EXHIBIT 10.02

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of December 23, 2013 by and among AudioEye, Inc., a Delaware corporation (the
“Company”), and the several purchasers signatory hereto (each a “Purchaser” and
collectively, the “Purchasers”).

 

This Agreement is made pursuant to a Securities Purchase Agreement between the
Company and each Purchaser (the “Purchase Agreement”) with respect to one or
more closings (each a “Closing”) of the sale by the Company of Units consisting
of Warrants and Shares (as defined below).

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers agree as follows:

 

Definitions.  Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement.  As used in this Agreement, the following terms shall
have the following meanings:

 

“Advice” has the meaning set forth in Section 10(c).

 

“Agreement” has the meaning set forth in the Preamble.

 

“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in Tucson, Arizona are authorized or required by law to remain
closed.

 

“Closing” has the meaning set forth in the Preamble of this Agreement.

 

“Closing Date” means the last date of the Closings.

 

“Closing Sale Price” means, for the Common Stock, the last trade price for such
security on the principal trading market for such security, as reported by
Bloomberg Financial Markets, or, if such principal trading market begins to
operate on an extended hours basis and does not designate the last trade price,
then the last trade price of such security prior to 4:00 P.M., New York City
time, as reported by Bloomberg Financial Markets, or if the foregoing do not
apply, the last trade price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg
Financial Markets, or, if no last trade price is reported for such security by
Bloomberg Financial Markets, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by OTC Markets. If the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Sale
Price of such security on such date shall be the fair market value as determined
in good faith by the Board of Directors of the Company. The Board of Directors’
determination shall be binding upon all parties absent demonstrable error.

 

“Commission” means the U.S. Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $.00001 per share, of the
Company.

 

“Company” has the meaning set forth in the Preamble.

 

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“Effective Date” means the date that the Registration Statement filed pursuant
to Section 6(a) is first declared effective by the Commission.

 

“Effectiveness Deadline” means, with respect to the Initial Registration
Statement or the New Registration Statement, the ninetieth (90th) calendar day
following the Closing Date; provided, however, that if the Effectiveness
Deadline falls on a Saturday, Sunday or other day that the Commission is closed
for business, the Effectiveness Deadline shall be extended to the next Business
Day on which the Commission is open for business.

 

“Effectiveness Period” has the meaning set forth in Section 6(b).

 

“Event” has the meaning set forth in Section 6(c).

 

“Event Date” has the meaning set forth in Section 6(c).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Filing Deadline” means, with respect to the Initial Registration Statement
required to be filed pursuant to Section 6(a), the thirtieth (30th) calendar day
following the Closing Date, provided, however, that if the Filing Deadline falls
on a Saturday, Sunday or other day that the Commission is closed for business,
the Filing Deadline shall be extended to the next business day on which the
Commission is open for business.

 

“FINRA” has the meaning set forth in Section 7(i).

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

 

“Indemnified Party” has the meaning set forth in Section 9(c).

 

“Indemnifying Party” has the meaning set forth in Section 9(c).

 

“Initial Registration Statement” has the meaning set forth in Section 6(a).

 

“Liquidated Damages” has the meaning set forth in Section 6(c).

 

“Losses” has the meaning set forth in Section 9(a).

 

“New Registration Statement” has the meaning set forth in Section 6(a).

 

“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of

 

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any portion of the Registrable Securities covered by a Registration Statement,
and all other amendments and supplements to the Prospectus, including post
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

 

“Purchase Agreement” has the meaning set forth in the Recitals.

 

“Purchaser” or “Purchasers” has the meaning set forth in the Preamble.

 

“Registrable Securities” means all of (i) the Shares, (ii) the Warrant Shares
and (iii) any securities issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the
foregoing, provided, that the Holder has completed and delivered to the Company
a Selling Stockholder Notice and Questionnaire and provided to the Company any
other information regarding the Holder and the distribution of the Registrable
Securities as the Company may, from time to time, reasonably require for
inclusion in a Registration Statement pursuant to applicable law; and provided,
further, that with respect to a particular Holder, such Holder’s Shares and
Warrant Shares shall cease to be Registrable Securities upon a sale pursuant to
a Registration Statement or Rule 144 under the Securities Act (in which case,
only such security sold by the Holder shall cease to be a Registrable Security).

 

“Registration Statements” means any one or more registration statements of the
Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement (including
without limitation the Initial Registration Statement, the New Registration
Statement and any Remainder Registration Statements), amendments and supplements
to such Registration Statements, including post-effective amendments, all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such Registration Statements.

 

“Remainder Registration Statement” has the meaning set forth in Section 6(a).

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“SEC Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the
Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Selling Stockholder Notice and Questionnaire” means a questionnaire in the form
attached as Annex B hereto, or such other form of questionnaire as may
reasonably be adopted by the Company from time to time.

 

“Shares” means the shares of Common Stock that form a component of the Units
issued to the Purchasers pursuant to the Purchase Agreement.

 

“Trading Day” means a day on which exchanges in the United States are open for
the buying and selling of securities.

 

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“Units” means the Units issued to the Purchasers pursuant to the Purchase
Agreement.

 

“Warrants” means the Warrants that form a component of the Units issued to the
Purchasers pursuant to the Purchase Agreement.

 

“Warrant Shares” means the Warrant Shares issued or issuable upon exercise of
the Warrants.

 

6.                                      Registration.

 

(a)                                 On or prior to the Filing Deadline, the
Company shall prepare and file with the Commission a Registration Statement
covering the resale of all of the Registrable Securities not already covered by
an existing and effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 or, if Rule 415 is not available for
offers and sales of the Registrable Securities, by such other means of
distribution of Registrable Securities as the Holders may reasonably specify
(the “Initial Registration Statement”).  The Initial Registration Statement
shall be on Form S-1 (except if the Company is then ineligible to register for
resale the Registrable Securities on Form S-1, in which case such registration
shall be on such other form available to register for resale the Registrable
Securities as a secondary offering) subject to the provisions of
Section 6(e) and shall contain (except if otherwise required pursuant to written
comments received from the Commission upon a review of such Registration
Statement) the “Plan of Distribution” section attached hereto as Annex A (which
may be modified to respond to comments, if any, provided by the Commission or to
reflect any non-material changes).  Notwithstanding the registration obligations
set forth in this Section 6, if the Commission informs the Company that all of
the Registrable Securities cannot, as a result of the application of Rule 415,
be registered for resale as a secondary offering on a single registration
statement, the Company agrees to promptly (i) inform each of the holders thereof
and use its commercially reasonable efforts to file amendments to the Initial
Registration Statement as required by the Commission and/or (ii) withdraw the
Initial Registration Statement and file a new registration statement (a “New
Registration Statement”), in either case covering the maximum number of
Registrable Securities permitted to be registered by the Commission, on Form S-1
or such other form available to register for resale the Registrable Securities
as a secondary offering. Notwithstanding any other provision of this Agreement
and subject to the payment of Liquidated Damages in Section 6(c), if applicable,
if the Commission or any SEC Guidance sets forth a limitation of the number of
Registrable Securities permitted to be registered on a particular Registration
Statement as a secondary offering, unless otherwise directed in writing by a
Holder as to its Registrable Securities, the number of Registrable Securities to
be registered on such Registration Statement will first be reduced by
Registrable Securities represented by holders of Warrant Shares (applied, in the
case that some Warrant Shares may be registered, to the Holders on a pro rata
basis based on the total number of unregistered Warrant Shares held by such
Holders) and second by Registrable Securities represented by Shares (applied, in
the case that some Shares may be registered, to the Holders on a pro rata basis
based on the total number of unregistered Shares held by such Holders, subject
to a determination by the Commission that certain Holders must be reduced first
based on the number of Shares held by such Holders).  If the Company amends the
Initial Registration Statement or files a New Registration Statement, as the
case may be, under clauses (i) or (ii) above, the Company will use its
commercially reasonable efforts to file with the Commission, as promptly as
allowed by the Commission or SEC Guidance provided to the Company, one or more
registration statements on Form S-1 or such other form available to register for
resale those Registrable Securities that were not registered for resale on the
Initial Registration Statement, as amended, or the New Registration Statement
(the “Remainder Registration Statements”).

 

(b)                                 The Company shall use its commercially
reasonable efforts to cause each Registration Statement to be declared effective
by the Commission as soon as practicable and, with

 

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respect to the Initial Registration Statement or the New Registration Statement,
as applicable, no later than the Effectiveness Deadline (including filing with
the Commission a request for acceleration of effectiveness in accordance with
Rule 461 promulgated under the Securities Act), and shall use its commercially
reasonable efforts to keep each Registration Statement continuously effective
under the Securities Act until the earliest of (i) such time as all of the
Registrable Securities covered by such Registration Statement have been sold by
the Holders; (ii) the date that all the Shares, the Warrant Shares and any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing
cease to be Registrable Securities; and (iii) the second anniversary of the
Closing Date (provided, however, that such two-year period will be extended for
a period of time equal to the period any Purchaser is required to suspend sales
of such Registrable Securities pursuant to the terms of this Agreement) (the
“Effectiveness Period”).  The Company shall, as soon as practicable after the
Effective Date, file a final Prospectus with the Commission, as required by
Rule 424(b).

 

(c)                                  Subject to the provisions of Sections 7(a),
7(h) and 7(i), if (i) the Initial Registration Statement is not filed with the
Commission on or prior to the Filing Deadline, (ii) the Initial Registration
Statement or the New Registration Statement, as applicable, is not declared
effective by the Commission (or otherwise does not become effective) for any
reason on or prior to the Effectiveness Deadline or (iii) after its Effective
Date, (A) such Registration Statement ceases for any reason (including without
limitation by reason of a stop order, or the Company’s failure to update the
Registration Statement), to remain continuously effective as to all Registrable
Securities included in such Registration Statement or (B) the Holders are not
permitted to utilize the Prospectus therein to resell such Registrable
Securities for any reason for more than an aggregate of thirty (30) consecutive
calendar days (or forty-five (45) consecutive calendar days if the Company
receives comments on its Annual Report on Form 10-K for the year ended
December 31, 2013) or sixty (60) calendar days (which need not be consecutive
days) during any twelve (12) month period,  (any such failure or breach in
clauses (i) through (iii) above being referred to as an “Event,” and, for
purposes of clauses (i) or (ii), the date on which such Event occurs, or for
purposes of clause (iii), the date on which such thirty (30), forty-five (45) or
sixty (60) calendar day period is exceeded, being referred to as an “Event
Date”), then, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the earlier of (1) the applicable Event is cured, (2) termination of the
Company’s obligations hereunder, and (3) the Registrable Securities are eligible
for resale pursuant to Rule 144 without manner of sale or volume restrictions,
the Company shall pay to each Holder an amount in Common Stock (valued at the
Closing Sales Price on the Event Date and at the Closing Sales Price on each
monthly anniversary of each such Event Date (if the applicable Event shall not
have been cured by such date)), as liquidated damages and not as a penalty
(“Liquidated Damages”), equal to two percent (2%) of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any
unregistered Registrable Securities then held by such Holder (which remedy shall
be exclusive of any other remedies available under this Agreement or under
applicable law).  The parties agree that (1)  notwithstanding anything to the
contrary herein or in the Purchase Agreement, no Liquidated Damages shall be
payable with respect to any period after the expiration of the Effectiveness
Period (except in respect of an Event described in Section 6(c)(iv) herein), (it
being understood that this sentence shall not relieve the Company of any
Liquidated Damages accruing prior to the Effectiveness Deadline) and (2) in no
event shall the Company be liable in any thirty (30) day period for Liquidated
Damages under this Agreement in excess of two percent (2%) of the aggregate
purchase price paid by the Holders pursuant to the Purchase Agreement, except in
the case of a payment made on an Event Date and the monthly anniversary of such
Event Date.  The Liquidated Damages pursuant to the terms hereof shall apply on
a daily pro-rata basis for any portion of a month prior to the cure of an Event,
except in the case of the first Event Date.  The Company shall not be liable for
Liquidated Damages under this Agreement as to any Registrable Securities which
are not permitted by the Commission to be included in a Registration Statement
from the time that it is determined that such Registrable Securities are not
permitted to be registered until such time

 

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as the provisions of this Agreement as to the Remainder Registration Statements
required to be filed hereunder are triggered, in which case the provisions of
this Section 6(c) shall once again apply, if applicable.  In such case, the
Liquidated Damages shall be calculated to only apply to the percentage of
Registrable Securities which are permitted by the Commission to be included in
such Registration Statement.  The Effectiveness Deadline for a Registration
Statement shall be extended without default or Liquidated Damages hereunder in
the event that the Company’s failure to obtain the effectiveness of the
Registration Statement on a timely basis results from the failure of a Purchaser
to timely provide the Company with information requested by the Company and
necessary to complete the Registration Statement in accordance with the
requirements of the Securities Act (in which the Effectiveness Deadline would be
extended with respect to Registrable Securities held by such Purchaser).
Notwithstanding the foregoing, the Company shall not be obligated to pay any
Holder aggregate Liquidated Damages greater than ten percent (10%) of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement.

 

(d)                                 Each Holder agrees to furnish to the Company
a completed Selling Stockholder Notice and Questionnaire not more than three
(3) Trading Days following the date of this Agreement.  At least five
(5) Trading Days prior to the first anticipated filing date of a Registration
Statement for any registration under this Agreement, the Company will notify
each Holder of the information the Company requires from that Holder other than
the information contained in the Selling Stockholder Notice and Questionnaire,
if any, which shall be completed and delivered to the Company promptly upon
request and, in any event, within three (3) Trading Days prior to the applicable
anticipated filing date.  Each Holder further agrees that it shall not be
entitled to be named as a selling security holder in the Registration Statement
or use the Prospectus for offers and resales of Registrable Securities at any
time (and shall not be entitled to, or eligible to receive, any Liquidated
Damages), unless such Holder has returned to the Company a completed and signed
Selling Stockholder Notice and Questionnaire and a response to any reasonable
requests for further information as described in the previous sentence.  If a
Holder of Registrable Securities returns a Selling Stockholder Notice and
Questionnaire or a request for further information, in either case, after its
respective deadline, the Company shall use its commercially reasonable efforts
to take such actions as are required to name such Holder as a selling security
holder in the Registration Statement or any pre-effective or post-effective
amendment thereto and to include (to the extent not theretofore included) in the
Registration Statement the Registrable Securities identified in such late
Selling Stockholder Notice and Questionnaire or request for further information,
provided, however, that the Company shall not be obligated to file more than one
post-effective amendment or supplement in any 60-day period following the date
such Registration Statement is declared effective for the purpose of naming
Holders as selling security holders who are not named in such Registration
Statement at the time of effectiveness. Each Holder acknowledges and agrees that
the information in the Selling Stockholder Notice and Questionnaire or request
for further information as described in this Section 6(d) will be used by the
Company in the preparation of the Registration Statement and hereby consents to
the inclusion of such information in the Registration Statement.

 

(e)                                  If Form S-1 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form and (ii) undertake to register the Registrable Securities on
Form S-1 promptly after such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-1 covering the Registrable
Securities has been declared effective by the Commission.  The Holders
acknowledge that as of the Closing Date and at the time of the Filing Deadline
the Company will not be eligible to use a Form S-3 to register the resale of the
Registrable Securities.

 

7.                                      Registration Procedures

 

In connection with the Company’s registration obligations hereunder, the Company
shall:

 

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(a)                                 Not less than two (2) Trading Days prior to
the filing of each Registration Statement and not less than one (1) Trading Day
prior to the filing of any related Prospectus or any amendment or supplement
thereto (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and any similar or successor reports or any
prospectus supplement the substance of which is limited to any of the foregoing
filings), (i) furnish to the Holder copies of such Registration Statement,
Prospectus or amendment or supplement thereto, as proposed to be filed, which
documents will be subject to the review of such Holder (it being acknowledged
and agreed that if a Holder does not object to or comment on the aforementioned
documents within such two (2) Trading Day or one (1) Trading Day period, as the
case may be, then the Holder shall be deemed to have consented to and approved
the use of such documents) and (ii) use commercially reasonable efforts to cause
its officers and directors, counsel and independent registered public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act.  The Company shall not
file any Registration Statement or amendment or supplement thereto in a form to
which a Holder reasonably objects in good faith, provided that, the Company is
notified of such objection in writing within the two (2) Trading Day or one
(1) Trading Day period described above, as applicable, and for such period as
the Company and such Holder are attempting in good faith to resolve the
objection of such Holder, any time period or deadline for purposes of
Section 6(c) shall be extended for such period and no Liquidated Damages shall
accrue or be payable for such period.

 

(b)                                 (i) Prepare and file with the Commission
such amendments (including post effective amendments) and supplements, to each
Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep such Registration Statement continuously effective as to the
applicable Registrable Securities for its Effectiveness Period; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and, as so supplemented or
amended, to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably practicable to any comments received from the Commission with respect
to each Registration Statement or any amendment thereto and, as promptly as
reasonably possible, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration
Statement that pertains to the Holders as “Selling Stockholders” but not any
other comments or any comments that would result in the disclosure to the
Holders of material and non-public information concerning the Company; and
(iv) comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by a
Registration Statement during the Effectiveness Period (subject to the terms of
this Agreement) in accordance with the intended methods of disposition by the
Holders thereof as set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented; provided, however, that each Purchaser shall
be responsible for the delivery of the Prospectus, if required, to the Persons
to whom such Purchaser sells any of the Shares or the Warrant Shares (including
in accordance with Rule 172 under the Securities Act), and each Purchaser agrees
to dispose of Registrable Securities in compliance with the “Plan of
Distribution” described in the Registration Statement and otherwise in
compliance with applicable federal and state securities laws. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 7(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous report under the Exchange Act, the Company shall have incorporated
such report by reference into such Registration Statement, if applicable, or
shall file such amendments or supplements with the Commission on the same day on
which the Exchange Act report which created the requirement for the Company to
amend or supplement such Registration Statement was filed.

 

(c)                                  Notify the Holders (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction
to suspend the use of the Prospectus until the requisite changes have been made)
as promptly as reasonably practicable (and, in the case of (i)(A) below, not
less than one

 

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(1) Trading Day prior to such filing): (i)(A) when a Prospectus or any
Prospectus supplement or post effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there
will be a “review” of such Registration Statement and whenever the Commission
comments in writing on any Registration Statement (in which case the Company
shall provide to each of the Holders true and complete copies of all comments
that pertain to the Holders as a “Selling Stockholder” or to the “Plan of
Distribution” and all written responses thereto, but not any other comments or
responses or information that the Company believes would constitute material and
non-public information); and (C) with respect to each Registration Statement or
any post effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information that pertains to the Holders as “Selling Stockholders” or
the “Plan of Distribution”; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; (v) of the occurrence of any event or passage of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in such 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 such Registration Statement, Prospectus or other
documents so that, in the case of such 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 the case of any Prospectus, form of prospectus
or supplement thereto, in light of the circumstances under which they were
made), not misleading and (vi) of the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus, provided that, any and all such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; and provided, further,
that notwithstanding each Holder’s agreement to keep such information
confidential, each such Holder makes no acknowledgement that any such
information is material, non-public information.

 

(d)                                 Use commercially reasonable efforts to avoid
the issuance of, or, if issued, obtain the withdrawal of (i) any order
suspending the effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as practicable.

 

(e)                                  If requested by a Holder, furnish to such
Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission; provided, that
the Company shall have no obligation to provide any document pursuant to this
clause that is available on the Commission’s EDGAR system; provided further,
that the Company shall have no obligation to provide an unredacted form of any
exhibit if the Company has filed or the Commission has granted a confidential
treatment request with respect to such exhibit.

 

(f)                                   Prior to any resale of Registrable
Securities by a Holder, use its commercially reasonable efforts to register or
qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within

 

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the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.

 

(g)                                  If requested by a Holder, cooperate with
such Holder to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to (i) the Holder upon
effectiveness of a Registration Statement covering the resales of the Shares or
(ii) a transferee pursuant to transfers made pursuant to the Registration
Statement, which certificates shall be free, to the extent permitted by the
Purchase Agreement and the Warrants and under law, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may reasonably request.

 

(h)                                 Following the occurrence of any event
contemplated by Section 7(c), as promptly as reasonably practicable (taking into
account the Company’s good faith assessment of any adverse consequences to the
Company and its stockholders of the premature disclosure of such event), prepare
a supplement or amendment, including a post effective amendment, to the affected
Registration Statements or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, no
Registration Statement nor any Prospectus will contain an 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 the case of any Prospectus, form of
prospectus or supplement thereto, in light of the circumstances under which they
were made), not misleading.  If the Company notifies the Holders in accordance
with clauses (iii) through (vi) of Section 7(c) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been made, then
the Holders shall suspend use of such Prospectus.  The Company will use its
commercially reasonable efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable.  The Company shall be entitled to
exercise its right under this Section 7(h) to suspend the availability of a
Registration statement and Prospectus, without the payment of partial Liquidated
Damages otherwise required pursuant to Section 6(c), for periods not to exceed
the time periods set forth in Section 2(c)(iii)(B).

 

(i)                                     The Company may require each selling
Holder to furnish to the Company a certified statement as to (i) the number of
shares of Common Stock beneficially owned by such Holder and any Affiliate
thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”)
affiliations, (iii) any natural persons who have the power to vote or dispose of
the common stock and (iv) any other information as may be requested by the
Commission, FINRA or any state securities commission.  During any periods that
the Company is unable to meet its obligations hereunder with respect to the
registration of Registrable Securities because any Holder fails to furnish such
information within three (3) Trading Days of the Company’s request, any
Liquidated Damages that are accruing at such time as to such Holder only shall
be tolled and any Event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information is delivered
to the Company.

 

(j)                                    Neither the Company nor any subsidiary or
affiliate thereof shall identify any Purchaser as an underwriter in any public
disclosure or filing with the Commission or any trading market on which the
Common Stock is then listed for trading, and any Purchaser being deemed an
underwriter by the Commission shall not relieve the Company of any obligations
it has under this Agreement or any other Transaction Document; provided,
however, that the foregoing shall not prohibit the Company from including the
disclosure found in the “Plan of Distribution” section attached hereto in the
Registration Statement, provided, further, if any Purchaser is required to be
identified as an underwriter by the

 

9

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Commission or the trading market, prior to the Company so naming such Purchaser,
the Company shall promptly notify such Purchaser and such Purchaser shall be
entitled to either (i) agree to be so named, or (ii) withdraw as a selling
stockholder with respect to the applicable Registration Statement.  If any such
Purchaser refuses to be so named as an underwriter or to withdraw from the
applicable Registration Statement, such Purchaser shall not be entitled to any
Liquidated Damages or to recover from the Company any other damages or losses
caused by such refusal.

 

8.                                      Registration Expenses.  All fees and
expenses incident to the Company’s performance of or compliance with its
obligations under this Agreement (excluding any underwriting discounts and
selling commissions and all legal fees and expenses of legal counsel for any
Holder) shall be borne by the Company whether or not any Registrable Securities
are sold pursuant to a Registration Statement.  The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with any trading market on which
the Common Stock is then listed for trading and (B) with respect to compliance
with applicable state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holder), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities), (iii) messenger, telephone and delivery expenses
incurred by the Company, (iv) fees and disbursements of counsel for the Company,
and (v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement.  In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.  In no event shall the Company be
responsible for any underwriting, broker or similar fees or commissions of any
Holder or any legal fees or other costs of the Holders.

 

9.                                      Indemnification.

 

(a)                                 Indemnification by the Company.  The Company
shall, notwithstanding any termination of this Agreement, indemnify, defend and
hold harmless each Holder, the officers, directors, agents, partners, members,
managers, stockholders, Affiliates and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, managers, stockholders, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, expenses, damages, liabilities and costs (including,
without limitation, reasonable costs of preparation and investigation and
reasonable attorneys’ fees, all of which shall be payable quarterly in arrears
as they are incurred) (collectively, “Losses”), that arise out of or are based
upon (i) any untrue or alleged untrue statement of a material fact contained in
any Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, or (ii) any
violation or alleged violation by the Company of the Securities Act, Exchange
Act or any state securities law or any rule or regulation thereunder, in
connection with the performance of its obligations under this Agreement, except
to the extent, but only to the extent, that (A) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates
to such Holder or such Holder’s proposed

 

10

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method of distribution of Registrable Securities and was reviewed and approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that each Holder has approved Annex A hereto for this
purpose) or (B) in the case of an occurrence of an event of the type specified
in Section 7(c)(iii)-(vi), related to the use by a Holder of an outdated or
defective Prospectus after the Company has notified such Holder that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated and defined in Section 10(c) below, to the extent that
following the receipt of the Advice the misstatement or omission giving rise to
such Loss would have been corrected or (C) to the extent that any such Losses
arise out of the Purchaser’s (or any other indemnified Person’s) failure to send
or give a copy of the Prospectus or supplement (as then amended or
supplemented), if required, pursuant to Rule 172 under the Securities Act (or
any successor rule) to the Persons asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such Prospectus or supplement.  The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of an Indemnified Party (as defined in Section 9(c)) and shall survive
the transfer of the Registrable Securities by the Holders.

 

(b)                                 Indemnification by Holders.  Each Holder
shall, severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses (all of which shall be payable quarterly in arrears as they
are incurred), as incurred, arising out of or are based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus, or any form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (A) to the extent that
such untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder expressly for use
therein or (B) to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was
reviewed and approved in writing by such Holder expressly for use in a
Registration Statement (it being understood that the Holder has approved Annex A
hereto for this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (C) in the case of an occurrence of an event
of the type specified in Section 7(c)(iii)-(vi), to the extent related to the
use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in
Section 10(c).  In no event shall the liability of any selling Holder hereunder
be greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities.

 

(c)                                  Conduct of Indemnification Proceedings.  If
any Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably satisfactory
to the Indemnified Party and the payment of all reasonable fees and expenses
incurred in connection with defense thereof; provided, that the failure of any

 

11

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Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, unless such
failure materially prejudices the Indemnifying Party.  An Indemnified Party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless:  (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that, in the reasonable judgment of such counsel, representation of both
parties by the same counsel would be inappropriate under the applicable rules of
professional responsibility (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party); provided, that the Indemnifying Party shall not be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties.  The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed.  No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner
not inconsistent with this Section 9) shall be paid to the Indemnified Party,
quarterly in arrears as they are incurred; provided, that the Indemnified Party
shall promptly reimburse the Indemnifying Party for that portion of such fees
and expenses applicable to such actions for which such Indemnified Party is
finally judicially determined to not be entitled to indemnification hereunder).

 

(d)                                 Contribution.  If a claim for
indemnification under Section 9(a) or 9(b) is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any Losses, then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations.  The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.  The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section 9 was available to such party in
accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 9(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. 
Notwithstanding the provisions of this Section 9(d), (A) no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any

 

12

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damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (B) no
contribution will be made under circumstances where the maker of such
contribution would not have been required to indemnify the Indemnified Party
under the fault standards set forth in this Section 9.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section 9 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

10.                               Miscellaneous.

 

(a)                                 Remedies.  In the event of a breach by the
Company or by a Holder of any of their obligations under this Agreement, each
Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
it of any of the provisions of this Agreement and hereby further agrees that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.

 

(b)                                 Compliance.  Each Holder covenants and
agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it (unless an exemption therefrom is available)
in connection with sales of Registrable Securities pursuant to the Registration
Statement and shall sell the Registrable Securities only in accordance with a
method of distribution described in the Registration Statement.

 

(c)                                  Discontinued Disposition.  By its
acquisition of Registrable Securities, each Holder agrees that, upon receipt of
a notice from the Company of the occurrence of any event of the kind described
in Section 7(c)(iii)-(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under a Registration Statement until it is advised
in writing (the “Advice”) by the Company that the use of the applicable
Prospectus (as it may have been supplemented or amended) may be resumed.  The
Company will use its commercially reasonable efforts to ensure that the use of
the Prospectus may be resumed as promptly as is practicable.  The Company agrees
and acknowledges that any periods during which the Holder is required to
discontinue the disposition of the Registrable Securities hereunder shall be
subject to the provisions of Section 6(c) and Section 7(h).

 

(d)                                 Amendments and Waivers.  The provisions of
this Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, or waived unless the same shall be in writing and
signed by the Company and Holders holding no less than two-thirds of the
Registrable Securities issued and issuable pursuant to the Securities Purchase
Agreement and the Transaction Documents on the Closing Date, provided that any
party may give a waiver as to itself.  Notwithstanding the foregoing,  a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of
the Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

 

(e)                                  Notices.  Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be delivered as set forth in the Purchase Agreement.

 

13

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(f)                                   Successors and Assigns.  This Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of each Holder. 
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.  The Company may not
assign its rights or obligations hereunder (except in connection with a
Fundamental Transaction (as such term is defined in the Warrants), provided that
the Company is in compliance with the provisions governing Fundamental
Transactions set forth in the Warrants) without the prior written consent of all
the Holders of the then outstanding Registrable Securities.  Each Holder may
assign its respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement; provided in each case that (i) the
Holder agrees in writing with the transferee or assignee to assign such rights
and related obligations under this Agreement, and for the transferee or assignee
to assume such obligations, and a copy of such agreement is furnished to the
Company promptly, and in any event within three (3) Business Days, (ii) the
Company is promptly, and in any event within three (3) Business Days, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
transferred or assigned, (iii) at or before the time the effectiveness of such
transfer or assignment, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein and (iv) the
transferee or assignee is an “accredited investor,” as that term is defined in
Rule 501 of Regulation D.

 

(g)                                  Execution and Counterparts.  This Agreement
may be executed in two or more counterparts, each of which when so executed
shall be deemed to be an original and, all of which taken together shall
constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart.  If any
signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature were the original thereof.

 

(h)                                 Governing Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be determined in accordance with the provisions of the Purchase Agreement.

 

(i)                                     Cumulative Remedies.  Except as provided
herein, the remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.

 

(j)                                    Severability.  If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their good faith reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.  It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.

 

(k)                                 Headings.  The headings in this Agreement
are for convenience only and shall not limit or otherwise affect the meaning
hereof.

 

(l)                                     Independent Nature of Purchasers’
Obligations and Rights.  The obligations of each Purchaser under this Agreement
are several and not joint with the obligations of any other Purchaser

 

14

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hereunder, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser hereunder.  The decision of each
Purchaser to purchase the Securities pursuant to the Purchase Agreement has been
made independently of any other Purchaser.  Nothing contained herein or in any
other agreement or document delivered at any closing, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement.  Each Purchaser acknowledges that no other Purchaser has acted
as agent for such Purchaser in connection with making its investment hereunder
and that no Purchaser will be acting as agent of such Purchaser in connection
with monitoring its investment in the Securities or enforcing its rights under
the Transaction Documents (as such term is defined in the Warrants).  Each
Purchaser shall be entitled to protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose.  The Company acknowledges that each of the
Purchasers has been provided with the same Registration Rights Agreement for the
purpose of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser.

 

(m)                             Termination.  This Agreement shall be
automatically terminated with respect to any Holder and shall have no force or
effect with respect to such Holder upon the termination of the Purchase
Agreement with respect to such Holder (other than such Holder’s obligations
under Section 9).  Nothing in this Section 6(m) shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement.

 

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

 

 

AUDIOEYE, INC.

 

 

 

 

 

By:

 

 

 

Nathaniel T. Bradley

 

 

Chief Executive Officer

 

 

 

 

 

PURCHASER:

 

 

 

Each Purchaser executing the Signature Page in the form attached hereto and
delivering the same to the Company or its agents shall be deemed to have
executed this Registration Rights Agreement and agreed to the terms hereof.

 

16

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Registration Rights Agreement

Purchaser Counterpart Signature Page

 

The undersigned, desiring to enter into this Registration Rights Agreement
between the undersigned, AudioEye, Inc., a Delaware corporation (the “Company”),
and the other parties thereto, in or substantially in the form furnished to the
undersigned, hereby agrees to join the Registration Rights Agreement as a party
thereto, with all the rights and privileges appertaining thereto, and to be
bound in all respects by the terms and conditions thereof.

 

IN WITNESS WHEREOF, the undersigned has executed this Registration Rights
Agreement as of the date first written above.

 

 

PURCHASER:

 

 

 

NAME OF INVESTING ENTITY:

 

 

 

 

 

 

 

 

 

AUTHORIZED SIGNATORY:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

ADDRESS FOR NOTICE:

 

 

 

c/o:

 

 

 

 

Street:

 

 

 

 

City/State/Zip:

 

 

 

 

Attention:

 

 

 

 

Tel:

 

 

 

 

Fax:

 

 

 

 

Email:

 

 

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ANNEX A

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock issued to the selling stockholders
and issuable upon exercise of the warrants issued to the selling stockholders to
permit the resale of these shares of common stock by the holders of the shares
of common stock and warrants from time to time after the date of this
prospectus.  We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock.  We will bear all fees and
expenses incident to our obligation to register the offer and sale of the shares
of common stock.

 

The selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent’s commissions.  The shares of common stock may be sold on any national
securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale, in the over-the-counter market or in transactions
otherwise than on these exchanges or systems or in the over-the-counter market
and in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at
negotiated prices.  These sales may be effected in transactions, which may
involve crosses or block transactions.  The selling stockholders may use any one
or more of the following methods when selling shares:

 

·                  ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

 

·                  block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

 

·                  purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

 

·                  an exchange distribution in accordance with the rules of the
applicable exchange;

 

·                  privately-negotiated transactions;

 

·                  settlement of short sales entered into after the effective
date of the registration statement of which this prospectus is a part;

 

·                  broker-dealers may agree with the selling stockholders to
sell a specified number of such shares at a stipulated price per share;

 

·                  through the writing or settlement of options or other hedging
transactions, whether such options are listed on an options exchange or
otherwise;

 

·                  a combination of any such methods of sale; and

 

·                  any other method permitted pursuant to applicable law.

 

The selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, as
permitted by that rule, or Section 4(1) under the

 

18

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Securities Act, if available, rather than under this prospectus, provided that
they meet the criteria and conform to the requirements of those provisions.

 

Broker dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales.  If the selling stockholders effect such
transactions by selling shares of common stock to or through underwriters,
broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from
the selling stockholders or commissions from purchasers of the shares of common
stock for whom they may act as agent or to whom they may sell as principal. 
Such commissions will be in amounts to be negotiated, but, except as set forth
in a supplement to this prospectus, in the case of an agency transaction will
not be in excess of a customary brokerage commission in compliance with FINRA
Rule 2440; and in the case of a principal transaction a markup or markdown in
compliance with FINRA IM-2440.

 

In connection with sales of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the shares of
common stock in the course of hedging in positions they assume.  The selling
stockholders may also sell shares of common stock short and deliver shares of
common stock covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales.  The selling
stockholders may also loan or pledge shares of common stock to broker-dealers
that in turn may sell such shares, to the extent permitted by applicable law. 
The selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the warrants or shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act,
amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.  The selling stockholders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.

 

The selling stockholders and any broker-dealer or agents participating in the
distribution of the shares of common stock may be deemed to be “underwriters”
within the meaning of Section 2(11) of the Securities Act in connection with
such sales and in which case may be subject to certain statutory liabilities
under the Exchange Act.

 

The selling stockholders will be subject to the applicable prospectus delivery
requirements of the Securities Act unless subject to an exemption therefrom,
including under Rule 172 thereunder.

 

Each selling stockholder has informed us that it is not a registered
broker-dealer and does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the common stock.  Upon
our being notified in writing by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of common
stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the

 

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number of shares involved, (iii) the price at which such the shares of common
stock were sold, (iv) the commissions paid or discounts or concessions allowed
to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this prospectus, and (vi) other facts material to the
transaction.  In no event shall any broker-dealer receive fees, commissions and
markups, which, in the aggregate, would exceed 8.0%.

 

Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers.  In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of
the shares of common stock registered pursuant to the registration statement, of
which this prospectus forms a part.

 

Each selling stockholder and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, to the extent applicable,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the shares of common stock by the selling stockholder and any
other participating person.  To the extent applicable, Regulation M may also
restrict the ability of any person engaged in the distribution of the shares of
common stock to engage in market-making activities with respect to the shares of
common stock.  All of the foregoing may affect the marketability of the shares
of common stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, including, without limitation,
SEC filing fees and expenses of compliance with state securities or “blue sky”
laws; provided, however, that each selling stockholder will pay all underwriting
discounts and selling commissions, if any and any related legal expenses
incurred by it.  We will indemnify the selling stockholders against certain
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreement, or the selling stockholders will be
entitled to contribution.  We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
stockholders specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to contribution.

 

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