EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 30, 2006 (this
"Agreement"), is made by and among ADVANCED TECHNOLOGY INDUSTRIES, INC., a
Delaware corporation, with headquarters located at 000 Xxxxxxx Xxxxxx, #00X, Xxx
Xxxx, Xxx Xxxx 00000 (the "Company"), and the entity (other than the Company)
named on the signature page hereto (the "Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of even date, between the Investor and the Company
(the "Securities Purchase Agreement"; capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Securities Purchase
Agreement), the Company has agreed to issue and sell to the Investor the
Debentures; and
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Conversion Shares"; which term, for purposes of this Agreement, shall include
shares of Common Stock of the Company issuable in lieu of accrued interest
through the Maturity Date (as that term is defined in the Debentures)) upon the
terms and subject to the conditions contained in the Debentures; and
WHEREAS, upon and subject to the terms of the Securities Purchase
Agreement, the Company has agreed to issue the Warrants to the Investor in
connection with the issuance of the Debentures, and the Warrants may be
exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon
the terms and conditions of the Warrants; and
WHEREAS, to induce the Investor to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities (as defined
below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
(b) "Held Shares Value" means, for shares of Common Stock acquired by the
Investor upon a conversion of a Debenture within the thirty (30) days preceding
the Restricted Sale Date, but not yet sold by the Investor, the principal amount
of the Debentures converted into such Conversion Shares; provided, however, that
if the Investor effected more than one such conversion during such thirty (30)
day period and sold less than all of such shares, the sold shares shall be
deemed to be derived first from the conversions in the sequence of such
conversions (that is, for example, until the number of shares from the first of
such conversions have been sold, all shares shall be deemed to be from the first
conversion; thereafter, from the second conversion until all such shares are
sold).
(c) "Investor" means the Investor and any permitted transferee or assignee
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof and who holds Debentures, Warrants or Registrable
Securities.
(d) "Payment Shares" means shares of Common Stock issued by the Company as
provided in Section 2(b) below.
(e) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(f) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(g) "Registrable Securities" means, collectively, the Conversion Shares,
the Warrant Shares and the Payment Shares.
(h) "Registration Statement" means a registration statement of the Company
under the Securities Act covering Registrable Securities on Form S-3, if the
Company is then eligible to file using such form, and if not eligible, on Form
S-2 or other appropriate form which shall include only the Registrable
Securities and the such other securities as may be permitted by Section 5(b)
hereof.
(i) "Required Effective Date" means the relevant Initial Required Effective
Date or Increased Required Effective Date (as those terms are defined below).
(j) "Required Filing Date" means May 15, 2006.
(k) "Restricted Sale Date" means the first date, other than a date during a
Permitted Suspension Period (as defined below), on which the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, not later than the
Required Filing Date, either a Registration Statement or an amendment to an
existing Registration Statement, in either event registering for resale by the
Investor a sufficient number of shares of Common Stock for the Investor to sell
the Registrable Securities, but in no event less than the number of shares equal
to the sum of (x) two hundred and ten percent (210%) of the aggregate of the
number of shares into which the Debentures and all interest thereon through the
Maturity Date would be convertible at the time of filing of such Registration
Statement and any pre-effective amendment thereto (assuming for such purposes
that all Debentures had been issued, had been eligible to be converted, and had
been converted, into Conversion Shares in accordance with their terms, whether
or not such issuance, eligibility, accrual of interest or conversion had in fact
occurred as of such date) and (y) one hundred and ten percent (110%) of the
aggregate of the number of Warrant Shares which would be issuable on exercise of
the Warrants (assuming for such purposes that all Warrants had been issued, had
been eligible for exercise and had been exercised for Warrant Shares in
accordance with their terms, whether or not such issuance, eligibility or
exercise had in fact occurred as of such date). Unless otherwise specifically
agreed to in writing in advance by the Investor, the Registration Statement
shall state that, in accordance with Rule 416 and 457 under the Securities Act,
it also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Debentures or exercise of the
Warrants to prevent dilution resulting from stock splits, or stock dividends.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (the "Initial Required Effective
Date") which is no later than the earlier of (Y) five (5) days after oral or
written notice by the SEC that it may be declared effective or (Z) July 21,
2006.
(ii) If at any time (an "Increased Registered Shares Date") after a
Registration Statement has been filed with the SEC, the Investor determines that
the number of shares of Common Stock represented by the Registrable Shares,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
the aggregate number of shares of Common Stock then registered or sought to be
registered in a Registration Statement which has not yet been declared
effective, the Company shall, upon the written request of the Investor, either
(X) amend the relevant Registration Statement filed by the
Company pursuant to the preceding provisions of this Section 2,
if such Registration Statement has not been declared effective by
the SEC at that time, to register, in the aggregate, at least the
number of shares (the "Increased Shares Amount") equal to (A) the
number of shares theretofore issued on conversion of the
Debentures (including any interest paid on conversion by the
issuance of Conversion Shares) , plus (B) the number of shares
theretofore issued on exercise of the Warrants, plus (C) the sum
of:
(I) the number of shares into which the unconverted
Debentures and all interest thereon through the Maturity
Date would be convertible at the date of such filing
(assuming for such purposes that all such Debentures had
been issued, had been eligible to be converted, and had been
converted, into Conversion Shares in accordance with their
terms, whether or not such issuance eligibility, accrual of
interest, or conversion had in fact occurred as of such
date), and
(II) the number of Warrant Shares which would be issuable on
exercise of the unexercised Warrants (assuming for such
purposes that all such Warrants had been issued, had been
eligible for exercise and had been exercised for Warrant
Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of
such date), or
(Y) if such Registration Statement has been declared effective by
the SEC at that time, file with the SEC an additional
Registration Statement (an "Additional Registration Statement")
to register the number of shares equal to the excess of the
Increased Shares Amount over the aggregate number of shares of
Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable Securities is
not filed in proper form with the SEC by the Required Filing Date, the Company
will make payment to the Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities is
not effective by the relevant Required Effective Date or if there is a
Restricted Sale Date, then the Company will make payments to the Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to the
Investor shall be determined as of each Computation Date (as defined below) and
such amount shall be equal to the Periodic Amount Percentage (as defined below)
of the Purchase Price for all Debentures held by the Investor for the period
from the date following the relevant Required Filing Date or the Required
Effective Date or a Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date.
The "Periodic Amount Percentage" means (A) one percent (1%) of the Purchase
Price of all Debentures for the first two Computation Dates after the relevant
Required Filing Date; and (B) two percent (2%) of the Purchase Price of all
Debentures to any Computation Date thereafter. Anything in the preceding
provisions of this paragraph (iii) to the contrary notwithstanding, after the
relevant Effective Date the Purchase Price shall be deemed to refer to the sum
of (X) the principal amount of all Debentures not yet converted and (Y) the Held
Shares Value. By way of illustration and not in limitation of the foregoing, if
the Registration Statement is filed on or before the Required Filing Date, but
is not declared effective by August 27, 2006, the Periodic Amount will aggregate
two percent (2%).
(iv) Each Periodic Amount will be payable by the Company, except as
provided in the other provisions of subparagraph (v), in cash or other
immediately available funds to the Investor (1) on the day after the Required
Filing Date, the Required Effective Date or a Restricted Sale Date, as the case
may be, and (2) on the earlier of (A) each thirtieth day thereafter, (B) the
third business day after the date the Registration Statement is filed or is
declared effective, or (C) the third business day after the Registration
Statement has its restrictions removed after the relevant Effective Date, in
each case without requiring demand therefor by the Investor.
(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv),
(i) at the option of the Company, exercisable in its discretion
on the date the Periodic Amount is due; provided, however, that
the Company may exercise this discretion if, but only if the
Registration Statement covering the Payment Shares is then
effective; or
(ii) at the option of the Investor, exercisable in its sole and
absolute discretion by written notice to the Company at any time
before the Periodic Amount is paid,
all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to such Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the then
applicable Conversion Price; provided, further that the Delivery Date for the
Payment Shares shall be three (3) business days after the date the Periodic
Amount is due (if the election is made by the Company) or after the Investor
gives the notice contemplated by clause (ii) of this subparagraph.
(vi) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement is not filed by the Required Filing Date
or the Registration Statement has not been declared effective by a Required
Effective Date, including if the right to sell Registrable Securities under a
previously effective Registration Statement is suspended or the shares of the
Company's stock are not listed on the Principal Trading Market, may be difficult
to ascertain. The parties agree that the amounts payable pursuant to the
foregoing provisions of this Section 2(b) represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.
(vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
filing or effectiveness of the Registration Statement occurs because of an act
of, or a failure to act or to act timely by the Investor or its counsel.
(viii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required Effective
Date or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, such Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b) hereof) or
is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.
(ix) Notwithstanding anything herein to the contrary the remedy set forth
in this Section 2(b) shall be the sole remedy for the Investor if the
Registration Statement covering the Registrable Securities is not filed in
proper form with the SEC by the Required Filing Date or if the Registration
Statement covering the Registrable Securities is not effective by the relevant
Required Effective Date or if there is a Restricted Sale Date.
(C) PIGGYBACK REGISTRATION. If the Company at any time proposes to register
any of its securities under the Securities Act for sale to the public, whether
for its own account or for the account of other security holders or both, except
with respect to registration statements on Forms S-4 and S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale
pursuant to an effective registration statement, each such time it will give at
least fifteen (15) days' prior written notice to the Investor of its intention
so to do. Upon the written request of the Investor, received by the Company
within ten (10) days after the giving of any such notice by the Company, to
register any of the Registrable Securities not previously registered, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the Investor.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC by the Required Filing Date, a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times, other than during Permitted
Suspension Periods, during the period (the "Registration Period") continuing
until the earlier of (i) the date when the Investor may sell all Registrable
Securities under Rule 144 without volume or other restrictions or limits or (ii)
the date the Investor no longer own any of the Registrable Securities, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration Period
(except during Permitted Suspension Periods), and, during the Registration
Period, comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the Investor (which,
until further notice, shall be deemed to be Xxxxxxx & Xxxxxx LLP, Attn: Xxxxxx
Xxxxxxx, Esq., which firm has requested to receive such notification; each, an
"Investor's Counsel") to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects, unless the Company reasonably
determines that such document is required by law to be so filed;
(d) Notify the Investor and the Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) business days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) business day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investor); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the Investor
shall have the opportunity to comment thereon;
(e) Furnish to the Investor and to Investor's Counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one (1) copy of the Registration Statement, each preliminary
prospectus and prospectus, and each amendment or supplement thereto, and (ii)
such number of copies of a prospectus, and all amendments and supplements
thereto and such other documents, as the Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by the
Investor;
(f) As promptly as practicable after becoming aware thereof, notify the
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, subject to Section 4(c), use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement or other
appropriate filing with the SEC to correct such untrue statement or omission,
and deliver a number of copies of such supplement or amendment to the Investor
as the Investor may reasonably request;
(g) [intentionally omitted ]
(h) Comply with Regulation FD or any similar rule or regulation regarding
the dissemination of information regarding the Company, and in furtherance of
the foregoing, and not in limitation thereof, not disclose to the Investor any
non-public material information regarding the Company;
(i) Use its reasonable efforts to secure and maintain the designation of
all the Registrable Securities covered by the Registration Statement on the
Principal Trading Market and the quotation of the Registrable Securities on the
Principal Trading Market;
(j) Provide a transfer agent ("Transfer Agent") and registrar, which may be
a single entity, for the Registrable Securities not later than the initial
Effective Date;
(k) Cooperate with the Investor to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investor may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to the Investor) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities (including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions, subject to compliance with applicable
law, including, without limitation, prospectus delivery requirements; and
(l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. OBLIGATIONS OF THE INVESTOR. In connection with the registration of the
Registrable Securities, the Investor shall have the following obligations:
(a) The Investor, by the Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless the Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(b) The Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(d)(iii) or
3(f), above, the Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(d)(iii) or 3(f)
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice;
(c) Notwithstanding anything in this Agreement to the contrary, if at any
time or from time to time after the date of effectiveness of the Registration
Statement, the Company notifies the Investor in writing that the effectiveness
of the Registration Statement is suspended for any reason, whether due to a
Potential Material Event or otherwise, the Investor shall not offer or sell any
Registrable Securities, or engage in any other transaction involving or relating
to the Registrable Securities, from the time of the giving of such notice until
the Investor receives written notice from the Company that such the
effectiveness of the Registration Statement has been restored, whether because
the Potential Material Event has been disclosed to the public or it no longer
constitutes a Potential Material Event or otherwise; provided, however, that the
Company may not so suspend the right to such holder of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during a
Permitted Suspension Period) . The term "Permitted Suspension Period" means up
to two such suspension periods during any consecutive 12-month period, each of
which suspension period shall not either (i) be for more than ten (10) business
days or (ii) begin less than ten (10) business days after the last day of the
preceding suspension (whether or not such last day was during or after a
Permitted Suspension Period)
5. EXPENSES OF REGISTRATION. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company shall be entitled to
include all the shares required to be registered hereunder under any
registration rights agreement entered into after the date of this Agreement,
that is not inconsistent with the rights granted to the Holders in this
Agreement or that otherwise conflicts with the provisions hereof on a single
registration statement under the Securities Act.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless the Investor, the directors, if any, of the Investor, the officers, if
any, of the Investor, and each Lender Control Person (each, an "Lender
Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act") or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively referred to as
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investor, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (I) apply to any Claim
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of such Lender Indemnified Party expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (II) be available to the extent such Claim is
based on a failure of any Lender Indemnified Party to deliver or cause to be
delivered the prospectus made available by the Company or the amendment or
supplement thereto made available by the Company; (III) be available to the
extent such Claim is based on the delivery of a prospectus by any Lender
Indemnified Party after receiving notice from the Company under Section
3(d)(iii) or 3(f) or Section 4(c) hereof (other than a notice regarding the
effectiveness of the Registration Statement or any amendment or supplement
thereto), or (IV) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. The Investor will
indemnify the Company and its officers, directors and agents and each Company
Control Person (each, an "Company Indemnified Party", and together with each
Lender Indemnified Party, each an "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of the Investor, expressly for use in connection with the preparation of the
Registration Statement or the amendment or supplement thereto, subject to such
limitations and conditions as are applicable to the indemnification provided by
the Company to this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Party under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Party. In case any such action is
brought against any Indemnified Party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Party under this Section 6 for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and reasonable out-of-pocket expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the Indemnified Party provided such counsel is of the opinion that all defenses
available to the Indemnified Party can be maintained without prejudicing the
rights of the indemnifying party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to the Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investor to sell securities of the Company to the public
without Registration ("Rule 144"), for a period of two years after the date
hereof, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) if not available on the SEC's XXXXX system, a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Investor to sell such securities pursuant to
Rule 144 without Registration; and
(d) at the request of the Investor, give its Transfer Agent instructions to
the effect that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that
the Investor's holding period (as determined in accordance with
the provisions of Rule 144) for the shares of Registrable
Securities which the Investor proposes to sell (the "Securities
Being Sold") is not less than (1) year and (B) as to such other
matters as may be appropriate in accordance with Rule 144 under
the Securities Act, and
(ii) an opinion of counsel acceptable to the Company for which
purpose it is agreed that Investor's Counsel shall be deemed
acceptable if not given by Ropes and Xxxx that, based on the Rule
144 Certificate, Securities Being Sold may be sold pursuant to
the provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the
Investor, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Investor). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debentures) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned and (c) written evidence of the transferee's
assumption of the Investor's obligations under this Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Investor
and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, if to the Company
or to the Investor, to their respective address contemplated by the Securities
Purchase Agreement, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
COVENIENS, to the bringing of any such proceeding in such jurisdictions.
(e) The Company and the Investor hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
this Agreement or any of the other Transaction Agreements.
(f) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(k) Neither party shall be liable for consequential damages as a result of
any delay under this Agreement.
(l) This Agreement (including to the extent relevant the provisions of
other Transaction Agreements) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
ADVANCED TECHNOLOGY INDUSTRIES, INC.
By:_________________________________
Name:
Title:
INVESTOR:
By:__________________________
