EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 23, 2004 (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, dated as of December 23, 2004, 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, as
contemplated by the Debentures) upon the terms and subject to the conditions
contained in the Securities Purchase Agreement, the Debentures, or the other
Transaction Agreements; 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:
"Company Counsel" means Aboudi & Xxxxxxxxxx
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"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 Debentures within the twenty (20) Trading Days
(excluding any Trading Days during which the Investor is restricted from making
sales of Registrable Securities covered by any previously effective Registration
Statement) 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 twenty (20) Trading 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).
"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 Purchased Securities or
Registrable Securities; provided, however, that the term "Investor" does not
include Permitted Investors or their transferees or assignees, if any.
"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 increased Warrant Shares and
other Payment 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 Investors" has the meaning ascribed to it in Schedule 10
annexed hereto.
"Permitted Suspension Period" means one or more periods aggregating not
more than fifty (50) 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
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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.
"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 covered by any previously
effective Registration Statement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon as
practicable after the Closing Date but no later than thirty (30) days after the
Closing Date (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) the number of shares into
which the Debentures and all interest thereon through the Maturity Date would be
convertible at the time of filing of such Registration Statement (assuming for
such purposes that all such Debentures had been issued, had been eligible to be
converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such issuance, eligibility, accrual of interest or
conversion had in fact occurred as of such date), based on the Conversion Price
then in effect, (y) the number of Warrant Shares covered by the Warrants
(assuming for such purposes that all the 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),
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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). If, after the filing of the Registration Statement
and prior to the Effective Date, the Conversion Price or the number of shares
covered by the Warrants or both is or are to be adjusted, the Company shall file
an amendment to the Registration Statement reflecting the registration of the
adjusted number of shares reflected in the foregoing formula based on such
adjustments. Unless otherwise specifically agreed to in writing in advance by
the Holder, the Registration Statement (W) shall include only (1) the
Registrable Securities, (2) the shares issuable on exercise of warrants issued
to the Finder in connection with the transactions contemplated by the
Transaction Agreements, (3) the shares listed on Part I of Schedule 10 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 Purchased
Shares, 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 (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z) 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 contemplated by the Transaction Agreements, exceeds
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 the sum of (A) the number
of shares theretofore issued on conversion of the Debentures (including any
interest paid by the issuance of Conversion Shares) and on exercise of the
Warrants, plus (B) the sum of (I) the number of shares into which the
Unconverted Debentures and all interest thereon through the Maturity Date
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 issued, had been eligible to
be converted, and had been converted, into Conversion Shares in accordance
with their terms, whether or not such issuance, eligibility, accrual of
interest or conversion had in fact occurred as of such date), (II) 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
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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 (III)
the number of Other Issuable Shares as of the date of the filing of such
amendment to the Registration Statement (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 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 (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.
(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 Purchase Price for 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 (A) one percent
(1%) of the Stated Value of all Purchased Shares for the first Computation
Period (and pro rata for any Computation Period which is less than thirty [30]
days), and (B) two percent (2%) of the Stated Value of all Purchased Shares for
each Computation Period thereafter (and pro rata for any Computation Period
which is less than thirty [30] days); provided, however, that with respect to
Periodic Amounts payable with respect to (X) Section 2(a)(i) or (Y) Section
2(a)(ii) with respect to any Computation Period (or portion thereof) occurring
prior to the Effective Date, such
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Periodic Amounts shall cease to accrue on the date which is one hundred eighty
(180) days after the Initial Required Effective Date. Anything in the preceding
provisions of this paragraph (iii) to the contrary notwithstanding, after the
relevant Effective Date the Purchase Price shall be deemed to refer to the sum
of (X) the Purchase Price of all Unconverted Debentures and (Y) the Held Shares
Value. 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 four percent (4%) of the
Purchase Price of the Debentures (1% 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 the relevant Computation Period, 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 within two
hundred ten (210) days after the Closing Date and the Registration
Statement covering the Payment Shares is then effective1; 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 then
applicable Conversion Price; 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 election is made by the Company) or after the Investor
gives the notice contemplated by clause (ii) of this subparagraph.
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1 If the Investor requests payment of any accrued Periodic Amount on any
date which is earlier than two hundred ten (210) days after the Closing Date but
prior to the Effective Date, and if, prior to the payment thereof, the Investor
does not elect to have such payment made in shares as provided in clause (B) of
this paragraph, the Company shall either pay such amount to the Investor or
deposit such amount in escrow with the Company Counsel with a statement that it
will issue shares to the Investor pursuant to this clause (A) if the conditions
provided herein are met. If such amount is paid in escrow, it shall be held
until such date or the earlier issuance of shares pursuant to such election in
accordance with such terms. If the shares are not issued or issuable by such
date, the Company Counsel shall release the funds to the Investor. If the shares
are duly issued to the Investor, as confirmed by the Investor, the funds held in
escrow may be released to the Company.
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(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 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.
(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.
(ix) 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 thirty (30) days following the Initial Required
Effective Date,
(A) the provisions of Section 2(b)(i) shall not apply; and
(B) 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
Investor with respect thereto; provided, however, that the provisions of Section
2(b)(ii) shall continue to apply to all other events described therein.
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
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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 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 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
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
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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 (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;
(e) 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 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 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) 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, not disclose to the
Investor any non-public material information regarding the Company;
(i) 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
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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 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);
(j) 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;
(k) 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;
(l) 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;
(m) 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
(n) Not file any other registration statement (other than the
Registration Statement and amendments thereto) during the period commencing on
the Closing Date and ending on the Effective Date.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
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(a) 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
(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 $3,500 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 Lender 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 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
11
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 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
12
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 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 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
13
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, 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
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 shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities (or all or any portion of any Unconverted Debentures) 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
hold at least eighty (80%) percent interest of the Registrable Securities (as
14
calculated by the principal amount of the Unconverted Debentures then held by
all Holders). 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 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.
15
(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 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.
(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 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]
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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:/s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
(Print Name)
Chief Executive Officer
(Title)
INITIAL INVESTOR:
______________________________________
[PRINT NAME OF INITIAL INVESTOR]
By: __________________________________
Name: ________________________________
Title: _______________________________
17
SCHEDULE 10
SHARES WHICH MAY BE INCLUDED IN THE REGISTRATION STATEMENT
The shares included in the Company's registration statement on Form SB-2 which
was declared effective by the SEC on or about November 14, 2003 and which have
not yet been sold by the selling stockholders named therein. (All of the shares
contemplated by paragraph 2 reflect shares or rights issued prior to the date
hereof.)
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