EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of March 15, 2007, between ATS Medical, a Minnesota corporation (the
"Company") and each of the several purchasers signatory hereto (each such
purchaser, a "Purchaser" and, collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof, between the Company and each Purchaser (the "Purchase
Agreement").
The Company and each Purchaser hereby agrees as follows:
1. Definitions
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE DEFINED IN
THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN THE PURCHASE
AGREEMENT. As used in this Agreement, the following terms shall have the
following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 90th calendar day following
the date hereof (or, in the event of a "full review" by the Commission, the
120th calendar day following the date hereof) and with respect to any
additional Registration Statements which may be required pursuant to
Section 3(c), the 90th calendar day following the date on which an
additional Registration Statement is required to be filed hereunder;
provided, however, that in the event the Company is notified by the
Commission that one or more of the above Registration Statements will not
be reviewed or is no longer subject to further review and comments, the
Effectiveness Date as to such Registration Statement shall be the fifth
Trading Day following the date on which the Company is so notified if such
date precedes the dates otherwise required above.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the initial Registration
Statement required hereunder, the 30th calendar day following the date
hereof and, with respect to any additional Registration Statements which
may be required pursuant to Section 3(c), the earliest practical date on
which the Company is permitted by SEC Guidance to file such additional
Registration Statement related to the Registrable Securities.
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"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Initial Registration Statement" means the initial Registration
Statement filed pursuant to this Agreement.
"Initial Shares" means a number of shares of Common Stock equal to the
lesser of the Registrable Securities or one-third of the number of shares
of Common Stock issued and outstanding and held by non-affiliates of the
Company immediately prior to the filing date of the Initial Registration
Statement.
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in Section
2(a).
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means (i) all Shares, (ii) all Warrant Shares
(assuming on the date of determination the Warrants are exercised in full
without regard to any exercise limitations therein), and (iii) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
"Registration Statement" means the registration statement required to
be filed hereunder and any additional registration statements required by
Section 3(c), if any, including (in each case) the Prospectus, amendments
and supplements to such registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended or interpreted from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule.
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"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended or interpreted from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set forth
in Section 3(a).
"SEC Guidance" means (i) any publicly-available written or oral
guidance, comments, requirements or requests of the Commission staff and
(ii) the Securities Act.
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of
all or such portion of the Registrable Securities as permitted by SEC
Guidance (provided that the Company shall use diligent efforts to advocate
with the Commission for the registration of all of the Registrable
Securities in accordance with the SEC Guidance, including without
limitation, the Manual of Publicly Available Telephone Interpretations
D.29) that are not then registered on an effective Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form
in accordance herewith) and shall contain (unless otherwise directed by at
least an 85% majority in interest of the Holders) substantially the "Plan
of Distribution" attached hereto as Annex A. Subject to the terms of this
Agreement, the Company shall use its best efforts to cause a Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act
until all Registrable Securities covered by such Registration Statement
have been sold, or may be sold without volume restrictions pursuant to Rule
144(k), as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the affected Holders (the "Effectiveness Period"). The
Company shall telephonically request effectiveness of a Registration
Statement as of 5:00 p.m. New York City time on a Trading Day. The Company
shall immediately notify the Holders via facsimile or by e-mail delivery of
a ".pdf" format data file of the effectiveness of a Registration Statement
on the same Trading Day that the Company telephonically confirms
effectiveness with the Commission, which shall be the date requested for
effectiveness of a Registration Statement. The Company shall, by 9:30 a.m.
New York City time on the second Trading Day after the Effective Date, file
a final Prospectus with the Commission as required by Rule 424. Failure to
so notify the Holder within 2 Trading Days of such notification of
effectiveness or failure to file a final Prospectus as foresaid shall be
deemed an Event under Section 2(b). Notwithstanding any other provision of
this Agreement and subject to the payment of liquidated damages in Section
2(b), if any SEC Guidance sets forth a limitation of the number of
Registrable
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Securities permitted to be registered on a particular Registration
Statement (and notwithstanding that the Company used diligent efforts to
advocate with the Commission for the registration of all or a greater
number of Registrable Securities), unless otherwise directed in writing by
a Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will first be
reduced by Registrable Securities represented by Warrant Shares (applied,
in the case that some Warrant Shares may be registered, to the Holders on a
pro rata basis based on the total number of unregistered Warrant Shares
held by such Holders), and second by Registrable Securities represented by
Shares (applied, in the case that some Shares may be registered, to the
Holders on a pro rata basis based on the total number of unregistered
Shares held by such Holders).
(b) If: (i) the Initial Registration Statement is not filed on or
prior to its Filing Date (if the Company files the Initial Registration
Statement without affording the Holders the opportunity to review and
comment on the same as required by Section 3(a) herein, the Company shall
be deemed to have not satisfied this clause (i)), or (ii) the Company fails
to file with the Commission a request for acceleration of a Registration
Statement in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that such
Registration Statement will not be "reviewed" or not be subject to further
review, or (iii) prior to the Effectiveness Date of a Registration
Statement, the Company fails to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect
of such Registration Statement within 20 Trading Days after the receipt of
comments by or notice from the Commission that such amendment is required
in order for such Registration Statement to be declared effective, or (iv)
as to, in the aggregate among all Holders on a pro-rata basis based on
their purchase of the Securities pursuant to the Purchase Agreement, a
Registration Statement registering for resale all of the Initial Shares is
not declared effective by the Commission by the Effectiveness Date of the
Initial Registration Statement, or (v) all of the Registrable Securities
are not registered for resale pursuant to one or more effective
Registration Statements on or before November 30, 2007, or (vi) after the
Effectiveness Date of a Registration Statement, such Registration Statement
ceases for any reason to remain continuously effective as to all
Registrable Securities included in such Registration Statement, or the
Holders are otherwise not permitted to utilize the Prospectus therein to
resell such Registrable Securities, for more than 10 consecutive calendar
days or more than an aggregate of 15 calendar days during any 12-month
period (which need not be consecutive calendar days) (any such failure or
breach being referred to as an "Event", and for ----- purposes of clause
(i), (iv) or (v) the date on which such Event occurs, or for purposes of
clause (ii) the date on which such five Trading Day period is exceeded, or
for purposes of clause (iii) the date which such 20 Trading Day period is
exceeded, or for purposes of clause (vi) the date on which such 10 or 15
calendar day period, as applicable, is exceeded being referred to as "Event
Date"), then, in addition to any other rights the Holders may have
hereunder or under applicable law, on each such Event Date and on each
monthly anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and
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not as a penalty, equal to 1.0% of the aggregate purchase price paid by
such Holder pursuant to the Purchase Agreement for any unregistered
Registrable Securities then held by such Holder. The parties agree that (1)
the Company shall not be liable for liquidated damages under this Agreement
with respect to any Warrants or Warrant Shares and (2) the maximum
aggregate liquidated damages payable to a Holder under this Agreement shall
be 12% of the aggregate Subscription Amount paid by such Holder pursuant to
the Purchase Agreement. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum
(or such lesser maximum amount that is permitted to be paid by applicable
law) to the Holder, accruing daily from the date such partial liquidated
damages are due until such amounts, plus all such interest thereon, are
paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro rata basis for any portion of a month prior to
the cure of an Event.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than 5 Trading Days prior to the filing of each
Registration Statement and not less than one Trading Day prior to the
filing of any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each
Holder copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such Holders and (ii) cause its officers
and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion
of respective counsel to each Holder, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file a
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that the Company
is notified of such objection in writing no later than 5 Trading Days after
the Holders have been so furnished copies of a Registration Statement or 1
Trading Day after the Holders have been so furnished copies of any related
Prospectus or amendments or supplements thereto. Each Holder agrees to
furnish to the Company a completed questionnaire in the form attached to
this Agreement as Annex B (a "Selling Shareholder Questionnaire") not less
than two Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep a
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the
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related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and, as so
supplemented or amended, to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the
Commission with respect to a Registration Statement or any amendment
thereto and provide as promptly as reasonably possible to the Holders true
and complete copies of all correspondence from and to the Commission
relating to a Registration Statement (provided that the Company may excise
any information contained therein which would constitute material
non-public information as to any Holder which has not executed a
confidentiality agreement with the Company); and (iv) comply in all
material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the intended
methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of Common Stock
then registered in a Registration Statement, then the Company shall file as
soon as reasonably practicable, but in any case prior to the applicable
Filing Date, an additional Registration Statement covering the resale by
the Holders of not less than the number of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied
by an instruction to suspend the use of the Prospectus until the requisite
changes have been made) as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than one Trading Day prior to such filing)
and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the
Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement;
and (C) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of any request by the
Commission or any other federal or state governmental authority for
amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in a 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 a Registration Statement, Prospectus or other documents so
that, in the case
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of a 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; and (vi) of the occurrence or existence of any
pending corporate development with respect to the Company that the Company
believes may be material and that, in the determination of the Company,
makes it not in the best interest of the Company to allow continued
availability of a Registration Statement or Prospectus, provided that any
and all of such information shall remain confidential to each Holder until
such information otherwise becomes public, unless disclosure by a Holder is
required by law; provided, further, that notwithstanding each Holder's
agreement to keep such information confidential, each such Holder makes no
acknowledgement that any such information is material, non-public
information.
(e) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness
of a Registration Statement, or (ii) any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, at least one conformed
copy of each such Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent requested by
such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission; provided,
that any such item which is available on the XXXXX system need not be
furnished in physical form.
(g) Subject to the terms of this Agreement, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).
(h) The Company shall effect a filing with respect to the public
offering contemplated by each Registration Statement (an "Issuer Filing")
with the National Association of Securities Dealers, Inc. ("NASD")
Corporate Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i)
within one Trading Day of the date that the Registration Statement is first
filed with the Commission and pay the filing fee required by such Issuer
Filing. The Company shall use commercially reasonable efforts to pursue the
Issuer Filing until the NASD issues a letter confirming that it does not
object to the terms of the offering contemplated by the Registration
Statement as described in the Plan of Distribution attached hereto as Annex
A. A copy of the Issuer Filing and all related correspondence to or from
the NASD with respect thereto shall be provided to FWS.
(i) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with
the selling
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Holders in connection with the registration or qualification (or exemption
from the Registration or qualification) of such Registrable Securities for
the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by each Registration
Statement; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of
process in any such jurisdiction.
(j) If requested by a Holder, cooperate with such Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and
registered in such names as any such Holder may request.
(k) Upon the occurrence of any event contemplated by Section 3(d), as
promptly as reasonably possible under the circumstances taking into account
the Company's good faith assessment of any adverse consequences to the
Company and its stockholders of the premature disclosure of such event,
prepare a supplement or amendment, including a post-effective amendment, to
a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered,
neither a Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (iii) through (vi)
of Section 3(d) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus. The Company will use its reasonable best
efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable. The Company shall be entitled to exercise its right
under this Section 3(k) to suspend the availability of a Registration
Statement and Prospectus, subject to the payment of partial liquidated
damages otherwise required pursuant to Section 2(b), for a period not to
exceed 60 calendar days (which need not be consecutive days) in any 12
month period.
(l) Comply with all applicable rules and regulations of the
Commission.
(m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the
natural persons thereof that have voting and dispositive control over the
Shares. During any periods that the Company is
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unable to meet its obligations hereunder with respect to the registration
of the Registrable Securities solely because any Holder fails to furnish
such information within three Trading Days of the Company's request, any
liquidated damages that are accruing at such time as to such Holder only
shall be tolled and any Event that may otherwise occur solely because of
such delay shall be suspended as to such Holder only, until such
information is delivered to the Company, and the Company shall be permitted
to exclude such Holder from the Registration Statement, provided that as
soon as such information and/or questionnaire is furnished, the Company
shall use its best efforts to in include such Holder on the Registration
Statement after filing.
4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses of the Company's counsel and
auditors) (A) with respect to filings made with the Commission, (B) with respect
to filings required to be made with any Trading Market on which the Common Stock
is then listed for trading, (C) in compliance with applicable state securities
or Blue Sky laws reasonably agreed to by the Company in writing (including,
without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities) and (D) if not previously paid by the Company in connection with an
Issuer Filing, with respect to any filing that may be required to be made by any
broker through which a Holder intends to make sales of Registrable Securities
with the NASD pursuant to NASD Rule 2710, so long as the broker is receiving no
more than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions of any Holder or, except to the extent provided for in
the Transaction Documents, any legal fees or other costs of the Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, members, partners, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result
of a pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees (and any other Persons with a
functionally equivalent role of a Person holding such titles,
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notwithstanding a lack of such title or any other title) of each of them,
each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, members, shareholders, partners, agents and employees (and any
other Persons with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to (1)
any untrue or alleged untrue statement of a material fact contained in a
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading or
(2) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law, or any rule or
regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the
extent, that (i) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by
such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or in any amendment or supplement thereto (it
being understood that the Holder has approved Annex A hereto for this
purpose) or (ii) in the case of an occurrence of an event of the type
specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated
or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d). The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, to the extent arising out of or based
solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (i) to the extent,
but only to the extent, that such untrue statement or omission is contained
in any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such
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Prospectus or (ii) to the extent that such information relates to such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use
in a Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an
event of the type specified in Section 3(d)(iii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense thereof and the reasonable fees and expenses of no more
than one separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of
any such Proceeding effected without its written consent, which consent
shall not be unreasonably withheld or delayed. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.
11
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party; provided, that
the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is judicially determined to be not entitled to
indemnification hereunder.
(d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified
Party harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party, in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys' or other fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been indemnified
for such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the net proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
6. Miscellaneous.
12
(a) Remedies. In the event of a breach by the Company or by a Holder
of any of their respective obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise
all rights granted by law and under this Agreement, including recovery of
damages, shall be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect
of such breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as set forth on Schedule
6(b) attached hereto, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include
securities of the Company in any Registration Statements other than the
Registrable Securities.
(c) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to a Registration Statement.
(d) Discontinued Disposition. By its acquisition of Registrable
Securities, each Holder agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Section
3(d)(iii) through (vi), such Holder will forthwith discontinue disposition
of such Registrable Securities under a Registration Statement until it is
advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus (as it may have been supplemented or amended) may be
resumed. The Company will use its best efforts to ensure that the use of
the Prospectus may be resumed as promptly as it practicable. The Company
agrees and acknowledges that any periods during which the Holder is
required to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section 2(b).
(e) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with the
Company's stock option or other employee benefit plans, then the Company
shall send to each Holder a written notice of such determination and, if
within fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Holder
requests to be registered; provided, however, that the Company shall not be
required to register any Registrable Securities pursuant to this Section
6(e) that are eligible for resale pursuant to Rule 144(k) promulgated under
the Securities Act or that are the subject of a then effective Registration
Statement.
13
(f) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of a majority of the then outstanding
Registrable Securities (including, for this purpose any Registrable
Securities issuable upon exercise or conversion of any Security). If a
Registration Statement does not register all of the Registrable Securities
pursuant to a waiver or amendment done in compliance with the previous
sentence, then the number of Registrable Securities to be registered for
each Holder shall be reduced pro rata among all Holders and each Holder
shall have the right to designate which of its Registrable Securities shall
be omitted from such Registration Statement. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of some Holders and that does
not directly or indirectly affect the rights of other Holders may be given
by Holders of all of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the first sentence of this Section 6(f).
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set
forth in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign (except by merger) its rights or obligations hereunder without the
prior written consent of all of the Holders of the then-outstanding
Registrable Securities. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(i) No Inconsistent Agreements. Neither the Company nor any of its
Subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its Subsidiaries, on or after the date of this Agreement, enter into
any agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into
any agreement granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in full.
(j) Execution and Counterparts. This Agreement may be executed in two
or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission or by
e-mail delivery of a ".pdf" format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such
facsimile or ".pdf" signature page were an original thereof.
14
(k) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined in accordance with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any other remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this Agreement are for convenience only,
do not constitute a part of the Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
(o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and
it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
********************
15
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
ATS MEDICAL, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
16
[SIGNATURE PAGE OF HOLDERS TO ATSI RRA]
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGES CONTINUE]
17
ANNEX A
Plan of Distribution
Each Selling Stockholder (the "Selling Stockholders") of the common stock
and any of their pledgees, assignees and successors-in-interest may, from time
to time, sell any or all of their shares of common stock on the Nasdaq Global
Market or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- settlement of short sales entered into after the effective date
of the registration statement of which this prospectus is a part;
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- a combination of any such methods of sale; or
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage
18
commission in compliance with NASDR Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(k) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
19
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the common stock for the applicable
restricted period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
20
ANNEX B
[__________
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock (the "Registrable
Securities") of [_______, a [_______ corporation (the "Company"), understands
that the Company has filed or intends to file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement (the
"Registration Rights Agreement") to which this document is annexed. A copy of
the Registration Rights Agreement is available from the Company upon request at
the address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it in the Registration Statement.
21
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. NAME.
(a) Full Legal Name of Selling Securityholder
______________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities are held:
______________________________________________________________________
(c) Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by the questionnaire):
______________________________________________________________________
2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Telephone: _____________________________________________________________________
Fax: ___________________________________________________________________________
Contact Person: ________________________________________________________________
3. BROKER-DEALER STATUS:
(a) Are you a broker-dealer?
Yes _____ No _____
(b) If "yes" to Section 3(a), did you receive your Registrable Securities
as compensation for investment banking services to the Company.
Yes _____ No _____
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
22
(c) Are you an affiliate of a broker-dealer?
Yes _____ No _____
(d) If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of business,
and at the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable Securities?
Yes _____ No _____
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
4. BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY OWNED BY THE SELLING
SECURITYHOLDER.
Except as set forth below in this Item 4, the undersigned is not the
beneficial or registered owner of any securities of the Company other than
the securities issuable pursuant to the Purchase Agreement.
(a) Type and Amount of other securities beneficially owned by the Selling
Securityholder:
______________________________________________________________________
______________________________________________________________________
23
5. RELATIONSHIPS WITH THE COMPANY:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of 5%
of more of the equity securities of the undersigned) has held any position
or office or has had any other material relationship with the Company (or
its predecessors or affiliates) during the past three years.
State any exceptions here:
___________________________________________________________________________
___________________________________________________________________________
The undersigned agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 5 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: Beneficial Owner:
------------------------------ ----------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
24
