<PAGE>
11
dividend, or the Board of Directors may close the stock transfer books for such
purpose for a period of not less than ten (10) nor more than sixty (60) days
prior to the payment date of such dividend. In the absence of any action by the
Board of Directors, the date upon which the Board shall adopt the resolution
declaring the dividend shall be the record date.
8.2 Reserves. There may be created from time to time by resolution of the
Board of Directors, out of the earned surplus of the Corporation, such reserve
or reserves as the Board of Directors from time to time in its discretion, shall
deem proper to provide for contingencies, or to equalize dividends, or to repair
or maintain any property of the Corporation or for such other purpose as the
Board of Directors shall deem beneficial to the Corporation. The Board may
modify or abolish any such reserve in the manner in which it was created.
8.3 Signatures for Contracts, Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money and all contracts shall be
signed or countersigned by such officer, officers, agent or agents and in such
manner as are permitted by these By-Laws or as, from time to time, may be
prescribed by resolution (whether general or special) of the Board of Directors.
8.4 Fiscal Year. The fiscal year of the Corporation shall be from January
1 through December 31.
8.5 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of its
shareholders and Board of Directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of the shares of stock of the Corporation
held by them.
8.6 Annual Statement. The Board shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
8.7 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
8.8 Corporate Seal. The Board shall providea suitable corporate seal,
containing the name of the corporation, which seal shall be in the cahrre of eh
Secretary.
8.9 Indemnification. The indemnification of directors, officers, employees
and agents of the Corporation shall be subject to the following provisions:
(i) The Corporation shall indemnify any person made, or threatened to be
made, a party to any action or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened to be brought against
him, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Corporation, or served any other corporation or
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity, at the request of the Corporation while he was such a director or
officer, against expenses (including legal fees), judgments, fines and amounts
paid in settlement, to the fullest extent permitted and in the manner prescribed
by law.
<PAGE>
12
(ii) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action as permitted by law.
(iii) The foregoing provisions of this Article shall be deemed to be
contract between the Corporation and each director or officer of the Corporation
who serves in such capacity at any time while this Article and the relevant
provisions of the Delaware General Corporation Law are in effect, and any repeal
or modification of this article or such provisions of the Delaware General
Corporation Law shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing as it relates to any
action or proceeding theretofore or thereafter brought or threatened, based in
whole or in part upon any such state of facts; provided, however, that the
rights of indemnification and advancement of expenses provided in this Article
shall not be deemed exclusive of any other rights to which any director or
officer of the Corporation may now or hereafter become entitled apart from this
Article.
(iv) The Board of Directors in its discretion shall have the power on
behalf of the Corporation to provide indemnification and advancement of expenses
to the extent and in the manner it may deem appropriate, for any person made, or
threatened to be made, a party to any action or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, his
testator or intestate, is or was an employee or agent of the Corporation or
served the Corporation in any other capacity or served any other corporation or
any partnership, joint venture, trust employee benefit plan or other enterprise
in any capacity at the request of the Corporation.
(v) The provisions of this section shall be applicable to all actions,
suits or proceedings commenced after its adoption, whether such rise out of acts
or omissions which occurred prior to or subsequent to such adoption and shall
continue as to a person who has ceased to be a director or officer or to render
services for or at the request of the Corporation and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(vi) The Corporation may purchase and maintain insurance to provide for
payment of the indemnification required or permitted y these By-Laws and the
Delaware Corporation Law.
8.10 Surety Bonds. Such officers and agents of the Corporation as the
President or as the Board of Directors may direct, from time to time, shall be
bonded for the faithful performance of their duties and for the restoration to
the Corporation, in case of their death, resignation, retirement,
disqualification or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in their possession or under their control
belonging to the Corporation, in such amounts and by such surety companies as
the Chief Executive Officer or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
8.11 Interested Directors, Officers and Shareholders.
(i) Validity. Any contract or other transaction between the Corporation
and any of its directors, officers or shareholders (or any corporation or firm
in which any of them are directly or indirectly interested) shall be valid for
all purposes notwithstanding the presence of such director, officer or
shareholder at the meeting authorizing such contract or transaction, or his
participation or vote in such meeting or authorization.
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13
(ii) Disclosure or Approval. The foregoing shall, however, apply only if
the material facts of the relationship or the interest of each such director,
officer or shareholder is known or disclosed:
(A) to the Board of Directors and it nevertheless authorizes or ratifies
the contract or transaction by a majority of the directors present, each such
interested director to be counted in determining whether a quorum is present but
not in calculating the majority necessary to carry the vote; or
(B) to the Shareholders and they nevertheless authorize or ratify the
contract or transaction by majority of the shares present, each such interested
person to be counted for quorum and voting purposes.
(iii) Non-exclusive. This provision shall not be construed to invalidate
any contract or transaction which would be valid in the absence of this
provision.
Article IX
Amendments
In addition to the right of the stockholders of the corporation to make, alter,
amend, change, add to or repeal the By-Laws of the corporation, the Board shall
have the power (without the assent or vote of the stockholders) to make, alter,
amend, change add to or repeal the By-laws of the corporation.
Exhibit 3.7
THE COMPANIES ORDINANCE (1983)
MEMORANDUM OF ASSOCIATION
OF
KLIKS.COM LTD.
1. The name of the Company is Kliks.com Ltd. in English and _______________ in
Hebrew.
2. The purposes for which the Company is established are:
(a) To market and develop any products and services as shall be determined by
the Company from time to time.
(b) To engage in and conduct any business as shall be determined by the Company
from time to time.
3. The liability of the members is limited.
4. The share capital of the Company is 39,100 New Israeli Shekels divided into
390,100 ordinary Shares of 0.1 New Israeli Shekel each.
We, the undersigned, want to incorporate as a Company, in pursuance of this
Memorandum of Association, and we respectively agree to take the number of
shares in the capital of the Company set opposite our respective names.
Name and Number of shares
Addresses of . taken by each
subscribers I.D. Signature Address Subscriber
- ----------------------------------------------------------------------------
5/11 Remez 60
Bernard Wolff 3 1788407 0 Street,
Netanya
42271
Brounstein-Aboudi 51-200476-3 136 40
Trustees Ltd. Rothschild
Blvd., Tel
Aviv, 65272
DATED this 4th day of January 2000.
<PAGE>
2
WITNESS to the above signatures:__________
Advocate
THE COMPANIES ORDINANCE (1983)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
KLIKS.COM LTD.
The regulations contained in the Second Schedule to the Companies Ordinance (New
Version) (the "Regulations") shall apply to Kliks.com Ltd. (the "Company")
subject to the modifications hereinafter expressed.
(a) The Articles of Association of the Company shall be numbered in the same
manner as the Regulations, except with respect to Regulations not adopted, and
the word "deleted" shall appear next to the number of such deleted provision.
Capitalized terms used herein shall have the meaning, unless defined otherwise,
as set forth in the Shareholders Agreement between Ambient Corp. and Bernie
Wolff dated January 4, 2000.
(b) After Clause I of the Regulations, the following clause shall be inserted:
1(a) The Company is a private limited Company and accordingly:
(i) The number of members of the Company at any time shall not
exceed 50 (not including persons who are in the employment to the Company, and
persons who, having been formerly in the employment of the Company were while in
that employment and have continued after the termination of that employment to
be members of the Company). However for the purposes of this provision, where
two or more persons hold one or more shares in the Company jointly they shall be
treated as a single member;
(ii) No invitation shall be issued to the public to subscribe for
any shares or debenture stocks of the Company;
(iii) The right to transfer shares of the company shall be
restricted in accordance with the provisions of these Articles; and
(iv) Any transfer of shares in the Company shall require the
authorization of the Board of Directors.
<PAGE>
2
(c) clause 5 of the Regulations shall be deleted.
(d) Clause 19 (1) of the Regulations shall be amended by deleting the words 'not
paid up in full.'
(e) After Clause 22 of the Regulations the following clause should be inserted:
22.1 Restrictions on Transfer. No Shareholder shall assign, transfer or
otherwise dispose of all or any part of its shares to any other person, firm or
corporation unless such Shareholder complies with the provisions of this Section
22, or unless otherwise specifically provided for in this Agreement.
22.2 All or a portion of the Proportionate Share of a Shareholder in the
Company may be transferred, assigned or granted to:
(i) any corporation or firm which is an affiliate of, or acts directly
or indirectly as a nominee for such Shareholder; or
(ii) any successor to such Shareholder by reason of death, disability,
merger, consolidation, amalgamation or acquisition of all, or
substantially all, of its assets provided that the Shareholder
controls at least 50% of the voting rights attached to all issued
and outstanding shares in the capital of such transferee.
(the above transferees shall collectively be referred to as "Permitted
Transferees")
For the purposes of this Section 22.2, an affiliated corporation means any
corporation which directly or indirectly, is effectively controlled by or
effectively controls a Founder. Effective control means control at least 50% of
the voting rights attached to all issued and outstanding shares in the capital
of such corporation.
Furthermore, Bernie shall be entitled to transfer part of his
Proportionate Share within the first year of this Agreement without being
subject to the Right of First Refusal below, but subject to the approval of
Ambient which shall not be unreasonably withheld, to third parties whom are
reasonably required to assist the Company in successfully achieving the Company
Business.
The other Shareholder hereby consents to any such grant, transfer or
assignment and agree to execute any documents or assurances that may be
necessary to give effect to such transfer, assignment or grant.
22.3 Right of First Refusal. Subject to section 2.2, a Shareholder in the
company shall not be permitted, without prior and written permission of the
other Shareholder, to transfer to another his shares in the company except
pursuant to the following provisions:
<PAGE>
3
(a) A Shareholder desirous of transferring to others the shares held by
him, in whole or in part (hereinafter the "transferor") shall be obligated to
offer them first to the other Shareholders of the company, by giving notice in
writing to the Shareholders (hereinafter the "sale notice").
(b) In the sale notice the transferor shall mention the number of shares
he wishes to transfer (hereinafter the "offered shares"), the price forming the
consideration for the offered shares, the name of the offeror (if known at such
time) and the other conditions of the sale.
(c) The sale notice shall be irrevocable.
(d) Each one of the shareholders may inform the transferor in writing
within 10 days from the day of receipt of the sale notice as to his desire to
buy the offered shares,, in the price and payment conditions as provided for in
the sale notice (hereinafter the "purchase notice"). A shareholder who has
submitted a purchase notice shall be referred to hereinafter as "buyer".
(e) Each shareholder shall also have the right of over-allotment such that
if any other shareholder fails to exercise its right to purchase its
proportionate share of such offered shares, each other shareholder may purchase,
on a pro-rata basis, the portion(s) allocable to the non-purchasing
shareholder(s). In the event that any shareholder shall have failed to exercise
its right thereunder by the expiration of the time specified, then, on the
expiration of such time, the transferor shall give each shareholder who has
submitted a purchase notice ("participating buyer") a written notice stating the
amount of shares with respect to which no purchase notice was submitted. Each
participating buyer shall have three (3) days from the date of delivery of such
notice to exercise its right of over-allotment. The process described herein
shall be repeated until (i) purchase notices equal to the abatable amount are
made by participating buyers or (ii) no participating buyer timely exercises its
right of over-allotment.
(f) If there have been received purchase notices for a total number of
shares equal to the number of offered shares, in that case every buyer shall buy
the number of shares as mentioned in the purchase notice he has submitted.
(g) If by the end of the time referred to in sub-Section (d) and (e) above
no purchase notices have been received by the transferor or purchase notices for
a total number of shares less than the number of offered shares the transferor
may, within 60 days from expiration of the time for submission of purchase
notices, sell all the offered shares, at a price not less than the price
mentioned in the sale notice and upon all other conditions not less favorable to
the transferor than those provided for in the sale notice. If the transferor
shall not transfer the offered shares as aforesaid, within the aforesaid 60
days, he shall be obligated, before selling the offered shares to another, to
offer them again to the other shareholders in the company in accordance with the
aforesaid procedure, and such procedure shall apply to any further offer.
(h) If purchase notices shall have been received for a total number of
shares greater than the number of offered shares, the buyers may acquire shares
in a manner proportionate to the share capital of the company held by them at
that time. However, no buyer shall be required to buy a greater number of shares
than the number provided for in the purchase notice submitted by him.
<PAGE>
4
(i) In every one of the events referred to in sub Sections (f), (g) and
(h), the transferor shall send within 3 days after the last date for submission
of purchase notices to each of the buyers, a notice accompanied by copies of all
purchase notices received by the transferor of either non-acceptance of the
offer pursuant to the sale notice or the acceptance thereof (hereinafter the
"acquisition notice") that shall mention the number of shares that shall be
acquired by each buyer.
(j) After receipt of the acquisition notice each buyer shall purchase from
the transferor, and the transferor shall sell and transfer to such buyer the
number of shares referred to in such notice according to the terms of the sale
notice. Upon transfer to the buyers such shares must be free and clear of any
liens or encumbrances unless otherwise specified in the he sale notice. The
transferor and such buyer shall each have all the remedies for breach of
contract available under any applicable laws in connection with the transaction
set forth in this Section.
22.4 Assumption of Obligation by Transferee It is agreed by and between
the Shareholders that it shall be a condition precedent to the right of any
transferee (who is not a party to this Agreement) of any shares in the Company
pursuant to any of the provisions of this Agreement who receives title to such
share, that such transferee shall execute and deliver an appropriate instrument
in writing in favor of the remaining parties whereby such transferee shall agree
to observe and be bound by all the provisions contained in this Agreement.
(h) Clauses 34-39, 48(b) and 51 of the Regulations shall be deleted.
(i) After Clause 59 of the Regulations the following clause shall be inserted:
599(a) Resolutions by the General Assembly or Board of Directors
with respect to the following matters shall be subject to the favourable
voting of Ambient Ltd. or the Ambient director, respectively.
(a) enter into any transaction with a shareholder (or any principal,
employee or affiliate or subsidiary thereof or any other entity under
common control therewith) or a key employee, officer or director
including, without limitation, any modification in an agreement between
the company and a shareholder, or any agreement among such parties or a
modification in the salary or terms of any director or officer of the
company, and enter into any other type of transaction with any officer,
director, key employee or shareholder of the company and the granting of
any bonuses to a shareholder;
(b) entry into any line of business, a change of its objectives, or a
reorganization of its operations, where such business, objectives or
operations do not form a part of the company's current business,
objectives or operations;
(c) increase the number of shares that the company may issue and/or create
a new class of equity and/or change the legal structure of the company,
including but not limited to, any split or subdivision of stock, the
creation of new stock or separate classes of stock, the alteration of
rights associated with any security, or the issue of
<PAGE>
5
any debenture or loan stock of the company and any recapitalization or
reduction in share capital of the company or making any changes in the
authorized capital stock of the company, and/or any increase in the issued
or outstanding capital stock of the company, issuance of any shares in the
company, the issuance or authorization for issuance or sale of any of the
company's capital stock or the issuance or authorization for issuance of
any options, warrants or rights to acquire any capital stock of the
company;
(d) declare a cash or share dividend;
(e) complete or contract to complete the merger, reorganization or
consolidation of the company with or into any other entity;
(f) sell or purchase, or contract or agree to sell or purchase, or abandon
or remove, any of the company's assets, in one transaction or a series of
transactions valued at over $25,000 in each year;
(g) make or effect any change in any accounting principles or practices of
the company or the method in which the books and records of the company
are maintained, except as required by law, regulation or professional
practice, or the appointment to serve as the company's auditors any person
or entity that is not affiliated with one of the "top 6" nationally
recognized accounting firms in the united states;
(h) enter into any transaction out of the company's ordinary course of
business;
(i) cease operations and/or voluntarily winding up business;
(j) borrow or encumber its assets or grant any loan other than a loan to
employee of the company or any of its subsidiaries;
(k) change the number of the members of the board of directors;
(l) form or acquire any subsidiary or enter into of any partnership;
(m) amend the incorporation documents;
(n) terminate or retain the services of any senior employee;
(o) change the company's accountants or legal advisors;
(p) determine the duties of members of the board of directors, their
manner of appointment and termination
(j) After Clause 67 at the Regulations, the following clause shall be inserted:
<PAGE>
6
67(a) A resolution in writing signed by all members of the Company
then entitled to attend and vote at General Meetings or to which all such
members have given their written consent (by letter, telegram, telex, telefax or
otherwise) shall be deemed to have been unanimously adopted by a General Meeting
duly convened and held.
67(b) Where all the directors present at or participating in the
meeting have consented thereto, any director may participate in a meeting of the
board by means of conference telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously and a director participating
in such a meeting by such means is deemed to be present at the meeting.
(k) Clauses 68-70 of the Regulations shall be deleted and after clause 70 the
following clause shall be inserted:
70(a) The Board of Directors shall be comprised of 2 directors and
their duties and the manner of their appointment and termination will be
determined from time to time by a general meeting of the Company.
(l) Clauses 73,79, 80(5) and 8l-89 of the Regulations shall be deleted.
(m) Clause 91 of the Regulations shall be deleted and after it the following
clause shall be inserted:
91(a) The Board of Directors can set the size of the quorum required
to conduct the business affairs of the Company and can define the signatory
rights of the Company. Until resolved to the contrary the quorum for a meeting
of the Board of Directors shall be two, of whom one shall be Bernard Wolff.
Clause 93 of the Regulations shall be deleted and after it the following clause
shall be inserted:
93(a) Ambient Corp shall be entitled to appoint the Director
appointed by them as the Chairman of the Board of Directors. The Chairman of the
Board of Directors shall not hold a casting vote.
(n) After clause 95 of the Regulations.the following clauses shall be inserted:
95(a) A resolution in writing signed by all the members of the Board
of Directors or such resolution that all the members of the Board of Directors
have given their written consent ( by letter, telegram, telex, telefax or
otherwise ) shall be valid for every purpose as a resolution adopted at a Board
of Directors meeting that was duly convened and held.
95 (b)(i) The Company may enter into a contract for the insurance of
part or all of its officers' liability in respect of any of the following:
<PAGE>
7
(1) violations of his obligation toward the Company or
toward any other to act with circumspection;
(2) violations of his obligation of loyalty toward it,
provided the officer acted in good faith and had
reasonable cause to assume that his act would not injure
the Company;
(3) financial obligations imposed on him in favor of a third
party, in respect of an act performed by virtue of his
position as officer of the Company.
(ii) The Company may indemnify any of its officers for the
following matters:
(1) a financial obligation imposed on the officer in favor of
a third party by a court judgment, including a compromise
judgment or an arbitrator's decision approved by a court, for
an act performed by virtue of his position as officer of the
Company; and
(2) reasonable legal expenses, including attorney's fees,
expended by or charged to an officer or adjudged against him
by a court in an action lodged against him by the Company or
on its behalf by another person, or in a criminal charge in
which he was found innocent, all for an act performed by
virtue of his position as officer of the Company.
(o) Clause 100 of the Regulations shall be deleted.
Addresses & Descriptions of
Name Subscribers Signatures
- --------------------------------------------------------------------------------
Bernard Wolff 5/11 Remez Street
Netanya 42271
Brounstein-Aboudi 51-200476-3
Trustees Ltd.
Dated this 4th day of January 2000.
Witness to the above signatures _____________________________
Exhibit 3.9
THE COMPANIES ORDINANCE (1983)
MEMORANDUM OF ASSOCIATION
OF
INSULATED CONNECTIONS CORPORATION
1. The name of the Company is Insulated Connections Corporation.
2. The purposes for which the Company is established are:
(a) To market and develop any products and services as shall be determined by
the Company from time to time.
(b) To engage in and conduct any business as shall be determined by the Company
from time to time.
3. The liability of the members is limited.
4. The share capital of the Company is 38,100 New Israeli Shekels divided into
38,100 ordinary Shares of 1 New Israeli Shekel each.
We, the undersigned, want to incorporate as a Company, in pursuance of this
Memorandum of Association, and we respectively agree to take the number of
shares in the capital of the Company set opposite our respective names.
Name and Number of shares
Addresses of . taken by each
subscribers I.D. Signature Address Subscriber
- ----------------------------------------------------------------------------
80
David Aboudi 309936573 136
Rothschild
Blvd., Tel
Aviv, 65272
Brounstein-Aboudi 51-200476-3 136 20
Trustees Ltd. Rothschild
Blvd., Tel
Aviv, 65272
DATED this 25 day of July 1999.
WITNESS to the above signatures:__________
Advocate
Exhibit 3.10
THE COMPANIES ORDINANCE (1983)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
INSULATED CONNECTIONS CORPORATION
The regulations contained in the Second Schedule to the Companies Ordinance (New
Version) (the "Regulations") shall apply to INSULATED CONNECTIONS CORPORATION.
(the "Company") subject to the modifications hereinafter expressed.
(a) The Articles of Association of the Company shall be numbered in the same
manner as the Regulations, except with respect to Regulations not adopted, and
the word "deleted" shall appear next to the number of such deleted provision.
(b) After Clause I of the Regulations, the following clause shall be inserted:
1(a) The Company is a private limited Company and accordingly:
(i) The number of members of the Company at any time shall not
exceed 50 (not including persons who are in the employment to the Company, and
persons who, having been formerly in the employment of the Company were while in
that employment and have continued after the termination of that employment to
be members of the Company). However for the purposes of this provision, where
two or more persons hold one or more shares in the Company jointly they shall be
treated as a single member;
(ii) No invitation shall be issued to the public to subscribe for
any shares or debenture stocks of the Company;
(iii) The right to transfer shares of the company shall be
restricted in accordance with the provisions of these Articles; and
(iv) Any transfer of shares in the Company shall require the
authorization of the Board of Directors.
(c) clause 5 of the Regulations shall be deleted.
(d) Clause 19 (1) of the Regulations shall be amended by deleting the words 'not
paid up in full.'
<PAGE>
2
(e) Clauses 34-39, 48(b) and 51 of the Regulations shall be deleted.
(f) After Clause 67 at the Regulations, the following clause shall be inserted:
67(a) A resolution in writing signed by all members of the Company
then entitled to attend and vote at General Meetings or to which all such
members have given their written consent (by letter, telegram, telex, telefax or
otherwise) shall be deemed to have been unanimously adopted by a General Meeting
duly convened and held.
67(b) Where all the directors present at or participating in the
meeting have consented thereto, any director may participate in a meeting of the
board by means of conference telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously and a director participating
in such a meeting by such means is deemed to be present at the meeting.
(g) Clauses 68-70 of the Regulations shall be deleted and after clause 70 the
following clause shall be inserted:
70(a) The number of the members of the Board of Directors, their
duties and the manner of their appointment and termination will be determined
from time to time by a general meeting of the Company.
(h) Clauses 73,79, 80(5) and 8l-89 of the Regulations shall be deleted.
(i) Clause 91 of the Regulations shall be deleted and after it the following
clause shall be inserted:
91(a) The Board of Directors can set the size of the quorum required
to conduct the business affairs of the Company and can define the signatory
rights of the Company. Until resolved to the contrary the quorum for a meeting
of the Board of Directors shall be one.
(j) After clause 95 of the Regulations.the following clauses shall be inserted:
95(a) A resolution in writing signed by all the members of the Board
of Directors or such resolution that all the members of the Board of Directors
have given their written consent ( by letter, telegram, telex, telefax or
otherwise ) shall be valid for every purpose as a resolution adopted at a Board
of Directors meeting that was duly convened and held.
95 (b)(i) The Company may enter into a contract for the insurance of
part or all of its officers' liability in respect of any of the following:
<PAGE>
3
(1) violations of his obligation toward the Company or
toward any other to act with circumspection;
(2) violations of his obligation of loyalty toward it,
provided the officer acted in good faith and had
reasonable cause to assume that his act would not injure
the Company;
(3) financial obligations imposed on him in favor of a third
party, in respect of an act performed by virtue of his
position as officer of the Company.
(ii) The Company may indemnify any of its officers for the
following matters:
(1) a financial obligation imposed on the officer in favor of
a third party by a court judgment, including a compromise
judgment or an arbitrator's decision approved by a court, for
an act performed by virtue of his position as officer of the
Company; and
(2) reasonable legal expenses, including attorney's fees,
expended by or charged to an officer or adjudged against him
by a court in an action lodged against him by the Company or
on its behalf by another person, or in a criminal charge in
which he was found innocent, all for an act performed by
virtue of his position as officer of the Company.
(k) Clause 100 of the Regulations shall be deleted.
Addresses & Descriptions of
Name Subscribers Signatures
- --------------------------------------------------------------------------------
David Aboudi 136 Rothschild Blvd. Tel
Aviv 65272
Brounstein-Aboudi 136 Rothschild Blvd. ,
Trustees Ltd. Tel Aviv 65272
Dated this 25 day of July 1999.
Witness to the above signatures _____________________________
EXHIBIT 4.2
This Note has not been registered under the Securities Act of 1933, as amended
(the "Securities Act") or under the provisions of any applicable state
securities laws, but has been acquired by the registered holder hereof for
purposes of investment and in reliance on statutory exemptions under the
Securities Act, and under any applicable state securities laws. This Note may
not be sold, pledged, transferred or assigned except in a transaction which is
exempt under the provisions of the Securities Act and any applicable state
securities laws or pursuant to an effective registration statement; and in the
case of an exemption, only if the Company has received an opinion of counsel
satisfactory to the Company that such transaction does not require the
registration of this Note or any securities into which this Note may be
convertible.
AMBIENT CORPORATION
January ___, 2000 $________
10% PROMISSORY NOTE
Ambient Corporation, a Delaware corporation (the "Company"), for value
received, promises to pay to _________________ or registered assigns (the
"Holder") on the earlier of (i) the 10th business day following the consummation
by the Company of any form of financing as described in subparagraph 2b below or
(ii) twelve (12) months from the date hereof (the earlier of such dates referred
to herein as the "Maturity Date"), the principal sum of
_____________________________ ($_____________) Dollars and to pay simple
interest on the outstanding principal sum hereof at the rate of ten percent (10
%) per annum from the date of receipt of the principle by the Company until the
date of repayment (the "Note"). The Company will punctually pay or cause to be
paid the principal amount and interest on this Note. Any sums required to be
withheld from any payment of principal amount, or interest on this Note by
operation of Law or pursuant to any order, judgment, execution, treaty, rule or
regulation may be withheld by the Company and paid over in accordance therewith.
1. Transfer of Note to Comply with the Securities Act
The Holder agrees that this Note (the "Securities") may not be sold,
transferred, pledged, hypothecated or otherwise disposed of except as follows:
(1) to a person who, in the opinion of counsel to the Company, is a person to
whom the Note may legally be transferred without registration and without
delivery of a current prospectus under the Securities Act with respect thereto
and then only against receipt of an agreement of such person to comply with the
provisions of this Note, including this Section 1 with respect to any resale or
other disposition of any of the Note.
<PAGE>
2
2. Prepayment
a. The principal amount of this Note may be repaid by the Company, in
whole or in part without premium or penalty, at any time. Upon any prepayment of
the entire principal amount of this Note, or portion thereof, all accrued, but
unpaid, interest shall be paid to the Holder on the date of prepayment with
respect to the principal amount prepaid.
b. The entire principal amount of this Note and accrued interest shall be
repaid on the date that the Company receives proceeds from the consummation of
any form of public or private equity or debt financing in the aggregate amount
equal to or exceeding the principal amount set forth on the face of this Note.
3. Covenants of Company
a. The Company covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its income and
profits, or upon any of its property, before the same shall become a lien upon
the Company's assets or property, as well as all lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge upon such
properties or any part thereof; provided, however, that the Company shall not be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings and the Company shall set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim so contested;
(ii) Do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company as its counsel may advise;
(iii) At all times maintain, preserve, protect and keep its property
used and useful in the conduct of its business so that the business carried on
in connection therewith may be properly and advantageously conducted in the
ordinary course at all times;
(iv) At all times keep true and correct books, records and accounts.
b. Until repayment of this Note, the Company will not issue any dividends.
4. Events of Default
<PAGE>
EXHIBIT A
a. This Note become due and payable immediately upon any of the following
events, herein called "Events of Default":
(i) Default in the payment of the principal or accrued interest on
this Note, when and as the same shall become due and payable, whether by
acceleration or otherwise, and the same shall continue for 5 days thereafter
following written notice by the Holder;
(ii) Default in the due observance or performance of any covenant,
condition or agreement on the part of the Company to be observed or performed
pursuant to the terms hereof, if such default shall continue uncured for 10 days
after written notice, specifying such default, shall have been given to the
Company by the Holder;
(iii) Default in the payment of any principal or interest due in
connection with any secured or institutional indebtedness now or hereafter due
and owing by the Company;
(iv) Application for, or consent to, the appointment of a receiver,
trustee or liquidator for the Company or of its property;
(v) Admission in writing of the Company's inability to pay its debts
as they mature;
(vi) General assignment by the Company for the benefit of creditors;
(vii) Filing by the Company of a voluntary petition in bankruptcy or
a petition or an answer seeking reorganization, or an arrangement with
creditors; or
(viii) Entering against the Company of a court order approving a
petition filed against it under the federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within 60 days.
b. The Company agrees that it shall give notice to the Holder at his or
her registered address by certified mail, of the occurrence of any Event of
Default within five (5) days after such Event of Default shall have occurred.
c. In the case any one or more of the Events of Default specified above
shall happen or be continuing, the Holder may proceed to protect and enforce his
or her right by suit in the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such Holder may have.
5. Miscellaneous
a. This Note has been issued by Company pursuant to authorization of the
Board of Directors of the Company.
<PAGE>
4
b. The Company may consider and treat the person in whose name this note
shall be registered as the absolute owner thereof for all purposes whatsoever
(whether or not this Note shall be overdue) and the Company shall not be
affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner shall take place upon presentation of
this Note to the Company at its principal officer, together with a duly
authenticated assignment. In case of transfer by operation of law, the
transferee agrees to notify the Company of such transfer and of his address, and
to submit appropriate evidence regarding the transfer so that this Note may
registered in the name of the transferee. This Note is transferable only on the
books of the Company by the Holder hereof in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all holders or transferees of the Note not
registered at the time of sending the Communication.
c. The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, whether at law or in equity, and the rights of the
Holder are limited to those expressed.
d. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Note, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Note, if mutilated, the Company shall execute
and deliver a new Note of like tenor and date. Any such new Note executed and
delivered shall constitute and additional contractual obligation on the part of
the Company, whether or not this Note so lost, stolen, destroyed or mutilated
shall be art any time enforceable by anyone.
e. This Note shall be construed and enforce in accordance with the laws of
the State of New York. The Company and the Holder hereby consent to the
jurisdiction of the courts of the State of New York and the United States
District Courts situated therein in connection with any action concerning the
provisions of this Note instituted by the Holder against the Company.
f. No recourse shall be had for the payment of principal or interest on
this Note against any incorporator or any past, present, or future stockholder,
officer, director, agent or attorney of the Company, or of any successor
corporation, either directly or through the Company or any successor
corporation, otherwise, all such liability of the incorporators, stockholders,
officers, directors, attorneys and agents being waived, released and surrendered
by the Holder hereof by the acceptance of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed as of
the date first written above.
AMBIENT CORPORATION
<PAGE>
EXHIBIT A
By: ____________
Title:
EXHIBIT 4.2.1
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY
NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER
THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
No. 00- US $
-------------
AMBIENT CORPORATION
10% CONVERTIBLE DEBENTURE DUE FEBRUARY 28, 2002
THIS DEBENTURE is one of a duly authorized issue of up to $2,000,000 in
Debentures of AMBIENT CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Company") designated as its 10%
Convertible Debentures. Such Debentures may be issued in series, each of which
may have a different maturity date, but which otherwise have substantially
similar terms.
FOR VALUE RECEIVED, the Company promises to pay to ____________________,
the registered holder hereof (the "Holder"), the principal sum of
_________________________ Dollars (US $__________) on February 28, 2002 (the
"Maturity Date") and to pay interest on the principal sum outstanding from time
to time in arrears (i) prior to the Maturity Date, quarterly, on the last day of
March, June, September and December of each year, (ii) upon conversion as
provided herein or (iii) on the Maturity Date, at the rate of 10% per annum
accruing from February 17, 2000, the date of initial issuance of this Debenture.
Accrual of interest shall commence on the first such business day to occur after
the date hereof and shall continue to accrue on a daily basis until payment in
full of the principal sum has been made or duly provided for.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Twenty-five Thousand
Dollars (US$25,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of
1
<PAGE>
the United States income tax laws or other applicable laws at the time of such
payments, and Holder shall execute and deliver all required documentation in
connection therewith.
3. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of this
Debenture into shares of Common Stock of the Company, $.001 par value per share
("Common Stock") of the Company at any time until the Maturity Date (except as
contemplated by Section 5 hereof), at a conversion price for each share of
Common Stock equal to Forty Cents ($0.40) (the "Conversion Rate"; which amount
is subject to adjustment as hereinafter provided); provided that the principal
amount being converted is the lower of (x) at least Twenty-five Thousand Dollars
[US $25,000] (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less than
Twenty-five Thousand Dollars [US $25,000], then the whole amount thereof) or (y)
the maximum amount which the Holder can then convert pursuant to the terms of
Section 4(D) hereof.
B. Conversion shall be effectuated by surrendering the Debentures to
be converted to the Company or to the Company's transfer agent, North American
Transfer Company, accompanied by or preceded by facsimile or other delivery to
the Company of the form of conversion notice attached hereto as Exhibit A,
executed by the Holder of the Debenture evidencing such Holder's intention to
convert this Debenture or a specified portion hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank. Subject to the
provisions of Section 4(D) hereof, interest accrued or accruing from the date of
issuance to the date of conversion shall, at the option of the Company, be paid
in cash or Common Stock upon conversion at the Conversion Rate applicable to
such conversion. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion"), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company, provided that the Holder shall deliver to the
Company's transfer agent or the Company the original Debentures being converted
within five (5) business days thereafter (and if not so delivered with such
time, the Conversion Date shall be the date on which
2
<PAGE>
the later of the Notice of Conversion and the original Debentures being
converted is received by the Company). Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (0119722)
648-2997; ATTN: Aryeh Weinberg. Certificates representing Common Stock upon
conversion will be delivered within three (3) business days if the address for
delivery is in the United States (and within eight (8) business days if the
address for delivery is outside the United States) from the date later of the
Notice of Conversion is delivered to the Company as contemplated in the first
sentence of this paragraph C or the original Debenture is delivered to the
Company's transfer agent or to the Company.
C. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(C), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with clause (y) of Section 6 hereof.
D. Notwithstanding any other provision hereof, of the Warrants or of
any of the other Transaction Agreements (as those terms are defined in the
Securities Purchase Agreement), in no event (except (i) with respect to an
automatic conversion, if any, of a Debenture as provided in the Debentures or a
conversion pursuant to a Redemption Notice Conversion [as defined below], (ii)
as specifically provided in this Debenture as an exception to this provision, or
(iii) while there is outstanding a tender offer for any or all of the shares of
the Company's Common Stock) shall the Holder be entitled to convert any
Debenture, or shall the Company have the obligation to convert all or any
portion of this Debenture (and the Company shall not have the right to pay
interest on this Debenture), to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or unexercised portion of the Warrants), and (2) the number of shares
of Common Stock issuable upon the conversion of the Debentures with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Holder upon such conversion). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Holder, by its acceptance of this Debenture, further agrees that if the
Holder transfers or assigns any of the Debentures to a party who or which would
not be considered such an affiliate, such assignment shall be made subject to
the transferee's or assignee's specific agreement to be bound by the provisions
of this Section 4(D) as if such transferee or assignee were the original Holder
hereof.
5. A. (i) Notwithstanding any other provision hereof to the contrary, at
any time prior to the Conversion Date, the Company shall have the right to
redeem all or any portion of the then outstanding principal amount of the
Debentures then held by the Holder in cash for an amount (the
3
<PAGE>
"Redemption Amount") equal to the sum of (a) such outstanding principal of the
Debentures plus all accrued but unpaid interest thereon through the date the
Redemption Amount is paid to the Holder (the "Redemption Payment Date"), plus
(b) the Redemption Premium (as defined below).
(ii) The "Redemption Premium" shall be an amount equal to the
excess, if any, of (a) an amount equal to (I) the number of shares of Common
Stock into which the Holder could have converted the Debentures being redeemed
had the Holder effected such conversion on the Redemption Payment Date,
multiplied by (II) the closing transaction sale price of the Common Stock on the
trading day immediately preceding the Redemption Payment, over (b) the principal
of the Debentures so redeemed.
(iii) The Company shall give at least ten (10) business days'
written notice of such redemption to the Holder (the "Notice of Redemption").
The date so specified in such Notice of Redemption shall be the Redemption
Payment Date. Anything in the preceding provisions of this Section 5 to the
contrary notwithstanding, the Redemption Amount shall, unless otherwise agreed
to in writing by the Holder after receiving the Notice of Redemption, be paid to
the Holder in good funds at least five (5) but not more than ten (10) business
days from the date of the Notice of Redemption, except that, with respect to any
Debentures for which a Notice of Redemption is given, the Holder shall have the
right, exercisable by giving a Notice of Conversion is submitted to the Company
within five (5) business days of the Holder's receipt of the Company's Notice of
Redemption, to convert any or all of the Debentures sought to be redeemed (a
"Redemption Notice Conversion") and the Redemption Notice Conversion shall take
precedence over the redemption contemplated by the Notice of Redemption. Such
Debentures shall be converted in accordance with the terms hereof. Furthermore,
in the event such Redemption Amount is not timely made, any rights of the
Company to redeem outstanding Debentures shall terminate, and the Notice of
Redemption shall be null and void. Any redemption contemplated by this Debenture
shall be made only in cash by the payment of immediately available good funds to
the Holder.
B. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
kind by the Company or any of its agents, employees or representatives, as of
the Maturity Date at the Conversion Rate applicable on the Maturity Date
("Mandatory Conversion").
6. The Holder recognizes that the Company may be limited in the number of
shares of Common Stock it may issue by (i) reason of its authorized shares, or
(ii) the applicable rules and regulations of the principal securities market on
which the Common Stock is listed or traded (collectively, the"Cap Regulations").
Without limiting the other provisions hereof, (i) the Company will take all
steps reasonably necessary to be in a position to issue shares of Common Stock
on conversion of the Debentures without violating the Cap Regulations and (ii)
if, despite taking such steps, the Company still can not issue such shares of
Common Stock without violating the Cap Regulations, the Holder of this Debenture
(to the extent the same can not be converted in compliance with the Cap
Regulations (an "Unconverted Debenture"), shall have the option, exercisable in
the Holder's sole and absolute discretion, to elect any one of the following
remedies:
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<PAGE>
(x) if permitted by the Cap Regulations, require the Company to
issue shares of Common Stock in accordance with such Holder's Notice of
Conversion relating to the Unconverted Debenture at a conversion purchase
price equal to the average of the closing price per share of Common Stock
for any five (5) consecutive trading days (subject to the equitable
adjustments for certain events occurring during such period as provided in
this Debenture) during the sixty (60) trading days immediately preceding
the date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V x M
-----------------
CP
where:
"V" means the outstanding principal plus accrued interest through
the Cap Redemption Date (as defined below) of an Unconverted Debenture;
"CP" means the Conversion Rate in effect on the date of redemption
(the "Cap Redemption Date") specified in the notice from the Holder
electing this remedy; and
"M" means the highest closing price during the period beginning on
the Cap Redemption Date and ending on the date of payment of the Cap
Redemption Amount.
The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
February17, 2000 (the "Securities Purchase Agreement"), between the Company and
the Holder (or the Holder's predecessor in interest), no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor
5
<PAGE>
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
9. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert this Debenture by delivering a Notice of Conversion to the Company
within fifteen (15) days of receipt of notice of such Sale from the Company. In
the event the Holder hereof shall elect not to convert, the Company may (but
shall not be required to) prepay all outstanding principal and accrued interest
on this Debenture by paying the Redemption Amount contemplated by Section 5(A)
hereof, less all amounts required by law to be deducted, upon which tender of
payment following such notice, the right of conversion shall terminate.
10. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, 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 (i)
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 Debentures 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
Debentures") been converted as of the close of business on the trading day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the conversion of all or any of the Outstanding
Debentures, such amount of the Reserved Spin Off Shares equal to (x) the
Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the principal amount of the Outstanding Debentures then being
converted, and (II) the denominator is the principal amount of the Outstanding
Debentures.
11. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Rate shall be equitably adjusted to reflect such
action. By way of illustration, and not in limitation, of the foregoing (i) if
the Company effectuates a 2:1 split of its Common Stock, thereafter, with
respect to any conversion
6
<PAGE>
for which the Company issues the shares after the record date of such split, the
Conversion Rate shall be deemed to be one-half of what it had been calculated to
be immediately prior to such split; (ii) if the Company effectuates a 1:10
reverse split of its Common Stock, thereafter, with respect to any conversion
for which the Company issues the shares after the record date of such reverse
split, the Conversion Rate shall be deemed to be ten times what it had been
calculated to be immediately prior to such split; and (iii) if the Company
declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such dividend, the Conversion Rate
shall be deemed to be the amount of such Conversion Rate calculated immediately
prior to such record date multiplied by a fraction, of which the numerator is
the number of shares (10) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11).
12. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate,
by notice to the Company, a different delivery address for any one or more
specific payments or deliveries.
13. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Wilmington or the state courts of the State of Delaware sitting in the
City of Wilmington in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and same shall continue for a
period of five (5) days; or
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<PAGE>
b. Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration
Rights Agreement or in any certificate or financial or other
written statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall be false
or misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this
Debenture, fails to transfer or to cause its Transfer Agent to
transfer any certificate for shares of Common Stock issued to
the Holder upon conversion of this Debenture and when required
by this Debenture or the Registration Rights Agreement, and
such transfer is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer
on any certificate or any shares of Common Stock issued to the
Holder upon conversion of this Debenture as and when required
by this Debenture, the Agreement or the Registration Rights
Agreement and such legend removal is otherwise lawful, and any
such failure shall continue uncured for five (5) business
days.
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any Debenture in this series and
such failure shall continue uncured for a period of thirty
(30) days after written notice from the Holder of such
failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement
or obligation of the Company under the Securities Purchase
Agreement or the Registration Rights Agreement and such
failure shall continue uncured for a period of thirty (30)
days after written notice from the Holder of such failure
(other than a failure to cause the Registration Statement to
become effective no later than the Required Effective Date, as
defined and provided in the Registration Rights Agreement, as
to which no such cure period shall apply); or
f. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for
the benefit of creditors or commence proceedings for its
dissolution; or (3) apply for or consent to the appointment of
a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
8
<PAGE>
g. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty
(60) days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of
the properties or assets of the Company and shall not be
dismissed within sixty (60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars
in the aggregate shall be entered or filed against the Company
or any of its properties or other assets and shall remain
unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60)
days after such institution or the Company shall by any action
or answer approve of, consent to, or acquiesce in any such
proceedings or admit the material allegations of, or default
in answering a petition filed in any such proceeding; or
k. The Company shall have its Common Stock suspended or delisted
from an exchange or over-the-counter market from trading for
in excess of twenty (20) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
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<PAGE>
17. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: February 17, 2000
AMBIENT CORPORATION
By:_______________________________________
__________________________________________
(Print Name)
__________________________________________
(Title)
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Debenture No. ___ into Shares of Common Stock
of AMBIENT CORPORATION (the "Company") according to the conditions hereof, as of
the date written below.
Conversion Date*
________________________________________________________________________________
Applicable Conversion Rate
________________________________________________________________________________
Signature
________________________________________________________________________________
[Name]
Address:
________________________________________________________________________________
________________________________________________________________________________
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
EXHIBIT 4.2.2
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A TRANSFER
MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH
TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
AMBIENT CORPORATION
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and
valuable consideration, the receipt of which is hereby acknowledged by AMBIENT
CORPORATION, a Delaware corporation (the "Company"), ____________ or registered
assigns (the "Holder") is hereby granted the right to purchase at any time until
5:00 P.M., New York City time, on February 28, 2003 (the "Expiration Date"),
_______________ (_________) fully paid and nonassessable shares of the Company's
Common Stock, par value $.001 per share (the "Common Stock") at an initial
exercise price per share (the "Exercise Price") of $1.00 per share, subject to
further adjustment as set forth herein. This Warrant is being issued pursuant to
the terms of that certain Securities Purchase Agreement, dated as of February
17, 2000 (the "Securities Purchase Agreement"), to which the Company and Holder
(or Holder's predecessor in interest) are parties.
2. Exercise of Warrants.
2.1 General. This Warrant is exercisable in whole or in part
at any time and from time to time at the Exercise Price per share of Common
Stock payable hereunder, payable in cash or by certified or official bank check,
by means of tendering this Warrant Certificate to the Company. Upon surrender of
this Warrant Certificate with the annexed Notice of Exercise Form duly executed
(which Notice of Exercise Form may be submitted either by delivery to the
Company or by facsimile transmission as provided in Section 8 hereof), together
with payment of the Exercise Price for the shares of Common Stock purchased, the
Holder shall be entitled to receive a certificate or certificates for the shares
of Common Stock so purchased. Anything herein to the contrary notwithstanding,
the provisions of Section 2 of the Joint Escrow Instructions (as defined in the
Securities Purchase Agreement) shall apply to the exercise of this Warrant.
2.2 Limitation on Exercise. Notwithstanding the provisions of
this Warrant, the Securities Purchase Agreement or of the other Transaction
Agreements (as defined in the Securities Purchase Agreement), in no event
(except (i) with respect to an automatic conversion, if any, of a Debenture as
provided in the Debentures or a conversion pursuant to a Redemption Notice
Conversion [as defined in the Debentures], (ii) as specifically provided in this
Warrant as an exception to this provision, or (iii) while there is outstanding a
tender offer for any or all of the shares of the Company's Common Stock) shall
the Holder be entitled to exercise this Warrant, or
<PAGE>
shall the Company have the obligation to issue shares upon such exercise of all
or any portion of this Warrant, to the extent that, after such exercise the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or unexercised portion of the Warrants), and (2) the number of shares
of Common Stock issuable upon the exercise of the Warrants with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such exercise). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), except as otherwise provided in clause (1) of such sentence. The Holder,
by its acceptance of this Warrant, further agrees that if the Holder transfers
or assigns any of the Warrants to a party who or which would not be considered
such an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that at all
times during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of additional shares of Common Stock as will cause (i) the
total number of shares of Common Stock Holder is entitled to purchase pursuant
to this Warrant, multiplied by (ii) the adjusted purchase price per share, to
equal (iii) the dollar amount of the total number of shares of Common Stock
Holder is entitled to purchase before adjustment multiplied by the total
purchase price before adjustment.
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<PAGE>
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof. A rights offering to stockholders shall be deemed a stock dividend to
the extent of the bargain purchase element of the rights.
6.3 Adjustment for Spin Off. 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.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to the
Registration Rights Agreement (as that term is defined in the Securities
Purchase Agreement). The Company's
3
<PAGE>
obligations under the Registration Rights Agreement and the other terms and
conditions thereof with respect to the Warrant Shares, including, but not
necessarily limited to, the Company's commitment to file a registration
statement including the Warrant Shares, to have the registration of the Warrant
Shares completed and effective, and to maintain such registration, are
incorporated herein by reference.
(b) In addition to the registration rights referred to in the
preceding provisions of Section 7.2(a), effective after the expiration of the
effectiveness of the Registration Statement as contemplated by the Registration
Rights Agreement, the Holder shall have demand piggy-back registration rights
with respect to the Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time after the
Registration Statement has ceased to be effective, the Company participates
(whether voluntarily or by reason of an obligation to a third party) in the
registration of any shares of the Company's stock, the Company shall give
written notice thereof to the Holder and the Holder shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Holder's Remaining Warrant Shares in
such registration statement. If the Holder exercises such election, the
Remaining Warrant Shares so designated shall be included in the registration
statement at no cost or expense to the Holder (other than any costs or
commissions which would be borne by the Holder under the terms of the
Registration Rights Agreement). The Holder's rights under this Section 7.2 are
subject to the following conditions:
(x) under no circumstances will the Aggregate Remaining Warrant Shares (as
defined below) included in such registration statement exceed twenty
percent (20%) of the all the shares (including the Aggregate Remaining
Warrant Shares) included in such registration statement; and
(y) if there is a managing underwriter of the offering of shares referred
to in the registration statement and such managing underwriter advises the
Company in writing that the number of shares proposed to be included in
the offering will have an adverse effect on its ability to successfully
conclude the offering and, as a result, the number of shares to be
included in the offering is to be reduced, the number of Remaining Warrant
Shares of the Holder which were to be included in the registration (before
such reduction) will be reduced pro rata with the number of shares
included for all other parties whose shares are being registered.
The term "Aggregate Remaining Warrant Shares" means the aggregate of all
Remaining Warrant Shares of the Holder and of the holders of all other Warrants
originally issued pursuant to and as contemplated by the Securities Purchase
Agreement, to the extent such Remaining Warrant Shares are to be included in a
registration statement pursuant to this Section 7.2(b).
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<PAGE>
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
(i) if to the Company, to:
Ambient Corporation
270 Madison Avenue
New York, NY 10016
Attn:
Telephone No.: (888) 861-0205
Telecopier No.: (212) -
with a copy to:
Baer Marks & Upham LLP.
805 Third Avenue
New York, NY 10022
Attn: Samuel Ottensosser, Esq.
Telephone No.: (212) 702-5700
Telecopier No.: (212) 702-5941
and with a copy to:
Aboudi & Brounstein
3 Gavish St.
P.O.B. 2432
Kfar Saba Industrial Zone, Israel 44641
Attn: David Aboudi, Esq.
Telephone No.: (011 972 9) 764-4833
Telecopier No.: (011 972 9) 764-4834
(ii) if to the Holder, to:
---------------
ATTN:
Telephone No.: ( ) -
Telecopier No.: (718) 972-6400
5
<PAGE>
with a copy to:
Krieger & Prager LLP,
39 Broadway
Suite 1440
New York, NY 10006
Attn: Samuel Krieger, Esq.
Telephone No.: (212) 363-2900
Telecopier No. (212) 363-2999
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant of even date herewith contain the full understanding of the
parties hereto with respect to the subject matter hereof and thereof and there
are no representations, warranties, agreements or understandings other than
expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of
Wilmington or the state courts of the State of Delaware sitting in the City of
Wilmington in connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
6
<PAGE>
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the17th day of February, 2000.
AMBIENT CORPORATION
By:_________________________________
Name:
Its:
Attest:
- ------------------------
Name:
Title:
7
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ______________, 200_, to
purchase ______ shares of the Common Stock, par value $.001 per share, of
AMBIENT CORPORATION and tenders herewith payment in accordance with Section 1 of
said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:______________________
____________________________
[Name of Holder]
By:_________________________
|_| CASH: $ _______________________
8
EXHIBIT 4.2.3
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A TRANSFER
MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH
TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
AMBIENT CORPORATION
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions. In consideration of good and
valuable consideration, the receipt of which is hereby acknowledged by AMBIENT
CORPORATION, a Delaware corporation (the "Company"), ENGLEWOOD HOLDING, INC or
registered assigns (the "Holder") is hereby granted the right to purchase at any
time until 5:00 P.M., New York City time, on February 28, 2002 (the "Expiration
Date"), One Million Three Hundred Thousand (1,300,000) fully paid and
nonassessable shares of the Company's Common Stock, par value $.001 per share
(the "Common Stock") at an initial exercise price per share (the "Exercise
Price") of One Dollar ($1.00), subject to further adjustment as set forth
herein.
2. Exercise of Warrants.
2.1 General. This Warrant is exercisable in whole or in part
at any time and from time to time at the Exercise Price per share of Common
Stock payable hereunder, payable in cash or by certified or official bank check,
by means of tendering this Warrant Certificate to the Company. Upon surrender of
this Warrant Certificate with the annexed Notice of Exercise Form duly executed
(which Notice of Exercise Form may be submitted either by delivery to the
Company or by facsimile transmission as provided in Section 8 hereof), together
with payment of the Exercise Price for the shares of Common Stock purchased, the
Holder shall be entitled to receive a certificate or certificates for the shares
of Common Stock so purchased.
2.2 Limitation on Exercise. Notwithstanding the provisions of
this Warrant, in no event (except while there is outstanding a tender offer for
any or all of the shares of the Company's Common Stock) shall the Holder be
entitled to exercise this Warrant, or shall the Company have the obligation, to
issue shares upon such exercise of all or any portion of this Warrant, to the
extent that, after such exercise, the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of the Warrants), and (2) the number of shares of Common
Stock issuable upon the exercise of the Warrants with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares
<PAGE>
of Common Stock (after taking into account the shares to be issued to the Holder
upon such exercise). For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
except as otherwise provided in clause (1) of such sentence. The Holder, by its
acceptance of this Warrant, further agrees that if the Holder transfers or
assigns any of the Warrants to a party who or which would not be considered such
an affiliate, such assignment shall be made subject to the transferee's or
assignee's specific agreement to be bound by the provisions of this Section 2.2
as if such transferee or assignee were the original Holder hereof.
3. Reservation of Shares. The Company hereby agrees that at all
times during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of additional shares of Common Stock as will cause (i) the
total number of shares of Common Stock Holder is entitled to purchase pursuant
to this Warrant, multiplied by (ii) the adjusted purchase price per share, to
equal (iii) the dollar amount of the total number of shares of Common Stock
Holder is entitled to purchase before adjustment multiplied by the total
purchase price before adjustment.
6.2 Capital Adjustments. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
2
<PAGE>
A rights offering to stockholders shall be deemed a stock dividend to the extent
of the bargain purchase element of the rights.
6.3 Adjustment for Spin Off. 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.
7. Transfer to Comply with the Securities Act; Registration Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) The Company hereby grants to the
Holder piggyback registration rights with respect to the Warrant Shares. In the
event the Company is filing a Registration Statement for itself or on behalf of
any of its shareholders, the Company shall notify the Holder in writing
reasonably in advance of such filing (but at least five business days) and give
the Holder the opportunity to include all or any party of the Warrant Shares
(whether or not previously issued, to the extent permissible under the Act or
any regulation promulgated thereunder. Upon the Holder's notification that the
Holder desires to have all or any portion of the Warrant Shares included in such
registration, the Company shall, at no cost or expense to the Holder, include or
cause to be included in such registration statement the Warrant Shares so
identified by the Holder. The Company's obligations under the foregoing
provisions of this Section 7.2 will be satisfied by
3
<PAGE>
the inclusion of the Warrant Shares in the Registration Statement contemplated
by that certain Registration Rights Agreement, dated as of February 17, 2000
(the "Registration Rights Agreement"), to which the Company and certain
purchasers of the Company's 10% Convertible Debentures are parties, provided
such Registration Statement is declared effective and remains effective for the
term contemplated in the Registration Rights Agreement.
(b) In addition to the registration rights referred to in the
preceding provisions of Section 7.2(a), effective after the expiration of the
effectiveness of the Registration Statement as contemplated by the Registration
Rights Agreement, the Holder shall have demand piggy-back registration rights
with respect to the Warrant Shares then held by the Holder or then subject to
issuance upon exercise of this Warrant (collectively, the "Remaining Warrant
Shares"), subject to the conditions set forth below. If, at any time after the
Registration Statement has ceased to be effective, the Company participates
(whether voluntarily or by reason of an obligation to a third party) in the
registration of any shares of the Company's stock, the Company shall give
written notice thereof to the Holder and the Holder shall have the right,
exercisable within ten (10) business days after receipt of such notice, to
demand inclusion of all or a portion of the Holder's Remaining Warrant Shares in
such registration statement. If the Holder exercises such election, the
Remaining Warrant Shares so designated shall be included in the registration
statement at no cost or expense to the Holder (other than any costs or
commissions which would be borne by the Holder under the terms of the
Registration Rights Agreement). The Holder's rights under this Section 7.2(b)
are subject to the following conditions:
(x) under no circumstances will the Aggregate Remaining Warrant Shares (as
defined below) included in such registration statement exceed twenty
percent (20%) of the all the shares (including the Aggregate Remaining
Warrant Shares) included in such registration statement; and
(y) if there is a managing underwriter of the offering of shares referred
to in the registration statement and such managing underwriter advises the
Company in writing that the number of shares proposed to be included in
the offering will have an adverse effect on its ability to successfully
conclude the offering and, as a result, the number of shares to be
included in the offering is to be reduced, the number of Remaining Warrant
Shares of the Holder which were to be included in the registration (before
such reduction) will be reduced pro rata with the number of shares
included for all other parties whose shares are being registered.
The term "Aggregate Remaining Warrant Shares" means the aggregate of all
Remaining Warrant Shares of the Holder and of the holders of all other Warrants
originally issued pursuant to and as contemplated by the Securities Purchase
Agreement, to the extent such Remaining Warrant Shares are to be included in a
registration statement pursuant to this Section 7.2(b).
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile
4
<PAGE>
transmission or sent by certified, registered or express mail, postage pre-paid.
Any such notice shall be deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission, or, if mailed, two days after the
date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Ambient Corporation
270 Madison Avenue
New York, NY 10016
Attn:
Telephone No.: (888) 861-0205
Telecopier No.: (212)
with a copy to:
Baer Marks & Upham LLP.
805 Third Avenue
New York, NY 10022
Attn: Samuel Ottensosser Esq.
Telephone No.: (212) 702-5700
Telecopier No.: (212) 702-5941
and with a copy to:
Aboudi & Brounstein
3 Gavish St.
P.O.B. 2432
Kfar Saba Industrial Zone, Israel 44641
Attn: David Aboudi, Esq.
Telephone No.: (011 972 9) 764-4833
Telecopier No.: (011 972 9) 764-4834
(ii) if to the Holder, to:
ENGLEWOOD HOLDING, INC.
Telephone No.: ( )
Telecopier No.: ( )
5
<PAGE>
with a copy to:
Krieger & Prager, LLP.
Suite 1440
39 Broadway
New York, New York 10006
Attn: Sam Krieger, Esq.
Telecopier No. (212) 363-2999
Telephone No.: (212) 363-2900
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant of even date herewith contain the full understanding of the
parties hereto with respect to the subject matter hereof and thereof and there
are no representations, warranties, agreements or understandings other than
expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of
Wilmington or the state courts of the State of Delaware sitting in the City of
Wilmington in connection with any dispute arising under this Warrant and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
6
<PAGE>
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the17th day of February 2000.
AMBIENT CORPORATION
By:_________________________________
Name:
Its:
Attest:
- ------------------------
Name:
Title:
7
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ___________________, 200_, to
purchase ________ shares of the Common Stock, par value $.001 per share, of
AMBIENT CORPORATION and tenders herewith payment in accordance with Section 1 of
said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:______________________
____________________________
[Name of Holder]
8
<PAGE>
By:_________________________
|_| CASH: $ _______________________
9
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 27th day of March,
2000 between Michael Braunold (the "Employee") and PLT Solutions Inc., a
Delaware company (the "Company").
W I T N E S S E T H
WHEREAS, the Company is wishes to employ the Employee in accordance with
the terms and conditions of this Agreement, and the Employee wishes to be so
employed.
NOW THEREFORE the parties hereto agree as follows:
1. Employment. With effect from the effective date (as defined in section 2),
the Company hereby engages Employee to serve as chief executive officer who
shall perform such duties, undertake such responsibilities and exercise such
authority as the Board of Directors.
2. Term.
2.1 Employee's employment under this Agreement shall commence not later
than March 27th, 2000 (the "Effective Date") and, unless otherwise provided,
shall end on the earlier of (i) the death or disability (as defined herein ) of
the Employee, (ii) termination of Employee's employment by Company with cause
(as defined herein); (iii) after one year from the Effective Date (the "initial
term"), (vi) termination of Employee's employment without cause by the Company
or Employee upon 90 days prior written notice any time. After the expiration of
such initial term (other than for reasons set forth in clauses (i), (ii) and
(vi) this Agreement shall automatically be renewed for an additional one (1)
year periods on the same terms and conditions set forth herein (unless mutually
agreed otherwise).
Notwithstanding the foregoing, in the event that Company or Employee shall have
terminated this Agreement without cause, upon the request of the Company the
Employee shall vacate his position and the premises on a date specified by the
Company which is earlier than the end of the notice period specified in (vi)
above upon payment to Employee, in one lump sum on the effective date of
termination, the amount of pro rata Gross Salary payable under Section 3.1 from
the effective date of termination until the end of such notice period.
2.2 For the purpose of this paragraph 2, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
2.3 For the purpose of this paragraph 2, "cause" shall exist if Employee
(i) breaches any of the material terms or conditions of this Agreement; (ii)
substantially fails to perform the Employee's areas of responsibility set forth
herein, (iii) engages in willful misconduct or acts in bad faith with respect to
the Company, in connection with and related to the employment hereunder, (iv) is
convicted of a felony, (v) fails to comply with the
<PAGE>
2
instructions of the Company's Board; provided that with respect to clauses (i)
and (ii), if Employee has cured any such condition within 15 days following
delivery of the advance notice, then "cause" shall be deemed not to exist. For
purposes of this Paragraph 2, "advance notice" shall constitute a written notice
delivered to Employee that sets forth with particularity the facts and
circumstances relied upon by the Company as the basis for cause.
3. Compensation
3.1 During the term hereof, and subject to the performance of the services
required to be performed hereunder by Employee, the Company shall pay to the
Employee for all services rendered hereunder, as salary, payable not less often
than once per month and in accordance with the Company's normal and reasonable
payroll practices, a monthly gross amount equal to $3000 payable (the "Gross
Salary") less required employee deductions under law.
3.2 (i) Employee shall be issued options to acquire up to 100,000 shares
of Common Stock of the Company's parent company, Ambient Corporation ("Options")
exercisable at par value of the shares. At the option of the Company, these
Options may be issued from and pursuant to a Company employee stock option plan
or otherwise. Such Options shall vest in the Employee equally over three (3)
years, so long as Employee remains in the employ of the Company and in
accordance with the terms and subject to Employee executing the Company's
standard Employee Stock Option Plan. The options shall vest in the Employee
pro-rata to the number of complete months which Employee was employed hereunder.
If the Company sells all or substantially all of its assets, the Employee shall
be entitled to exercise, immediately prior to such sale the Options which have
not yet vested.
3.3 Upon the execution of this Agreement the Company shall pay to Employee
the sum of $12,000, less required deductions.
4. Vacation. The Employee shall be entitled to 21 working days of paid vacation
during each fiscal year that this Agreement is in effect to be taken at times as
agreed upon by the parties.
5. Development Rights. The Employee agrees and declares that all proprietary
information including but not limited to trade secrets, know-how, patents and
other rights in connection therewith developed by or with the contribution of
Employee's efforts during his employment with the Company shall be the sole
property of the Company. Upon the Company's request (whenever made), Employee
shall execute and assign to the Company all the rights in the proprietary
information.
6. Secrecy and Nondisclosure The Employee shall treat as secret and confidential
all of the processes, methods, formulas, procedures, techniques, software,
designs, know-how, data, and other information which are not of public knowledge
or record pertaining to the Company's business (existing, potential, and
future), including without limitation all business information relating to
customers and supplies and products of which the employee becomes aware during
and as a result of employment with the Company, and Employee shall not
<PAGE>
3
disclose, use, publish, or in any other manner reveal, directly or indirectly,
at any time during and after the term of this Agreement, any such information
detailed herein.
7. Non-Competition & Poaching
7.1 During the term of this Agreement and for a term of one (1) year after
Employee ceases to be employed by the Company, Employee will not, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor, consultant or otherwise (except as an
investor in a corporation whose stock is publicly traded and in which Employee
holds less than 5% of the outstanding shares) engage in or contribute his
knowledge to any work or activity that involves a product, process, service or
development which directly competes with the business of the Company, now or
hereafter existing or which relates to internet security.
7.2 Employee acknowledges that the restricted period of time and
geographical location specified under this Section 7 are reasonable, in view of
the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such area and during such period of time
as shall be determined to be reasonable by such judicial proceeding.
7.3 The Employee shall not at any time during the period from the
termination of this Agreement or any extension hereof, to the expiry of six (6)
months, employ or attempt to employ or solicit or endeavor to entice away from
or discourage from being employed by the Company any person who is, or shall at
any time until the termination of this Agreement or any extension hereof, one of
the employees of the Company.
8. Miscellaneous
8.1 Employee Representations. The Employee represents and warrants to the
Company that the execution and delivery of this Agreement and the fulfillment of
the terms hereof (i) will not constitute a breach of any agreement or other
instrument to which he is party, (ii) does not require the consent of any
person, and (iii) shall not utilize during the term of his employment any
proprietary information of any third party, including prior employers of the
Employee.
8.2 Entire Agreement. This Agreement constitutes the entire understanding
and agreement between the parties and supersedes any and all prior discussions
and agreements and correspondence, and may not be amended or modified in any
respect except by a subsequent writing executed by both parties.
8.3 Notices. All notices or other communications required or desired to be
sent to either Party shall be in writing and shall be sent by hand or by
Registered or Certified mail, postage prepaid, return receipt requested, or sent
by telegram or facsimile to the address set forth in the Preamble to this
Agreement or to such other address as the recipient may designate by notice in
accordance with the provisions of this Clause. Any such notice shall
<PAGE>
4
have been deemed to have been delivered if served by hand when delivered, if by
Registered or Certified Mail 48 hours after posting if within the same country
or 14 days if posted from another country, and by telex or facsimile
transmission when dispatched and receipt confirmed by recipient party.
8.4 Severability. Any term or provision of this Agreement which is found
by a court, tribunal or arbitration panel to be invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the other terms
or provisions of this Agreement. In the event that any term or provision of this
Agreement is found to be unenforceable or ineffective, then the reviewing court,
tribunal or arbitration panel may modify such term or provision to the extent
necessary to render it enforceable and the parties agree to be bound by and
perform this Agreement as modified.
8.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed by the date stated above.
PLT Solutions Inc.
S/Michael Braunold S/Michael Braunold
- ------------------ ------------------
Michael Braunold
Ambient Corporation hereby agrees to section 3.2 herein.
Ambient Corporation
S/Michael Braunold
- ------------------
Exhibit 10.6
EMPLOYMENT AGREEMENT
with
Aryeh Weinberg
AGREEMENT entered into as of the 10th day of April 2000 between Aryeh
Weinberg, Israeli I.D. 317094472 residing at (the "Employee") and Ambient
Corporation, a Delaware corporation ( the "Company")
W I T N E S S E T H
WHEREAS, the Company desires to engage the Employee for the Company upon
the terms and conditions contained herein; and
NOW THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:
1. Engagement & Duties
1.1 With effect from the effective date (as defined in Section 2), the
Company employs Employee and Employee accepts employment with the Company to be
performed for the Company as Chief Financial Officer of each of the Company, PLT
Solutions Inc. ("PLT"), Ambient Ltd., Insulated Connections Corporation and
Kliks.com Ltd. subsidiaries of the Company (collectivelt the "Subsidiaries"),
upon the terms and conditions set forth herein. The Employee shall perform
faithfully and diligently the duties customarily performed by persons in the
position for which Employee is engaged. Employee shall devote Employee's full
business time and efforts to rendition of such services and to the performance
of such duties as are set forth herein.
The Employee shall further have such duties and responsibilities
commensurate with his position as may be assigned to him from time to time by
the Company
The Employee shall not be entitled to demand or receive, inter alia,
payment for overtime as may be required by the Company, and the amount paid to
him as a Gross Salary, shall also include full compensation for overtime hours
and hours of weekly rest and holidays.
1.2 The Employee's authority shall be subject to the authority of the
Chief Executive Officer (the "CEO") of the Company or to whom the CEO shall so
instruct Employee to report to. Employee shall report regularly and as requested
to the CEO of the Company or as the CEO or Board of Directors of the Company
shall so instruct. Until further notice the Employee shall report to the CEO of
the Company.
<PAGE>
2. Term
2.1 Employee's employment under this Agreement shall commence on April 1,
2000 (the "Effective Date") and shall end on the earlier of: (i) the death or
disability (as defined herein ) of the Employee, (ii) termination of Employee's
employment with cause (as defined herein); (iii) termination by either party
without cause upon three (3) months prior written notice; (iv) one (1) year from
the date of this Agreement. After the expiration of such initial term (other
than for reasons set forth in clauses (i), (ii) and (iii)), this Agreement shall
automatically be renewed for additional one year terms.
2.2 For the purpose of this paragraph 2, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
2.3 For the purpose of this paragraph 2, "cause" shall exist if Employee
(i) fails to perform the Employee's areas of responsibility set forth herein,
(ii) engages conduct which, in the sole discretion of the Company, is unethical,
illegal or which otherwise brings notoriety to Company or has an adverse effect
on the name or public image of the Company, (iii) fails to comply with the
instructions of Company in a manner detrimental to the Company, provided that
with respect to clauses (i) and (ii), if Employee has cured any such condition
(that is reasonably susceptible to cure) within 15 days following delivery of
the advance notice (as defined herein) then "cause" shall be deemed not to
exist. For purposes of this Paragraph 2, "advance notice" shall constitute a
written notice delivered to Employee that sets forth with particularity the
facts and circumstances relied upon by the Company as the basis for cause.
2.4 During the period following notice of termination until the effective
date of termination by either party for whatever reason, the Employee shall
cooperate with the Company and use his best efforts to assist the integration
into the Company the person or persons who will assume the Employee's
responsibilities.
2.5 Upon termination for cause, Employee shall be entitled to the compensation
set forth as Gross Salary herein, prorated to the effective date of such
termination as full compensation for any and all claims of Employee under this
Agreement.
3. Remuneration
3.1 During the term hereof, , the Company shall pay to the Employee for
all services rendered hereunder, as salary, payable not less often than once per
month and in accordance with the Company's normal and reasonable payroll
practices, a monthly gross amount equal to U.S. $6,000 (the "Gross Salary"). The
Gross Salary shall be reviewed by the Company annually.
3.2 The Company or an affiliate shall establish and maintain in Israel
<PAGE>
Manager's Insurance (Bituach Menahalin) for the Employee. Each of the Company
and the Employee shall contribute toward the premiums payable in respect of such
insurance those amounts which would be recognized under applicable law as tax
free benefits, but in no event shall such contributed amounts be more than
thirteen and one third percent (13 1/3%) of fifty percent (50%) of each monthly
Gross Salary payment from the Company and five percent (5 %) of such amount from
the Employee provided, however, at Employee's election, the Employee may
contribute amounts which exceed those amounts recognized as tax free benefits,
provided that Employee shall bear such taxes as may be due in connection with
such excess. It is hereby agreed that provided Employee is not terminated under
section 2.3 (iii or iv), he shall be entitled upon termination or expiration of
this Agreement to the amount paid by the Company (13 1/3%) hereunder, and to the
extent available, such payment shall be in lieu and in full and final
substitution of any severance pay required under law. If pursuant to the law
there is a shortfall in the severance account, then when and if the Employee is
entitled to receive severance pay, the Company shall pay such shortfall to the
Employee.
3.3 The Company or an affiliate and the Employee shall maintain an advancement
fund under Israeli law (Keren Heshtamlut) for exclusive benefit of the Employee.
The Company shall contribute to such fund an amount equal to 7-1/2% of fifty
percent (50%) of each monthly Gross Salary payment and the employee shall
contribute to such fund an amount equal to 2-1/2% of fifty percent (50%) each
monthly Gross Salary payment. The Employee hereby instructs the Company to
transfer to such advancement fund the amount of the Employee's and the Company's
contribution from each monthly Gross Salary payment.
3.5 Ambient Stock Options. Upon and subject to the Company adopting a new stock
option plan Employee shall be issued options to acquire up to 50,000 shares of
Common Stock ("Options") of the Company exercisable at par value of the shares.
The Options shall vest in the Employee equally over eighteen months, so long as
Employee remains in the employ of the Company and in accordance with the terms
and subject to Employee executing the Company's standard Employee Stock Option
Plan. The options shall vest in the Employee pro-rata to the number of complete
months which Employee was employed hereunder.
4. Vacation and Fringe Benefits
4.1 Vacation The Employee shall be entitled to 22 working days of paid vacation
during each fiscal year that this Agreement is in effect (and a proportionate
number of days for every partial year) to be taken at times as agreed upon by
the parties. The Employee may accumulate up to two years of paid vacation days
and shall be entitled to payment in respect of any such days not used, to the
extent permitted at law.
4.2 Expenses. Employee is authorized, to incur reasonable and proper expenses
for promoting the business of the Company. The Company will reimburse Employee
promptly for all such expenses upon presentation by Employee, of receipts or
other appropriate evidence of expenses.
<PAGE>
4.3 Car. Company shall provide Employee with use of automobile and Company shall
pay for registration, gas, maintenance and insurance; and shall provide the
Employee with a cell phone and pay for its maintenance and use.
5. Development Rights
The Employee agrees and declares that all proprietary information
including but not limited to trade secrets, know-how, patents and other rights
in connection therewith developed by or with the contribution of Employee's
efforts during his employment with the Company shall be the sole property of the
Company.
6. Employee Representations
The Employee represents and warrants to the Company that the execution and
delivery of this Agreement and the fulfillment of the terms hereof (i) will not
constitute a breach of any agreement or other instrument to which Employee is
party, (ii) does not require the consent of any person, and (iii) shall not
utilize during the term of his employment any proprietary information of any
third party, including prior employers of the Employee.
7. Confidentiality
7.1 The term "Information" as used in this section means any and all
confidential and proprietary information including but not limited to any and
all specifications, formulae, prototypes, software design plans, computer
programs, and any and all records, data, methods, techniques, processes and
projections, plans, marketing information, materials, financial statements,
memoranda, analyses, notes, and other data and information (in whatever form),
as well as improvements and know-how related thereto, relating to the Company or
its products. Information shall not include information that (a) was already
known to or independently developed by the Employee prior to its disclosure as
demonstrated by reasonable and tangible evidence satisfactory to the Company;
(b) shall have appeared in any printed publication or patent or shall have
become part of the public knowledge except as a result of breach of this
Agreement by the Employee or similar agreements by other Company employees (c)
shall have been received by the Employee from another person or entity having no
obligation to the Company or (d) is approved in writing by the Company for
release by the Employee.
7.2 The Employee agrees to hold in trust and confidence all Information
disclosed to Employee and further agrees not to exploit or disclose the
Information to any other person or entity or use the Information directly or
indirectly for any purpose other than for Employee's work with the Company.
7.3 The Employee agrees to disclose the Information only to persons necessary in
connection with Employee's work with the Company and who have undertaken the
same
<PAGE>
confidentiality obligations set forth herein in favor of the Company. The
Employee agrees to assume full responsibility for the confidentiality of the
Information disclosed to Employee and to prevent its unauthorized disclosure,
and shall take appropriate measures to ensure that such persons acting on his
behalf are bound by a like covenant of secrecy.
7.4 The Employee acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
8. Non-Compete.
8.1 Employee will not, directly or indirectly, for his own account or as
an employee, officer, director, consultant, joint venturer, shareholder,
investor, or otherwise ( except of as an investor in a corporation whose stock
is publicly traded and in which the Employee holds less than 5% of the
outstanding shares) interest him/herself or engage, directly or indirectly, in
the design, development, production, sale or distribution of any product or
component that directly or indirectly competes with a product or component (i)
being designed, produced, sold or distributed by the Company or any of its
affiliates (ii) or to which the Company or any of its affiliates shall then have
proprietary rights.
8.2 Employee will not hire or otherwise contract the services of, whether
directly or indirectly (i) an employee of the Company (ii) a former employee of
the Company whose employment with the Company ended less than six months prior
to the date of such hiring, or (iii) any corporation or entity in which such
employee or former employee is an officer, director or shareholder holding 25%
of the equity or is employed providing service to that corporation or entity.
8.3 Employee's undertakings herein under section 8 shall be binding upon
Employee's successors, heirs or assigns, and shall continue until the later of
(i) the expiration of one year from the date of execution of this Agreement or
(ii) the expiration of one year from the date the Employee last represented
him/herself as an employee, agent or representative of the Company or any of its
affiliates, subsidiaries or successors.
8.4 Employee acknowledges that the restricted period of time and the
geographical location specified under this section 8 are reasonable, in view of
the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such a period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such an area and during such a period of
time as shall be determined to be reasonable by such judicial proceeding.
9. Indemnity
The Company shall indemnify the Employee as follows: (a) against all
expenses and liabilities, including counsel fees, reasonably incurred by or
imposed upon him in
<PAGE>
connection with any proceeding to which he may be made a party, or in which he
may become involved, by reason of his being or having been a director, officer,
employee or agent of the Corporation or is or was serving at the request, of the
Company as a director, officer, employee or agent of the company, partnership,
joint venture, trust or enterprise, or any settlement thereof, whether or not he
is a director, officer, employee or agent at the time such expenses are
incurred, except in such cases wherein the director, officer, or employee is
adjudged guilty of willful misfeasance or malfeasance in the performance of his
duties; provided that in the event of a settlement the indemnification herein
shall apply only when the Board of Directors approves such settlement and
reimbursement as being for the best interests of the Company.
10. Miscellaneous
10.1 Benefit & Assignment This Agreement shall inure to the benefit of and
be binding upon the Company, its successors and assigns. The rights and
obligations of the Employee under this Agreement may not be assigned by the
Employee.
10.2 Entire Agreement This Agreement constitutes the entire understanding
and agreement between the parties, and supersedes any and all prior discussions
and agreements and correspondence, and may not be amended or modified in any
respect except by a subsequent writing executed by both parties.
10.3 Notices All notices or other communications hereunder shall be in
writing and shall be sent to either party by hand or by Registered or Certified
mail, postage prepaid, return receipt requested, or sent by telegram or
facsimile to the address set forth in the Preamble to this Agreement or to such
other address as the recipient may designate by notice in accordance with the
provisions of this section.
10.4 Applicable Law. This Agreement shall be interpreted, governed,
construed and enforced according to the laws of the State of New York.
Jurisdiction and venue for any action shall reside with the appropriate court in
New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed as of the date stated above.
Ambient Corporation
/S/ Aryeh Weinberg /S/ Aryeh Weinberg
- ------------------ ------------------
Aryeh Weinberg
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1 day of February,
2000 between Bernard Wolff, Israel Identity # 3 1788407 0 (the "Employee") and
Kliks.com Ltd., an Israeli company (the "Company").
W I T N E S S E T H
WHEREAS, the Company is wishes to employ the Employee in accordance with
the terms and conditions of this Agreement, and the Employee wishes to be so
employed.
NOW THEREFORE the parties hereto agree as follows:
1.
1.1 Employment. With effect from the effective date (as defined in section
2), the Company hereby engages Employee to serve as Chief Executive Officer who
shall perform such duties, undertake such responsibilities and exercise such
authority as the Board of Directors of the Company shall designate and shall
report to the Board of Directors. Employee shall devote his full time to the
affairs of the Company as required without any right or entitlement to
additional or overtime compensation except as expressly provided herein.
1.2 The employer/employee relationship between the Company and employee
shall prevail separately and independently from the status of the employee as a
shareholder and/or director of the Company.
2. Term.
2.1 Employee's employment under this Agreement shall commence not later
than February 1, 2000 (the "Effective Date") and, unless otherwise provided,
shall end on the earlier of (i) the death or disability (as defined herein ) of
the Employee, (ii) termination of Employee's employment by Company with cause
(as defined herein); (iii) after one year from the Effective Date (the "initial
term"), (iv) after February 1, 2001, termination of Employee's employment
without cause by the Company or Employee upon 90 days prior written notice any
time and (v) termination during the first year without cause or notice pursuant
to Section 5 of the Shareholders Agreement among the parties and Ambient Corp
dated December __ , 1999. After the expiration of such initial term (other than
for reasons set forth in clauses (i) and (ii) ) this Agreement shall
automatically be renewed for an additional one (1) year periods on the same
terms and conditions set forth herein (unless mutually agreed otherwise).
Notwithstanding the foregoing, in the event that Company or Employee shall have
terminated this Agreement without cause, upon the request of the Company the
Employee shall vacate his position and the premises on a date specified by the
Company which is earlier than the end of the notice period specified in (iv)
above upon payment to Employee, in one lump sum on the effective date of
termination, the amount of pro rata Gross Salary payable under
<PAGE>
2
Section 3.1, plus other payments pursuant to sections 3.2, 3.3, and 3.4
(notwithstanding any other income or benefit earned or received by the employee
from any source), from the effective date of termination until the end of such
notice period.
2.2 For the purpose of this paragraph 2, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
2.3 For the purpose of this paragraph 2, "cause" shall exist if Employee
(i) breaches any of the material terms or conditions of this Agreement; (ii)
substantially fails to perform the Employee's areas of responsibility set forth
herein, (iii) engages in willful misconduct or acts in bad faith with respect to
the Company, in connection with and related to the employment hereunder, (iv) is
convicted of a felony, (v) fails to comply with the instructions of the
Company's Board; provided that with respect to clauses (i) and (ii), if Employee
has cured any such condition within 15 days following delivery of the advance
notice, then "cause" shall be deemed not to exist. For purposes of this
Paragraph 2, "advance notice" shall constitute a written notice delivered to
Employee that sets forth with particularity the facts and circumstances relied
upon by the Company as the basis for cause.
3. Compensation
3.1 During the term hereof, and subject to the performance of the services
required to be performed hereunder by Employee, the Company shall pay to the
Employee for all services rendered hereunder, as salary, payable not less often
than once per month , and in accordance with the Company's normal and reasonable
payroll practices, a monthly gross amount equal to U.S. $5000 (the "Gross
Salary") payable in NIS (according to the representative rate of exchange at the
Company's bank on the date of payment) or US dollars, less required employee
deductions under law.
3.2 The Company and the Employee will obtain and maintain Manager's
Insurance (Bituach Menahalim) under Israeli law for the benefit of the Employee
in the customary form in Israel. Each of the Company and the Employee shall
contribute toward the premiums payable in respect of such insurance those
amounts which would be recognized under applicable law, but in no event shall
such contributed amounts be more than thirteen and one third percent (13 1/3%)
of each monthly Gross Salary payment from the Company and five percent (5 %) of
such amount from the Employee. In Addition, the Company shall pay 2.5% of each
monthly Gross Salary payment for Disability Insurance in Israel. It is hereby
agreed that provided Employee is not terminated under section 2.3 (iii or iv),
he shall be entitled upon termination or expiration of this Agreement to the
amount paid by the Company (13 1/3%) hereunder, and to the extent available,
(and without derogating from section 2.1 above) such payment shall be in lieu
and in full and final substitution of any severance pay required under law.
3.3 The Company and the Employee shall maintain an advancement fund under
Israeli law (keren Heshtamlut) for exclusive benefit of the Employee. The
Company shall contribute to such fund an amount equal to 7-1/2% of each monthly
Gross Salary payment and the employee shall contribute to such fund an amount
equal to 2-1/2% of each monthly Gross
<PAGE>
3
Salary payment. The Employee hereby instructs the Company to transfer to such
advancement fund the amount of the Employee's and the Company's contribution
from each monthly Gross Salary payment.
3.4 Company shall pay for registration, gas, maintenance and insurance of
Employee's personal vehicle; and shall provide the Employee with a cell phone
and pay for its maintenance and use. The Company shall gross up the said
expenses and pay the income tax which would otherwise have been payable by the
employee.
4. Vacation. The Employee shall be entitled to 22 working days of paid vacation
during each fiscal year that this Agreement is in effect to be taken at times as
agreed upon by the parties, taking into account the employees reasonable needs.
5. Medical. The employee shall be entitled to sick leave and sick pay
aggregating 30 (thirty) days per year.
6. Development Rights. The Employee agrees and declares that all proprietary
information including but not limited to trade secrets, know-how, patents and
other rights in connection therewith developed by or with the contribution of
Employee's efforts during his employment with the Company shall be the sole
property of the Company. Upon the Company's request (whenever made), Employee
shall execute and assign to the Company all the rights in the proprietary
information.
7. Secrecy and Nondisclosure The Employee shall treat as secret and confidential
all of the processes, methods, formulas, procedures, techniques, software,
designs, know-how, data, and other information which are not of public knowledge
or record pertaining to the Company's business (existing, potential, and
future), including without limitation all business information relating to
customers and supplies and products of which the employee becomes aware during
and as a result of employment with the Company, and Employee shall not disclose,
use, publish, or in any other manner reveal, directly or indirectly, at any time
during and after the term of this Agreement, any such information detailed
herein.
8. Non-Competition & Poaching
8.1 During the term of this Agreement and for a term of one (1) year after
Employee ceases to be employed by the Company, Employee will not, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor, consultant or otherwise (except as an
investor in a corporation whose stock is publicly traded and in which Employee
holds less than 5% of the outstanding shares) engage in or contribute his
knowledge to any work or activity that involves a product, process, service or
development which directly competes with the business of the Company, now or
hereafter existing.
8.2 Employee acknowledges that the restricted period of time and
geographical location specified under this Section 7 are reasonable, in view of
the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall
<PAGE>
4
be reduced so that this Agreement may be enforced in such area and during such
period of time as shall be determined to be reasonable by such judicial
proceeding.
8.3 The Employee shall not at any time during the period from the
termination of this Agreement or any extension hereof, to the expiry of six (6)
months, employ or attempt to employ or solicit or endeavor to entice away from
or discourage from being employed by the Company any person who is, or shall at
any time until the termination of this Agreement or any extension hereof, one of
the employees of the Company.
9. Expenses
Employee is authorized to incur reasonable and proper expenses for
promoting the business of the Company including expenses for entertainment,
travel, lodging, and similar items. The Company will reimburse Employee promptly
for all such expenses upon presentation by Employee, of receipts or other
appropriate evidence of expenses.
10. Miscellaneous
10.1 Employee Representations. The Employee represents and warrants to the
Company that the execution and delivery of this Agreement and the fulfillment of
the terms hereof (i) will not constitute a breach of any agreement or other
instrument to which he is party, (ii) does not require the consent of any
person, and (iii) shall not utilize during the term of his employment any
proprietary information of any third party, including prior employers of the
Employee.
10.2 Entire Agreement. This Agreement constitutes the entire understanding
and agreement between the parties and supersedes any and all prior discussions
and agreements and correspondence, and may not be amended or modified in any
respect except by a subsequent writing executed by both parties.
10.3 Notices. All notices or other communications required or desired to
be sent to either Party shall be in writing and shall be sent by hand or by
Registered or Certified mail, postage prepaid, return receipt requested, or sent
by telegram or facsimile to the address set forth in the Preamble to this
Agreement or to such other address as the recipient may designate by notice in
accordance with the provisions of this Clause. Any such notice shall have been
deemed to have been delivered if served by hand when delivered, if by Registered
or Certified Mail 48 hours after posting if within the same country or 14 days
if posted from another country, and by telex or facsimile transmission when
dispatched and receipt confirmed by recipient party.
10.4 Severability. Any term or provision of this Agreement which is found
by a court, tribunal or arbitration panel to be invalid or unenforceable shall
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the other terms
or provisions of this Agreement. In the event that any term or provision of this
Agreement is found to be unenforceable or ineffective, then the reviewing court,
tribunal or arbitration panel may modify such term or provision to the extent
necessary to
<PAGE>
5
render it enforceable and the parties agree to be bound by and perform this
Agreement as modified.
10.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Israel.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed by the date stated above.
Kliks.com Ltd.
S/Michael Braunold S/Bernie Wolff
- ------------------ --------------
Bernie Wolff
Exhibit 10.8
Marketing, Sales, and Representation Agreement
This agreement is made as of the 25 day of February, 2000 between Ambient
Corporation, ("AMBIENT"), and Hamilton Trading Ltd. ("CONSULTANT").
1. BACKGROUND
AMBIENT, or its affiliates, is a business specializing in market development for
screen phone services and technologies.
CONSULTANT specializes and possesses expertise in marketing and promoting new
products and services to the telecommunications industry.
AMBIENT and CONSULTANT seek a relationship in which AMBIENT shall retain, on a
non-exclusive basis, Consultant to represent, market, and sell the Company's
products.
2. AGREEMENT
Therefore, AMBIENT and CONSULTANT agree to the following with regard to:
Business Development
CONSULTANT will provide to AMBIENT a focussed effort to develop business for
screen phone product line. Specifically, CONSULTANT will introduce the Company
to and represent it to potential customers.
Upon written notice, AMBIENT may instruct CONSULTANT not to contact certain
potential customers. In the event that CONSULTANT has previously initiated
contact with such customers, as demonstrated by reasonable and tangible
evidence.
AMBIENT, will provide CONSULTANT with marketing support in the form of
information, documentation, visits by experts, administrative support, pricing
and delivery schedules, as AMBIENT deems appropriate.
In performance of its duties hereunder, CONSULTANT shall act only in accordance
with AMBIENT's instructions, terms and conditions as shall be decided from time
to time by AMBIENT. No agreement of any kind or order for any products or
services shall be binding on AMBIENT or the Company unless accepted by AMBIENT
or the Company, as the case may be, in writing.
3. Trademarks, Trade Names, Intellectual Property
Nothing contained in the Agreement will give CONSULTANT any rights in AMBIENT'S
or the Company's trademarks, trade names, copyrights, patents, trade secrets,
logos or designations (collectively referred to as Intellectual Property
Rights). CONSULTANT will not at any time during or after this Agreement do
anything that may infringe or contribute to the infringement or such
Intellectual Property Rights.
Nothing in this agreement shall give AMBIENT any rights in CONSULTANT's
trademarks, trade names, copyrights, trade secrets, logos or designations
(collectively referred to as Intellectual Property Rights).
4. Compensation
(a) In consideration for CONSULTANT's services, AMBIENT will transfer to the
CONSULTANT,
<PAGE>
2
subject to (and in compliance with) US federal securities laws, 300,000 shares
of AMBIENT Common Stock.
(b) CONSULTANT shall bear its own out-of-pocket expenses incurred in the
furtherance of the objectives of this Agreement and neither AMBIENT or the
Company shall be responsible for any such amounts.
5. Confidentiality
AMBIENT and CONSULTANT acknowledge that they will have access to certain
information and material ("Confidential Information") concerning each other's
and the Company's business, customers, technology and products that are
confidential and of substantial value to the disclosing party or the Company, as
the case may be, which value would be impaired if such Confidential Information
was disclosed to third parties. AMBIENT and CONSULTANT will not use such
Confidential Information, except in performance of this Agreement, nor will they
disclose such Confidential Information to third parties. AMBIENT and CONSULTANT
will take every reasonable precaution to protect the Confidential Information.
For the purposes of the forgoing obligations, Confidential Information does not
include information which was rightfully known to one party prior to its receipt
hereunder by the other party, is or becomes publicly available without breach of
the Agreement or wrongful act of the receiving party, is received by one party
without an obligation of confidentiality and without breach of this Agreement or
is developed independently by one party without using Confidential Information
of the other party.
6. Non Competition
During the term of this Agreement and for 12 (twelve) months after its
termination or expiration, CONSULTANT shall not deal, directly or indirectly,
for its own account or for the account of another person, in any products which
may be competitive with AMBIENT's products or any other product competitive with
the Company's products. In order to avoid any dispute, AMBIENT's determination,
to be exercised in its sole but reasonable discretion, as to whether a product
competitive, shall be final, conclusive and binding on CONSULTANT.
7. Indemnity
CONSULTANT shall defend, indemnify, and save AMBIENT and the Company harmless
from and against injury, loss or damage to AMBIENT or the Company from any third
party arising out of or resulting from the acts or omissions of CONSULTANT
beyond the scope of this Agreement.
8. Term
This Agreement shall terminate December 31, 2000, unless terminated earlier upon
mutual consent or for cause.
9. MISCELLANEOUS
Notification
All notices, requests, and demands pertaining to this agreement shall be in
writing and will be delivered by telex, fax, certified or registered mail, or
express courier. Email via Internet will be considered informal communication
for operational purposes only.
<PAGE>
3
Amendments
No amendment or modification of any kind, including waiver, will be effective
unless it is in writing and signed by both parties to this agreement.
Governing Law
This Agreement will be governed by the laws of the State of New York.
Force Majeure
Neither party will be responsible for any failure to perform due to unforeseen
circumstances or causes beyond its control including but not limited to acts of
God, war, floods, accidents, and strikes. A party whose performance is affected
by force majeure conditions shall be excused from performing under this
Agreement to the extent imposed by the force majeure so long as he takes all
reasonable steps to immediately continue performance when the force majeure
condition is over.
Entire Agreement
This Agreement constitutes the entire Agreement between the parties and may not
be modified or amended except in writing by the parties below.
Non- Assignment
CONSULTANT may not sell, assign or otherwise transfer any of its rights or
obligation under this Agreement without the prior written consent of AMBIENT.
AMBIENT CORPORATION HAMILTON TRADING LTD.
By: S/ Michael Braunold By: S/Minna Ledereich
------------------- -----------------
Director
Name (print) Name (print)
Exhibit 10. 9
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 29th day of March,
2000 by and between Ambient Corporation., a Delaware corporation (hereafter the
"Company") and Cabus Ltd., ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company's or its affiliates has developed certain technology
in the PLT field;
WHEREAS, Consultant has experience and expertise in the providing
technical and strategic financial advice to companies in the PLT field
(hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
form time to time by the Company. Consultant shall devote such time and effort
to the consulting services hereunder as is necessary and proper for the
fulfillment of Consultant's obligations hereunder.
1.2 Consultant shall report regularly to the President of the Company with
respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company shall issue to
Consultant 200,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through June 1, 2001, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an
<PAGE>
2
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in respect of
the Common Stock or (ii) engaged in a primary or secondary offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act (either of which event, a "Public Offering"), Consultant may sell
at any time any of its Securities in a Rule 144 Transaction (as hereinafter
defined); provided, that, each such sale shall be made in compliance with
Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according to
Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
5. Proprietary Information; Non- Competition
5.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
5.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further agrees not to exploit or disclose the Information to
any other person or entity or use the Information directly or indirectly for any
purpose other than for its work with the Company.
5.3 The Consultant agrees to disclose the Information only to persons
necessary in connection with its work with the Company and who have undertaken
the same confidentiality obligations set forth herein in favor of the Company.
The Consultant agrees to assume full responsibility for the confidentiality of
the Information disclosed to it and to prevent its unauthorized disclosure, and
shall take appropriate measures to ensure that such persons acting on his behalf
are bound by a like covenant of secrecy.
<PAGE>
3
5.4 The Consultant acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
5.5 Consultant represents and warrants that his receipt of Information
hereunder or use thereof for the purposes of this Agreement shall not violate
any undertaking or obligation of the Consultant to any third party or entitle
any third party to access or right in the Information.
6. Ownership
6.1 'Project Materials' - shall mean any and all works of authorship and
materials developed by the Consultant, its employees, agents in relation to
Services (whether individually, collectively or jointly with the Company and on
whatever media) including, without limitation, any and all reports, studies,
data, diagrams, charts, specifications, pre contractual and contractual
documents and all drafts thereof and working papers relating thereto, but
excluding consultants ordinary correspondence.
6.2 The Project Materials and the intellectual property rights therein or
relating thereto shall be and remain the exclusive property of the Company and
shall vest in the Company at the time they are first created.
6.3 In the event and to the extent that any of the Project Materials or
the intellectual property rights therein or relating thereto are deemed for any
reason not to vest in the Company pursuant to this Section 6 then, upon request
by the Company, the Consultant shall forthwith assign or otherwise transfer the
same to the Company free of any encumbrance or compensation to the Consultant.
6.4 At the request and the expense of the Company, the Consultant shall do
all such things and sign all documents or instruments reasonably necessary in
the opinion of the Company to enable the Company to obtain, defend and enforce
its rights in the Project Materials.
6.5 Upon the request by the Company, and in any event upon expiration or
termination of this Agreement, the Consultant shall promptly deliver to the
Company all copies of the Project Materials then in Consultants custody, control
or possession.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
7. Warranty
Consultant represents and warrants that on the date hereof it free to be engaged
by the Company upon the terms contained in this Agreement and that there are no
agreements or arrangements restricting full performance of Consultant's duties
hereunder.
8. Force Majeure
8.1 No liability shall result to any Party due to a delay in performance
caused by circumstances beyond the reasonable control of the Party affected,
including, but not limited to acts of God, flood, war, terrorism, embargo,
accident, and governmental laws, or request, or any ruling of a court or
tribunal;
<PAGE>
4
8.2 Each Party affected by an event of force majeure shall (a) promptly
notify the other Party hereto of the expected duration thereof, and its
anticipated effect on the Party effected in terms of the performance required
hereunder; and (b) make reasonable efforts to remedy any such event of force
majeure. Performance that is delayed by any event of force majeure shall be
extended for such time as the event shall continue.
9. General Provisions
9.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
9.2 No failure, delay or forbearance by a party in exercising any power or
right hereunder shall in any way restrict or diminish such party's rights and
powers under this Agreement, or operate as a waiver of any breach or
non-performance by either party of any of the terms or conditions hereof.
9.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall deem it reasonable to enforce such term or
provision and if such term or provision shall be unenforceable, such term or
provision shall be severed and all remaining terms and provisions shall be
unaffected and shall continue in full force and effect.
9.4 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof.
9.5 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
9.6 This Agreement is personal to Consultant and Consultant shall not
assign or delegate his rights or duties to a third party, whether by contract,
will or operation of law, without the Company's prior written consent.
9.7 Each notice and/or demand given by one party pursuant to this
Agreement shall be given in writing and shall be sent by registered mail to the
other party at its designated address and such notice and/or demand shall be
deemed given at the expiration of seven (7) days from the date of mailing by
registered mail or immediately if delivered by hand. Delivery by facsimile and
other electronic communication shall be sufficient and be deemed to have
occurred upon electronic confirmation of receipt.
9.8 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation Cabus Ltd.
S/ Michael Braunold S/Robin Cotterell
- ------------------- -----------------
Exhibit 10.10
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 27th day of March,
2000 by and between Ambient Corporation., a Delaware corporation (hereafter the
"Company") and Rivermill Limited ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company's affiliate Kliks.com Ltd has recently been
established to market sreen phone technology in Israel and elsewhere;
WHEREAS, Consultant has experience and expertise in the providing
marketing advice to start up companies, including without limitation, locating
and interesting strategic partners, (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
form time to time by the Company. Consultant shall devote such time and effort
to the consulting services hereunder as is necessary and proper for the
fulfillment of Consultant's obligations hereunder.
1.2 Consultant shall report regularly to the President of the Company with
respect to Consultant's activities hereunder.
2. Compensation
2.1 Stock. For services rendered hereunder, the Company shall issue to
Consultant 100,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
2.2 The Company shall pay monthly to Consultant the sum of US $3000 per month.
2.3 The Company shall pay to the Consultant the sum of $12,000 upon execution of
this Agreement.
3. Term & Termination. This Agreement shall continue in full force and effect
through December 31, 2000, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or
<PAGE>
2
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (each a "Transfer") any of the Securities unless such Transfer
complies with the provisions of this Agreement and (i) the Transfer is pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, and the rules and regulations in effect thereunder (the "Securities
Act"), or (ii) counsel for Consultant shall have furnished the Company with an
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in respect of
the Common Stock or (ii) engaged in a primary or secondary offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act (either of which event, a "Public Offering"), Consultant may sell
at any time any of its Securities in a Rule 144 Transaction (as hereinafter
defined); provided, that, each such sale shall be made in compliance with
Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according to
Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
5. Proprietary Information; Non- Competition
5.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
5.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further agrees not to exploit or disclose the Information to
any other person or entity or use the Information directly or indirectly for any
purpose other than for its work with the Company.
5.3 The Consultant agrees to disclose the Information only to persons
necessary in connection with its work with the Company and who have undertaken
the same
<PAGE>
3
confidentiality obligations set forth herein in favor of the Company. The
Consultant agrees to assume full responsibility for the confidentiality of the
Information disclosed to it and to prevent its unauthorized disclosure, and
shall take appropriate measures to ensure that such persons acting on his behalf
are bound by a like covenant of secrecy.
5.4 The Consultant acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
5.5 Consultant represents and warrants that his receipt of Information
hereunder or use thereof for the purposes of this Agreement shall not violate
any undertaking or obligation of the Consultant to any third party or entitle
any third party to access or right in the Information.
6. Ownership
6.1 'Project Materials' - shall mean any and all works of authorship and
materials developed by the Consultant, its employees, agents in relation to
Services (whether individually, collectively or jointly with the Company and on
whatever media) including, without limitation, any and all reports, studies,
data, diagrams, charts, specifications, pre contractual and contractual
documents and all drafts thereof and working papers relating thereto, but
excluding consultants ordinary correspondence.
6.2 The Project Materials and the intellectual property rights therein or
relating thereto shall be and remain the exclusive property of the Company and
shall vest in the Company at the time they are first created.
6.3 In the event and to the extent that any of the Project Materials or
the intellectual property rights therein or relating thereto are deemed for any
reason not to vest in the Company pursuant to this Section 6 then, upon request
by the Company, the Consultant shall forthwith assign or otherwise transfer the
same to the Company free of any encumbrance or compensation to the Consultant.
6.4 At the request and the expense of the Company, the Consultant shall do
all such things and sign all documents or instruments reasonably necessary in
the opinion of the Company to enable the Company to obtain, defend and enforce
its rights in the Project Materials.
6.5 Upon the request by the Company, and in any event upon expiration or
termination of this Agreement, the Consultant shall promptly deliver to the
Company all copies of the Project Materials then in Consultants custody, control
or possession.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
7. Warranty
Consultant represents and warrants that on the date hereof it free to be engaged
by the Company upon the terms contained in this Agreement and that there are no
agreements or arrangements restricting full performance of Consultant's duties
hereunder.
8. Force Majeure
8.1 No liability shall result to any Party due to a delay in performance
caused by circumstances beyond the reasonable control of the Party affected,
including, but not limited
<PAGE>
4
to acts of God, flood, war, terrorism, embargo, accident, and governmental laws,
or request, or any ruling of a court or tribunal;
8.2 Each Party affected by an event of force majeure shall (a) promptly
notify the other Party hereto of the expected duration thereof, and its
anticipated effect on the Party effected in terms of the performance required
hereunder; and (b) make reasonable efforts to remedy any such event of force
majeure. Performance that is delayed by any event of force majeure shall be
extended for such time as the event shall continue.
9. General Provisions
9.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
9.2 No failure, delay or forbearance by a party in exercising any power or
right hereunder shall in any way restrict or diminish such party's rights and
powers under this Agreement, or operate as a waiver of any breach or
non-performance by either party of any of the terms or conditions hereof.
9.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall deem it reasonable to enforce such term or
provision and if such term or provision shall be unenforceable, such term or
provision shall be severed and all remaining terms and provisions shall be
unaffected and shall continue in full force and effect.
9.4 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof.
9.5 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
9.6 This Agreement is personal to Consultant and Consultant shall not
assign or delegate his rights or duties to a third party, whether by contract,
will or operation of law, without the Company's prior written consent.
9.7 Each notice and/or demand given by one party pursuant to this
Agreement shall be given in writing and shall be sent by registered mail to the
other party at its designated address and such notice and/or demand shall be
deemed given at the expiration of seven (7) days from the date of mailing by
registered mail or immediately if delivered by hand. Delivery by facsimile and
other electronic communication shall be sufficient and be deemed to have
occurred upon electronic confirmation of receipt.
9.8 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation Rivermill Limited
S/Aryeh Weinberg S/ Anthony Charles Director
- ---------------- ---------------------------
Exhibit 10.11
AGREEMENT
THIS AGREEMENT is made and entered into as of the 15th day of February, 2000 by
and between Ambient Corporation, a Delaware corporation (hereinafter "Ambient"
or the "Company") and Limekiln Ltd. ( hereinafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company, or its affiliates, is in the business developing and
marketing various power line telecommunication products and components;
WHEREAS, Consultant or its affiliates wish to provide to the Company marketing
and business advisory services and advice (hereinafter the "Services");
WHEREAS, the Company desires remunerate the Consultant in full for all Services
to be rendered;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Compensation; Term For services rendered hereunder, and in full and final
payment thereof, the Company hereby issues to Consultant 180,000, shares of the
Company's Common Stock (the "Securities"). The Consultant shall provide the
Services for a period of one year from the date of this Agreement.
2. Representations of Consultant Respecting the Securities.
2.1 General Restriction on Transfer. Except for transfers otherwise permitted by
this Agreement or applicable law, Consultant agrees that it will not transfer
any of the Securities.
2.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. Notwithstanding the general prohibition
on Transfers contained herein, the Company acknowledges and agrees that any
Transfer in a
<PAGE>
private transaction which does not include a public distribution is permitted
and need not require an opinion of counsel, provided, that prior to such
Transfer, the transferee shall deliver to the Company a valid written
undertaking to be bound by the terms of this Agreement.
3. Proprietary Information.
3.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
3.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further confirms that it will not exploit or disclose the
Information to any other person or entity or use the Information directly or
indirectly for any purpose other than for its work with the Company.
3.3 The Consultant acknowledges and agrees that the Information furnished by the
Company to it is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
4. General Provisions
4.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
4.2 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof
4.3 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit
<PAGE>
the Company by or to any contract or otherwise. Consultant is not, expressly or
by implication, an employee of the Company for any purpose whatsoever.
4.4 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Ambient Corporation. Limekiln Ltd.
S/Michael Braunold S/ Robin Cotterell
- ------------------ ------------------
Exhibit 10.12
AGREEMENT
THIS AGREEMENT is made and entered into as of the 17th day of February,
2000 by and between Ambient Corporation, a Delaware corporation (hereinafter
"Ambient" or the "Company ") and Gershon Tokayer ( hereinafter the
"Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing various
software products and components;
WHEREAS, Consultant wishes to provide during the course of the following
10 months marketing and business advisory services and advice to the Company
(hereinafter the "Services");
WHEREAS, the Company desires remunerate the Consultant in full for all
Services rendered to date;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Compensation For services rendered hereunder, and in full and final payment
thereof, the Company hereby issues to Consultant 25,000, shares of the Company's
Common Stock, par value $0.001, (the "Securities"). This contract shall
terminate 10 months from its date.
2. Representations of Consultant Respecting the Securities.
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it
will not transfer any of the Securities.
2.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or
for resale in connection with, the distribution or other disposition
thereof. Consultant agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of
(each a "Transfer") any of the Securities unless such Transfer complies
with the provisions of this Agreement and (i) the Transfer is pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, and the rules and regulations in effect thereunder (the
"Securities Act"), or (ii) counsel for Consultant shall have furnished the
Company with an opinion, reasonably acceptable to the Company, that no
such registration is required because of the availability of an exemption
under the Securities Act.
<PAGE>
2.3 Certain Permitted Transfers. Notwithstanding the general prohibition
on Transfers contained herein, the Company acknowledges and agrees that
any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel,
provided, that prior to such Transfer, the transferee shall deliver to the
Company a valid written undertaking to be bound by the terms of this
Agreement.
3. Proprietary Information;
3.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
3.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further confirms that it will not exploit or disclose the
Information to any other person or entity or use the Information directly or
indirectly for any purpose other than for its work with the Company.
3.3 The Consultant acknowledges and agrees that the Information furnished
by the Company to it is and shall remain proprietary to the Company. Unless
otherwise required by statute or government rule or regulation, all copies of
the Information, shall be returned to the Company immediately upon request
without retaining copies thereof.
4. General Provisions
4.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
4.2 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof
<PAGE>
4.3 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company
for any purpose whatsoever.
4.4 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation.
S/ Aryeh Weinberg S/Gershon Tokayer
- ----------------- -----------------
Gershon Tokayer
Exhibit 10.13
AGREEMENT
THIS AGREEMENT is made and entered into as of the 14th day of February,
2000 by and between Ambient Corporation, a Delaware corporation (hereinafter
"Ambient" or the "Company ") and Grove Industries Ltd. (hereinafter the
"Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing various
power line telcommunication products and components;
WHEREAS, Consultant has experience and wishes to provide financial
advisory services and advice to the Company (hereinafter the "Services");
WHEREAS, the Company desires remunerate the Consultant in full for all
Services rendered to date;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Compensation; Term. For services rendered hereunder, and in full and final
payment thereof, the Company hereby issues to Consultant 643,750 shares of the
Company's Common Stock(the "Securities"). The term of this Agreement shall be 12
months from its date.
2. Representations of Consultant Respecting the Securities.
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
2.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. Notwithstanding the general prohibition
on
<PAGE>
Transfers contained herein, the Company acknowledges and agrees that any
Transfer in a private transaction which does not include a public distribution
is permitted and need not require an opinion of counsel, provided, that prior to
such Transfer, the transferee shall deliver to the Company a valid written
undertaking to be bound by the terms of this Agreement.
3. Proprietary Information.
3.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
3.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further confirms that it will not exploit or disclose the
Information to any other person or entity or use the Information directly or
indirectly for any purpose other than for its work with the Company.
3.3 The Consultant acknowledges and agrees that the Information furnished
by the Company to it is and shall remain proprietary to the Company. Unless
otherwise required by statute or government rule or regulation, all copies of
the Information, shall be returned to the Company immediately upon request
without retaining copies thereof.
4. General Provisions
4.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
4.2 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof.
4.3 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit
<PAGE>
the Company by or to any contract or otherwise. Consultant is not, expressly or
by implication, an employee of the Company for any purpose whatsoever.
4.4 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation. Grove Industries Ltd.
S/Aryeh Weinberg S/Margaret Grant
- ---------------- ----------------
Corpman Inc.
Director
Presented by Margaret Grant
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT is made and entered into as of the 19th day of
March 2000 by and between Ambient Corporation, a Delaware corporation
(hereinafter "Ambient" or the "Company") and Grove Industries Ltd. (hereinafter
the "Consultant").
WITNESSETH
WHEREAS, the Company and Consultant entered into an agreement in February
2000 and wish to amend the same;
NOW THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Section 1 of the agreement shall be deleted and replaced with the
following section. All other terms and conditions shall remain the same.
"Compensation. For services rendered hereunder, and in full and final
payment thereof, the Company hereby issues to Consultant 700,000 shares of
the Company's Common Stock (the "Securities")."
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation Grove Industries Ltd.
- ------------------------- -----------------------------------
CORPMAN INC.
Director
represented by Margaret Grant
Exhibit 10.15
AGREEMENT
This Agreement is made as of March 27th, 2000 by and between Lingfield Limited
(hereinafter "Lingfield") and Ambient Corporation (hereinafter "Company").
THE PARTIES AGREE AS FOLLOWS:
1. Term
1.1 The term of this Agreement shall extend for 12 months from the date hereof
(the "Term"), provided, that, prior to such date this Agreement shall be deemed
terminated and of no further force or effect upon the (i) Company's insolvency,
liquidation, dissolution or commencement of any bankruptcy proceeding and (ii)
delivery by either party to the other upon thirty (30) days prior written notice
of such party's intention to terminate this Agreement.
1.2 Upon the termination, cancellation or expiration of this Agreement in
accordance with the provisions hereof, neither party shall be responsible or
liable to the other for consequential or incidental damages of any kind.
2. Services. Lingfield shall provide the following services (the "Services"):
o Assist the Company or its affiliates in meeting appropriate potential
strategic partners and investors, including but not limited to venture capital
firms, individual and institutional investors, and strategic partners;
o Support the follow-up efforts and negotiations as requested and appropriate.
In performance of the Services hereunder, Lingfield shall act only in
accordance with the Company's instructions, terms and conditions. Lingfield
shall report regularly to the Company with respect to Lingfield's activities
hereunder, including periodic meetings with Company personnel.
3. Compensation. In consideration of the Services, Lingfield shall be issued
346,250 shares of the Company's common stock.
4. Expenses
Company shall reimburse Lingfield for all expenses incurred in providing
its services under this Agreement up to an aggregate of $500 per month. Expenses
over $500 per month must be preapproved in writing by the Company.
Company will make such reimbursement to Lingfield within thirty (30) days
after a statement of expenses (with appropriate supporting documents) has been
sent to Company.
<PAGE>
2
5. Confidential Information. The Parties shall execute the Company's Reciprocal
Confidentiality Agreement.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
laws principles.
7. Arbitration. Any controversy or claim between the parties arising out of or
relating to this Agreement or the breach hereof shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in the State of New York.
8. Representations and Warranties. Each Party represents and warrants that it
has the right to enter into this Agreement, to fully perform its obligations
hereunder, that it has acquired all rights necessary for the exercise of all
rights hereunder, that the materials and technology supplied herein will not
violate or infringe upon any trademark, trade name, copyright, right of privacy
or publicity, patent, property right or any other right of any third party.
9. Modification. This Agreement may not be modified except by a written
agreement signed by both parties.
10. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between Company and Lingfield relating to the subject matter
herein and merges all prior and contemporaneous agreements between the parties.
11. Further Assurances. The parties shall each perform such acts, execute and
deliver such instruments and documents, and do all such other things as may be
reasonably necessary to accomplish the transactions contemplated by this
Agreement.
12. Assignment. This Agreement is personal to Lingfield and Lingfield shall not
assign or delegate its rights or duties to a third party, whether by contract,
will or operation of law, without the Company's prior written consent.
13. Agency. Lingfield acknowledges and agrees that it is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Lingfield is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
<PAGE>
3
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LINGFIELD LIMITED AMBIENT CORPORATION
Name: S/ Anthony Charles By S/ Aryeh Weinberg
------------------ -----------------
Title: Director Title:
Exhibit 10.16
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 19th day of February
2000 by and between Ambient Corporation, a Delaware Corporation (herineafter the
"Company") and Trax Investments Ltd. ( herineafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business of developing and marketing
various power line telecommunications products and components, and
WHEREAS, the Consultant is in the business of providing financial, and
advisory services (hereinafter the "Services") , and
WHEREAS, the Company wishes to have the Consultant provide the Services,
which the Company deems critical to its operations
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company related to the Services. Consultant
shall devote such time and effort to the consulting services hereunder as is
necessary and proper for the fulfillment of Consultant's obligations hereunder.
1.2 Consultant shall report regularly to the Director of the Company with
respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder the Company hereby (i) issues to
Consultant 589,750 shares of the Company's Common Stock (the Securities.") and
(ii) shall pay to the Consultant the sum of $5,000 per month.
3. Representations of Consultant Respecting the Securities.
3.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
3.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
3.3 Certain Permitted Transfers. Notwithstanding the general prohibition
<PAGE>
2
on Transfers contained herein, the Company acknowledges and agrees that
any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel,
provided, that prior to such Transfer, the transferee shall deliver to the
Company a valid written undertaking to be bound by the terms of this
Agreement.
4. Proprietary Information
4.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
4.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further agrees not to exploit or disclose the Information to
any other person or entity or use the Information directly or indirectly for any
purpose other than for its work with the Company.
4.3 The Consultant agrees to disclose the Information only to persons
necessary in connection with its work with the Company and who have undertaken
the same confidentiality obligations set forth herein in favor of the Company.
The Consultant agrees to assume full responsibility for the confidentiality of
the Information disclosed to it and to prevent its unauthorized disclosure, and
shall take appropriate measures to ensure that such persons acting on his behalf
are bound by a like covenant of secrecy.
4.4 The Consultant acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
5. General Provisions
5.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
5.2 No failure, delay or forbearance by a party in exercising any power or
right hereunder shall in any way restrict or diminish such party's rights and
powers under this Agreement, or operate as a waiver of any breach or
non-performance by either party of any of the terms or conditions hereof.
5.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall
<PAGE>
3
deem it reasonable to enforce such term or provision and if such term or
provision shall be unenforceable, such term or provision shall be severed and
all remaining terms and provisions shall be unaffected and shall continue in
full force and effect.
5.4 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof.
5.5 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
5.6 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation Trax Investments Ltd.
By its Director HTL Corp Services
S/Aryeh Weinberg S/ Derrick Harper
- ---------------- -----------------
S/ Peter Goulden
----------------
Exhibit 10.17
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 20th day of March,
2000 by and between Ambient Corporation., a Delaware corporation (hereafter the
"Company") and Nina Fischman, ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company's has recently undertaken two new ventures - PLT and
Screenphone technologies;
WHEREAS, Consultant has experience and expertise in the providing general
financial advice to start up companies, including without limitation, locating
and interesting strategic and financial partners, (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
form time to time by the Company. Consultant shall devote such time and effort
to the consulting services hereunder as is necessary and proper for the
fulfillment of Consultant's obligations hereunder.
1.2 Consultant shall report regularly to the President of the Company with
respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company shall issue to
Consultant 250,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through June 1, 2001, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an
<PAGE>
2
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in respect of
the Common Stock or (ii) engaged in a primary or secondary offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act (either of which event, a "Public Offering"), Consultant may sell
at any time any of its Securities in a Rule 144 Transaction (as hereinafter
defined); provided, that, each such sale shall be made in compliance with
Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according to
Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
5. Proprietary Information; Non- Competition
5.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
5.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further agrees not to exploit or disclose the Information to
any other person or entity or use the Information directly or indirectly for any
purpose other than for its work with the Company.
5.3 The Consultant agrees to disclose the Information only to persons
necessary in connection with its work with the Company and who have undertaken
the same confidentiality obligations set forth herein in favor of the Company.
The Consultant agrees to assume full responsibility for the confidentiality of
the Information disclosed to it and to prevent its unauthorized disclosure, and
shall take appropriate measures to ensure that such persons acting on his behalf
are bound by a like covenant of secrecy.
<PAGE>
3
5.4 The Consultant acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
5.5 Consultant represents and warrants that his receipt of Information
hereunder or use thereof for the purposes of this Agreement shall not violate
any undertaking or obligation of the Consultant to any third party or entitle
any third party to access or right in the Information.
6. Ownership
6.1 'Project Materials' - shall mean any and all works of authorship and
materials developed by the Consultant, its employees, agents in relation to
Services (whether individually, collectively or jointly with the Company and on
whatever media) including, without limitation, any and all reports, studies,
data, diagrams, charts, specifications, pre contractual and contractual
documents and all drafts thereof and working papers relating thereto, but
excluding consultants ordinary correspondence.
6.2 The Project Materials and the intellectual property rights therein or
relating thereto shall be and remain the exclusive property of the Company and
shall vest in the Company at the time they are first created.
6.3 In the event and to the extent that any of the Project Materials or
the intellectual property rights therein or relating thereto are deemed for any
reason not to vest in the Company pursuant to this Section 6 then, upon request
by the Company, the Consultant shall forthwith assign or otherwise transfer the
same to the Company free of any encumbrance or compensation to the Consultant.
6.4 At the request and the expense of the Company, the Consultant shall do
all such things and sign all documents or instruments reasonably necessary in
the opinion of the Company to enable the Company to obtain, defend and enforce
its rights in the Project Materials.
6.5 Upon the request by the Company, and in any event upon expiration or
termination of this Agreement, the Consultant shall promptly deliver to the
Company all copies of the Project Materials then in Consultants custody, control
or possession.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
7. Warranty
Consultant represents and warrants that on the date hereof it free to be engaged
by the Company upon the terms contained in this Agreement and that there are no
agreements or arrangements restricting full performance of Consultant's duties
hereunder.
8. Force Majeure
8.1 No liability shall result to any Party due to a delay in performance
caused by circumstances beyond the reasonable control of the Party affected,
including, but not limited to acts of God, flood, war, terrorism, embargo,
accident, and governmental laws, or request, or any ruling of a court or
tribunal;
<PAGE>
4
8.2 Each Party affected by an event of force majeure shall (a) promptly
notify the other Party hereto of the expected duration thereof, and its
anticipated effect on the Party effected in terms of the performance required
hereunder; and (b) make reasonable efforts to remedy any such event of force
majeure. Performance that is delayed by any event of force majeure shall be
extended for such time as the event shall continue.
9. General Provisions
9.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
9.2 No failure, delay or forbearance by a party in exercising any power or
right hereunder shall in any way restrict or diminish such party's rights and
powers under this Agreement, or operate as a waiver of any breach or
non-performance by either party of any of the terms or conditions hereof.
9.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall deem it reasonable to enforce such term or
provision and if such term or provision shall be unenforceable, such term or
provision shall be severed and all remaining terms and provisions shall be
unaffected and shall continue in full force and effect.
9.4 The terms and conditions of this Agreement supersede those of all
previous agreements and arrangements, either written or oral between the Company
and Consultant relating to the subject thereof.
9.5 Consultant acknowledges and agrees that he is an independent
contractor, is not the agent of the Company and has no authority in such
capacity to bind or commit the Company by or to any contract or otherwise.
Consultant is not, expressly or by implication, an employee of the Company for
any purpose whatsoever.
9.6 This Agreement is personal to Consultant and Consultant shall not
assign or delegate his rights or duties to a third party, whether by contract,
will or operation of law, without the Company's prior written consent.
9.7 Each notice and/or demand given by one party pursuant to this
Agreement shall be given in writing and shall be sent by registered mail to the
other party at its designated address and such notice and/or demand shall be
deemed given at the expiration of seven (7) days from the date of mailing by
registered mail or immediately if delivered by hand. Delivery by facsimile and
other electronic communication shall be sufficient and be deemed to have
occurred upon electronic confirmation of receipt.
9.8 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Ambient Corporation Nina Fischman
S/ Michael Braunold S/ Nina Fischman
- ------------------- ----------------
Exhibit 10.18
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT is made this 31st day of December, 1999 by and
between Bernard Wolff, Israel Identity # 3 1788407 0 ("Bernie"), Ambient
Corporation, a Delaware company ("Ambient").
W I T N E S S E T H
WHEREAS, Bernie and Ambient intend to form a private company under the
laws of the State of Israel (the "Company"; each of Bernie and Ambient, in their
capacity as shareholders of the Company, shall be referred to as a "Shareholder"
and together as "Shareholders")) for the purpose of developing, marketing and
selling screen phone technology (the "Company Business");
WHEREAS, the Shareholders have agreed to enter into this Agreement for the
purpose of setting forth their respective rights and obligations in relation to
the development and operation of said Company, with the intent that their
relationship and involvement as aforesaid be governed by the terms and
conditions herein contained.
NOW, THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows.
1. Formation of Company; Share Ownership; Division of Profits and Losses
1.1 Formation of the Company. The Shareholders shall take all action
necessary or desirable to form, organize and establish a private company under
the laws of the State of Israel with such name as shall be approved by the
Shareholders. Following establishment of the Company, the parties shall cause
the Company to formally adopt and ratify the terms contained in this Agreement
applicable to it.
1.2 Business. The sole business in which the Company shall be authorized
to engage in shall be the Company Business. Attached hereto as Appendix I for
reference purposes only is a preliminary business plan of the Company. However,
the Parties agree that the contents of the same are not binding on the Parties
or the Company.
1.3 Articles & Memorandum. The Articles of Association and Memorandum of
the Company, shall be in such form and substance as are attached hereto,
respectively, as Appendix II (hereinafter, "Articles of Association") and
Appendix III.
1.4 Share Issuances; Option. (i) The Company shall issue [initially] only
one class of ordinary share of capital stock. The initial authorized share
capital of the Company shall be comprised of 38,000 NIS divided into 380,000
Ordinary Shares, each with a nominal value of 0.1 NIS (the "Ordinary Shares").
<PAGE>
2
(ii) The parties agree that following the formation of the Company, the
Company shall immediately issue to Bernie and Ambient, respectively, 60% and
40%, of the outstanding share capital of the Company and such shares shall be
registered as fully paid (each such Shareholder's interest shall be referred to
as its "Proportionate Share").
(iii) Option. Subject to the terms and conditions of this Agreement,
Ambient shall be entitled, but not obligated, to purchase up to 10% of the
Company's share capital, on a fully diluted basis, on one or more occasions,
until the second anniversary of the execution of this Agreement, upon the
payment of $250,000 to the Company, and the Company agrees to sell and issue to
Ambient upon the exercise of its right hereunder such shares. Such right
designated herein shall be referred to as the "Investment Option".
1.6 Profits. Profits to be derived from, or incurred as a result of the
Company Business, shall be divisible between the Shareholders in accordance with
their respective Proportionate Share in the Company.
1.7 Use of Proceeds of Business. All proceeds of revenues and other income
from the Company's activities shall be used in the following order of priority:
(i) payment of outstanding taxes (municipal and otherwise);
(ii) payment of employee salaries and other required payments, other than
those owing to any of the parties;
(iii) payment of amounts owed to suppliers and banks;
(iv) allocation of dividends; and
(v) any other use authorized by the Company's board of Directors.
1.8 Financing Subject to the provisions contained herein, Ambient shall
pay (by way of equity investment) to the Company up to $1,000,000 U.S. dollars
to meet the financing needs of the Company in accordance with a budget(s)
adopted by the Board of Directors of the Company from time to time. Ambient
shall not be issued any additional shares or securities of any kind for such
payments.
2. Administration
2.1 Board of Directors. The overall management and control of affairs of
the Company shall be managed by its board of directors (the "Board"), which
shall be comprised of two members. Ambient shall be entitled to designate one
member and Bernie shall be appointed as a member of the Board.
2.2 Officers of the Company. The following individuals shall be appointed
to serve as officers of the Company as designated below:
to be appointed Chairman of the Board
by Ambient
Bernie Chief Executive Officer/General Manager
<PAGE>
3
2.3 Day to Day Management. Day to day Management of the Company shall be
carried out in accordance with policies and procedures duly adopted by the
Board.
2.4 Major Decisions. The parties agree that the Company shall not take any
of the following actions without obtaining the prior written consent of Ambient
or one of Ambient's directors:
(A) enter into any transaction with a Shareholder (or any principal,
employee or affiliate or subsidiary thereof or any other entity under
common control therewith) or a key employee, officer or director
including, without limitation, any modification in an agreement between
the Company and a shareholder, or any agreement among such parties or a
modification in the salary or terms of any director or officer of the
Company, and enter into any other type of transaction with any officer,
director, key employee or shareholder of the Company and the granting of
any bonuses to a shareholder;
(B) entry into any line of business, a change of its objectives, or a
reorganization of its operations, where such business, objectives or
operations do not form a part of the Company's current business,
objectives or operations;
(C) increase the number of shares that the Company may issue and/or create
a new class of equity and/or change the legal structure of the Company,
including but not limited to, any split or subdivision of stock, the
creation of new stock or separate classes of stock, the alteration of
rights associated with any security, or the issue of any debenture or loan
stock of the Company and any recapitalization or reduction in share
capital of the Company or making any changes in the authorized capital
stock of the Company, and/or any increase in the issued or outstanding
capital stock of the Company, issuance of any shares in the Company, the
issuance or authorization for issuance or sale of any of the Company's
capital stock or the issuance or authorization for issuance of any
options, warrants or rights to acquire any capital stock of the Company;
(D) declare a cash or share dividend;
(E) complete or contract to complete the merger, reorganization or
consolidation of the Company with or into any other entity;
(F) sell or purchase, or contract or agree to sell or purchase, or abandon
or remove, any of the Company's assets, in one transaction or a series of
transactions valued at over $25,000 in each year;
(G) make or effect any change in any accounting principles or practices of
the Company or the method in which the books and records of the Company
are maintained, except as required by law, regulation or professional
practice, or the appointment to serve as the Company's auditors any person
or entity that is not affiliated with one of the "top 6" nationally
recognized accounting firms in the United States;
<PAGE>
4
(H) enter into any transaction out of the Company's ordinary course of
business;
(I) cease operations and/or voluntarily winding up business;
(J) borrow or encumber its assets or grant any loan other than a loan to
employee of the Company or any of its subsidiaries;
(K) change the number of the members of the Board of Directors;
(L) form or acquire any subsidiary or enter into of any partnership;
(M) amend the incorporation documents;
(N) terminate or retain the services of any senior employee;
(O) change the Company's accountants or legal advisors; or
(P) determine the duties of members of the board of directors, their
manner of appointment and termination.
2.5 Bank Accounts. The Company shall maintain a bank account with such
other bank or banks or trust companies as the Board shall from time to time
agree upon for purposes of banking transactions of the Company required pursuant
to this Agreement. Any bank account of the Company shall be in the name of the
Company. All advances made pursuant to this Agreement or by third-party lenders
shall, in the first instance, be paid into a bank account of the Company, and
all other monies received from time to time on account shall be paid immediately
into the said bank account for the time being in operation in the same drafts,
checks, bills or cash in which they are received and all disbursements on
account of the Company shall be made by cheque on such account or accounts. Any
disbursements or obligations to be incurred on account of the Company under
$5000 may be approved or signed by Bernie alone and over such sum by the
approval or signatures of Bernie and an Ambient appointee jointly.
2.6 Books & Records. Proper books of accounts with respect to the Company
shall be kept and maintained by the Company at its offices, or by such other
person as the Shareholders may direct or designate in writing and entries shall
be made therein of all such matters, terms, transactions, and things as are
usually written and entered into books of account kept by others engaged in an
enterprise of a similar nature, and each of the parties hereto shall have free
access at all times to inspect, examine and copy them, and shall at all times
furnish to the others correct information, accounts and statements of and
concerning all such transactions without any concealment or suppression.
2.7 Financial Statements. The parties further covenant and agree to
initially retain Brightman Bar Levav Friedman & Co., as its auditors, to review
quarterly or semi-annual and audit annual statements, which statements shall, in
each case, show in reasonable detail the aggregate of all receipts and expenses
and other financial transactions in any way concerning the Company, all in
accordance with generally accepted accounting principles consistently applied
("Financial
<PAGE>
5
Statements"). For purposes of preparing the Financial Statements, the
accountants shall have access to all books, records, checks, papers and
documents relating to the Company.
2.7.1 Quarterly Financial Statements shall be prepared and completed
within 30 days of the end of each calendar quarter and annual Financial
statements shall be prepared and completed within 45 days following the end of
each calendar year. All Financial Statements and copies thereof shall be
forthwith delivered to each Shareholder upon completion.
2.8 Legal Representation It is agreed by and among the Shareholders that
the law firm of Aboudi & Brounstein shall initially be retained as legal counsel
to the Company for all matters other than patents.
3. Non-Competition
3.1 Non-Competition. Each of the Shareholders (each of whom in this sub
section is called a 'covenantor') covenants with each of the others and
separately with the Company (whether alone or jointly with any other person,
firm or company, and whether directly or indirectly, and whether as shareholder,
participator, partner , promoter, director, officer, agent, manager, employee or
consultant of, in or to any other person, firm or company except as a holder of
not more than 5% of shares of a publicly traded company) that it shall not (and,
where the covenantor is a company, will procure that non of its officers or
directors shall) at any time while the covenantor is the holder of any shares in
the Company and for a period of one year after the date on which the covenantor
ceases to be a shareholder in the Company (the "Relevant Period"):
(a) compete directly or indirectly with any business (including any
business then under development) of the Company as carried on during
the Relevant Period in any territory on which the Company carries on
such business or solicit or endeavor to entice away from or
discourage from dealing with the Company any person who was at any
time during the Relevant Period a manufacturer or a supplier,
customer or client of the Company;
(b) solicit or endeavor to entice away from or discourage from being
employed by the Company any person who was at the Relevant Period an
officer or employee of the Company whether or not such person would
commit a breach of contract by reason of leaving service;
(c) employ or engage or attempt to employ or engage or negotiate or
arrange the employment or engagement by any other person, firm or
company of any person who was at the Relevant Period an officer or
employee of the Company;
3.2 Each of sub sections (a) to (c) of clause 3.1 shall be deemed to
constitute a separate agreement and shall be construed independently of the
others;
<PAGE>
6
3.3 The restrictions contained in section 3.1 are considered reasonable by
the parties but in the event any such restriction shall be found void but would
be valid if some part thereof were deleted or the period or area of application
reduced such restriction shall apply with such modification as may be necessary
to make it valid and effective.
4. Transfer of Interest
4.1 Restrictions on Transfer. No Shareholder shall assign, transfer or
otherwise dispose of all or any part of its shares to any other person, firm or
corporation unless such Shareholder complies with the provisions of this Section
4, or unless otherwise specifically provided for in this Agreement.
4.2 All or a portion of the Proportionate Share of a Shareholder in the
Company may be transferred, assigned or granted to:
(i) any corporation or firm which is an affiliate of, or acts directly
or indirectly as a nominee for such Shareholder; or
(ii) any successor to such Shareholder by reason of death, disability,
merger, consolidation, amalgamation or acquisition of all, or
substantially all, of its assets provided that the Shareholder
controls at least 50% of the voting rights attached to all issued
and outstanding shares in the capital of such transferee.
(the above transferees shall collectively be referred to as "Permitted
Transferees")
For the purposes of this Section 4.2, an affiliated corporation means any
corporation which directly or indirectly, is effectively controlled by or
effectively controls a Founder. Effective control means control at least 50% of
the voting rights attached to all issued and outstanding shares in the capital
of such corporation.
Furthermore, Bernie shall be entitled to transfer part of his
Proportionate Share within the first year of this Agreement without being
subject to the Right of First Refusal below, but subject to the approval of
Ambient which shall not be unreasonably withheld, to third parties whom are
reasonably required to assist the Company in successfully achieving the Company
Business.
The other Shareholder hereby consents to any such grant, transfer or
assignment and agree to execute any documents or assurances that may be
necessary to give effect to such transfer, assignment or grant.
4.3 Right of First Refusal. Subject to section 4.2, a Shareholder in the
company shall not be permitted, without prior and written permission of the
other Shareholder, to transfer to another his shares in the company except
pursuant to the following provisions:
(a) A Shareholder desirous of transferring to others the shares held by
him, in whole or in part (hereinafter the "transferor") shall be obligated to
offer them first to
<PAGE>
7
the other Shareholders of the company, by giving notice in writing to the
Shareholders (hereinafter the "sale notice").
(b) In the sale notice the transferor shall mention the number of shares
he wishes to transfer (hereinafter the "offered shares"), the price forming the
consideration for the offered shares, the name of the offeror (if known at such
time) and the other conditions of the sale.
(c) The sale notice shall be irrevocable.
(d) Each one of the shareholders may inform the transferor in writing
within 10 days from the day of receipt of the sale notice as to his desire to
buy the offered shares,, in the price and payment conditions as provided for in
the sale notice (hereinafter the "purchase notice"). A shareholder who has
submitted a purchase notice shall be referred to hereinafter as "buyer".
(e) Each shareholder shall also have the right of over-allotment such that
if any other shareholder fails to exercise its right to purchase its
proportionate share of such offered shares, each other shareholder may purchase,
on a pro-rata basis, the portion(s) allocable to the non-purchasing
shareholder(s). In the event that any shareholder shall have failed to exercise
its right thereunder by the expiration of the time specified, then, on the
expiration of such time, the transferor shall give each shareholder who has
submitted a purchase notice ("participating buyer") a written notice stating the
amount of shares with respect to which no purchase notice was submitted. Each
participating buyer shall have three (3) days from the date of delivery of such
notice to exercise its right of over-allotment. The process described herein
shall be repeated until (i) purchase notices equal to the abatable amount are
made by participating buyers or (ii) no participating buyer timely exercises its
right of over-allotment.
(f) If there have been received purchase notices for a total number of
shares equal to the number of offered shares, in that case every buyer shall buy
the number of shares as mentioned in the purchase notice he has submitted.
(g) If by the end of the time referred to in sub-Section (d) and (e) above
no purchase notices have been received by the transferor or purchase notices for
a total number of shares less than the number of offered shares the transferor
may, within 60 days from expiration of the time for submission of purchase
notices, sell all the offered shares, at a price not less than the price
mentioned in the sale notice and upon all other conditions not less favorable to
the transferor than those provided for in the sale notice. If the transferor
shall not transfer the offered shares as aforesaid, within the aforesaid 60
days, he shall be obligated, before selling the offered shares to another, to
offer them again to the other shareholders in the company in accordance with the
aforesaid procedure, and such procedure shall apply to any further offer.
(h) If purchase notices shall have been received for a total number of
shares greater than the number of offered shares, the buyers may acquire shares
in a manner proportionate to the share capital of the company held by them at
that time. However, no buyer shall be required to buy a greater number of shares
than the number provided for in the purchase notice submitted by him.
<PAGE>
8
(i) In every one of the events referred to in sub Sections (f), (g) and
(h), the transferor shall send within 3 days after the last date for submission
of purchase notices to each of the buyers, a notice accompanied by copies of all
purchase notices received by the transferor of either non-acceptance of the
offer pursuant to the sale notice or the acceptance thereof (hereinafter the
"acquisition notice") that shall mention the number of shares that shall be
acquired by each buyer.
(j) After receipt of the acquisition notice each buyer shall purchase from
the transferor, and the transferor shall sell and transfer to such buyer the
number of shares referred to in such notice according to the terms of the sale
notice. Upon transfer to the buyers such shares must be free and clear of any
liens or encumbrances unless otherwise specified in the he sale notice. The
transferor and such buyer shall each have all the remedies for breach of
contract available under any applicable laws in connection with the transaction
set forth in this Section.
4.4 Assumption of Obligation by Transferee It is agreed by and between the
Shareholders that it shall be a condition precedent to the right of any
transferee (who is not a party to this Agreement) of any shares in the Company
pursuant to any of the provisions of this Agreement who receives title to such
share, that such transferee shall execute and deliver an appropriate instrument
in writing in favor of the remaining parties whereby such transferee shall agree
to observe and be bound by all the provisions contained in this Agreement.
5. Employment Agreements The parties acknowledge and agree that upon its
formation, the Company will enter into the "Employment Agreement" with Bernie in
the form attached hereto as Exhibit IV. In the event that Ambient to terminate
the activities of the Company prior to the January 31, 2001, Ambient or one of
its affiliates shall offer to Bernie employment as a senior officer with equal
compensationprovisions as contained in the Employment Agreement and the
Employment Agreement shall be automatically terminated under Section 2.1(v)
thereof.
6. First Right of Refusal
Ambient shall have the right of first refusal to obtain from third parties
or provide from its own capital any future financing whereby the Company is
offering, directly or indirectly, any securities of the Company or its
subsidiary or parent.
7. Confidentiality.
Each Shareholder agrees that any information obtained from or on behalf of
the company will be used solely for the purpose of monitoring its investment in
the Company and will not be used for any other purpose or disclosed to any
person without the prior written consent of the Company unless it is required by
law or stock exchange rule to include financial information obtained pursuant to
this Agreement in reports to government authorities or stock exchanges, in which
case such Shareholder shall be entitled to make such disclosure as required;
provided, that in connection to periodic reports to their shareholders or
partners, the Shareholders may, without first obtaining the prior written
consent of the Company, make general statements, not
<PAGE>
9
containing technical information or confidential intellectual property,
regarding the general nature of the Company, and may provide summary and general
information regarding the Company's revenues and profits to their lawyers and
consultants, and in their reports to their shareholders and partners, but may
not annex to such reports the full financial information to be provided by the
Company hereunder. Confidential information as referred to in this section shall
not include information (i) which or becomes public knowledge through no fault
of the Shareholder; or (ii) which is known to the Shareholder at the time of
disclosure by the disclosing party, as evidenced by the Shareholder's written
records; or (iii) which is disclosed to the Shareholder on a non-confidential
basis by a third party having no obligation of secrecy to the Company.
8. Miscellaneous
8.1 Operations Subject to Agreement and Articles of the Company. The
parties agree that the operation, ownership and management of the Company and
their respective rights, powers and obligations shall be governed by this
Agreement, the Articles of Incorporation and the Memorandum of the Company. In
the event of conflict between this Agreement and any other document attached
hereto, including the Articles of Incorporation and the Memorandum of the
Company, the terms and provisions of this Agreement shall prevail.
8.2 Non-Agency, etc. Except to the extent only as may herein be expressly
provided, no party shall (whether by reason of any provision herein contained or
otherwise) be deemed to be the partner, agent or legal representative of the
other parties, whether for the purpose of this Agreement, the Company or
otherwise, nor shall any party have, nor represent itself to have, any authority
or power to act for, or to undertake any obligations or responsibility on behalf
of the other party, unless expressly provided herein.
8.3 Notices. All notices, requests, demands or other communications by the
terms hereof required or permitted to be given by any party hereto to another
shall, unless otherwise specifically provided for herein, be given in writing
and be personally served or posted by registered mail, postage prepaid,
addressed to such other party or delivered to such other party at the addresses
noted above, or may be served by fax.
Any notice, request, demand or other communication given by mail as
aforesaid shall be deemed to have been received - on the fourth business day if
mailed to an address in the country of posting and on the twenty first business
day if mailed to an address outside the country of posting- following the
posting thereof (except during times of publicized disruption in normal postal
service in which case such notice, request, demand or other communication shall
be deemed to have been received only upon actual receipt thereof) or where such
notice is personally delivered it shall be deemed to have been received on the
date of such delivery or if delivered by fax upon confirmation by receiving
party of receipt thereof.
8.4 No Pledging, etc., of Proportionate Shares. Each of the Shareholders
hereby covenants and agrees that, except as in this Agreement expressly provided
or permitted, it will not in any manner or degree whatsoever pledge, charge,
mortgage,
<PAGE>
10
hypothecate or otherwise encumber its respective Proportionate Share in the
Company; provided that nothing herein contained shall prevent any of the
Shareholders from granting a floating charge upon its Proportionate Share to any
bank or financial institution as part of such Shareholder's general financing so
long as such charge specifically provides as follows, namely:
(a) that in the event of the realization of any such Proportionate Share
by whatever process pursued by the secured party, the purchaser or
successor thereto shall be obliged to comply with the provisions of
this Agreement; and
(b) for the entire release and discharge of such charge upon demand in
order to permit any sale or adjustment of interests pursuant to
Section 4 hereof.
8.5 Assurances The parties hereto and all of them hereby covenant and
agree to do such things, to attend such meetings and to execute such further
documents, agreements and assurances as may be deemed necessary or advisable
from time to time in order to carry out the terms and conditions of this
Agreement in accordance with their intent.
8.6 Headings. The division of this Agreement into Articles and Sections
and the headings thereof are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement, nor be relied upon
to construe the intention of any of the parties hereto.
8.7 Enurement This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and assigns.
8.8 Number and Gender. This Agreement shall be read and construed as the
number and gender of the party or parties referred to in each case requires and
as may otherwise be required by the context.
8.9 Loss of Privileges In the event that a Shareholder is in default, as
determined by a court of law, of any terms of this Agreement, such Shareholder,
during the period of such default, shall not have any right to vote, sign
documentation, receive notice of or attend at any meeting or generally
participate in the decision making process of the Company. Furthermore, each
Shareholder agrees to appoint Brounstein - Aboudi Trustees Ltd. as its attorney
to execute any and all documentation which would otherwise be required to be
signed by such Shareholder, during the period of such default.
8.10 Termination. The termination of this Agreement however caused and the
ceasing by any shareholder to hold any shares shall be without prejudice to any
obligations or rights of any of the parties hereto which have accrued prior to
any such termination or cessation and shall not affect any provision of this
Agreement which is expressly or by implication provided to come into effect on
or to continue in effect after such termination or cessation.
<PAGE>
11
8.11 Conflicting Agreements Neither the execution nor the delivery of this
Agreement nor the fulfillment nor the compliance with the terms and conditions
hereof will constitute a breach of the terms, conditions or provisions of, or
constitute a default under or result in a violation of any agreement, contract,
instrument, order, judgment or decree to which any Shareholder is a party or by
which it is bound, or result in a violation by any Shareholder of any existing
law or statute or regulation.
8.12 Entire Agreement. This Agreement constitutes the entire understanding
and agreement between the parties, and supersedes any and all prior discussions
and agreements and correspondence, and may not be amended or modified in any
respect except by a subsequent writing executed by both parties.
8.15 Jurisdiction. This Agreement , its validity, construction and effect
shall be governed by and construed under the laws of the State of Israel.
IN WITNESS WHEREOF the parties hereto have fixed their signatures as of
the day and year first above typewritten.
Ambient Corporation
S/M. Braunold
- -------------
Name:
Title:
S/ Bernie Wolff
- ---------------
Bernie Wolff
Company
S/M. Braunold
- -------------
By:
Title:
EXHIBIT 10.19
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between AMBIENT CORPORATION,
a Delaware corporation, with headquarters located at 270 Madison Avenue, New
York, NY 10016 (the "Company"), and each entity named on a signature page hereto
(each, a "Buyer") (each agreement with a Buyer being deemed a separate and
independent agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer under such
agreement and the Transaction Agreements, as defined below, referred to
therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 10% Convertible Debentures of the Company (the
"Convertible Debentures") which which will be convertible into shares of Common
Stock, $.001 par value per share, of the Company (the "Common Stock"), upon the
terms and subject to the conditions of such Convertible Debentures, together
with the Warrants (as defined below) exercisable for the purchase of shares of
Common Stock, and subject to acceptance of this Agreement by the Company;
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 parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase.
(i) The undersigned hereby agrees to purchase from the Company
Convertible Debentures in the principal amount set forth on the signature page
of this Agreement (the "Debentures," which term includes the Initial Debentures
and the Additional Debentures defined below), out of a total offering of
$2,000,000 of such Convertible Debentures, and having the terms and conditions
and being in the form attached hereto as Annex I.
(ii) Subject to the terms and conditions of this Agreement and the
other Transaction Agreements, the Buyer will purchase (x) fifty percent (50%) of
the Debentures (the
<PAGE>
"Initial Debentures") on the Initial Closing Date (as defined below) and (y) the
balance of the Debentures (the "Additional Debentures") on the Additional
Closing Date (as defined below).
(iii) The purchase price to be paid by the Purchaser shall be equal
to the face amount of the Initial Debentures or the Additional Debentures, as
the case may be, and shall be payable in United States Dollars.
b. Certain Definitions. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
(i) "Securities" means the Debentures, the Warrants and the Common
Stock issuable upon conversion of the Debentures or the exercise of the
Warrants.
(ii) "Purchase Price" means the purchase price for the Initial
Debentures or the Additional Debentures, as the case may be.
(iii) "Initial Closing Date" means the date of the closing of the
purchase and sale of the Initial Debentures, as provided herein.
(iv) "Additional Closing Date" means the date of the closing of the
purchase and sale of the relevant Additional Debentures, as provided herein.
(v) "Closing Date" means the Initial Closing Date or the Additional
Closing Date, as the case may be.
(vi) "Buyer's Allocable Share" means the fraction of which the
numerator is the Buyer's Debentures and the denominator is $2,000,000.
(vii) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below).
(viii) "Converted Shares" means the shares of Common Stock issuable
upon conversion of the Debentures.
(ix) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(x) "Shares" means the shares of Common Stock representing any or
all of the Converted Shares and the Warrant Shares.
(xi) "Strategic Partner" means a third party unaffiliated with the
Company as of the date hereof which party (i) is engaged in a business which is
the business in which the Company is engaged or a similar or related business,
and (ii) subsequently purchases equity
2
<PAGE>
securities of the Company (or securities convertible into equity securities of
the Company), where such purchase is accompanied or followed by any one or more
of the following: the licensing by the Company of all or any portion of its
technology to such third party, the licensing by such third party of all or any
portion of its technology to the Company, or any other coordination of all or a
portion of their respective business activities or operations by the Company and
such third party. By way of illustration and not in limitation of the foregoing,
if a third party entity engaged in smartcard interface technology (exclusively
or as one of multiple fields of endeavor) purchases an equity interest in the
Company where the Company and such third party intend that such investment is to
be accompanied by any one or more of a licensing agreement by one or the other
of the other party's technology or by a cross-licensing agreement, by an OEM
agreement, by a joint development agreement or by other coordination of design,
production or marketing activities, such third party would be a Strategic
Partner.
c. Form of Payment; Delivery of Certificates.
(i) The Buyer shall pay the Purchase Price for the relevant
Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") on
the date prior to the relevant Closing Date.
(ii) No later than the relevant Closing Date, but in any event
promptly following payment by the Buyer to the Escrow Agent of the relevant
Purchase Price, the Company shall deliver the relevant Debentures and the
Warrants, each duly executed on behalf of the Company and issued in the name of
the Buyer (collectively, the "Certificates") to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
d. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager LLP, Esqs.
Account No.: [To be provided to the Buyer by Krieger
& Prager LLP]
Re: Ambient Transaction
Not later than 5:00 p.m., New York time, on the date which is seven (7) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a
3
<PAGE>
signed counterpart of this Agreement to the Escrow Agent by facsimile, the Buyer
shall deposit with the Escrow Agent the Purchase Price for the Initial
Debentures in currently available funds. Time is of the essence with respect to
such payment, and failure by the Buyer to make such payment, shall allow the
Company to cancel this Agreement.
e. Escrow Property. The Purchase Price and the Certificates
delivered to the Escrow Agent as contemplated by Sections 1(c) and (d) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement, the Buyer is purchasing the Debentures and the
Warrants and will be acquiring the Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Debentures and the Shares
by the Buyer shall be made pursuant to registration of the Shares under the 1933
Act or pursuant to an exemption from registration.
d. The Buyer understands that the Debentures are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Debentures.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debentures and the offer of the
Shares which have been requested by
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<PAGE>
the Buyer, including Annex V hereto. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Buyer has also had the opportunity to obtain
and to review the Company's (1) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, and (2) Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, June 30, and September 30, 1999, respectively (the
"Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. The Buyer represents that, for the five (5) trading days prior to
the date hereof, the Buyer has not engaged in any puts, calls, futures
contracts, short sales and hedging and arbitrage transactions with respect to
the Common Stock.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants
to the Buyer as of the date hereof and as of each Closing Date that, except as
otherwise provided in the relevant Section or paragraph reference in Annex V
hereto (corresponding to the Section or paragraph references below):
a. Concerning the Debentures and the Shares. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Debentures,
the Warrants or the Shares. No party has a currently exercisable right of first
refusal which would be applicable to any or all of the transactions contemplated
by the Transaction Agreements.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operation of the Company and its
subsidiaries taken as a whole.. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the
5
<PAGE>
Common Stock is listed and traded on The NASDAQ/Bulletin Board Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such listing.
c. Authorized Shares. The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, $.001 par value per share, of
which approximately 8,326,611 shares had been issued as of the date hereof and
(ii) 5,000,000 shares of Preferred Stock, par value $.001 per share, none of
which have been issued as of the date hereof. All issued and outstanding shares
of Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares. The
Shares have been duly authorized and, when issued upon conversion of, or as
interest on, the Debentures or upon exercise of the Warrants, each in accordance
with its respective terms, will 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 holder.
d. Securities Purchase Agreement; Registration Rights Agreement and
Stock. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Debentures, the Warrants and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Debentures do 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 (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the business, operations or financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, or
on the transactions contemplated herein.
6
<PAGE>
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents 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. The Company has since January 1, 1999 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since December 31, 1998, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of operations
of the Company, except as disclosed in the Company's SEC Documents. Since
December 31, 1998, except as provided in the Company's SEC Documents, the
Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business, operations or financial condition of the Company or results of
operations of the Company and its subsidiaries, taken as a whole , (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements"), or (iii) would reasonably be expected to materially
and adversely affect the value of the rights granted to the Buyer in the
Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court,
7
<PAGE>
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the properties, business,
operations or financial condition, or results of operation of the Company and
its subsidiaries taken as a whole or the transactions contemplated by any of the
Transaction Agreements or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, any of the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the business,
operations or the financial condition or results of operations of the Company
and its subsidiaries, taken as a whole.
l. Prior Issues. During the twelve (12) months preceding the date
hereof, the Company has not issued any convertible securities. The presently
outstanding unconverted principal amount of each such issuance as at February ,
2000 are set forth in Annex V.
m. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since December 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business,
operations, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, operations, financial
condition, or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the certificate of incorporation or
other charter document or by-laws of the Company, each as currently in effect,
with or without shareholder approval, which change would reduce or otherwise
adversely affect the rights and powers of the shareholders of the Common Stock
or (y) materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
n. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since December
8
<PAGE>
1, 1998, made any offer or sales of any security or solicited any offers to buy
any security under circumstances that would eliminate the availability of the
exemption from registration under Rule 506 of Regulation D in connection with
the offer and sale of the Securities as contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the
Debentures and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Debentures. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Debentures and upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
r. Brokers, Finders. Except for payment of fees to Burstein &
Lindsay Securities Corp. (the "Placement Agent"), payment of which is the sole
responsibility of the Company, the Company has taken no action which would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 3(r) that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other
9
<PAGE>
person is under any obligation to register the Securities (other than pursuant
to the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures and the Warrants, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Registrable Securities) on The NASDAQ/Bulletin Board
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the National
Association of Securities Dealers, Inc. ("NASD") or The NASDAQ/Bulletin Board
Market.
f. Use of Proceeds. The Company will use the proceeds from the sale
of the Debentures (excluding amounts paid by the Company for legal fees,
finder's fees and escrow fees in connection with the sale of the Debentures) for
internal working capital purposes, and, unless specifically consented to in
advance in each instance by the Buyer, the Company shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
10
<PAGE>
corporation, partnership enterprise or other person or for the repayment of any
outstanding loan by the Company to any other party.
g. Certain Agreements. (i) Except to the extent specifically
provided below, but in each such event subject to compliance with all of the
other provisions of this Agreement, the Company covenants and agrees that it
will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock (collectively, "New Common Stock") with any third party
pursuant to a transaction which in any manner permits the sale of the New Common
Stock on any date which is earlier than one hundred eighty (180) days after the
Effective Date.
(ii) The provisions of subparagraph (g)(i) will not apply to (x) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, or a sale or disposition of assets, or (y) the exchange
of the capital stock for assets, stock or other joint venture interests;
provided, however, that any action contemplated under this subparagraph (g)(ii)
is subject to the condition that registration rights, if any, in connection with
such action shall not require the filing of a Registration Statement in respect
of such stock prior to one hundred eighty (180) days after the Effective Date.
(iii) The provisions of subparagraph (g)(i) will also not apply to
(x) the issuance of securities to a Strategic Partner (except that the
provisions of subparagraph g(iv) shall apply with respect to the issuance of
such securities to the Strategic Partner) and (y) the issuance of securities to
employees of the Company under the Company's ESOP in existence on the date
hereof.
(iv) Within ten (10) business days after the Initial Closing Date,
the Company shall obtain the agreement (each, a "Principal's Agreement") of each
of its Principals (as defined below) that, without the prior written consent of
the Buyer in each instance, such Principal will not sell or otherwise transfer
or offer to sell or otherwise transfer (except in a private transaction in which
the transferee agrees in writing for the benefit of Buyer and enforceable by
Buyer, a copy of which written agreement is provided to Buyer, to be bound by
the provisions of the Principal's Agreement as if such transferee were a
Principal) any shares of Common Stock directly or indirectly held by such
Principal prior to one hundred eighty (180) days after the Effective Date. Each
such Principal's Agreement shall (w) specify that it is entered into as an
inducement to the Buyer's execution, delivery and performance of this Agreement,
(x) name the Buyer as a third party beneficiary thereof, (y) acknowledge that
the Company's transfer agent will be provided with instructions that transfers
by a Principal require the consent of the Company and the Buyer, and (z)
contemplate that, in addition to any other damages or remedies that may be
appropriate, the Principal's Agreement shall be enforceable by injunction sought
by the Company and the Buyer or any one or more of them. A "Principal" is a
person who meets any one or more of the following criteria: (A) a person who is
a director or principal officer of the Company (each, a "Company Principal") and
who, directly or indirectly, holds any shares of Common Stock of the Company;
(B) a spouse of a Company Principal (a "Principal's Spouse") who, directly or
indirectly, holds any shares of Common Stock of the Company, (C) a parent,
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<PAGE>
sibling or child of a Company Principal who resides in the household of a
Company Principal or of a Principal's Spouse (each, a "Principal's Relative")
and who, directly or indirectly, holds any shares of Common Stock, (D) any other
person or entity, including, without limitation, for profit or non-profit
corporations, partnerships and trusts, whose voting rights regarding Common
Stock of the Company is subject to the direction, control or other influence of
any Company Principal, Principal's Spouse, or Principal's Relative, or (E) a
Strategic Partner and any person or entity controlled by or in control of such
Strategic Partner. If the Company enters into an agreement with a Strategic
Partner after the date hereof, the Company shall obtain the Principal's
Agreement from the parties contemplated by clause (E) of the immediately
preceding sentence simultaneously with the closing of such agreement. Anything
in the preceding provisions of this subparagraph (iv) to the contrary
notwithstanding, Buyer agrees that each of Aryeh Weinberg and Michael Braunold
may exclude 25,000 shares of the Company's Common Stock currently held by him
from his Principal's Agreement.
(v) In the event the Company breaches the provisions of this Section
4(g), the Conversion Rate (as defined in the Debentures) shall be amended to be
equal to (x) 90% of (y) the amount determined in accordance with the provisions
of the Debenture without regard to this provision, and the Purchaser may require
the Company to immediately redeem all outstanding Debentures in accordance with
Section 4(j)(y) hereof.
h. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable (i) at conversion as may be required to satisfy the conversion
rights of the Buyer pursuant to the terms and conditions of the Debentures and
(ii) upon exercise as may be required to satisfy the exercise rights of the
Buyer pursuant to the terms and conditions of the Warrants.
i. Warrants. The Company agrees to issue to the Buyer on each
Closing Date transferable, divisible warrants (the "Warrants") for the purchase
of six thousand two hundred fifty (6,250) shares of Common Stock for ten
thousand dollars ($10,000) of Purchase Price for the Debentures issued on that
date. The Warrants attributable to each such conversion shall bear an exercise
price One Dollar ($1.00) per share (subject to adjustment as provided in the
Warrant). The Warrants will expire on the last day of the calendar month in
which the third anniversary of the relevant Closing Date occurs. The Warrants
shall be in the form annexed hereto as Annex VI, together with (x) registration
rights as provided in the Registration Rights Agreement and (y) piggy-back
registration rights after the effectiveness of the Registration Statement
expires, as contemplated by the Registration Rights Agreement.
j. Limitation on Issuance of Shares. The Company may be limited in
the number of shares of Common Stock it may issue by virtue of (i) the number of
authorized shares or (ii) the applicable rules and regulations of the principal
securities market on which the Common Stock is listed or traded, including, but
not necessarily limited to, NASDAQ Rule 4310(c)(25)(H)(i)(d)(2) (collectively,
the "Cap Regulations"). Without limiting the other provisions thereof, the
Debentures shall provide that (i) the Company will take all steps
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<PAGE>
reasonably necessary to be in a position to issue shares of Common Stock on
conversion of the Debentures without violating the Cap Regulations and (ii) if,
despite taking such steps, the Company still can not issue such shares of Common
Stock without violating the Cap Regulations, the holder of a Debenture which can
not be converted as result of the Cap Regulations (each such Debenture, an
"Unconverted Debenture") shall have the option, exercisable in such holder's
sole and absolute discretion, to elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company to
issue shares of Common Stock in accordance with such holder's notice of
conversion at a conversion purchase price equal to the average of the
closing price per share of Common Stock for any five (5) consecutive
trading days (subject to certain equitable adjustments for certain events
occurring during such period) during the sixty (60) trading days
immediately preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Redemption Amount"), payable in cash, equal to:
V x M
-----------------
CP
where:
"V" means the principal of an Unconverted Debenture plus any accrued
but unpaid interest thereon;
"CP" means the conversion price in effect on the date of redemption
(the "Redemption Date") specified in the notice from the holder of the
Unconverted Debentures electing this remedy; and
"M" means the highest closing price per share of the Common Stock
during the period beginning on the Redemption Date and ending on the date
of payment of the Redemption Amount.
A holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture. The Debentures shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Buyer. The provisions of
this paragraph are not intended to limit the scope of the provisions otherwise
included in the Debentures.
k. Hedging Transactions. (i) The Company understands that the Buyer
may be a so-called "hedge" fund, and the Company hereby expressly agrees that,
except as provided in subparagraph (ii) of this paragraph (k), the Buyer shall
not in any way be prohibited
<PAGE>
or restricted from any purchases or sales of any securities or other instruments
of, or related to, the Company or any of its securities, including, but not
necessarily limited to, puts, calls, futures contracts, short sales and hedging
and arbitrage transactions. The Buyer acknowledges that such purchases, sales
and other transactions may be subject to various federal and state securities
laws and agrees to comply with all such applicable securities laws.
(ii) The Buyer agrees that, prior to the Effective Date, the Buyer
will not engage in any puts, calls, futures contracts, short sales and hedging
and arbitrage transactions with respect to the Common Stock.
l. Right of First Refusal. (i) The Company covenants and agrees that
if during the period from the date hereof through and including the date which
is two hundred seventy (270) days after the Effective Date, the Company offers
to enter into any transaction other than with a Strategic Partner (a "New
Transaction") for the sale of New Common Stock, the Company shall notify the
Buyer in writing of all of the terms of such offer (a "New Transaction Offer").
The Buyer shall have the right (the "Right of First Refusal"), exercisable by
written notice given to the Company by the close of business on the fifth
business day after the Buyer's receipt of the New Transaction Offer (the "Right
of First Refusal Expiration Date"), to participate in all or any part of the New
Transaction Offer on the terms so specified.
(ii) If, and only if, the Buyer does not exercise the Right of First
Refusal in full, the Company may consummate the remaining portion of the New
Transaction with any New Investor on the terms specified in the New Transaction
Offer within thirty (30) days of the Right of First Refusal Expiration Date.
(iii) If the terms of the New Transaction to be consummated with
such other party differ from the terms specified in the New Transaction Offer so
that the terms are more beneficial in any respect to the New Investor, the
Company shall give the Buyer a New Transaction Offer relating to the terms of
the New Transaction, as so changed, and the Buyer's Right of First Refusal and
the preceding terms of this paragraph (l) shall apply with respect to such
changed terms.
(iv) If there is more than one Buyer signatory to this Agreement,
the preceding provisions of this paragraph (l) shall apply pro rata among them
(based on their relative Buyer's Allocable Shares), except that, to the extent
any such Buyer does not exercise its Right of First Refusal in full (a
"Declining Buyer"), the remaining Buyer or Buyers who or which have exercised
their own Right of First Refusal in full, shall have the right (pro rata among
them based on their relative Buyer's Allocable Shares, if more than one) to
exercise all or a portion of such Declining Buyer's unexercised Right of
Refusal. Nothing in this paragraph (l) shall be deemed to permit a transaction
not otherwise permitted by subparagraph (g)(i), as modified by the provisions of
subparagraph (g)(ii).
(v) In the event the New Transaction is consummated with such other
third party at any time prior to the expiration of ninety (90) days after the
Effective Date on terms providing
<PAGE>
for (x) either a sale price equal to or computed based on, or a determination of
a conversion price based on, a lower percentage of the then current market price
(howsoever defined or computed) than provided in the Debentures for determining,
the Conversion Rate (howsoever defined or computed) and/or (y) the issuance of
warrants at an exercise price lower than that provided in the Warrants, the
terms of any unissued or unconverted Debentures or any unissued or unexercised
Warrants shall be modified to reduce the relevant Conversion Rate or Warrant
exercise price to be equal to that provided in the New Transaction as so
consummated.
m. Certain Transfers Require Consent of Company. Anything in the
other provisions of this Agreement or any of the other Transaction Agreements to
the contrary notwithstanding, in no event shall any one or more of the Buyers
individually or collectively transfer any of the Debentures, Shares, Warrants or
Warrant Shares to any party except (i) in an ordinary bona fide arm's-length
over-the-counter or other established market transaction, (ii) provided the
transferee in such transaction agrees in writing in favor of the Company and
enforceable by the Company, a copy of which writing shall be provided to the
Company, to be bound by the provisions of this paragraph, to a relative or
affiliate of the Buyer or (iii) with the prior written consent of the Company,
which consent the Company agrees not to unreasonably withhold or delay. The
provisions of this paragraph shall not be read in any way to limit any other
rights the Buyer may have under the Transaction Agreements , including but not
limited to the right to convert the Debentures as contemplated therein and in
this Agreement.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the Purchase
Price for the Initial Debentures in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to issue Common Stock from
time to time upon conversion of the Debentures in such amounts as specified from
time to time by the Company to the transfer agent, bearing the restrictive
legend specified in Section 4(b) of this Agreement prior to registration of the
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such denominations to be specified by the Buyer in connection with each
conversion of the Debentures. The Company warrants that no instruction
inconsistent with the instructions referred to in this Section 5 and the stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent with respect to the Shares and that the Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement, the Registration Rights
Agreement, and applicable law. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Converted Shares
or the Warrant Shares, as the case may be, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such name and in such
<PAGE>
denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Debentures by telecopying or delivering an executed and completed
Notice of Conversion to the Company and delivering, within five (5) business
days thereafter, the original Debentures being converted to the Company by
express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Debentures, the date specified in the
Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that it is received by the Company on or before such
specified date.
(iii) The Company will transmit the certificates representing the
Converted Shares issuable upon conversion of any Debentures (together, unless
otherwise instructed by the Buyer, with Debentures not being so converted) to
the Buyer at the address specified in the Notice of Conversion (which may be the
Buyer's address for notices as contemplated by Section 11 hereof or a different
address) via recognized express or overnight courier, by electronic transfer or
otherwise, within three (3) business days if the address for delivery is in the
United States and within eight (8) business days if the address for delivery is
outside the United States (such third business day or eighth business day, as
the case may be, the "Delivery Date") after (A) the business day on which the
Company has received both of the Notice of Conversion (by facsimile or other
delivery) and the original Debentures being converted (and if the same are not
delivered to the Company on the same date, the date of delivery of the second of
such items) or (B) the date an interest payment on the Debenture, which the
Company has elected to pay by the issuance of Common Stock, as contemplated by
the Debentures, was due.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond two (2) business days from the
Delivery Date):
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
--------------------------------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
<PAGE>
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each
Business Day Late beyond
10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within two (2) business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Company shall pay
to the Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
<PAGE>
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
f. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
designated by the Buyer in writing to the Company upon the request of the Buyer
or any such representative. The Company will provide the Buyer with a copy of
the authorization so given to the transfer agent.
6. CLOSING DATES.
a. The Initial Closing Date shall occur on the date which is the
first NYSE trading day after each of the conditions contemplated by Sections 7
and 8 hereof shall have either been satisfied or been waived by the party in
whose favor such conditions run.
b. (i) The Additional Closing Date shall be earlier of the date
specified in the Filing Additional Closing Date Notice or the date contemplated
by the Effectiveness Additional Closing Date Notice (as those terms are defined
below; each an "Additional Closing Date Notice").
Each Additional Closing Date Notice shall be a written notice given by the
Company to the Buyer and to the Escrow Agent by fax transmission or hand
delivery. Additional provisions regarding the giving of any Additional Closing
Date Notice are provided in the following provisions of this Section 6(b).
(ii) The term "Filing Additional Closing Date Notice" means a
notice given within thirty (30) days after the date (the "Statement Filing
Date") on which the Registration Statement has been filed by the Company with
the SEC (on the SEC's EDGAR system) in which the Company specifies as the
Additional Closing Date a business day which is at least forty-five (45) days
after the Statement Filing Date.
(iii) Subject to the other provisions of this Section 6(b), the
term "Effectiveness Additional Closing Date Notice" means a notice given no
later than one (1) business day after the Company submits the Effectiveness
Request (as defined below; a copy of the Effectiveness Request shall be attached
to the Effectiveness Additional Closing Date Notice) in which the Company
specifies the the number of business days after the actual Effective Date, which
number shall be at least two (2) and not more than five (5), on which the
Additional Closing Date is to occur. If an Effectiveness Closing Date Notice is
given, the Company shall also notify the Buyer and the Escrow Agent both (x) by
fax transmission or hand delivery and (y) by telephone communication of the
actual Effective Date declared by the SEC no later than noon on the business day
after such Effective Date.
(iv) The term "Effectiveness Request" means the Company's written
request to the SEC that the SEC declare the Registration Statement effective on
a specified date
<PAGE>
which is more than (5) business days prior to the Additional Closing Date
specified in the Filing Additional Closing Date Notice; provided, however, that
the Effectiveness Request shall be given only after the SEC has advised the
Company informally, in writing or otherwise that it will respond favorably to
such request.
(v) The closing for the Additional Debentures shall be conducted
upon the same terms and conditions as those applicable to the Initial
Debentures.
(vi) The Buyer agrees that, anything in Section 10 hereof to the
contrary notwithstanding, an Additional Closing Date Notice and any other
communication contemplated to be given to the Buyer under this Section 6(b)
shall be deemed properly given to the Buyer if such notice is given in the
manner contemplated by this Section 6(b) to Advisor Associates, Inc., 1575 45th
Street, Brooklyn, NY 11219, Attn: Nourit Bassiri, telephone no. (718) 972-6400,
fax no. (718) 972-8141 on behalf of Buyer.
c. Each closing of the purchase and issuance of Debentures shall
occur on the relevant Closing Date at the offices of the Escrow Agent and shall
take place no later than 3:00 P.M., New York time, on such day or such other
time as is mutually agreed upon by the Company and the Buyer.
d. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the relevant Closing Date
upon satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
relevant Debentures to the Buyer pursuant to this Agreement on the relevant
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the relevant
Debentures in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
<PAGE>
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Debentures on the relevant Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the Registration
Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement. each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. On such Closing Date, the Registration Rights Agreement shall be
in full force and effect and the Company shall not be in default thereunder;
e. On such Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
Annex III attached hereto;
f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
g. From and after the date hereof to and including such Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC
or the NASD and trading in securities generally on the New York Stock Exchange
or The NASDAQ/Bulletin Board Market shall not have been suspended or limited,
nor shall minimum prices been established for securities traded on The
NASDAQ/Bulletin Board Market, nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the Debentures; and
h. With respect to the Additional Closing Date,
(i) an appropriate Additional Closing Date Notice shall have been
duly given;
(ii) if the Additional Closing Date is the date contemplated by the
Effectiveness Additional Closing Date Notice, the Registration Statement shall
have been declared effective by the SEC to cover all Registrable Securities for
all the Debentures (and all the related Warrants), as contemplated by the
Registration Rights Agreement, prior to such Additional Closing Date;
<PAGE>
(iii) the representations and warranties of the Company contained in
Section 3 hereof shall be true and correct in all material respects (and the
Company's issuance of the relevant Additional Debentures shall constitute the
Company's making each such representation and warranty as of such date) and
there shall have been no material adverse changes (financial or otherwise) in
the business or conditions of the Company from the Initial Closing Date through
and including the Additional Closing Date (and the Company's issuance of the
relevant Additional Debentures shall constitute the Company's making such
representation and warranty as of such date), (iv) the Company shall have timely
issued all shares issuable upon conversion of the Debentures prior to the date
of such Additional Closing Date; and
(iv) the Company shall have available and shall reserve for issuance
to Buyer at least one hundred percent (100%) of the number of Shares which would
be issued on conversion of all unconverted Initial Debentures and all Additional
Debentures and exercise of all unexercised Warrants and all Warrants which would
be issued in connection with the conversion of any unconverted Debentures
(including all Additional Debentures).
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of Wilmington or
the state courts of the State of Delaware sitting in the City of Wilmington in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
<PAGE>
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
g. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability 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.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express
courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: Ambient Corporation
270 Madison Avenue
New York, NY 10016
Attn:
Telephone No.: (888) 861-0205
Telecopier No.:(212) -
with a copy to:
Baer Marks & Upham
<PAGE>
New York, NY
Attn: Samuel Ottensosser, Esq.
Telephone No.: (212) 702-5700
Telecopier No. (212) -
and with a copy to:
Aboudi & Brounstein
3 Gavish St.
P.O.B. 2432
Kfar Saba Industrial Zone, Israel 44641
Attn: David Aboudi, Esq.
Telephone No.: (011 972 9) 764-4833
Telecopier No.:(011 972 9) 764-4834
<PAGE>
BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
Attn: Samuel Krieger, Esq.
New York, New York 10016
Telephone No.: (212) 363-2900
Telecopier No. (212) 363-2999
ESCROW AGENT: Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
Attn: Samuel Krieger, Esq.
New York, New York 10016
Telephone No.: (212) 363-2900
Telecopier No. (212) 363-2999
11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the Warrants
and the payment of the Purchase Price, and shall inure to the benefit of the
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer by one of its officers thereunto duly authorized as of the date set forth
below.
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this day of , 2000.
------ -----------
- --------------------------------
Address Printed Name of Subscriber
- --------------------------------
By:
Telecopier No. (Signature of Authorized Person)
------------------
-------------------------------------
Printed Name and Title
- -----------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
AMBIENT CORPORATION
By:
Title:
Date: ,2000
----------------------------------------
<PAGE>
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of February 17, 2000
(this "Agreement"), is made by and between AMBIENT CORPORATION, a Delaware
corporation, with headquarters located at 270 Madison Avenue, New York, NY 10016
(the "Company"), and each entity named on a signature page hereto (each, an
"Initial Investor") (each agreement with an Initial Investor being deemed a
separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of February 15, 2000, between the
Initial Investor and the Company (the "Securities Purchase Agreement"; terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investor one or more 10% Convertible Debentures of the Company, in an
aggregate principal amount not exceeding $2,000,000 (the "Debentures"); and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Investor in connection with the issuance of the Debentures; and
WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest on conversion as contemplated by the Debentures) upon the terms and
subject to the conditions contained in the Debentures and the Warrants may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and the Warrant Shares;
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
Initial Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
2.
<PAGE>
3. (a) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures, Warrants or
Registrable Securities.
4.
5. (b) "Potential Material Event" means 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 by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
6.
7. (c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
8.
9. (d) "Registrable Securities" means the Conversion Shares and the Warrant
Shares.
10.
11. (e) "Registration Statement" means a registration statement of the Company
under the Securities Act.
12.
13. (f) "Required Effective Date" means the relevant Initial Required Effective
Date or Increased Required Effective Date (as those terms are defined below).
14.
15. Registration.
16.
(One) Mandatory Registration.
(Two)
(Three) (i) The Company shall prepare and file with the SEC, as soon as possible
after the Initial Closing Date but no later than a date (the "Required Filing
Date") which is forty-five (45) days after the Initial Closing Date, either a
Registration Statement on Form SB-2 or an amendment to an existing Registration
Statement, in either event registering for resale by the Investor a sufficient
number of shares of Common Stock for the Initial Investors to sell the
Registrable Securities (or such lesser number as may be required by the SEC, but
in no event less than two hundred percent (200%) of the aggregate number of
shares (A) into which the Initial Debentures and the Additional Debentures and
all interest thereon through their respective
2
<PAGE>
Maturity Dates would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that the Additional Debentures had been
issued at such date and that all Debentures had been eligible to be converted,
and had been converted, into Conversion Shares in accordance with their terms,
whether or not such issuance, accrual of interest, eligibility or conversion had
in fact occurred as of such date) and (B) which would be issued upon exercise of
all of the Warrants at the time of filing of the Registration Statement
(assuming for such purposes that the Warrants issued in connection with the
purchase and sale of all Debentures had been issued and that all Warrants had
been eligible to be exercised for the maximum number of shares contemplated
thereby and had been exercised in accordance with their terms, whether or not
such issuance, eligibility or exercise had in fact occurred as of such date).
The Registration Statement (W) shall include only the Registrable Securities and
the shares specifically listed on Exhibit 1 annexed hereto; and (X) shall also
state that, in accordance with Rule 416 and 457 under the Securities Act, it
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Debentures and the exercise of the
Warrants to prevent dilution resulting from stock splits, or stock dividends.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (the "Initial Required Effective
Date") which no later than is the earlier of (Y) five (5) days after notice by
the SEC that it may be declared effective or (Z) ninety (90) days after the
Initial Closing Date.
(Four)
(Five) (ii) If at any time (an "Increased Registered Shares Date"), the number
of shares of Common Stock represented by the Registrable Shares, issued or to be
issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, the Company shall, within ten
(10) business days after receipt of a written notice from any Investor, either
(X) amend the Registration Statement filed by the Company pursuant to the
preceding provisions of this Section 2, if such Registration Statement has not
been declared effective by the SEC at that time, to register two hundred percent
(200%) of such Registrable Shares, computed as contemplated by the immediately
preceding subparagraph (i), or (Y) if such Registration Statement has been
declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on Form SB-2 or other appropriate registration statement
form (an "Additional Registration Statement") to register two hundred percent
(200%) of the shares of Common Stock represented by the Registrable Shares,
computed as contemplated by the immediately preceding subparagraph (i), that
exceed the aggregate number of shares of Common Stock already registered. The
Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.
(Six)
(Seven) (iii) Except with respect to the party identified as the "Consultant" on
Exhibit 1 annexed hereto, it shall be a condition to the inclusion in the
Registration Statement of the shares specifically listed on Exhibit 1 annexed
hereto that the holder of such shares (each
3
<PAGE>
such holder, an "Included Holder") agree in writing (an "Included Holder's
Agreement"), which writing shall be in favor of Buyer and enforceable against
such holder by Buyer (a copy of which Included Holder's Agreement shall be
provided to Buyer no later than the date the Registration Statement is first
filed with the SEC), that such Included Holder and any of such Included Holder's
transferees other than a Permitted Transferee (as defined below) (x) will not
sell or otherwise transfer, individually or on a combined basis, any shares
until thirty (30) days after the Effective Date, but thereafter may sell or
otherwise transfer an aggregate of the lesser of the number of shares specified
for such Included Holder on Exhibit 1 or 20,000 shares, and (y) after the
thirtieth day after the Effective Date, will not sell or otherwise transfer,
individually or on a combined basis, more than twenty percent (20%) of such
Included Holder's shares, if any, in excess of 20,000 shares listed in the
Registration Statement for such Included Holder (or transferee), during any
consecutive thirty (30) day period (the shares permitted to be transferred in
each such period are referred to as "Permitted Shares"). In addition to, and not
in lieu of the foregoing provisions of this subparagraph (iii), the Included
Holder's Agreement of any Included Holder who, as of the date of this Agreement,
holds a warrant to purchase Common Stock of the Company shall also provide that
such Included Holder agrees not to sell or otherwise transfer any of such
Included Holder's shares issued on exercise of such warrants prior to the date
which is thirty (30) days after the Effective Date, and that any sales and
transfers made thereafter will be made in compliance with the other terms and
conditions set forth in the Included Holder's Agreement. A "Permitted
Transferee" is a party acquiring all or a portion of the Permitted Shares in a
transaction made pursuant to the prospectus included in the Registration
Statement. The Buyer may require the Company to institute reasonable procedures
(such as, but not necessarily limited to, the establishment of an escrow
arrangement for the shares of each Included Holder) to assure compliance with
this provision.
(Eight)
(Nine) Payments by the Company.
(Ten)
(Eleven) (i) If the Registration Statement covering the Registrable Securities
is not filed in proper form with the SEC by the Required Filing Date, the
Company will make payment to the Initial Investor in such amounts and at such
times as shall be determined pursuant to this Section 2(b).
(Twelve)
(Thirteen) (ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if the
Investor is restricted from making sales of Registrable Securities covered by a
previously effective Registration Statement at any time (the date such
restriction commences, a "Restricted Sale Date") after the Effective Date other
than during a Permitted Suspension Period (as defined below), then the Company
will make payments to the Initial Investor in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(Fourteen)
(Fifteen) (iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Purchase Price for all Debentures for the period from the
date following the relevant
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Required Filing Date, Required Effective Date or Restricted Sale Date, as the
case may be, to the first relevant Computation Date, and thereafter to each
subsequent Computation Date. The "Periodic Amount Percentage" means (A) two
percent (2%) of the Purchase Price for all the Debentures for the period from
the date following the relevant Required Filing Date, Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and (B) three percent (3%) of the Purchase Price of all Debentures to each
Computation Date thereafter. Anything in the preceding provisions of this
paragraph (iii) to the contrary notwithstanding, after the Effective Date the
Purchase Price shall be deemed to refer to the sum of (X) the principal amount
of all Debentures not yet converted and (Y) the Held Shares Value (as defined
below). The "Held Shares Value" means, for shares acquired by the Investor upon
a conversion within the thirty (30) days preceding the Restricted Sale Date, but
not yet sold by the Investor, the principal amount of the Debentures converted
into such Conversion Shares; provided, however, that if the Investor effected
more than one conversion during such thirty (30) day period and sold less than
all of such shares, the sold shares shall be deemed to be derived first from the
conversions in the sequence of such conversions (that is, for example, until the
number of shares from the first of such conversions have been sold, all shares
shall be deemed to be from the first conversion; thereafter, from the second
conversion until all such shares are sold). By way of illustration and not in
limitation of the foregoing, if the Registration Statement is timely filed but
is not declared effective until one hundred sixty-five (165) days after the
Initial Closing Date, the Periodic Amount will aggregate eight percent (8%) of
the Purchase Price of the Debentures (2% for days 91-120, plus 3% for days
121-150, plus 3% for days 151-165).
(Sixteen)
(Seventeen) (iv) Each Periodic Amount will be payable by the Company in cash or
other immediately available funds to the Investor monthly, without requiring
demand therefor by the Investor.
(Eighteen)
(Nineteen) (v) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required Filing
Date or if the Registration Statement has not been declared effective by a
Required Effective Date, including if the right to sell Registrable Securities
under a previously effective Registration Statement is suspended, may be
difficult to ascertain. The parties agree that the Periodic Amounts represent a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages.
(Twenty)
(Twenty-one) (vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Initial Investor or its counsel, or
in the event all of the Registrable Securities may be sold pursuant to Rule 144
or another available exemption under the Act.
(Twenty-two)
(Twenty-three) (vii) "Computation Date" means (A) the date which is the earlier
of (1) thirty (30) days after the Required Filing Date, any relevant Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the date
after the Required Filing Date, such Required Effective Date or Restricted Sale
Date on which the Registration Statement is
5
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filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be,
and (B) each date which is the earlier of (1) thirty (30) days after the
previous Computation Date or (2) the date after the previous Computation Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be.
(Twenty-four)
(Twenty-five) (viii) Anything in the preceding provisions of this Section 2(b)
to the contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within one hundred twenty (120) days following the Initial
Closing Date, the provisions of Section 2(b)(ii) shall not apply to the fact
that the Registration Statement was initially declared effective after the
Initial Required Effective Date, and the Company will not have any obligation to
pay any Periodic Amount to the Initial Investor with respect thereto; provided,
however, that the provisions of Section.2(b)(ii) shall continue to apply to all
other events described therein.
(Twenty-six)
17. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.
18.
(One) Prepare promptly, and file with the SEC by the Required Filing Date a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the last day of the calendar month following the month in which
the Effective Date occurs, (ii) the date when the Investors may sell all
Registrable Securities under Rule 144 or (iii) the date the Investors no longer
own any of the Registrable Securities, which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(Two)
(Three) (b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(Four)
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<PAGE>
(Five) (c) The Company shall permit a single firm of counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(Six)
(Seven) (d) Notify each Investor, such Investor's legal counsel identified to
the Company (which, until further notice, shall be deemed to be Krieger &
Prager, ATTN: Samuel Krieger, Esq.; each, an "Investor's Counsel"), and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than five (5) days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investors with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(d) not later than one (1) business day in advance of the
filing of such responses with the SEC so that the Investors shall have the
opportunity to comment thereon.
(Eight)
(Nine) (e) Furnish to each Investor and such Investor's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor
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<PAGE>
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(Ten)
(Eleven) (f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(Twelve)
(Thirteen) (g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(Fourteen)
(Fifteen) (h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
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 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).
(Sixteen)
(Seventeen) (i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the "OTC Bulletin Board Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the quotation of the Registrable Securities on The
NASDAQ Bulletin Board Market; and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(Eighteen)
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<PAGE>
(Nineteen) (j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(Twenty)
(Twenty-one) (k) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(Twenty-two)
(Twenty-three) (l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement.
(Twenty-four)
19. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
20.
(One) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten (10) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if such Investor elects to have any
of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(Two)
(Three) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(Four)
(Five) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(e) or 3(f), above,
such Investor will
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<PAGE>
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) or 3(f) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. (Six)
21. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and a fee for a single counsel for the Investors not exceeding, in
the aggregate for all Investors, $3,500, shall be borne by the Company.
22.
23. (b) Except as and to the extent specifically set forth in Exhibit 1 attached
hereto, neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Investors in this Agreement or
otherwise conflicts with the provisions hereof. Except as and to the extent
specifically set forth in Exhibit 1 attached hereto, neither the Company nor any
of its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person. Without
limiting the generality of the foregoing, without the written consent of the
Investors holding a majority of the Registrable Securities, the Company shall
not grant to any person the right to request the Company to register any
securities of the Company under the Securities Act unless the rights so granted
are subject in all respects to the prior rights in full of the Investors set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement and the other Transaction Agreements.
24.
25. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
26.
(One) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to
10
<PAGE>
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to clause (b) of this
Section 6, the Company shall reimburse the Investors, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (III) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Each
Investor will indemnify the Company and its officers, directors and agents
(each, an "Indemnified Person" or "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(Two)
(Three) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person
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or Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action of its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
(Four)
27. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
28.
29. Reports under Exchange Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
30.
(One) make and keep public information available, as those terms are understood
and defined in Rule 144;
(Two)
(Three) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(Four)
(Five) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the
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<PAGE>
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.
(Six)
31. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debenture or unexercised
Warrant) only if: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein. In the event
of any delay in filing or effectiveness of the Registration Statement as a
result of such assignment, the Company shall not be liable for any damages
arising from such delay, or the payments set forth in Section 2(c) hereof
arising from such delay. 32.
33. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold an sixty-seven (67%)
percent interest of the Registrable Securities. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon each Investor and the
Company.
34.
35. 11. Miscellaneous.
36.
37. (a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
38.
39. (b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Agreement, (i) if to the Company or to the
Initial Investor, to their respective address contemplated by the Agreement, and
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).
40.
13
<PAGE>
41. (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
42.
43. (d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of Wilmington or the state courts
of the State of Delaware sitting in the City of Wilmington in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under this Agreement.
44.
45. (e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability 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.
46.
47. (f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
48.
49. (g) All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
50.
51. (h) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.
52.
53. (i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
54.
55. (j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
56.
14
<PAGE>
(k) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
COMPANY:
AMBIENT CORPORATION
By:
Name:
Title:
INITIAL INVESTOR:
[Print Name of Initial Investor]
By:
Name:
Title:
<PAGE>
EXHIBIT 1
Shares Permitted to Be Included in Registration Statement
---------------------------------------------------------
Shares of Owned/Description of Right to
Shareholder Name Common Stock Acquire
- ---------------- ------------ -----------------------------
1,300,000 Warrants, issued February 15,
Englewood Holding, 2000, exercisable at $1.00/share,
Inc.("Consultant") with piggy back registration rights
See attached Schedule A
"Shares to Be Registered"
Exhibit 21.1
Subsidiaries
Kliks.com Ltd.
Insulated Connections Corporation Ltd.
Ambient Ltd.
PLT Solutions Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 92,891
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 127,519
<PP&E> 264,928
<DEPRECIATION> 129,630
<TOTAL-ASSETS> 433,010
<CURRENT-LIABILITIES> 845,583
<BONDS> 0
0
0
<COMMON> 3,131
<OTHER-SE> (1,040,996)
<TOTAL-LIABILITY-AND-EQUITY> 433,010
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,131,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,863
<INCOME-PRETAX> (1,131,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,131,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,131,404)
<EPS-BASIC> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
