Exhibit 10.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 26, 2006
(this "Agreement"), is made by and between AMBIENT CORPORATION, a Delaware
corporation with headquarters located at 00 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000 (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 of even date herewith between the Initial Investor
and the Company (the "Securities Purchase Agreement"; capitalized 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 Investors the Debentures and the Warrants; 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 through the Maturity Date of the Debentures, as that term is defined in
and as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and
WHEREAS, the Warrant Shares may be issued upon the exercise 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 Registrable Securities (as defined
below);
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:
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"Applicable Conversion Price" means, on the relevant date, the
lower of the Voluntary Conversion Price or the Variable Conversion Price.
"Company Counsel" means Aboudi & Xxxxxxxxxx.
"Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
"Held Shares Value" means, for shares of Common Stock acquired
by the Investor upon a conversion of a Debenture 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 such 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).
"Increased Shares" means the good faith estimate of the number
of shares which the Company anticipates will be issuable to the Holder as a
result of either or both an adjustment to the Conversion Price or the issuance
of Added Warrants resulting from the application of Section 4(g) of the
Securities Purchase Agreement.
"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 or
Registrable Securities.
"Issued Principal Amount" means the original principal amount
of the Debentures.
"Other Issuable Shares" means (i) the Payment Shares, if any,
issued or issuable to the Holder as of the date of the filing of the
Registration Statement and any amendment thereto or any subsequent date, and
(ii) the good faith estimate of the Company of the number of the other Payment
Shares or the Increased Shares, as the case may be, which the Company
anticipates, as of the date of the filing of the Registration Statement and any
amendment thereto, will be issuable to the Holder pursuant to the provisions of
the Transaction Agreements.
"Payment Shares" means shares of Common Stock issued by the
Company as provided in Section 2(b) below.
"Permitted Selling Shareholders" has the meaning ascribed to
it in Schedule 1 annexed hereto.
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"Permitted Suspension Period" means one or more periods
aggregating not more than thirty (30) days during any consecutive 12-month
period during which the Holder's right to sell Registrable Securities under the
Registration Statement is suspended, provided, however, that each of such
periods shall neither (i) be for more than twenty (20) days nor (ii) begin less
than ten (10) Trading Days after the last day of the preceding suspension period
(whether or not such last day was during or after a Permitted Suspension
Period).
"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.
"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 SEC.
"Registrable Securities" means, collectively, the Conversion
Shares, the Warrant Shares, and the Other Issuable Shares.
"Registration Statement" means a registration statement of the
Company under the Securities Act covering Registrable Securities on Form SB-2,
if the Company is then eligible to file using such form, and if not eligible, on
Form S-1 or other appropriate form.
"Required Effective Date" means, initially, the Initial
Required Effective Date or the Increased Required Effective Date (as those terms
are defined below), as the case may be.
"Required Filing Date" means the date as soon as practicable
after the Closing Date but no later than the thirty (30) days after the Closing
Date.
"Restricted Sale Date" means the first date, other than a date
during a Permitted Suspension Period (as defined below), on which the Investor
is restricted from making sales of Registrable Securities pursuant to any
previously effective Registration Statement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION.
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(i) The Company shall prepare and file with the SEC, as soon
as practicable after the Closing Date but no later than the Required Filing
Date, a Registration Statement registering for resale by the Investor a
sufficient number of shares of Common Stock for the Initial Investors to sell
the Registrable Securities. Notwithstanding the requirement to register all
Registrable Securities, the Company's obligation to register the Registrable
Securities shall initially be satisfied by the registration of the Initial
Number of Shares to Be Registered (as defined below). The "Initial Number of
Shares to Be Registered" is a number of shares of Common Stock which is at least
equal to the sum of (x) one hundred seventy five percent (175%) of the number of
shares into which the Debentures and all interest thereon through their
respective Maturity Dates would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that interest is paid in
shares at the Conversion Price 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 eligibility, accrual of interest or conversion
had in fact occurred as of such date) based on the Applicable Conversion Price
in effect on, or within three (3) Trading Days prior to, the date the
Registration Statement is filed (or subsequently amended), (y) the number of
Warrant Shares covered by the Warrants (assuming for such purposes that all the
Warrants, including Additional Warrants, had been issued, had been eligible to
be exercised and had been exercised for the issuance of Warrant Shares in
accordance with their terms, whether or not such issuance, eligibility or
exercise had in fact occurred as of such date), and (z) the number of Other
Issuable Shares as of the date of the filing of the Registration Statement or
any amendment thereto (provided, however, that for purposes of this provision,
the number of Other Issuable Shares shall not be greater than the number of such
shares which the SEC permits to be included in the Registration Statement).
Unless otherwise specifically agreed to in writing in advance by the Holder, the
Registration Statement (X) shall include only (1) the Registrable Securities,
(2) the shares issuable on exercise of warrants issued to the Placement Agent,
as contemplated by the Transaction Agreements, (3) the shares of the Permitted
Selling Shareholders, if any, (Y) shall not restrict or limit the prices at
which the shares sold by the selling stockholders thereunder may be sold, and
(Z) 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, exercise
of the Warrants or issuances of Other Issuable Securities covered by such
Registration Statement to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(ii) 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 is no later than the earlier of (X) five (5)
days after oral or written notice by the SEC that it may be declared effective
or (Y) ninety (90) days after the Closing Date (unless the SEC provides a full
review of the Registration Statement, in which event it will be one hundred
twenty (120) days after the Closing Date).
(iii) If at any time (an "Increased Registered Shares Date"),
the number of shares of Common Stock represented by the Registrable Securities,
issued or to be issued as
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contemplated by the Transaction Agreements, exceeds eighty percent (80%) of the
aggregate number of shares of Common Stock then registered or sought to be
registered in a Registration Statement which has not yet been declared
effective, the Company shall either
(X) amend the relevant 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 the Increased Number of Shares to Be Registered
(as defined below). The "Increased Number of Shares to Be Registered"
is a number of shares of Common Stock which is at least equal to (A)
the number of shares theretofore issued on conversion of the Debentures
(including any interest paid on conversion by the issuance of
Conversion Shares) and on exercise of the Warrants, plus (B) the sum of
(x) one hundred fifty percent (150%) of the number of shares into which
the unconverted Debentures and all interest thereon through their
respective Maturity Dates would be convertible at the time of filing of
such Registration Statement or amendment (assuming for such purposes
that all Debentures, reduced by any previously converted Debentures,
had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such
eligibility, accrual of interest or conversion had in fact occurred as
of such date) based on the Applicable Conversion Price in effect on, or
within three (3) Trading Days prior to, the date the amendment to the
Registration Statement is filed, (y) the number of Warrant Shares
covered by the unexercised Warrants (assuming for such purposes that
all the Warrants, reduced by any exercised Warrants, had been issued,
had been eligible to be exercised and had been exercised for the
issuance of Warrant Shares in accordance with their terms, whether or
not such issuance, eligibility or exercise had in fact occurred as of
such date), (z) the number of Other Issuable Shares as of the date of
the filing of the Registration Statement or any amendment thereto
(provided, however, that for purposes of this provision, the number of
Other Issuable Shares shall not be greater than the number of such
shares which the SEC permits to be included in the Registration
Statement), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Number of Shares
to Be Registered (where the number of shares determined by clause (x)
is based on the Applicable Conversion Price in effect on, or within
three (3) Trading Days prior to, the date the additional Registration
Statement (or any amendment thereto) is filed, over 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 (iii), the Initial
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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) fifty (50) days after the Increased Registered
Shares Date.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed as contemplated by this Agreement 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).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if there
is a Restricted Sale Date, 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).
(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 Issued Principal Amount of all Debentures
for the period from the date following the relevant Required Filing Date or the
Required Effective Date or a Restricted Sale Date, as the case may be, to the
first relevant Computation Date, and thereafter to each subsequent Computation
Date (each such period, a "Computation Period"). The "Periodic Amount
Percentage" means two percent (2) of the Purchase Price of such Issued Principal
Amount for each Computation Period (and pro rata for any Computation Period
which is less than thirty [30] days). Anything in the preceding provisions of
this paragraph (iii) to the contrary notwithstanding, after the relevant
Effective Date the Issued Principal Amount shall be deemed to refer to the sum
of (X) the principal amount of all such Debentures not yet converted and (Y) the
Held Shares Value for such Debentures. By way of illustration and not in
limitation of the foregoing, if the Registration Statement is filed on or before
the Required Filing Date, but is not declared effective until seventy-five (75)
days after the Initial Required Effective Date, the Periodic Amount will
aggregate five percent (5%) of the Issued Principal Amount (2% for days 1-30,
plus 2% for days 31-60, plus 1% for days 61-75).
(iv) Each Periodic Amount, if any, will be payable by the
Company, except as provided in the other provisions of the immediately
succeeding subparagraph (v), in cash or other immediately available funds to the
Investor on the third Trading Day after
(A) with respect to Periodic Amounts for Computation Periods ending on
or before the Effective Date, (i) the earlier of the Effective Date or
the date which is one hundred eighty (180) days after the Initial
Closing Date (the "First Specified Periodic Payment Date") and (ii) if
relevant, the last day of each Computation Period after the First
Specified Periodic Payment Date, and
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(B) with respect to all Periodic Amounts accruing after the Effective
Date, the last day of the relevant Computation Period,
in each case, without requiring demand therefor by the Investor.
(v) Notwithstanding the provisions of the immediately
preceding subparagraph (iv),
(A) at the option of the Company, exercisable in its discretion on the
date the Periodic Amount is due; provided, however, that the Company
may exercise this discretion if, but only if the Effective Date is on
or before the First Specified Periodic Payment Date and the
Registration Statement covering the Payment Shares is then effective;
or
(B) at the option of the Investor, exercisable in its sole and absolute
discretion by written notice to the Company at any time before the
Periodic Amount is paid,
all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to the Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the Applicable
Conversion Price in effect on the date such option or election is exercised;
provided, further that the "Delivery Date" for the Payment Shares shall be three
(3) Trading Days after the date the Periodic Amount is due (if the option or
election is made by the Company) or after the Investor gives the notice
contemplated by clause (B) of this subparagraph. The provisions of Section
5(b)(i) of the Securities Purchase Agreement shall apply to the delivery of the
certificates of the Payment Shares based on the relevant Periodic Amount.
(vi) 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 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 or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that, subject
to the provisions of Section 11(k), the amounts payable pursuant to the
foregoing provisions of this Section 2(b) represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.
(vii) Notwithstanding the foregoing, the amounts payable by
the Company pursuant to this provision shall not be payable to the extent any
delay in the filing or 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.
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(viii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, the Required
Effective Date or a Restricted Sale Date, as the case may be, or (2) the date
after the Required Filing Date, the Required Effective Date or Restricted Sale
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 or the shares of the Company's stock are listed on the
Principal Trading Market (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 or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) 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 earlier of (i) the date when the
Investors may sell all Registrable Securities under Rule 144 without volume or
other restrictions or limits or (ii) 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;
(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;
(c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be Xxxxxxx & Prager
LLP, Attn: Xxxxxx Xxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of
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time (but not less than three (3) Trading Days) prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects;
(d) Notify each Investor (except for provisions marked with an asterisk
(*)) and the Investor's Counsel and any managing underwriters immediately (and,
in the case of (i)(A) below, not less than three (3) Trading Days prior to such
filing) and (if requested by any such person) confirm such notice in writing no
later than one (1) Trading 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 Investor's Counsel); 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 *( A) amendments or supplements to the
Registration Statement or Prospectus, *(B) additional information not pertaining
to the Investors or (C) additional information pertaining to the Investors;
(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 communicate with the Investor's Counsel with regard
to its proposed written responses to the comments contemplated in clause (i)(C)
of this Section 3(d), so that, to the extent practicable, the Investor's Counsel
shall have the opportunity to comment thereon;
(e) Unless such filing is publicly available on the SEC's
XXXXX system (via the SEC's web site at no additional charge), furnish to each
Investor and to 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
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Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(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, unless such filing is
publicly available on the SEC's XXXXX system (via the SEC's web site at no
additional charge), deliver a number of copies of such supplement or amendment
to each Investor as such Investor may reasonably request;
(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;
(h) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities of the fact that the
ability of the Investor to sell Registrable Securities under the Registration
Statement will soon be unavailable, as a result of
the impending cessation or expiration of the effectiveness of the
Registration Statement, for which notice should be given at least
twenty (20) days in advance, except that the Company's obligation under
this clause shall be satisfied if the Company has previously given
written notice of such date to such Investor and such date has not
changed since the date of such written notice.
(i) Comply with Regulation FD or any similar rule or
regulation regarding the dissemination of information regarding the Company, and
in furtherance of the foregoing, and not in limitation thereof, and
notwithstanding anything to the contrary in this Agreement or in any of the
other Transaction Agreements, not disclose to the Investor any non-public
material information regarding the Company;
(j) 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 that the effectiveness of the
Registration Statement is suspended for any reason, whether due to a Potential
Material Event or otherwise, 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 such notice until
such Investor receives written notice from the
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Company that such the effectiveness of the Registration Statement has been
restored, whether because the Potential Material Event has been disclosed to the
public or it no longer constitutes a Potential Material Event or otherwise;
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 (and
the applicable provisions of Section 2(b) shall apply with respect to any such
suspension other than during a Permitted Suspension Period);
(k) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market and the quotation of the Registrable
Securities on the Principal Trading Market;
(l) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(m) Cooperate with the Investors who hold Registrable
Securities being offered 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 five (5) Trading 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, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities(including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions, subject to compliance with applicable law
and other rules and regulations, including, without limitation, prospectus
delivery requirements;
(n) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement; provided, however, that the foregoing does not
require that the Company take any steps whatsoever regarding the identification
or selection of a broker to sell the Registrable Securities, the identification
of buyers of the Registrable Securities, or the negotiation of the sale terms of
the Registrable Securities; and
(o) Not file any other registration statement (other than the
Registration Statement and amendments thereto and except for (i) registration
statements on Form S-8 and post-effective amendments thereto and (ii)
post-effective amendments to a registration statement that was declared
effective prior to the Closing Date) during the period commencing on the Closing
Date and ending on the Effective Date.
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4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company to provide factual
information regarding the Investor 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
(b) 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(f),
(g) or (i) above, such Investor will 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(f), (g) or (i),
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.
5. EXPENSES OF REGISTRATION. 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 shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of each Registration Statement and $2,000 for the review of each
post-effective amendment to a Registration Statement shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) 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, and
each Buyer Control Person (each, an "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, Securities Exchange Act of 1934, as amended (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
12
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 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 referred to as "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 any 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 such Indemnified Party
expressly for use in connection with the preparation of the Registration
Statement, any such amendment thereof or supplement thereto or prospectus, if
such prospectus (or supplement or amendment thereto) was timely made available
by the Company pursuant to Section 3(b) 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 the amendment or
supplement thereto made available by the Company; (III) be available to the
extent such Claim is based on the delivery of a prospectus by the Investor after
receiving notice from the Company under Section 3(f), (g) or (i) hereof (other
than a notice regarding the effectiveness of the Registration Statement or any
amendment or supplement thereto), or (IV) 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 or delayed. The
Investor will indemnify the Company and its officers, directors and agents
(each, an "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 or the
amendment or supplement thereto, subject to such limitations and conditions as
are applicable to the indemnification provided by the Company pursuant 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 Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such 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
13
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel satisfactory to the indemnifying party (provided such counsel shall
not have a conflict of interest with the Indemnified Party and provided that all
defenses available to the Indemnified Party can be maintained without
prejudicing the rights of the indemnifying party). In case any such action is
brought against any 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
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Party under this Section 6 for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The 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 as provided above. 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 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; provided, however, that the Investor shall not obligated to make
any indemnification payment to the Company under this Section 6 unless and until
there has been a final adjudication of liability on the part of the Investor.
7. 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) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, 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.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view
to making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or
14
any other similar rule or regulation of the SEC that may at any time permit
Investor to sell securities of the Company to the public without Registration
("Rule 144"), the Company agrees , subject to the provisions of Section 4 (d) of
the Securities Purchase Agreement, to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) 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
(c) furnish to the Investor so long as the 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) if not available on the SEC's XXXXX
system, a copy of the 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 Investor to sell such
securities pursuant to Rule 144 without Registration; and
(d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent instructions (supported by an
opinion of Company Counsel or other counsel to the Company, if required or
requested by the Transfer Agent) to the effect that, upon the Transfer Agent's
receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Company Counsel) that, based on the
Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
15
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement and the
rights of the Investor under Section 8 hereof shall be automatically assigned by
the Investor to any transferee of the Registrable Securities (excluding any
transfer of such Registrable Securities by a sale pursuant to an effective
Registration Statement or pursuant to Rule 144) or of all or any portion of any
unconverted Debentures or unexercised Warrants, but , only if the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, (b)
the securities with respect to which such registration rights are being
transferred or assigned, and (c) written evidence of the transferee's assumption
of the Investor's obligations under this Agreement.
10. 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
represent a Majority in Interest of the Holders as of the relevant date. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
(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.
(b) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
contemplated by the Securities Purchase Agreement, and (ii) 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).
(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.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York 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
16
to the exclusive jurisdiction of the federal courts whose districts encompass
any part of the County of New York or the state courts of the State of New York
sitting in the County of New York 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.
(e) The Company and the Investor hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with this Agreement or any of the other Transaction Agreements.
(f) 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.
(g) 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.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(j) 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.
(k) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a) hereof, or any delay in such
performance, whether or not as a result of the Company's negligence, failure to
act or otherwise, 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 TO THE OTHER FOR CONSEQUENTIAL DAMAGES.
(l) This Agreement (including to the extent relevant the
provisions of other Transaction Agreements) constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the
17
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
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.
INITIAL INVESTOR:
------------------------------------
[PRINT NAME OF INITIAL INVESTOR]
By: ________________________________
Name: ______________________________
Title: _____________________________
COMPANY:
AMBIENT CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
19
SCHEDULE 1
Shares which may be included in
"PERMITTED SELLING SHAREHOLDER" REGISTRATION STATEMENT
------------------------------------- ----------------------------------------
Double U Master Fund LP 4,000,000 shares issuable on exercise of
warrants
------------------------------------- ----------------------------------------
