EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
April 9, 2001, by and among Audium Corporation, a Delaware corporation (the
"Company"), and holders of the Company's Preferred Stock (defined below) listed
on Schedule A (the "Investors").
Preliminary Statements
A. Each Investor is a party to a convertible note and/or securities
purchase agreement with the Company (the "Stock Purchase Agreements").
B. Pursuant to the Stock Purchase Agreements, the Company agreed to grant
the Investors certain registration rights as more particularly described herein.
C. Execution of this Agreement is a condition precedent to the Investors'
obligation to acquire Preferred Stock.
Agreement
The parties, intending to be legally bound, agree as follows:
1. Certain Definitions
1.1 Definitions. As used in this Agreement, the following terms shall have
the meanings set forth below.
"Best efforts" means a party's commercially reasonable best efforts.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value $.01 per
share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Founders" mean Xxxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxxx, Xxxx X. Oh and
Xxxxxx Oh.
"Holder" shall mean the Investors at any time during which they hold
Registrable Securities and any holder of Registrable Securities to
whom the registration rights granted by this Agreement have been
transferred by a Holder in compliance with Section 10 of this
Agreement.
"Initiating Holder" shall mean any Holder(s) owning at least a
majority of the Registrable Securities.
"Preferred Stock" shall mean the Series A Convertible Preferred Stock,
par value $.01 per share.
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"Qualified Public Offering" shall mean the closing by the Company of a
firm commitment underwritten public offering pursuant to a
registration statement filed under the Securities Act with an initial
"Price to the Public" of at least $10.00 per share and aggregate
offering proceeds to the Company of not less than $25,000,000 (net of
underwriting discounts and commissions).
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement
in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
"Registrable Securities" shall mean Shares issued or issuable pursuant
to the conversion of the Preferred Stock and any Shares issued as a
dividend, stock split or other distribution with respect to or in
exchange for or in replacement of such Shares; provided, however, that
Registrable Securities shall not include any Shares which have
previously been registered or which have been sold to the public
either pursuant to a registration statement or are eligible for sale
or have been sold pursuant to Rule 144, or which have been sold in a
private transaction in which the transferor's rights under this
Agreement are not assigned or are not assignable.
"Registration Expenses" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including without
limitation, salaries and expenses of the Company's officers and
directors, all registration, qualification, listing, quotation and
filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, expenses of any
regular or special audits (whether quarterly, annual or otherwise) and
other accounting fees incident to or required by any such
registration, any related liability insurance obtained by or on behalf
of the Company, but shall not include Selling Expenses.
"Rule 144" shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
"Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or
any similar successor rule that may be promulgated by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of
Registrable Securities and the fees and disbursements of counsel for
the Holders.
"Shares" shall mean shares of the Common Stock.
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2. Requested Registration
2.1 Request for Registration. If, after 180 days following the closing of a
Qualified Public Offering, the Company shall receive from Initiating Holders a
written request that the Company effect any registration with respect to that
number of Registrable Securities which would result in anticipated aggregate
gross proceeds to the Initiating Holders of at least $5,000,000, the Company
will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) as soon as practicable, file a registration statement on the
appropriate form (including with respect to such registration, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the
Securities Act) as may be so requested or required and as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request delivered to
the Company within 15 days after receipt of such written notice from the
Company.
Notwithstanding the foregoing, the Company shall not be obligated to
effect, or to take any action to effect, any such registration pursuant to
this Article 2:
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(ii) after the Company has effected two registrations pursuant to
Section 2.1;
(iii) if the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that
(A) it would be detrimental to the Company and its
stockholders for such registration statement to be filed on or
before the time filing would be required and it is therefore
essential to defer the filing of such registration statement. The
Company shall have the right to defer such filing (but not more
than once during any 12-month period) for a period of not more
than 90 days after receipt of the request of the Initiating
Holders; or
(B) the Company plans to file a registration statement for a
public offering within 90 days; or
(iv) if the Initiating Holders are able to request a registration
on Form S-3 pursuant to Article 4.
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2.2 Other Securities. The registration statement filed pursuant to the
request of the Initiating Holders, may, subject to the provisions Section 2.3
below, include other Shares of the Company which are issued by the Company or
held by officers or directors of the Company or which are held by persons who,
by virtue of agreements with the Company, are entitled to include their
securities in any such registration.
2.3 Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwritten
offering (including pursuant to Article 4), they shall so advise the Company as
a part of their request made pursuant to Section 2.1 or as appropriate, and the
Company shall include such information in the written notice referred to in
Section 2.1(a) or 4.1(a), as appropriate. The Company shall have the right to
select the investment banker or investment bankers and managers to administer
the offering. The right of any Holder to include his Shares in any registration
statement shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds. Shares
issued by the Company or owned by a person or entity other than the Holders may
be included in such registration statement; provided, however, that if the
managing underwriter or underwriters of such offering shall advise the Company
in writing that, because of marketing reasons or the size of the offering
intended to be made, the success of the offering would be adversely affected by
the inclusion of securities other than those owned by the Holders, then the
amount of securities to be offered for the account of the Company and each such
person or entity other than the Holders shall be reduced to the extent necessary
(including excluding such securities from the underwriting entirely) to reduce
the total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters. If after excluding all
Shares to be issued by the Company or held by persons or entities other than the
Holders, the managing underwriter or underwriters advises the Initiating Holders
in writing that, because of marketing reasons or the size of the offering
intended to be made, the success of the offering would be adversely affected by
the inclusion of all Registrable Securities requested to be included by Holders,
then the number of Registrable Securities to be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
owned by each Holder.
3. Piggy-Back Registration
3.1 Notices. If the Company shall determine to register any of its Shares
either for its own account or the account of a security holder or holders, other
than a registration relating to employee benefit plans, or a registration
relating to a Rule 145 transaction, or a registration on any registration form
that does not permit secondary sales, the Company shall:
(a) promptly give written notice to each Holder thereof; and
(b) use its best efforts to include in such registration (and any
related registration or qualification under blue sky laws or other
compliance), except as set forth in Section 3.2, and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made by any Holder and received by the Company within
30 days after the Company's written notice described in Section 3.1(a)
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above is given. A Holder's written request may specify all or a part of a
Holder's Registrable Securities.
3.2 Priority on Piggyback Registrations.
(a) If the registration of which the Company gives notice is for an
underwritten offering, the Company shall so advise the Holders as a part of
the written notice given pursuant to Section 3.1(a). In such event, the
right of any Holder to registration pursuant to this Article shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. The Company shall have the right to select the
investment banker or investment bankers and managers to administer the
offering.
(b) Notwithstanding the foregoing, if the representative of the
managing underwriters advises the Company that marketing factors or the
size of the offering require a limitation of the number of Shares to be
underwritten, the managing underwriter may limit the Registrable Securities
to be included in such registration. Under such circumstances, the priority
for inclusion in the underwritten offering shall be determined as follows:
(i) first, to those securities to be included in the underwritten offering
that are owned by holders exercising demand registration rights or to the
securities to be issued by the Company if the underwritten offering is
initiated by the Company, as applicable; (ii) second, to those securities
to be included in the underwritten offering that are owned by Holders of
Registrable Securities exercising piggy-back rights (allocated in
proportion, if necessary, as near as practicable to the amount of
Registrable Securities owned by each Holder); and (iii) third, to those
securities to be included in the underwritten offering by any other person.
If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter.
4. Registration on Form S-3
4.1 Following a Qualified Public Offering, in case the Company shall
receive from Initiating Holders a written request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3 that
permits resales of securities) for a public offering of shares of the
Registrable Securities the aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $2,500,000, and the Company
is a registrant entitled to use Form S-3 to register the Registrable Securities
for such an offering, the Company shall:
(a) promptly inform the other Holders of the proposed registration and
offer them the opportunity to participate; and
(b) use commercially reasonable efforts to cause such Registrable
Securities to be registered for the offering on such form and to cause such
Registrable Securities to be qualified in such jurisdictions as such Holder
or Holders may reasonably request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request delivered to the Company within 15 days
after receipt of such written notice from the Company. In the event the
registration is proposed to be part of an underwritten public offering, the
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substantive provisions of Section 2.3 shall be applicable to each such
registration initiated under this Article 4.
Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Article 4:
(i) following the filing of, and for 180 days immediately
following the effective date of, any registration statement pertaining
to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit
plan);
(ii) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(iii) after the Company has effected two registrations pursuant
to Section 4.1; or
(iv) if the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that
(A) it would be detrimental to the Company and its
stockholders for such registration statement to be filed on or
before the time filing would be required and it is therefore
essential to defer the filing of such registration statement. The
Company shall have the right to defer such filing (but not more
than once during any 12-month period) for a period of not more
than 90 days after receipt of the request of the Initiating
Holders; or
(B) the Company plans to file a registration statement for a
public offering within 90 days.
5. Costs and Expenses
5.1 Costs and Expenses. All Registration Expenses incurred in connection
with any registration, qualification or compliance pursuant to Articles 2, 3 or
4 shall be borne by the Company; provided, however, that all underwriting
discounts and selling commissions applicable to the Registrable Securities
covered by registrations effected pursuant to Articles 2, 3 or 4 shall be borne
by each Holder of Registrable Securities in proportion to the number of shares
of Registrable Securities sold by the respective Holder.
6. Obligations of the Company
6.1 Whenever required under this Agreement to effect the registration of
any Registrable Securities, the Company shall:
(a) Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and to keep such
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registration statement effective for at least 90 days or until the
distribution described in the registration statement has been completed,
whichever first occurs, to the extent permitted by and subject to
applicable law.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of the securities covered by such registration statement.
(c) Furnish to each Holder participating in the registration, without
charge such numbers of copies of the registration statement, each amendment
and supplement thereto, the prospectus included in such registration
statement, including the preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Holder
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(d) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
7. Contractual Preemptive Rights
7.1 Grant. The Company hereby grants to each Holder listed on Exhibit A who
owns 1,000,000 or more shares of Preferred Stock (or Shares issued or issuable
upon conversion of the Preferred Stock) and the Founders (which may be
considered "Holders," as the context requires, solely for purposes of this
Section 7), the right to purchase a pro rata share of New Securities (as defined
in Section 7.2) which the Company may, from time to time, propose to sell and
issue. A Holder's pro rata share, for purposes of this Article 7, is the ratio
of the number of Shares owned by such Holder immediately prior to the issuance
of New Securities, assuming full conversion of the Preferred Stock and including
all outstanding rights, options and warrants to acquire Shares held by such
Holder, to the total number of Shares outstanding immediately prior to the
issuance of New Securities, assuming full conversion of the Preferred Stock, and
including all outstanding rights, options and warrants to acquire Shares.
Furthermore, if any Holder does not elect to purchase New Securities pursuant to
this Section (collectively, the "Non-Participating Stockholders"), then each
Holder electing to purchase New Securities (each a "Purchasing Stockholder")
will have the right to purchase that number of shares such Non-Participating
Stockholders were entitled to purchase pursuant to this Section (the "Residual
Shares"). If more than one Purchasing Stockholder gives a notice pursuant to
this Section of its intention to purchase Residual Shares and the total number
of shares covered by such notices exceeds the total number of Residual Shares,
then the Residual Shares shall be allocated among such Purchasing Stockholders
such that each Purchasing Stockholder shall have the right to purchase that
number of Residual Shares equal to a fraction of the total Residual Shares, the
numerator of which is the number of shares of Shares owned by such Purchasing
Stockholder immediately prior to the issuance of New Securities, assuming full
conversion of the Preferred Stock and including all outstanding rights, options
and warrants to acquire Shares held by such Holder, and the denominator of which
is the combined number of Shares owned by all Purchasing Stockholders
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immediately prior to the issuance of New Securities, assuming full conversion of
the Preferred Stock and including all outstanding rights, options and warrants
to acquire Shares.
7.2 For purposes of this Article 7, "New Securities" shall mean any capital
stock (including Common Stock and/or preferred stock) of the Company whether now
authorized or not, and rights, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable for capital stock; provided that the term "New
Securities" does not include (a) securities purchased as part of the Preferred
Stock private placement pursuant to which this Agreement has been executed or
notes converted into Preferred Stock on or about the date hereof; (b) securities
issued pursuant to the acquisition of another business entity or business
segment of any such entity by the Company by merger, purchase of all or
substantially all the assets or other reorganization whereby the Company shall
own more than 50% of the voting power of such business entity or business
segment of any such entity; (c) up to 1,590,678 Shares issued to employees,
consultants or directors of the Company directly or pursuant to a stock option
plan, stock purchase plan, restricted stock plan or other employee benefit plan
approved by the Board of Directors of the Company; (d) securities issued in a
Qualified Public Offering; (e) securities issued upon conversion of the
Preferred Stock or other already outstanding convertible notes or securities or
as dividends, stock splits or distributions on the Preferred Stock; or (f)
securities issued pursuant to any warrants, options or convertible notes to
acquire capital stock of the Company existing or outstanding as of the date any
shares of Preferred Stock are first issued; and (g) any right, option or warrant
to acquire any security convertible into the securities excluded from the
definition of New Securities pursuant to and in accordance with subsections (a)
through (f) above.
7.3 Notice. In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Holder shall have 30
days after any such notice is received to agree to purchase such Holder's pro
rata share of such New Securities for the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
7.4 Failure to Exercise. In the event the Holders fail to exercise fully
such right within said 30-day period, the Company shall have one hundred twenty
(120) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within 120
days from the date of said agreement) to sell the New Securities respecting
which the Holders' right set forth in this Section was not exercised, at a price
and upon terms substantially the same as those specified in the Company's notice
to Holders pursuant to Section 7.3. In the event the Company has not sold within
said 120-day period or entered into an agreement to sell the New Securities in
accordance with the foregoing within 120 days from the date of said agreement,
the Company shall not thereafter issue or sell any New Securities without first
again offering such securities to the Holders in the manner provided in Article
7 above. A Holder's failure to respond within the 30-day period shall be deemed
a waiver of its right to acquire New Securities.
7.5 Expiration. The right to acquire New Securities granted under this
Article shall expire upon, and shall not be applicable to, a Qualified Public
Offering.
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7.6 Transferability. The right to acquire New Securities set forth in this
Article may not be assigned or transferred, except that such right is assignable
by each Holder to any majority-owned subsidiary or parent of, or to any
corporation or entity that is an affiliate of or successor in interest to, any
such Holder, or any transferee of 1,000,000 or more shares of Common Stock,
including Common Stock issuable upon conversion of the Preferred Stock.
8. Rule 144 Reporting
8.1 Reporting. With a view to making available to all Holders the benefits
of certain rules and regulations of the Commission which may permit the sale of
Registrable Securities to the public without registration, the Company agrees to
use its commercially reasonable efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for
an offering of its securities to the general public;
(b) file with the Commission in a timely manner all reports and other
documents required by the Company under the Securities Act and the Exchange
Act; and
(c) so long as a Holder owns any restricted securities, as that term
is understood and defined in Rule 144, subject to this Agreement, furnish
to each Holder of Registrable Securities forthwith upon such Holder's
request (i) a written statement by the Company as to its compliance with
the public information requirements of Rule 144 (at any time after 90 days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public); (ii) a
copy of the most recent annual or quarterly report of the Company; and
(iii) such other reports and documents as may be reasonably requested in
availing any such Holder of any rule or regulation of the Commission
permitting the sale of any shares without registration.
9. Information by Holder
9.1 Information to be Furnished. Each Holder of Registrable Securities
shall timely furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder as the Company may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Agreement.
10. Transferability
10.1 Transferability. The rights set forth in this Agreement (other than
Article 7, the assignability of which is governed by Section 7.6) may be
assigned by a Holder (a) to any majority-owned subsidiary or parent of, or to
any corporation or other entity that is an affiliate or successor in interest
to, any such Holder to which such Holder transfers any number of Registrable
Securities, (b) in the case of any Holder that is a partnership or limited
liability company, to any partner or member of such Holder to which such Holder
transfers any number of Registrable Securities, (c) to any spouse or lineal
descendant of a Holder or a trust for the benefit of any such person and (d) to
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any other transferee of 100,000 or more Registrable Securities; provided,
however, that any such assignee agrees in writing to be bound by the terms of
this Agreement.
11. "Market Stand-Off" Agreement
11.1 Agreement. Each Holder of Registrable Securities agrees that in
connection with the Company's first underwritten sale of Shares to the public
effected pursuant to a registration statement filed with, and declared effective
by, the Commission under the Securities Act and pursuant to which sales are
made, if requested by the Company and the managing underwriters in such
offering, not to effect any public sale or distribution or other transfer or
disposal (including encumbrances) of any of the Company's securities, including
a sale pursuant to Rule 144 (except as part of such underwritten offering), for
a period of up to 180 days after the closing date of such underwritten offering.
The Company may impose stop-transfer instructions with respect to the Shares (or
other securities) subject to the foregoing restriction until the end of such
180-day period; provided, however, that the foregoing obligation shall be
conditioned upon all officers and directors of the Company and all holders of
more than one percent of the Shares of the Company entering into similar
agreements and not being released from such agreements at any time before or
during such 180-day period.
12. Indemnification
12.1 Indemnification. If any Registrable Securities are included in a
registration statement under this Agreement:
(a) To the extent permitted by law, the Company shall indemnify and
hold harmless each Holder participating in a registration pursuant to this
Agreement, their affiliates, partners, officers, employees, directors and
agents (each, a "Participating Holder"), any underwriter (as defined in the
Securities Act) for such Participating Holder and each person, if any, who
controls such Participating Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject, insofar as
such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any prospectus or any amendments or
supplements thereto, (ii) 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, or (iii) any violation or alleged
violation of the Securities Act, the Exchange Act, state securities laws or
any rule or regulation promulgated under the Securities Act, the Exchange
Act or state securities laws; and the Company shall pay to each such
Participating Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in
conformity with information furnished expressly for use in connection with
such registration by such Participating Holder.
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(b) To the extent permitted by law, each Participating Holder shall
indemnify and hold harmless the Company, each of its current and former
directors, officers, employees and agents, each person, if any, who
controls the Company within the meaning of the Securities Act, any
underwriter, any other Participating Holder and any controlling person of
any such underwriter or other Participating Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent that such Violation
occurs in reliance upon information furnished by such Participating Holder
expressly for use in connection with such registration; and each such
Participating Holder shall pay any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this Section,
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Section shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Participating Holder, which consent
shall not be unreasonably withheld or delayed. However, in no event shall
any Participating Holder's liability under this Article 12 exceed the net
proceeds to such Participating Holder of Registrable Securities sold as
contemplated herein.
(c) Promptly after receipt by an indemnified party under this Article
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 Article, 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 the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) will have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party is inappropriate due to actual
or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability
to the indemnified party under this Article, but the omission so to deliver
written notice to the indemnifying party shall not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Article. The payments required by this Article shall be made
periodically throughout the course of investigation or defense, as and when
bills are received or expenses incurred, provided that the indemnified
party seeking reimbursement of expenses hereunder undertakes in a writing
reasonably satisfactory to the indemnifying party, to repay all amounts
previously paid over to the indemnified party if it is ultimately
determined (by a final judgment of a court of competent jurisdiction) that
such party is not entitled to indemnification hereunder.
(d) If the indemnification provided for in this Article is held by a
court of competent jurisdiction to be unavailable to an indemnified party,
other than pursuant to its terms, with respect to any loss, liability,
claim, damage, or expense referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party to this Agreement, shall
contribute to the amount paid or payable by such indemnified party as a
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result of such loss, liability, claim, damage or expense in such proportion
as is appropriate to reflect the relative fault of the indemnifying party
on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. In no event shall any Participating
Holder's liability for contribution under this Article exceed the net
proceeds to such Participating Holder of Registrable Securities sold as
contemplated hereby.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Article
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise; provided,
however, that the remedies provided for in this Article are not exclusive
and shall not limit any rights or remedies which may otherwise be available
to the Company or Holders at law or in equity.
13. Miscellaneous
13.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, facsimile or similar
writing) and shall be given to (a) the Company at its address or facsimile
number set forth below and (b) the Holders at their address or facsimile number
set forth on the Exhibits to this Agreement or such other address or facsimile
number as such party may hereafter specify for the purpose by notice to the
Holders and the Company. Each such notice, request or other communication shall
be effective (i) if given by facsimile, one business day following when such
facsimile is transmitted to the facsimile number specified in this Section and
the receipt is otherwise confirmed, (ii) if given by mail, five days for
domestic addresses and seven days for foreign addresses after deposit in the
mails, registered or certified mail with first class postage prepaid, addressed
as aforesaid or (iii) if given by any other means, when delivered at the address
specified by this Section.
If to the Company:
Audium Corporation
ATTN: Xxxx Xxxxxxxxx
000 Xxxxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No. (000) 000-0000
Fax No. (000) 000-0000
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With copy to (which shall not constitute notice):
Xxxxx & XxXxxxxx
ATTN: Xxxxxxxx X. Xxxxxx
0000 Xxxx Xxx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone No. (000) 000-0000
Fax No. (000) 000-0000
The address of any party to which notices may be delivered pursuant to this
Section may be changed by such party by delivering written notice of such
changed address in the same manner as notices are required to be delivered
pursuant to this Section.
13.2 No Waivers. No failure or delay by one party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
13.3 Additional Registration Rights. The Company shall not grant
registration rights equal or senior to the registration rights granted under
this Agreement to any other holder of the Company's securities without the prior
approval of the Holders of a majority of the number of Registrable Securities.
13.4 Modification of Agreement; Assignment. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and the holders of a majority of the
then outstanding Registrable Securities (or in the case of Article 7, a majority
of the shares of Common Stock (assuming conversion of all shares of Preferred
Stock) held by persons entitled to the rights granted under Article 7), and any
such amendment, waiver, discharge or termination shall be binding on all the
Holders, but in no event shall the obligation of any Holder hereunder be
materially increased, except upon the written consent of such Holder. Except as
set forth in Article 7 and Article 10, no party to this Agreement may sell,
assign or transfer any interest in this Agreement, or any rights or obligations
hereunder, including, without limitation, a party's rights, title, interests,
remedies, powers and duties hereunder.
13.5 Section and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.7 Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
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assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies under or by reason of this
Agreement.
13.8 Survival. All covenants, agreements, representations and warranties
made herein or otherwise in writing in connection herewith shall survive both
the execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby.
13.9 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
13.10 Entire Agreement. This Agreement and the other documents contemplated
herein collectively represent the final agreement among the parties and may not
be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements between the parties. There are no unwritten oral agreements between
the parties.
13.11 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall be deemed invalid,
illegal or unenforceable to any extent or for any reason, such provision shall
be severed from this Agreement and the remainder of this Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law. A provision which is valid, legal and
enforceable shall be substituted for the severed provision.
13.12 Aggregation of Stock. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
13.13 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to this Agreement
shall terminate on (a) the closing of the first the Company-initiated registered
public offering of Common Stock, if all Shares of Registrable Securities held or
entitled to be held upon conversion by such Holder may be sold under Rule 144
during any 90-day period, or (b) on the date after the closing of the first
Company-initiated registered public offering of Common Stock on which all Shares
of Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period, but in
no event later than the second anniversary of any such closing under either (a)
or (b) if such offering is a Qualified Public Offering.
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IN WITNESS WHEREOF, this Agreement is entered into between the parties
as of the first date written above.
AUDIUM CORPORATION
By:
Xxxxxxx X. Xxxxxxxxx, President
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INVESTORS:
FONIX CORPORATION
By:
Name:
Title:
Xxxxx Xxxxxxxxx, Individually
Address: 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
------------------------------------
Spouse of Xxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx, Individually
Address: 000 Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Xxxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx, Individually
Address: 0 Xxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Xxxxx Xxxxxxxx
Xxxxxxx Xxxxxx, Individually
Address: 00 X. 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Xxxxxxx Xxxxxx
Xxxxx Xxx, Individually
Address: 00 Xxx Xxx Xxx
Xxxxxxxx Xxxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxx Xxx
X-00
Xxxx Xxx, Xxxxxxxxxxxx
Address: 0000 Xxxxxxxx Xx., Xxx. 00
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxx Xxx
Xxxxx Xxx, Individually
Address: 000 X. 000xx Xx., Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxx Xxx
Xxxxxxx Xxxxxxx, Individually
Address: 000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxxxx Xxxxxxx
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Xxx Xxxxxxx, Individually
Address: 0000 Xxxxxxxxxxx Xxx. XX, Xxx 000
Xxxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxx Xxxxxxx
Xxxx Xxx, Individually
Address: 000 Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Xxxx Xxx
Yun Jun Oh, Individually
Address: Room 1005 Dong Book Xxxx 00-00
Xxxxxx-Xxxx
Xxxxxxxxxxxx-Xx, Xxxxx 000-000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Yun Jun Oh
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Youn K. Oh, Individually
Address: 00 Xxxx Xxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Youn K. Oh
Xxxxx Xxxxxxxxx, Individually
Address: 000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxx Xxxxxxxxx
Xxxx Xxxxxx, Individually
Address: 000-000 Xxxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile:
Consented to:
-----------------------------------
Spouse of Xxxx Xxxxxx
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Xxxxxx Xxxxxx, Individually
Address: 0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxxx Xxxxxx
FARD INVESTMENTS USA, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Person for Notice: Xxxxxx Xxxxxxxxxx
DRMW HOLDINGS USA, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Person for Notice: Xxxxxx Xxxxxxxxxx
X-00
Xxxxxxx Xxxxxxxxxx, Individually
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Xxxxxxx Xxxxxxxxxx
Xxx Xxxxxxxxx, Individually
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Xxx Xxxxxxxxx
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Xxxx Gut, Individually
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Xxxx Gut
Xxxxxxx Yuval, Individually
Address: c/o Tidan Constructions
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx
Xxxxxxxx, XX
Xxxxxx X0X 0X0
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Xxxxxxx Yuval
Avi Pelossof, Individually
Address: 00-X Xxxxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Avi Pelossof
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Xxxx Xxxx Xxxxxxxx, Individually
Address: c/o Chelsea Capital
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Consented to:
-----------------------------------
Spouse of Xxxx Xxxx Xxxxxxxx
LAVICAPITAL LLC
By: _________________________________
Name: _________________________________
Title: _________________________________
Address: c/o Lavipour & Company
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Person for Notice: Xxxxx Xxxxxxxx
Xxxxx Francesco, Individually
Address: c/o Xxxxx X. Xxxxxxxxx
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-983-9701
Consented to:
-----------------------------------
Spouse of Xxxxx Francesco
X-00
Xxxxxx Xxxxxxxx, Individually
Address: 0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Consented to:
-----------------------------------
Spouse of Xxxxxx Xxxxxxxx
BLUE HILL VENTURES, LLC
By: _________________________________
Name: _________________________________
Title: _________________________________
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Person for Notice:
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FOUNDERS:
(Solely for purposes of the rights and benefits under
Article 7 of this Agreement)
Xxxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxx
Xxxx X. Oh
Xxxxxx Oh
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SCHEDULE A
SERIES A INVESTORS
Name Amount of Securities
Fonix Corporation 2,054,794
Xxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Xxxxxxx Xxxxxx
Xxxxx Xxx
Xxxx Xxx
Xxxxx Xxx
Xxxxxxx Xxxxxxx
Xxx Xxxxxxx
Xxxx Xxx
Yun Jun Oh
Youn K. Oh
Xxxxx Xxxxxxxxx
Xxxx Xxxxxx
Xxxxxx Xxxxxx
Fard Investments USA, Inc.
DRMW Holdings USA, Inc.
Xxxxxxx Xxxxxxxxxx
Ami Xxxxxxxxx
Xxxx Gut
Xxxxxxx Yuval
Avi Xxxxxxxx
Xxxx Xxxx Xxxxxxxx
Lavicapital LLC
Xxxxx Francesco
Xxxxxx Xxxxxxxx
Lavicapital LLC
DRMW Holdings, Inc
Blue Hill Ventures, LLC
H-28