REGISTRATION RIGHTS AGREEMENT
Exhibit
99.2
This
Registration Rights Agreement (this “Agreement”) is made and entered into as of
July 14, 2005, by and among American Technology Corporation, a Delaware
corporation (the “Company”), and the investors signatory hereto (each a
“Purchaser” and collectively, the “Purchasers”).
This
Agreement is made pursuant to the Securities Purchase Agreement, dated as of
the
date hereof among the Company and the Purchasers (the “Purchase
Agreement”).
The
Company and the Purchasers hereby agree as follows:
1. 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
respective meanings set forth in this Section 1:
“Calculation
Ratio” means, with respect to each Holder, a fraction where: (x) the numerator
equals the sum of (i) the number of Shares and issued Warrant Shares held by
such Holder which, at the time of determination, cannot be sold under Rule
144(k) without volume limitations and (ii) the aggregate number of Warrant
Shares issuable upon exercise in full of the Warrant held by such Holder and
(y)
the denominator equals the sum of: (i) the aggregate number of Shares sold
to
the Original Purchaser thereof pursuant to the Purchase Agreement and (ii)
the
aggregate number of Warrant Shares issuable on the Closing Date upon exercise
in
full of the Warrants purchased by the Original Purchaser pursuant to the
Purchase Agreement. In the event a Holder holds Shares, Warrants or Warrant
Shares deriving from more than one Original Purchaser, the Calculation Ratio
and
the liquidated damages awardable pursuant to Section 2(b) shall be calculated
and awarded separately with respect to those Shares, Warrants and Warrant Shares
deriving from each Original Purchaser.
“Effective
Date” means the date that the Registration Statement is first declared effective
by the Commission.
“Effectiveness
Date” means the earlier of (a) the 90th day following the Closing Date, and (b)
the fifth Trading Day following the date on which the Company is notified by
the
Commission that the Registration Statement will not be reviewed or is no longer
subject to further review and comments.
“Effectiveness
Period” shall have the meaning set forth in Section 2(a).
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Filing
Date” means the 30th day following the Closing Date.
“Holder”
or “Holders” means the holder or holders, as the case may be, from time to time
of Registrable Securities.
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“Indemnified
Party” shall have the meaning set forth in Section 5(c).
“Indemnifying
Party” shall have the meaning set forth in Section 5(c).
“Losses”
shall have the meaning set forth in Section 5(a).
“New
Warrants” shall have the meaning set forth in the Warrants.
“Original
Purchaser” means with respect to the Shares, Warrants and Warrant Shares held by
any Holder, the Purchaser (which may be the Holder) which purchased from the
Company on the Closing Date the Shares or the Warrants held by such Holder,
or
which purchased from the Company on the Closing Date the Warrants pursuant
to
which the Warrant Shares held by such Holder were purchased, as the case may
be.
“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 any
portion of the Registrable Securities covered by the 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.
“Registrable
Securities” means (i) the Shares, (ii) the shares of Common Stock issuable upon
exercise of the Warrants and (iii) any shares of Common Stock issued upon any
stock split or similar event in respect of, or as a dividend or other
distribution upon, any of the foregoing securities, until such time as such
securities have been sold to the public pursuant to a registration statement
or
other means such that they are no longer “restricted securities” under the
Securities Act.
“Registration
Statement” means the registration statement required to be filed hereunder in
accordance with Section 2, including (in each case) the Prospectus, amendments
and supplements to such registration statement or Prospectus, including pre-
and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
“Rule
144” means Rule 144 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
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.
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“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.
“Securities
Act” means the Securities Act of 1933, as amended.
“Shares”
means the shares of Common Stock issued or issuable to the Purchasers pursuant
to the Purchase Agreement.
“Special
Counsel” means Proskauer Rose LLP.
“Warrants”
means (i) the Warrants issued or issuable under the Purchase Agreement, and
(ii)
any New Warrants issuable under the Warrants.
2. Registration.
(a) On
or
prior to the Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all 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. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible
to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) and
shall contain (except if otherwise agreed by the Holders) the “Plan of
Distribution” attached hereto as Annex A. The Company shall cause the
Registration Statement to be declared effective under the Securities Act as
soon
as possible but, in any event, no later than the Effectiveness Date, and shall
use its best efforts to keep the Registration Statement continuously effective
under the Securities Act until the date which is five years after the date
that
the Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by the Registration
Statement have been sold or may be sold without volume restrictions pursuant
to
Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”). The
Company shall not be obligated to enter into any underwriting agreement for
the
sale of any of the Registrable Securities.
(b) If:
(i)
the Registration Statement is not filed on or prior to the Filing Date (if
the
Company files the Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a)
hereof, the Company shall not be deemed to have satisfied this clause (i)),
or
(ii) after the Effective Date, the Registration Statement ceases to be effective
and available to the Holders thereunder as to all of the Registrable Securities
(whether upon the delivery of a notice pursuant to Section 6(d) or otherwise)
at
any time prior to the expiration of its Effectiveness Period without becoming
available to the Holders thereunder as to all of the Registrable Securities
within twenty Trading Days pursuant to the delivery of an Advice, or (iii)
the
exercise rights of the Holders pursuant to the Warrants are suspended for any
reason, or (iv) the Registration Statement shall not be declared effective
by
the Commission on or prior to the Effectiveness Date (any such failure or breach
being referred to as an “Event,” and for purposes of clause (i), (iii) or (iv)
the date on which such Event occurs, or for purposes of clause (ii) the date
which such twenty day-period is
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exceeded,
being referred to as “Event Date”), then, in addition to any other rights
available to the Holders, the Company shall pay to each Holder as liquidated
damages and not as a penalty the applicable Daily Liquidated Damages Percentage
of the product obtained by multiplying (x) the aggregate purchase price paid
by
the Original Purchaser of the applicable Registrable Securities pursuant to
the
Purchase Agreement and (y) such Holder’s Calculation Ratio, for each day
beginning with the Event Date and ending on the day immediately prior to the
date such Event is cured. If multiple Events pursuant to clauses (i), (ii)
and
(iv) exist on a given day, liquidated damages shall be payable with respect
to
only one Event pursuant to clauses (i), (ii) and (iv) on such day, but shall
continue to accrue until the date on which all then existing Events pursuant
to
clauses (i), (ii) and (iv) are cured. The Company shall make payment of
liquidated damages no later than the first Trading Day of the calendar month
next succeeding the month in which such damages accrue. If the Company fails
to
pay any liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of
12%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such liquidated
damages are due until such amounts, plus all such interest thereon, are paid
in
full. For purposes of this Section 2(b), “Daily Liquidated Damages Percentage”
means (i) for any day prior to and including the 180th
day
following the Closing Date, 0.0165%, and (ii) thereafter,
0.033%.
(c) Notwithstanding
anything herein to the contrary, the Company shall prepare and file a supplement
to the Prospectus (if required and permitted for such purpose under the
Securities Act) within seven (7) Trading Days following the written request
of
the holder of a New Warrant. If in the opinion of legal counsel for the Company
a post-effective amendment to the Registration Statement, or a new Registration
Statement is required to register the resale of Warrant Shares underlying the
New Warrant, the holder of the New Warrant will have the rights set forth in
Section 6(e).
(d) The
Company may require each selling Holder to furnish to the Company a Registration
Statement Questionnaire in the form attached to the Purchase Agreement as
Appendix 1, as such form may be revised from time to time by the Company to
correspond to information required by the Commission. Each Holder shall furnish
the information required in a Registration Statement Questionnaire within five
Trading Days of the Company’s request. During any periods that the Company is
unable to meet its obligations hereunder with respect to the registration of
the
Registrable Securities solely because any Holder fails to furnish such
information within five Trading Days of the Company’s request, any liquidated
damages that are accruing at such time in respect of such Holder’s Registrable
Securities shall be tolled and any Event Date that may otherwise occur solely
because of such delay shall be suspended, until such information is delivered
to
the Company. Notwithstanding anything to the contrary in this Agreement, the
Company may, at its option, remove from the applicable Registration Statement,
the Registrable Securities of any Holder who shall fail to furnish any
information required by the Commission in accordance with this subsection
2(d).
3. Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
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(a) Not
less
than two Trading Days prior to the filing of the Registration Statement or
any
related Prospectus or any amendment or supplement thereto, the Company shall
furnish to the Holders and the Special Counsel copies of all such documents
proposed to be filed which documents will be subject to the review of such
Holders and the Special Counsel. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities or the Special
Counsel shall reasonably object in good faith.
(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within fifteen (15) days, to any comments
received from the Commission with respect to the 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 the Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act with respect
to
the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the Holders thereof set forth in the Registration Statement
as
so amended or in such Prospectus as so supplemented.
(c) Notify
the Holders of Registrable Securities to be sold and the Special Counsel as
promptly as reasonably possible (and, in the case of (i)(A) below, not less
than
three Trading Days prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one Trading Day following the
day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C)
with
respect to the 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 during the period of effectiveness
of
the Registration Statement for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance
by
the Commission 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) 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 (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible
for
inclusion therein or 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.
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(d) Use
its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of
(i) any order suspending the effectiveness of the Registration Statement, or
(ii) any suspension of the qualification (or exemption from qualification)
of
any of the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(e) Furnish
to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein
by
reference, 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.
(f) Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of
the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice pursuant to Section
3(c) to discontinue disposition of Registrable Securities pursuant to the
Registration Statement.
(g) Prior
to
any public offering of Registrable Securities, use its best efforts to register
or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United States as
any
Holder reasonably requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable
the
disposition in such jurisdictions of the Registrable Securities covered by
the
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 or 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.
(h) Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement, which certificates shall be free, to
the
extent permitted by the Purchase Agreement, 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 request.
(i) Upon
the
occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement 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, neither the Registration Statement nor such 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 light of the circumstances under which they were made, not
misleading.
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(j) Comply
with all applicable rules and regulations of the Commission.
4. Registration
Expenses.
All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the 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 Nasdaq
SmallCap Market or any other Trading Market, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the
Company and up to $5,000 of the fees and disbursements of Special Counsel,
(v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) 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 broker
or similar commissions, or, except to the extent provided for in the preceding
sentence, any legal fees or other costs of the Holders.
5. Indemnification.
(a) Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Holder, the officers, directors, agents, investment advisors
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, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against
any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable costs of preparation and reasonable attorneys’ fees) and
expenses (collectively, “Losses”), as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
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 form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) 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 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 expressly 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 the Holder has approved Annex
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A
hereto
for this purpose) or (2) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), 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 6(d). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the
Company is aware in connection with the transactions contemplated by this
Agreement.
(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, as incurred, arising solely out of or based solely
upon: (x) such Holder’s failure to comply with the prospectus delivery
requirements of the Securities Act or (y) any 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 arising solely out
of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that (1) 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 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 expressly approved
in writing by such Holder expressly for use in the 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 (2) in the case of an occurrence of an event of the type specified
in
Section 3(c)(ii)-(v), 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 6(d). 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
giving rise to such indemnification obligation.
(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 fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that
it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
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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 a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party
(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 the reasonable fees and expenses of one separate counsel shall
be at
the expense of the Indemnifying Party). 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. 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.
All
reasonable 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) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses
to
the extent it is finally judicially determined that such Indemnified Party
is
not entitled to indemnification hereunder).
(d) Contribution.
If a
claim for indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), 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 Section 5(c), 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 was available to such party in
accordance with its terms.
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The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(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 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which
the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that
such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud
by
such Holder.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6. 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. Notwithstanding the foregoing, the Holders
shall have no right to take any action to restrain, enjoin or otherwise delay
any registration statement filed by or proposed to be filed by the Company
as a
result of any controversy that may arise with respect to the interpretation
or
implementation of this Agreement.
(b) No
Piggyback on Registrations.
Except
as and to the extent specified in Schedule 3.1(v) of the Purchase Agreement,
neither the Company nor any of its security holders (other than the Holders
in
such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders. Except as and to the extent specified
in
Schedule 3.1(v) of the Purchase Agreement, the Company has not previously
entered into any agreement granting any registration rights with respect to
any
of its securities to any Person which have not been fully
satisfied.
(c) Compliance.
Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(d) Discontinued
Disposition.
Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the
kind
described in Section 3(c), such Holder will forthwith discontinue disposition
of
such Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the “Advice”) by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.
-10-
(e) Regulation
M.
Each
Holder agrees not to take any action with respect to any distribution deemed
to
be made pursuant to such Registration Statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.
(f) Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so request
in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered,
subject to customary underwriter cutbacks applicable to all holders of
registration rights.
(g) Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence, may
not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and the Holder or Holders of no less than 66 2/3% of
the
then outstanding Registrable Securities; provided however that any such
amendment, modification, supplement, waiver or consent that adversely effects
any Holder or class of Holders in a manner that does not apply uniformly to
all
Holders, Shares, Warrants or Warrant Shares, as applicable, shall require the
written consent of such adversely affected Holder or class. 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 certain Holders and that
does not directly or indirectly affect the rights of other Holders must be
given
by Holders of all of the Registrable Securities to which such waiver or consent
relates, provided, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(h) Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the
Trading Day after the date of transmission, if such notice or communication
is
delivered via facsimile at the facsimile telephone number specified in this
Agreement later than 6:30 p.m. (New York City time) on any date and earlier
than
11:59 p.m. (New York City time) on such date, (iii) the Trading Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to
be
given. The address for such notices and communications shall be as
follows:
-11-
|
If
to the Company:
|
American
Technology Corporation
00000
Xxxxxxx Xxxxx Xxxxx Xxxxx
Xxx
Xxxxx, XX 00000
Attn:
Chief Financial Officer
Facsimile
No.: (000) 000-0000
|
|
With
a copy to:
|
Sheppard,
Mullin, Xxxxxxx & Xxxxxxx LLP
00000
Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attn:
Xxxx X. Xxxxxxx, Esq.
Facsimile
No.: (000) 000-0000
|
|
If
to a Purchaser:
|
To
the address set forth under such Purchaser’s name on the signature pages
hereto.
|
|
With
a copy to:
|
Proskauer
Rose LLP
0000
Xxxxxxxx
Xxx
Xxxx, XX 00000
Attn.:
Xxxx Xxxxxxx, Esq.
Fax
No.: (000) 000-0000
|
|
If
to any other Person who is then the registered Holder:
|
|
|
To
the address of such Holder as it appears in the stock transfer books
of
the Company
|
|
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
(i) 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. Except to its successors, the Company may not assign its rights or
obligations hereunder without the prior written consent of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Purchase Agreement.
(j) Execution
and Counterparts.
This
Agreement may be executed in any number of 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. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
-12-
(k) Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective Affiliates, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York, Borough of
Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the New York Courts for the adjudication of
any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any New York Court, or that such Proceeding has been commenced
in an improper or inconvenient forum. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in
any
such Proceeding by mailing a copy thereof via registered or certified mail
or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Agreement and agrees that such service
shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives,
to
the fullest extent permitted by applicable law, any and all right to trial
by
jury in any legal proceeding arising out of or relating to this Agreement or
the
transactions contemplated hereby. If either party shall commence a Proceeding
to
enforce any provisions of this Agreement, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
(l) Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(m) 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 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.
(n) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(o) End
of
Effectiveness Period.
At the
end of the Effectiveness Period the Holders shall discontinue sales of Shares
and Warrant Shares pursuant to such Registration Statement upon receipt of
notice from the Company of its intention to remove from registration the shares
covered by such Registration Statement which remain unsold.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES TO FOLLOW]
-13-
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
|
AMERICAN
TECHNOLOGY CORPORATION
|
|||
|
By:
|
_________________________________________________
|
||
|
|
|
|
Name:
|
|
|
|
|
Title:
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES OF PURCHASER TO FOLLOW]
-14-
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
| [ ] | |||
|
By:
|
_________________________________________________
|
||
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
Address
for Notice:
|
|||
| [ ] | |||
|
Facsimile
No.: [ ]
|
|||
|
Attn:
[ ]
|
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-15-
Annex
A
Plan
of Distribution
The
selling stockholders may, from time to time, sell any or all of their shares
of
common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. 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;
|
|
·
|
short
sales;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per share;
and
|
|
·
|
a
combination of any such methods of
sale.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
The
selling stockholders may also engage in short sales against the box, puts and
calls and other transactions in our securities or derivatives of our securities
and may sell or deliver shares in connection with these trades.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might
be
deemed to be underwriting discounts or commissions under the Securities Act.
Discounts, concessions, commissions and similar selling expenses, if any,
attributable to the sale of shares will be borne by a selling stockholder.
The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
-1-
In
connection with the sale of our common stock or interests therein, 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 common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. 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 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 under this
prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
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 the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as selling stockholders under this prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event,
any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the shares
of common stock. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under
the
Securities Act.
The
selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed
sale
of shares of common stock by any selling stockholder. If we are notified by
any
selling stockholder that any material arrangement has been entered into with
a
broker-dealer for the sale of shares of common stock, if required, we will
file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.
-2-
