EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of February 14, 2004 (this
"Agreement"), by and among Advance Nanotech, Inc., a Colorado corporation (the
"Company"), and the Purchasers (as defined below).
W I T N E S S E T H :
WHEREAS, the Company is offering (the "Offering") an aggregate of up to
One Million, Seven Hundred Thousand (1,700,000) shares of its Common Stock, par
value $0.001 per share (the "Common Stock") and up to Eight Hundred Fifty
Thousand (850,000) of its stock purchase warrants (the "Warrants"), each Warrant
to purchase one share of the Common Stock (each such share underlying a Warrant,
a "Warrant Share") (the securities offered in the Offering being sometimes
hereinafter referred to as (the "Securities"), in each case subject to an up to
10% overallotment at the Company's sole discretion;
WHEREAS, the Company desires to issue and sell to the persons listed on
Schedule A, attached hereto (each a "Purchaser," and collectively, the
"Purchasers"), the Securities as set forth in one or more Securities Purchase
Agreements entered into or to be entered into by and between the Company and
each Purchaser (the "Securities Purchase Agreement");
WHEREAS, the Company and the Purchasers have entered or will have
entered into a Securities Purchase Agreement;
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Securities Purchase Agreement that the Company
provide for the rights set forth in this Agreement; and
WHEREAS, certain terms used in this Agreement are defined in Section 3
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties hereto hereby agree as
follows:
1. REGISTRATION RIGHTS
1.1 REQUIRED REGISTRATION. The Company shall use its
reasonable best efforts to accomplish the following:
(x) prepare and file a "REQUIRED REGISTRATION
STATEMENT" (as such term is hereafter
defined) with the SEC by the date (the "REQUIRED FILING DATE") which is not more
than sixty (60) days after the first date to occur (the "COMMENCEMENT DATE") of
the following dates: the Final Closing Date (as such term is defined in the
Securities Purchase Agreement) or the termination of the Offering, if there is
no Final Closing Date; and
(y) cause either of the following (the
"EFFECTIVENESS ACTIONS") to occur by a date
(the "REQUIRED EFFECTIVENESS DATE") which is not more than one hundred and
twenty (120) days after the Commencement Date: (A) cause the SEC to declare the
Required Registration Statement to be effective or (B) cause the SEC to
communicate to the Company, orally or in writing, that the Required Registration
Statement will not be reviewed or that the Commission has no further comments
thereupon, whereupon the Company shall cause the Required Registration Statement
to be effective.
The failure of the Company to file a Required Registration Statement prior to
the Required Filing Date, or to cause either of the Effectiveness Actions to
occur prior to the Required Effectiveness Date, shall be deemed to be a
"NON-REGISTRATION EVENT". As used in this Agreement, the term "REQUIRED
REGISTRATION STATEMENT" shall mean a registration statement on Form SB-1 or any
successor form, or any other form selected by the Company that is available to
it under the Securities Act which conforms with all applicable rules and
regulations, with respect to all the Registrable Securities beneficially owned
by the Purchasers following the final Closing (as such term is defined in the
Securities Purchase Agreement) to permit the offer and re-sale from time to time
of such Registrable Securities in accordance with the methods of distribution
provided by the Purchasers.
The Company and the Purchasers agree that the Purchasers will suffer
damages if a Non-Registration Event occurs, and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if a
Non-Registration Event should occur, then for each thirty (30) day period during
the pendency of such Non-Registration Event, the Company shall deliver to each
Purchaser, as liquidated damages, an amount equal to one and one-half percent
(1.5%) of the aggregate Purchase Price (as such term is defined in the
Securities Purchase Agreement) paid by such Purchaser for Securities (as such
term is defined in the Securities Purchase Agreement), with such payment being
pro-rated for any Non-Registration Event of less than thirty (30) days. Each
such payment is hereinafter referred to as a "NON-REGISTRATION EVENT PENALTY
PAYMENT". Notwithstanding the foregoing, in no event shall the Company be
obligated to pay more than one Non-Registration Event Penalty Payment to the
same Purchaser in respect of a substantively concurrent failure to perform;
i.e., if a Non-Registration Event Penalty Payment is accruing due to failure to
file a Required Registration Statement prior to the Required Filing Date, a
separate Non-Registration Event Penalty Payment shall not be due for a
contemporaneous failure to cause an Effectiveness Action to occur prior to the
Required Effectiveness Date. The Company, at its sole discretion, shall pay the
Non-Registration Event Penalty Payment in cash or in shares of its Common Stock,
provided, that the Company may not elect to pay some Purchasers in cash while it
pays others in Common Stock. In the event that the Company elects to pay the
Non-Registration Event Penalty Payment to a Purchaser in shares of its Common
Stock, it shall deliver unregistered, legended shares of its Common Stock whose
aggregate Market Price is equal to the Non-Registration Event Penalty Payment
due to such Purchaser.
The Company shall use its reasonable best efforts to keep such Required
Registration Statement continuously effective (the "EFFECTIVE PERIOD") for a
period of two years after the Required Registration Statement first becomes
effective plus whatever period of time as shall equal any period, if any, during
such one year period in which the Company was not current with its reporting
requirements under the Exchange Act. To the extent that the Registrable
Securities are not sold under the Required Registration Statement, the
Purchasers shall have the registration rights as enumerated in Sections 1.3 and
1.4 of this Agreement.
1.2 CURRENT PUBLIC INFORMATION. The Company covenants that it
will use reasonable best efforts to file all reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and will use reasonable best efforts to take such
further action as the Purchaser may reasonably request, all to the extent
required to enable the holders of Registrable Securities to sell Registrable
Securities pursuant to Rule 144 or Rule 144A adopted by the SEC under the
Securities Act or any similar rule or regulation hereafter adopted by the SEC.
The Company shall, upon the request of a holder of Registrable Securities (each
a "DESIGNATED HOLDER" and collectively, the "DESIGNATED HOLDERS"), deliver to
such Designated Holder a written statement as to whether it has complied with
such requirements.
1.3 FORM S-3 REGISTRATION. If the Company is eligible to use
Form S-3 under the Securities Act (or any similar successor form) and shall
receive from a Purchaser and its permitted transferees (the "S-3 INITIATING
HOLDERS") a written request or requests that the Company effect a registration
on such Form S-3, including without limitation, pursuant to Rule 415 of the
Securities Act and any related qualification or compliance with respect to all
or part of the Registrable Securities owned by the S-3 Initiating Holders and
its permitted transferees (provided, that the S-3 Initiating Holders registering
Registrable Securities in such registration (together with all other holders of
Registrable Securities to be included in such registration) propose to sell
their Registrable Securities at an aggregate price (calculated based upon the
Market Price of the Registrable Securities on the date of filing of the Form S-3
with respect to such Registrable Securities) to the public of no less than the
lesser of $6,000,000 or the remaining Registrable Securities), the Company shall
(i) promptly give written notice of the proposed registration, and any related
qualification or compliance, to all other holders of Registrable Securities; and
(ii) as soon as practicable, use reasonable best efforts to file and effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of the Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other holder in
the group of holders joining in such request as is specified in a written
request given within fifteen (15) days after the holder's receipt of such
written notice from the Company. No registration requested by any S-3 Initiating
Holders pursuant to this Section 1.3 shall be deemed a registration pursuant to
Section 1.1.
1.4 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than
pursuant to a registration pursuant to Section 1.3 or a registration on
Form S-4 or S-8 or any successor or similar forms) and the registration
form to be used may be used for the registration of Registrable
Securities, whether or not for sale for its own account, the Company
will give prompt written notice (but in no event less than twenty five
(25) days before the anticipated filing date) to all holders of
Registrable Securities, and such notice shall describe the proposed
registration and distribution and offer to all holders of Registrable
Securities the opportunity to register the number of Registrable
Securities as each such holder may request. The Company will include in
such registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within
fifteen (15) days after the holders' receipt of the Company's notice (a
"PIGGYBACK REGISTRATION").
(b) REASONABLE EFFORTS. The Company shall use all reasonable
best efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Registrable Securities
requested to be included in a Piggyback Registration to be included on
the same terms and conditions as any similar securities of the Company
or any other security holder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the
intended method of distribution thereof.
(c) WITHDRAWAL. Any Designated Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 1.4 by giving written
notice to the Company of its request to withdraw; provided, that in the
event of such withdrawal (other than pursuant to Section 1.4(e) hereof,
the Company shall not be required to reimburse such holder for the fees
and expenses referred to in Section 1.6(t) hereof incurred by such
holder prior to such withdrawal, unless such withdrawal was due to a
material adverse change to the Company. The Company may withdraw a
Piggyback Registration at any time prior to the time it becomes
effective.
(d) PRIORITY IN REGISTRATIONS. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing (with a copy to
each party hereto requesting registration of Registrable Securities)
that in their opinion the number of Registrable Securities requested to
be included on a secondary basis in such registration exceeds the
number which can be sold in such offering without materially and
adversely affecting the marketability of such primary or secondary
offering (the "COMPANY OFFERING QUANTITY"), then the Company will
include in such registration securities in the following priority:
(i) First, the Company will include the securities
the Company proposes to sell.
(ii) Second, the Company will include all Registrable
Securities requested to be included by any Designated Holder,
and if the number of such Designated Holders' securities
requested to be included exceeds the Company Offering
Quantity, then the Company shall include only each such
requesting Designated Holders' pro rata share of the shares
available for registration by the Purchaser, based on the
amount of securities held by such holder.
(iii) Third, the Company will include other
securities of the Company proposed to be included in the
registration.
(e) CUTBACK. If, as a result of the proration provisions of
this Section 1.4, any Designated Holders shall not be entitled to
include all Registrable Securities in a Piggyback Registration that
such Designated Holders has requested to be included, such holder may
elect to withdraw his request to include Registrable Securities in such
registration.
1.5 HOLDBACK AGREEMENTS.
(a) To the extent not inconsistent with applicable law, in
connection with a public offering of securities of the Company, upon
the request of the Company or the underwriter, in the case of an
underwritten public offering of the Company's securities, each holder
of Registrable Securities who owns at least 5% of the outstanding
capital stock of the Company on an "as-converted" basis or is an
officer or director of the Company will not effect any public sale or
distribution (other than those included in the registration) of any
securities of the Company, or any securities, options or rights
convertible into or exchangeable or exercisable for such securities
during the fourteen (14) days prior to and the ninety (90) -day period
beginning on such effective date, unless (in the case of an
underwritten public offering) the managing underwriters otherwise agree
to a shorter period of time. Notwithstanding the foregoing, no
Designated Holder shall be required to enter into any such "lock up"
agreement unless and until all of the Company's executive officers and
directors execute substantially similar "lock up" agreements and the
Company uses commercially reasonable efforts to cause each holder of
more than 5% of its outstanding capital stock to execute substantially
similar "lock up" agreements. Neither the Company nor the underwriter
shall amend, terminate or waive a "lock up" agreement unless each "lock
up" agreement with a Designated Holder is also amended or waived in a
similar manner or terminated, as the case may be.
(b) The Company shall have the right at any time to require
that the Designated Holders of Registrable Securities suspend further
open market offers and sales of Registrable Securities pursuant to a
Registration Statement filed hereunder whenever in the reasonable
judgment of the Company after consultation with counsel there is or may
be in existence a Changing Event (as defined in this Agreement). The
Company will give the Designated Holders notice of any such suspension
and will use all reasonable best efforts to minimize the length of such
suspension.
1.6 REGISTRATION PROCEDURES. Whenever any Registrable
Securities are required to be registered pursuant to this Agreement,
the Company will use reasonable best efforts to effect the registration
and the sale of such Registrable Securities in accordance with the
intended methods of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
(a) prepare and file with the SEC on any form, if not so
otherwise provided for, for which the Company qualifies, as soon as
practicable after the end of the period within which requests for
registration may be given to the Company, a Registration Statement with
respect to the offer and sale of such Registrable Securities and
thereafter use reasonable best efforts to cause such Registration
Statement to become effective and remain effective until the completion
of the distribution contemplated thereby or the required time period
under this Agreement, whichever is shorter (and before filing such
Registration Statement, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities
initiating such Registration Statement copies of all such documents
proposed to be filed); PROVIDED, HOWEVER, that the Company may postpone
for not more than sixty (60) calendar days the filing or effectiveness
of any registration statement required pursuant to this Agreement other
than a Required Registration Statement required to be filed pursuant to
Section 1.1 of this Agreement if the Board of Directors, in its good
faith judgment, determines that such registration could reasonably be
expected to have a material adverse effect on the Company and its
stockholders including, but not limited to, any proposal or plan by the
Company to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer
or similar transaction then under consideration (in which event, the
Designated Holders shall be entitled to withdraw such request, and if
such request is withdrawn such registration will not count as a
registration statement pursuant to this Agreement) by delivering
written notice to the Designated Holders who requested inclusion of
Registrable Securities in such Registration Statement of its
determination to postpone such Registration Statement; provided,
further, that (i) the Company shall not disclose any information that
could be deemed material non-public information to any holder of
Registrable Securities included in a Registration Statement that is
subject to such postponement, (ii) in no event may the Company postpone
a filing requested hereunder more than twice in any twelve (12) month
period; PROVIDED, THAT any two postponements must be at least three (3)
months apart; PROVIDED, FURTHER, THAT the Company shall delay the
effectiveness of any such registration statement if the SEC rules and
regulations prohibit the Company from declaring a Registration
Statement effective because its financial statements are stale at a
time when its fiscal year has ended or it has made an acquisition
reportable under Item 2 of Form 8-K or any other similar situation
until the earliest time in which the SEC would allow the Company to
declare a Registration Statement effective (provided that the Company
shall use its reasonable best efforts to cure any such situation as
soon as possible so that the Registration Statement can be made
effective at the earliest possible time);
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for a period provided for in the applicable Section
above, or if not so provided, for a period of twelve (12) (for a
registration pursuant to Rule 415 of the Securities Act) or, if such
Registration Statement relates to an underwritten offering, such period
as in the opinion of counsel for the underwriters a prospectus is
required by law to be delivered in connection with sales of Registrable
Securities by an underwriter or dealer or (ii) such shorter period as
will terminate when all of the securities covered by such Registration
Statement have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
Registration Statement (but in any event not before the expiration of
any longer period required under the Securities Act), and to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement. In the event
the Company shall give any notice pursuant to Section 1.5(b), the
applicable time period mentioned in this Section 1.6(b) during which a
Registration Statement is to remain effective shall be extended by the
number of days during the period from and including the date of the
giving of such notice pursuant to Section 1.5(b) to and including the
date when each seller of a Registrable Security covered by such
Registration Statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 1.6(e);
(c) furnish to each seller of Registrable Securities, prior to
filing a Registration Statement, such number of copies of such
Registration Statement, each amendment and supplement thereto, the
prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) register or qualify such Registrable Securities under such
other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller and to keep each such registration or
qualification (or exemption therefrom) effective during the period
which the Registration Statement is required to be kept effective
(provided, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event (a "CHANGING
EVENT") as a result of which, the prospectus included in such
Registration Statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made, and, at the request of any such seller, the Company will as soon
as possible prepare and furnish to such seller (a "CORRECTION EVENT") a
reasonable number of copies of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company
are then listed and, if not so listed, to be listed on The Nasdaq Stock
Market or the Nasdaq SmallCap trading system or the Nasdaq OTC Bulletin
Board;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
Registration Statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form with any underwriter, if any
selected by the Company) and take all such other actions as the holders
of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities, including
causing its officers to participate in "road shows" and other
information meetings organized by an underwriter, if any, provided that
any underwriter shall have been selected by the Company;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant
to such Registration Statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's employees and independent accountants
to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(j) before filing a Registration Statement or prospectus or
any amendments or supplements thereto, the Company shall provide
counsel selected by the Designated Holders holding a majority of the
Registrable Securities being registered in such registration ("HOLDERS'
COUNSEL") and any other Inspector (as defined below) with an adequate
and appropriate opportunity to review and comment on such Registration
Statement and each prospectus included therein (and each amendment or
supplement thereto) to be filed with the SEC, subject to such documents
being under the Company's control, and the Company shall notify the
Holders' Counsel and each seller of Registrable Securities of any stop
order issued or threatened by the SEC;
(k) otherwise comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first
full calendar quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a Registration Statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any securities included in such
Registration Statement for sale in any jurisdiction, the Company will
use its reasonable best efforts promptly to obtain the withdrawal of
such order;
(m) obtain one or more comfort letters, dated the effective
date of such Registration Statement (and, if such registration includes
an underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by comfort letters as the holders of a majority of
the Registrable Securities being sold reasonably request;
(n) provide a legal opinion of the Company's outside counsel,
dated the effective date of such Registration Statement (and, if such
registration includes an underwritten offering, dated the date of the
closing under the underwriting agreement), with respect to the
Registration Statement, each amendment and supplement thereto, the
prospectus included therein (including the preliminary prospectus) and
such other documents relating thereto in customary form and covering
such matters of the type customarily covered by legal opinions of such
nature;
(o) subject to execution and delivery of mutually satisfactory
confidentiality agreements, make available at reasonable times for
inspection by any seller of Registrable Securities, any managing
underwriter participating in any disposition of such Registrable
Securities pursuant to a Registration Statement, Holders' Counsel and
any attorney, accountant or other agent retained by any managing
underwriter (each, an "INSPECTOr" and collectively, the "INSPECTORS"),
during normal business hours of Company at Company's corporate office
in New York, New York and without unreasonable disruption of Company's
business or unreasonable expense to Company and solely for the purpose
of due diligence with respect to the registration statement,
non-confidential, legally disclosable, financial and other records and
pertinent corporate documents of the Company and its subsidiaries
(collectively, the "RECORDS") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's and its subsidiaries' officers, directors and employees,
and the independent public accountants of the Company, to make
available for inspection, at such parties' offices during their
respective normal business hours and without unreasonable disruption of
their business or unreasonable expense to Company and solely for the
purpose of due diligence with respect to the Registration Statement all
information reasonably requested by any such Inspector in connection
with such Registration Statement;
(p) subject to execution and delivery of mutually satisfactory
confidentiality agreements, keep Holders' Counsel advised as to the
initiation and progress of any registration hereunder including, but
not limited to, providing Holders' Counsel with all correspondence with
the SEC;
(q) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD; and
(r) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(s) CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS PURSUANT TO
THIS AGREEMENT. It shall be a condition precedent to the obligations of
Company to take any action pursuant to this Agreement that each of the
holders whose Registrable Securities are to be registered pursuant to
this Agreement shall furnish such holder's written agreement to be
bound by the terms and conditions of this Agreement prior to
performance by Company of its obligations under this Agreement. By
executing and delivering this Agreement, each holder represents and
warrants that the information concerning, and representations and
warranties by, such holder, including information concerning the
securities of the Company held, beneficially or of record, by such
holder, furnished to the Company pursuant to the Securities Purchase
Agreement and the Purchasers Questionnaire delivered pursuant thereto,
are true and correct as if the same were represented and warranted on
the date of any registration statement by the Company pursuant to this
Agreement or any amendment thereto, and each holder covenants to
immediately notify the Company in writing of any change in any such
information, representation or warranty and to refrain from offering or
disposing of any securities pursuant to any such registration statement
until the Company has reflected such change in the registration
statement. By executing and delivering this Agreement, each such holder
further agrees to furnish any additional information as the Company may
reasonably request in connection with any action to be taken by the
Company pursuant to this Agreement, to pay such holder's expenses which
are not required to be paid by the Company pursuant to this Agreement.
(t) All expenses incident to the Company's performance of or
compliance with this Agreement including, without limitation, all
registration and filing fees payable by the Company, fees and expenses
of compliance by the Company with securities or blue sky laws, printing
expenses of the Company, messenger and delivery expenses of the
Company, and fees and disbursements of counsel for the Company and all
independent certified public accountants of the Company, underwriters
(excluding discounts and commissions, which will be paid by the sellers
of Registrable Securities) and other Persons retained by the Company
will be borne by the Company, and the Company will pay its internal
expenses (including, without limitation, all salaries and expenses of
its Employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability
insurance of the Company and the expenses and fees for listing the
securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on The
Nasdaq National Market, Nasdaq SmallCap Market or the OTC Bulletin
Board trading system. The Company shall have no obligation to pay any
underwriting discounts or commissions attributable to the sale of
Registrable Securities and any of the expenses incurred by any holder
of Registrable Securities which are not payable by the Company, such
costs to be borne by such holder or holders, including, without
limitation, underwriting fees, discounts and expenses, if any,
applicable to any holder's Registrable Securities; fees and
disbursements of counsel or other professionals that any holder may
choose to retain in connection with the registration statement filed
pursuant to this Agreement; selling commissions or stock transfer taxes
applicable to the Registrable Securities registered on behalf of any
holder; any other expenses incurred by or on behalf of such holder in
connection with the offer and sale of such Holder's Registrable
Securities other than expenses which the Company is expressly obligated
to pay pursuant to this Agreement.
1.7 Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the
fullest extent permitted by law, each holder of Registrable Securities
and its general or limited partners, officers, directors, members,
managers, employees, advisors, representatives, agents and Affiliates
(collectively, the "REPRESENTATIVES") from and against any loss, claim,
damage, liability, attorney's fees, cost or expense and costs and
expenses of investigating and defending any such claim (collectively,
the "Losses"), joint or several, and any action in respect thereof to
which such holder of Registrable Securities or its Representatives may
become subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened, in
respect thereto) arise out of or are based upon (i) any untrue or
alleged untrue statement of a material fact contained in any
Registration Statement, prospectus or preliminary or summary prospectus
or any amendment or supplement thereto or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the
Company shall reimburse each such holder of Registrable Securities and
its Representatives for any legal or any other expenses incurred by
them in connection with investigating or defending or preparing to
defend against any such Loss, action or proceeding; provided, however,
that the Company shall not be liable to any such holder or other
indemnitee in any such case to the extent that any such Loss (or action
or proceeding, whether commenced or threatened, in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission, made in such Registration
Statement, any such prospectus or preliminary or summary prospectus or
any amendment or supplement thereto, in reliance upon, and in
conformity with, written information prepared and furnished to the
Company by any holder of Registrable Securities or its Representatives
expressly for use therein or by failure of any holder of Registrable
Securities to deliver a copy of the Registration Statement or
prospectus or any amendments or supplements thereto after the Company
has furnished such holder of Registrable Securities with a sufficient
number of copies of the same. In no event, however, shall the Company
be liable for indirect, incidental or consequential or special damages
of any kind. In connection with an underwritten offering, the Company
will indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to
the indemnification of the holders of Registrable Securities.
(b) In connection with any Registration Statement in which the
holders of Registrable Securities are participating pursuant to this
Agreement, the holders of Registrable Securities will furnish to the
Company in writing such information as the Company reasonably requests
for use in connection with any such Registration Statement or
prospectus and, to the fullest extent permitted by law, each such
holder of Registrable Securities will indemnify and hold harmless the
Company and its Representatives from and against any Losses, severally
but not jointly, and any action in respect thereof to which the Company
and its Representatives may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon (i) the purchase or sale of Registrable Securities during a
suspension as set forth in Section 1.5(b) after written receipt of
notice of such suspension, (ii) any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, prospectus
or preliminary or summary prospectus or any amendment or supplement
thereto, or (iii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but, with respect to clauses (ii) and (iii)
above, only to the extent that such untrue statement or omission is
made in such Registration Statement, any such prospectus or preliminary
or summary prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information prepared and
furnished to the Company by such holder of Registrable Securities
expressly for use therein or by failure of such holder of Registrable
Securities to deliver a copy of the Registration Statement or
prospectus or any amendments or supplements thereto after the Company
has furnished such holder of Registrable Securities with a sufficient
number of copies of the same, and such holder of Registrable Securities
will reimburse the Company and each Representative for any legal or any
other expenses incurred by them in connection with investigating or
defending or preparing to defend against any such Loss, action or
proceeding; PROVIDED, HOWEVER, that such holder of Registrable
Securities shall not be liable in any such case to the extent that
prior to the filing of any such Registration Statement or prospectus or
amendment or supplement thereto, such holder of Registrable Securities
has furnished in writing to the Company information expressly for use
in such Registration Statement or prospectus or any amendment or
supplement thereto which corrected or made not misleading information
previously furnished to the Company. In no event, however, shall any
holder be liable for indirect, incidental or consequential or special
damages of any kind.
(c) Promptly after receipt by any Person in respect of which
indemnity may be sought pursuant to Section
1.7(a) or 1.7(b) (an "INDEMNIFIED PARTY") of notice of any
claim or the commencement of any action, the Indemnified Party shall,
if a claim in respect thereof is to be made against the Person against
whom such indemnity may be sought (an "INDEMNIFYING PARTY"), promptly
notify the Indemnifying Party in writing of the claim or the
commencement of such action; PROVIDED, that the failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party otherwise than
under Section 1.7(a) or 1.7(b) except to the extent of any actual
prejudice resulting therefrom. If any such claim or action shall be
brought against an Indemnified Party, and it shall notify the
Indemnifying Party thereof, the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with
any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party of
its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation; PROVIDED, that the Indemnified Party shall have the
right to employ separate counsel to represent the Indemnified Party and
its Representatives who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Indemnified
Party against the Indemnifying Party, but the fees and expenses of such
counsel shall be for the account of such Indemnified Party unless (i)
the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the written opinion
of counsel to such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim
or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all Indemnified Parties. No Indemnifying
Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability arising out of
such claim or proceeding other than the payment of monetary damages by
the Indemnifying Party on behalf of the Indemnified Party. Whether or
not the defense of any claim or action is assumed by the Indemnifying
Party, such Indemnifying Party will not be subject to any liability for
any settlement made without its consent, which consent will not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 1.7 is
unavailable to the Indemnified Parties in respect of any Losses
referred to herein, 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 benefits
received by the Company on the one hand and the holders of the
Registrable Securities on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Company
on the one hand and the holders of the Registrable Securities on the
other in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of each holder of
the Registrable Securities on the other shall be determined by
reference to, among other things, whether any action taken, including
any untrue or alleged untrue statement of a material fact, or the
omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the holders of the Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 1.7(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the Losses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 1.7, no holder of the Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such holder were
offered to the public exceeds the amount of any Losses which such holder has
otherwise paid by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Each holder's obligations to contribute pursuant to this
Section 1.7 is several in the proportion that the proceeds of the offering
received by such holder of the Registrable Securities bears to the total
proceeds of the offering received by all the holders of the Registrable
Securities and not joint.
1.8 PARTICIPATION IN REGISTRATIONS.
(a) No Person may participate in any registration hereunder
which is underwritten unless such Person (i) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to
approve such arrangements (including, without limitation, pursuant to
the terms of any over-allotment or "green shoe" option requested by the
managing underwriter(s), PROVIDED, that each holder of Registrable
Securities shall not be required to sell more than the number of
Registrable Securities that such holder has requested the Company to
include in any registration) and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of
such underwriting arrangements and this Agreement.
(b) Each Person that is participating in any registration
under this Agreement agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
1.6(e) above, such Person will forthwith discontinue the disposition of
its Registrable Securities pursuant to the Registration Statement and
all use of the Registration Statement or any prospectus or related
document until such Person's receipt of the copies of a supplemented or
amended prospectus as contemplated by such Section 1.6(e) and, if so
directed by the Company, will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in holder's
possession of such documents at the time of receipt of such notice.
Furthermore, each holder agrees that if such holder uses a prospectus
in connection with the offering and sale of any of the Registrable
Securities, the holder will use only the latest version of such
prospectus provided by Company
2. TRANSFERS OF CERTAIN RIGHTS
2.1 TRANSFER. The rights granted to the Purchaser under this
Agreement are non-transferable except for a transfer, without any
consideration whatsoever, to a person or entity which is an Affiliate
of the transferor, and any such transfer, in any case, shall be subject
to the provisions of Sections 2.2 and 2.3; provided that nothing
contained herein shall be deemed to permit an assignment, transfer or
disposition of the Registrable Securities in violation of the terms and
conditions of the Securities Purchase Agreement, or applicable law.
2.2 TRANSFEREES. Any permitted transferee to whom rights under
this Agreement are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which such transferee
agrees to be bound by the obligations imposed upon the Purchaser under
this Agreement to the same extent as if such transferee were a
Purchaser hereunder.
2.3 SUBSEQUENT TRANSFEREES. A transferee to whom rights are
transferred pursuant to this Section 2 may not again transfer such
rights to any other person or entity, other than as provided in
Sections 2.1 or 2.2 above.
3. CERTAIN DEFINITIONS The following capitalized terms shall have the
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly controls, or is under
control with, or is controlled by such Person. As used in this definition,
"control" (including with its correlative meanings, "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
"Closing Price" means, with respect to the Registrable Securities (a) if the
shares are listed or admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap Market, the last
reported sales price as reported on such exchange or market; (b) if the shares
are not listed or admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap Market, the average of
the last reported closing bid and asked quotation for the shares as reported on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or a similar service if NASDAQ is not reporting such information; (c)
if the shares are not listed or admitted for trading on any national securities
exchange or included in The Nasdaq National Market or Nasdaq SmallCap Market or
quoted by NASDAQ or a similar service, the average of the last reported bid and
asked quotation for the shares as quoted by a market maker in the shares (or if
there is more than one market maker, the bid and asked quotation shall be
obtained from two market makers and the average of the lowest bid and highest
asked quotation). In the absence of any available public quotations for the
Common Stock, the Board and a majority of the Holders shall determine in good
faith the fair value of the Common Stock.
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Employees" means any current, former, or retired employee, office consultant,
advisor, independent contractor, agent, officer or director of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Market Price" means, on any date of determination, the average of the daily
Closing Price of the Registrable Securities for the immediately preceding five
(5) on which the national securities exchanges are open for trading.
"Person" means any individual, company, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental body or other entity.
"Registrable Securities" means, subject to the immediately following sentence,
(i) shares of Common Stock and the Warrant Shares underlying the Warrants
acquired by the applicable Purchaser from the Company in the Offering pursuant
to the Securities Purchase Agreement, and (ii) any shares of Common Stock issued
or issuable pursuant to this Agreement or directly or indirectly with respect to
the securities referred to in clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares of Common
Stock constituting Registrable Securities, such shares of Common Stock will
cease to be Registrable Securities when they (x) have been effectively
registered under the Securities Act and disposed of in accordance with a
Registration Statement covering them, (y) have been sold to the public pursuant
to Rule 144 (or by similar provision under the Securities Act), or (z) are
eligible for resale under Rule 144(k) (or by similar provision under the
Securities Act) without any limitation on the amount of securities that may be
sold under paragraph (e) thereof.
"Registration Statement" means any registration statement of the Company filed
under the Securities Act which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such registration
statement.
"SEC" means the United States Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
4. MISCELLANEOUS.
4.1 Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply to the full extent set forth herein with respect
to (i) the Registrable Securities, (ii) any and all shares of Common
Stock into which the Registrable Securities are converted, exchanged or
substituted in any recapitalization or other capital reorganization by
the Company and (iii) any and all equity securities of the Company or
any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in
respect of, in conversion of, in exchange for or in substitution of,
the Registrable Securities and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The
Company shall cause any successor or assign (whether by merger,
consolidation, sale of assets or otherwise) to enter into a new
registration rights agreement with the Designated Holders on terms
substantially the same as this Agreement as a condition of any such
transaction.
4.2 NO INCONSISTENT AGREEMENTS. The Company has not and shall
not enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Purchasers in this
Agreement or grant any additional registration rights to any Person or
with respect to any securities which are not Registrable Securities
which are prior in right to or materially inconsistent with the rights
granted in this Agreement. The Parties acknowledge and agree that the
Company has granted registration rights heretofore and may grant
registration rights hereafter, which are or shall be pari passu with
the registration rights of the Purchasers, and shall not be deemed to
conflict with this covenant.
4.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement
may be amended and the Company may take action herein prohibited, or
omit to perform any act herein required to be performed by it, if, but
only if, the Company has obtained the written consent of holders of at
least a majority of the Registrable Securities then in existence.
4.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Agreement.
4.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
4.6 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy, telex or
similar writing) and shall be deemed given or made as of the date
delivered, if delivered personally or by telecopy (provided that
delivery by telecopy shall be followed by delivery of an additional
copy personally, by mail or overnight courier), one day after being
delivered by overnight courier or four business days after being mailed
by registered or certified mail (postage prepaid for the most
expeditious form of delivery, return receipt requested), to the parties
at the following addresses (or to such other address or telex or
telecopy number as a party may have specified by notice given to the
other party pursuant to this provision):
If to the Company, to:
Advance Nanotech, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000 0000
Facsimile: (000) 000 0000
If to the Purchaser, to:
The address or facsimile number of each Purchaser as
recorded in the stockholders records of the Company.
4.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to the conflicts of laws rules or provisions.
4.8 FORUM; SERVICE OF PROCESS. Any legal suit, action or
proceeding brought by any party or any of its affiliates arising out of
or based upon this Agreement shall be instituted in any federal or
state court in New York County, New York, and each party waives any
objection which it may now or hereafter have to the laying of venue or
any such proceeding, and irrevocably submits to the jurisdiction of
such courts in any such suit, action or proceeding.
4.9 CAPTIONS. The captions, headings and arrangements used in
this Agreement are for convenience only and do not in any way limit or
amplify the terms and provisions hereof.
4.10 NO PREJUDICE. The terms of this Agreement shall not be
construed in favor of or against any party on account of its
participation in the preparation hereof.
4.11 WORDS IN SINGULAR AND PLURAL FORM. Words used in the
singular form in this Agreement shall be deemed to import the plural,
and vice versa, as the sense may require.
4.12 REMEDY FOR BREACH. The Company hereby acknowledges that
in the event of any breach or threatened breach by the Company of any
of the provisions of this Agreement, the holders of the Registrable
Securities would have no adequate remedy at law and could suffer
substantial and irreparable damage. Accordingly, the Company hereby
agrees that, in such event, the holders of the Registrable Securities
shall be entitled, and notwithstanding any election by any holder of
the Registrable Securities to claim damages, to obtain a temporary
and/or permanent injunction to restrain any such breach or threatened
breach or to obtain specific performance of any such provisions, all
without prejudice to any and all other remedies which any holder of the
Registrable Securities may have at law or in equity.
4.13 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto, each subsequent holder of
the Registrable Securities and their respective permitted successors
and assigns and executors, administrators and heirs. Holders of the
Registrable Securities are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such holders.
4.14 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date and year first written
above.
ADVANCE NANOTECH, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
--------------
Title: Secretary
IN WITNESS WHEREOF, the undersigned Purchaser has caused this
Registration Rights Agreement to be duly executed as of the date and year first
above written and to be bound hereby.
Shares of Common Stock and Warrants are in:
Print Name of Investor
shares of Common Stock
____ individual name
_____________ Warrants
____ tenants in the entirety
Print Name of Joint Investor
(if applicable)
____ corporation (an officer must sign)
Signature of Investor
____ partnership (all general partners must sign)
Signature of Joint Investor
____ trust
(with a copy to:)
Address of Investor
____ limited liability company
