EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 14, 2005
(this "Agreement"), is made by and among ADVANCED TECHNOLOGY INDUSTRIES, INC., a
Delaware corporation, with headquarters located at 000 Xxxxxxx Xxxxxx, #00X, Xxx
Xxxx, Xxx Xxxx 00000 (the "Company"), and each individual or entity (other than
the Company) named on the signature page hereto (collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of even date, among the Investors and
the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Investors the Debentures; and
WHEREAS, the Debentures are convertible into shares of Common
Stock (the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu of accrued
interest through the Maturity Date (as that term is defined in the Debentures))
upon the terms and subject to the conditions contained in the Debentures; and
WHEREAS, upon and subject to the terms of the Securities
Purchase Agreement, the Company has agreed to issue the Warrants to the
Investors in connection with the issuance of the Debentures, and the Warrants
may be exercised for the purchase of shares of Common Stock (the "Warrant
Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities (as defined
below);
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
(b) "Held Shares Value" means, for shares of Common Stock
acquired by an Investor upon a conversion of a Debenture within the thirty (30)
days preceding the Restricted Sale Date, but not yet sold by such Investor, the
principal amount of the Debentures converted into such Conversion Shares;
provided, however, that if such Investor effected more than one such conversion
during such thirty (30) day period and sold less than all of such shares, the
sold shares shall be deemed to be derived first from the conversions in the
sequence of such conversions (that is, for example, until the number of shares
from the first of such conversions have been sold, all shares shall be deemed to
be from the first conversion; thereafter, from the second conversion until all
such shares are sold).
(c) "Investors" means the Investors and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Debentures, Warrants
or Registrable Securities.
(d) "Payment Shares" means shares of Common Stock issued by
the Company as provided in Section 2(b) below.
(e) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(f) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
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(g) "Registrable Securities" means, collectively, the
Conversion Shares, the Warrant Shares and the Payment Shares.
(h) "Registration Statement" means a registration statement of
the Company under the Securities Act covering Registrable Securities on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form S-2 or other appropriate form which shall include only the
Registrable Securities and the such other securities as may be permitted by
Section 5(b) hereof.
(i) "Required Effective Date" means the relevant Initial
Required Effective Date or Increased Required Effective Date (as those terms are
defined below).
(j) "Required Filing Date" means October 5, 2005.
(k) "Restricted Sale Date" means the first date, other than a
date during a Permitted Suspension Period (as defined below), on which the
Investors are restricted from making sales of Registrable Securities covered by
any previously effective Registration Statement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon
as practicable after the Certificate of Incorporation Amendment Filing Date,
either a Registration Statement or an amendment to an existing Registration
Statement, in either event registering for resale by the Investors a sufficient
number of shares of Common Stock for the Investors to sell the Registrable
Securities, but in no event less than the number of shares equal to one hundred
fifty percent (150%) of the aggregate of (x) the number of shares into which the
Debentures and all interest thereon through the Maturity Date would be
convertible at the time of filing of such Registration Statement (assuming for
such purposes that all Debentures had been issued, had been eligible to be
converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such issuance, eligibility, accrual of interest or
conversion had in fact occurred as of such date) and (y) the number of Warrant
Shares which would be issuable on exercise of the Warrants (assuming for such
purposes that all Warrants had been issued, had been eligible for exercise and
had been exercised for Warrant Shares in accordance with their terms, whether or
not such issuance, eligibility or exercise had in fact occurred as of such
date). Unless otherwise specifically agreed to in writing in advance by the
Investors, the Registration Statement shall state that, in accordance with Rule
416 and 457 under the Securities Act, it also covers such indeterminate number
of additional shares of Common Stock as may become issuable upon conversion of
the Debentures or exercise of the Warrants to prevent dilution resulting from
stock splits, or stock dividends. If the Certificate of Incorporation Amendment
Filing Date occurs the Company will use its reasonable best efforts to cause
such Registration Statement to be declared effective on a date (the "Initial
Required Effective Date") which is no later than the earlier of (Y) five (5)
days after oral or written notice by the SEC that it may be declared effective
or (Z) November 30, 2005.
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(ii) If at any time (an "Increased Registered Shares Date")
after a Registration Statement has been filed with the SEC, the number of shares
of Common Stock represented by the Registrable Shares, issued or to be issued as
contemplated by the Transaction Agreements, exceeds the aggregate number of
shares of Common Stock then registered or sought to be registered in a
Registration Statement which has not yet been declared effective, the Company
shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register, in the aggregate, at least the number of shares
(the "Increased Shares Amount") equal to (A) the number of shares
theretofore issued on conversion of the Debentures (including any
interest paid on conversion by the issuance of Conversion Shares) ,
plus (B) the number of shares theretofore issued on exercise of the
Warrants, plus (C) the sum of:
(I) the number of shares into which the unconverted Debentures
and all interest thereon through the Maturity Date would be
convertible at the date of such filing (assuming for such
purposes that all such Debentures had been issued, had been
eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or
not such issuance eligibility, accrual of interest, or
conversion had in fact occurred as of such date), and
(II) the number of Warrant Shares which would be issuable on
exercise of the unexercised Warrants (assuming for such
purposes that all such Warrants had been issued, had been
eligible for exercise and had been exercised for Warrant
Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of
such date), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Shares Amount
over the aggregate number of shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.
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(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the SEC by the Required
Filing Date, the Company will make payment to the Investors in such amounts and
at such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the
Registrable Securities is not effective by the relevant Required Effective Date
or if there is a Restricted Sale Date, then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid
by the Company to an Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Debentures held by
such Investor for the period from the date following the relevant Required
Filing Date or the Required Effective Date or a Restricted Sale Date, as the
case may be, to the first relevant Computation Date, and thereafter to each
subsequent Computation Date. The "Periodic Amount Percentage" means (A) one
percent (1%) of the Purchase Price of all Debentures for the first two
Computation Dates after the relevant Required Filing Date; and (B) two percent
(2%) of the Purchase Price of all Debentures to any Computation Date thereafter.
Anything in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the relevant Effective Date the Purchase Price shall be
deemed to refer to the sum of (X) the principal amount of all Debentures not yet
converted and (Y) the Held Shares Value. By way of illustration and not in
limitation of the foregoing, if the Registration Statement is filed on or before
the Required Filing Date, but is not declared effective by January 6, 2006, the
Periodic Amount will aggregate two percent (2%).
(iv) Each Periodic Amount will be payable by the
Company, except as provided in the other provisions of subparagraph (v), in cash
or other immediately available funds to the applicable Investor (1) on the day
after the Required Filing Date, the Required Effective Date or a Restricted Sale
Date, as the case may be, and (2) on the earlier of (A) each thirtieth day
thereafter, (B) the third business day after the date the Registration Statement
is filed or is declared effective, or (C) the third business day after the
Registration Statement has its restrictions removed after the relevant Effective
Date, in each case without requiring demand therefor by the Investors.
(v) Notwithstanding the provisions of the immediately
preceding subparagraph (iv),
(i) at the option of the Company, exercisable in its discretion on the
date the Periodic Amount is due; provided, however, that the Company
may exercise this discretion if, but only if the Registration Statement
covering the Payment Shares is then effective; or
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(ii) at the option of an Investor, exercisable in its sole and absolute
discretion by written notice to the Company at any time before the
Periodic Amount is paid,
all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to such Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the then
applicable Conversion Price; provided, further that the Delivery Date for the
Payment Shares shall be three (3) business days after the date the Periodic
Amount is due (if the election is made by the Company) or after such Investor
gives the notice contemplated by clause (ii) of this subparagraph.
(vi) The parties acknowledge that the damages which
may be incurred by the Investors if the Registration Statement is not filed by
the Required Filing Date or the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that the
amounts payable pursuant to the foregoing provisions of this Section 2(b)
represent a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of such damages.
(vii) Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the filing or effectiveness of the Registration Statement
occurs because of an act of, or a failure to act or to act timely by any
Investor or its counsel.
(viii) "Computation Date" means (A) the date which is
the earlier of (1) thirty (30) days after the Required Filing Date, any relevant
Required Effective Date or a Restricted Sale Date, as the case may be, or (2)
the date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with respect
to payments due as contemplated by Section 2(b) hereof) or is declared effective
or has its restrictions removed or the shares of the Company's stock are listed
on the Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b) hereof) or
is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
(ix) Notwithstanding anything herein to the contrary
the remedy set forth in this Section 2(b) shall be the sole remedy for the
Investors if the Registration Statement covering the Registrable Securities is
not filed in proper form with the SEC by the Required Filing Date or if the
Registration Statement covering the Registrable Securities is not effective by
the relevant Required Effective Date or if there is a Restricted Sale Date.
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3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC by the later of
(x) the Required Filing Date and (y) five business days after the Certificate of
Incorporation Amendment Filing Date, a Registration Statement with respect to
not less than the number of Registrable Securities provided in Section 2(a)
above, and thereafter use its reasonable best efforts to cause such Registration
Statement relating to Registrable Securities to become effective by the Required
Effective Date and keep the Registration Statement effective at all times, other
than during Permitted Suspension Periods, during the period (the "Registration
Period") continuing until the earlier of (i) the date when the Investors may
sell all Registrable Securities under Rule 144 without volume or other
restrictions or limits or (ii) the date the Investors no longer own any of the
Registrable Securities, which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period (except during Permitted Suspension Periods), and, during
the Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the
Investors (which, until further notice, shall be deemed to be Xxxxxxx & Xxxxxx
LLP, Attn: Xxxxxx Xxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
(but not less than three (3) business days) prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects,
unless the Company reasonably determines that such document is required by law
to be so filed;
(d) Notify the Investors and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to each Investor); and (D) with respect to the Registration
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Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;
(e) Furnish to the Investors and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as the Investors may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify the Investors of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and, subject to Section 4(c), use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement or
other appropriate filing with the SEC to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to the
Investors as the Investors may reasonably request;
(g) [intentionally omitted ]
(h) Comply with Regulation FD or any similar rule or
regulation regarding the dissemination of information regarding the Company, and
in furtherance of the foregoing, and not in limitation thereof, not disclose to
any Investor any non-public material information regarding the Company;
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(i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market and the quotation of the Registrable
Securities on the Principal Trading Market;
(j) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date;
(k) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to each Investor whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities (including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions, subject to compliance with applicable
law, including, without limitation, prospectus delivery requirements; and
(l) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investors of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) Each Investor, by the Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(b) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(d)(iii) or 3(f), above, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(d)(iii) or 3(f)
and, if so directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice;
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(c) Notwithstanding anything in this Agreement to the
contrary, if at any time or from time to time after the date of effectiveness of
the Registration Statement, the Company notifies an Investor in writing that the
effectiveness of the Registration Statement is suspended for any reason, whether
due to a Potential Material Event or otherwise, such Investor shall not offer or
sell any Registrable Securities, or engage in any other transaction involving or
relating to the Registrable Securities, from the time of the giving of such
notice until such Investor receives written notice from the Company that such
the effectiveness of the Registration Statement has been restored, whether
because the Potential Material Event has been disclosed to the public or it no
longer constitutes a Potential Material Event or otherwise; PROVIDED, HOWEVER,
that the Company may not so suspend the right to such holders of Registrable
Securities during the periods the Registration Statement is required to be in
effect other than during a Permitted Suspension Period (and the applicable
provisions of Section 2(b) shall apply with respect to any such suspension other
than during a Permitted Suspension Period) . The term "Permitted Suspension
Period" means up to two such suspension periods during any consecutive 12-month
period, each of which suspension period shall not either (i) be for more than
ten (10) business days or (ii) begin less than ten (10) business days after the
last day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period)
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses
(other than underwriting discounts and commissions of an Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company.
(b) Except for the Registration Rights Agreements attached as
Exhibits to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004 (the "Filed Registration Rights Agreements") neither the
Company nor any of its subsidiaries has, as of the date hereof, nor shall the
Company nor any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except for the Filed Registration Rights Agreements
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person that is currently in effect. The Company shall be entitled to
include all the shares required to be registered hereunder, under the Filed
Registration Rights Agreements and under any registration rights agreement
entered into after the date of this Agreement and prior to August 15, 2005, that
is not inconsistent with the rights granted to the Holders in this Agreement or
that otherwise conflicts with the provisions hereof on a single registration
statement under the Securities Act.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor, and
each Lender Control Person (each, an "Lender Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
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(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively referred to as "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse each Investor, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(I) apply to any Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such Lender Indemnified Party expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(b) hereof; (II) be available to
the extent such Claim is based on a failure of any Lender Indemnified Party to
deliver or cause to be delivered the prospectus made available by the Company or
the amendment or supplement thereto made available by the Company; (III) be
available to the extent such Claim is based on the delivery of a prospectus by
any Lender Indemnified Party after receiving notice from the Company under
Section 3(d)(iii) or 3(f) or Section 4(c) hereof (other than a notice regarding
the effectiveness of the Registration Statement or any amendment or supplement
thereto), or (IV) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Each Investor will
indemnify the Company and its officers, directors and agents and each Company
Control Person (each, an "Company Indemnified Party", and together with each
Lender Indemnified Party, each an "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement or the amendment or supplement thereto, subject to such
limitations and conditions as are applicable to the indemnification provided by
the Company to this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Registrable Securities by an
Investor pursuant to Section 9.
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(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party. In
case any such action is brought against any Indemnified Party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such Indemnified Party
under this Section 6 for any legal or other reasonable out-of-pocket expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Party provided such counsel is of the
opinion that all defenses available to the Indemnified Party can be maintained
without prejudicing the rights of the indemnifying party. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view
to making available to the Investors the benefits of Rule 144 promulgated under
the Securities Act or any other similar rule or regulation of the SEC that may
at any time permit the Investors to sell securities of the Company to the public
without Registration ("Rule 144"), for a period of two years after the date
hereof, the Company agrees to:
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(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to an Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) if not available on the SEC's XXXXX
system, a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit such Investor to sell such
securities pursuant to Rule 144 without Registration; and
(d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent instructions to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company for which purpose
it is agreed that Investor's Counsel shall be deemed acceptable if not
given by Ropes and Xxxx that, based on the Rule 144 Certificate,
Securities Being Sold may be sold pursuant to the provisions of Rule
144, even in the absence of an effective Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by an Investor to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debentures) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned and (c) written evidence of the transferee's
assumption of an Investor's obligations under this Agreement.
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10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors
who hold an eighty (80%) percent interest of the Registrable Securities (as
calculated by the stated value of the Debentures). Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to an Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.
(e) The Company and the Investors hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with this Agreement or any of the other Transaction Agreements.
14
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(k) Neither party shall be liable for consequential damages as
a result of any delay under this Agreement.
(l) This Agreement (including to the extent relevant the
provisions of other Transaction Agreements) constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
ADVANCED TECHNOLOGY INDUSTRIES, INC.
By:_____________________________
Name:
Title:
INVESTORS:
Alpha Capital AG
By:_____________________________
By:_____________________________
Xxx Nebenzhal
By:_____________________________
Xxxx Xxxxxxxxxx
By:_____________________________
Xxxx Xxxxx
00
Xxxxxx Xxxxx Center
By:_____________________________
By:_____________________________
Xxxxxx Xxxxxxxx
By:_____________________________
Xxxx Xxxxxxxxxx
By:____________________________
Ateres Michoel
By:_____________________________
Xxxxx Xxxxxx
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By:_____________________________
Xxxxx Xxxxxx
By:_____________________________
Xxxxxx Xxxxxxx
Nite Capital LP
By: ____________________________
18
