EXHIBIT 4.28
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the last date set
forth on the signature page hereof between American Technologies Group, Inc., a
Nevada corporation (the "Company"), and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company is conducting a private offering (the "Offering")
consisting of up to 25,000 shares (the "Shares") of Series E Convertible
Preferred Stock ("Preferred Stock"), pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act") and Rule 506 promulgated
thereunder; and
WHEREAS, the Subscriber desires to purchase that number of Shares set
forth on the signature page hereof on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR SHARES AND REPRESENTATIONS BY SUBSCRIBER
1.1 The Subscriber hereby irrevocably subscribes for and agrees to
purchase from the Company such number of Shares, and the Company agrees to sell
to the Subscriber as is set forth on the signature page hereof, at a per share
price equal to $100.00 per Share. The purchase price is payable by wire transfer
of immediately available funds to:
Account Name: ________________
Account # ________________
Swift Code ________________
ABA # ________________
Bank ________________
Address: ________________
________________
1.2 The Subscriber recognizes that the purchase of the Shares involves a
high degree of risk including, but not limited to, the following: (a) the
Company has limited operating history and requires substantial funds in addition
to the proceeds of the Offering; (b) an investment in the Company is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Shares; (c) the
Subscriber may not be able to liquidate its investment; (d) transferability of
the Shares is extremely limited; (e) in the event of a disposition, the
Subscriber could sustain the loss of its entire investment; (f) the Company has
not paid any dividends since its inception and does not anticipate paying any
dividends; and (g) the Company may issue additional securities in the future
which have rights and preferences that are senior to those of the Preferred
Stock. Without limiting the generality of the representations set forth in
Section 1.5 below, the Subscriber represents that the Subscriber has carefully
reviewed the Company's filings made pursuant to the Securities Exchange Act of
1934, as amended (the "34 Act Filings").
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1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act, as indicated by the Subscriber's responses
to the questions contained in Article VII hereof, and that the Subscriber is
able to bear the economic risk of an investment in the Shares.
1.4 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange nor on the
National Association of Securities Dealers, Inc. (the "NASD") automated
quotation system ("NASDAQ"), or the Subscriber has employed the services of a
"purchaser representative" (as defined in Rule 501 of Regulation D), attorney
and/or accountant to read all of the documents furnished or made available by
the Company both to the Subscriber and to all other prospective investors in the
Shares to evaluate the merits and risks of such an investment on the
Subscriber's behalf; (b) the Subscriber recognizes the highly speculative nature
of this investment; and (c) the Subscriber is able to bear the economic risk
that the Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of this
Agreement, the 34 Act Filings, including all exhibits thereto, and any documents
which may have been made available upon request as reflected therein
(collectively referred to as the "Offering Materials") and hereby represents
that the Subscriber has been furnished by the Company during the course of the
Offering with all information regarding the Company, the terms and conditions of
the Offering and any additional information that the Subscriber has requested or
desired to know, and has been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of the
Company concerning the Company and the terms and conditions of the Offering.
1.6 (a) In making the decision to invest in the Shares the Subscriber has
relied solely upon the information provided by the Company in the Offering
Materials. To the extent necessary, the Subscriber has retained, at its own
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Shares hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber's consideration of an investment in the Shares other than the
Offering Materials.
(b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Shares by the Company (or an authorized agent or
representative thereof) with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Shares were offered or sold to it by means
of any form of general solicitation or general advertising, and in connection
therewith, the Subscriber did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
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1.7 The Subscriber hereby represents that the Subscriber, either by reason
of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly), has the capacity to protect the
Subscriber's own interests in connection with the transaction contemplated
hereby.
1.8 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") nor
any state regulatory authority since the Offering is intended to be exempt from
the registration requirements of Section 5 of the Securities Act, pursuant to
Regulation D. The Subscriber understands that the Shares have not been
registered under the Securities Act or under any state securities or "blue sky"
laws and agrees not to sell, pledge, assign or otherwise transfer or dispose of
the Shares unless they are registered under the Securities Act and under any
applicable state securities or "blue sky" laws or unless an exemption from such
registration is available.
1.9 The Subscriber understands that the Shares have not been registered
under the Securities Act by reason of a claimed exemption under the provisions
of the Securities Act that depends, in part, upon the Subscriber's investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Shares for the Subscriber's own account for
investment and not with a view toward the resale or distribution to others. The
Subscriber, if an entity, further represents that it was not formed for the
purpose of purchasing the Shares.
1.10 The Subscriber understands that the common stock issuable upon
conversion of the Preferred Stock (the "Common Shares") is quoted on the OTC
Bulletin Board and that there is a limited market for the Common Shares. The
Subscriber understands that even if a public market develops for the Common
Shares, Rule 144 ("Rule 144") promulgated under the Securities Act requires for
non-affiliates, among other conditions, a one-year holding period prior to the
resale (in limited amounts) of securities acquired in a non-public offering
without having to satisfy the registration requirements under the Securities
Act. The Subscriber understands and hereby acknowledges that the Company is
under no obligation to register any of the Shares under the Securities Act or
any state securities or "blue sky" laws other than as set forth in Article V.
The Subscriber understands and acknowledges that presently the Company does not
have shares of common stock to issue upon conversion of the Preferred Stock and,
accordingly, the Company will be required to obtain shareholder approval to file
an amendment to its certificate of incorporation increasing its authorized
shares of common stock.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Shares and any shares of common
stock issuable upon conversion of the Preferred Stock that such securities have
not been registered under the Securities Act or any state securities or "blue
sky" laws and setting forth or referring to the restrictions on transferability
and sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records with respect to the
restrictions on the transferability of such Shares. The legend to be placed on
each certificate shall be in form substantially similar to the following:
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"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE
SECURITIES OR "BLUE SKY LAWS," AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
1.12 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company, at its sole discretion,
reserves the unrestricted right, without further documentation or agreement on
the part of the Subscriber, to reject or limit any subscription, to accept
subscriptions for fractional Shares and to close the Offering to the Subscriber
at any time and that the Company will issue stop transfer instructions to its
transfer agent with respect to such Shares.
1.13 The Subscriber hereby represents that the address of the Subscriber
furnished by Subscriber on the signature page hereof is the Subscriber's
principal residence if Subscriber is an individual or its principal business
address if it is a corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Shares. This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, ▇▇▇▇▇
Plan, or other tax-exempt entity, it is authorized and qualified to invest in
the Company and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
1.17 The Subscriber acknowledges that at such time, if ever, as the Shares
are registered (as such term is defined in Article V hereof), sales of the
Shares will be subject to state securities laws.
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1.18 (a) The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Company or
the terms of any agreement or covenant between them and the Company without the
Company's prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any
other information about the Subscribers, except as required by law; provided,
that the Company may use the name of the Subscriber for any offering or in any
registration statement filed pursuant to Article V in which the Subscriber's
shares are included.
1.19 The Subscriber agrees to hold the Company and its directors,
officers, employees, affiliates, controlling persons and agents and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any sale or distribution of the Shares by the Subscriber in
violation of the Securities Act or any applicable state securities or "blue sky"
laws; or (b) any false representation or warranty or any breach or failure by
the Subscriber to comply with any covenant made by the Subscriber in this
Agreement (including the Confidential Investor Questionnaire contained in
Article VII herein) or any other document furnished by the Subscriber to any of
the foregoing in connection with this transaction.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has full corporate power and authority to conduct its
business.
2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in the 34 Act Reports
and all issued and outstanding shares of the Company are validly issued, fully
paid and nonassessable. Except as set forth in the 34 Act Reports and the
securities to be issued to Laurus Master Fund Ltd., there are no outstanding
options, warrants, agreements, convertible securities, preemptive rights or
other rights to subscribe for or to purchase any shares of capital stock of the
Company. Except as set forth in the 34 Act Reports and as otherwise required by
law, there are no restrictions upon the voting or transfer of any of the shares
of capital stock of the Company pursuant to the Company's Articles of
Incorporation (the "Articles of Incorporation"), Bylaws or other governing
documents or any agreement or other instruments to which the Company is a party
or by which the Company is bound.
2.3 Authorization; Enforceability. The Company has all corporate right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the (a) authorization
execution, delivery and performance of this Agreement by the Company; and (b)
authorization, sale, issuance and delivery of the Shares contemplated hereby and
the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Shares, when issued and fully paid for
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance and sale of the Shares contemplated hereby
will not give rise to any preemptive rights or rights of first refusal on behalf
of any person which have not been waived in connection with this offering.
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2.4 No Conflict; Governmental Consents.
(a) The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
violation of any material law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or by
which the Company is bound, or of any provision of the Articles of Incorporation
or Bylaws of the Company, and will not conflict with, or result in a material
breach or violation of, any of the terms or provisions of, or constitute (with
due notice or lapse of time or both) a default under, any lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which the Company is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of any
lien upon any of the properties or assets of the Company.
(b) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Shares, except such filings as may be
required to be made with the SEC, NASD, NASDAQ and with any state or foreign
blue sky or securities regulatory authority.
2.5 Licenses. Except as otherwise set forth in the 34 Act Reports, the
Company has sufficient licenses, permits and other governmental authorizations
currently required for the conduct of its business or ownership of properties
and is in all material respects in compliance therewith.
2.6 Litigation. Except as set forth in the 34 Act Reports, the Company
knows of no pending or threatened legal or governmental proceedings against the
Company which could materially adversely affect the business, property,
financial condition or operations of the Company or which materially and
adversely questions the validity of this Agreement or any agreements related to
the transactions contemplated hereby or the right of the Company to enter into
any of such agreements, or to consummate the transactions contemplated hereby or
thereby. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which could materially adversely affect the business, property,
financial condition or operations of the Company. There is no action, suit,
proceeding or investigation by the Company currently pending in any court or
before any arbitrator or that the Company intends to initiate.
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2.7 Disclosure. The information set forth in the Offering Materials as of
the date hereof contains no untrue statement of a material fact nor omits to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.8 Investment Company. The Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.
2.9 Brokers. Neither the Company nor any of the Company's officers,
directors, employees or stockholders has employed or engaged any broker or
finder in connection with the transactions contemplated by this Agreement and no
fee or other compensation is or will be due and owing to any broker, finder,
underwriter, placement agent or similar person in connection with the
transactions contemplated by this Agreement. The Company is not party to any
agreement, arrangement or understanding whereby any person has an exclusive
right to raise funds and/or place or purchase any debt or equity securities for
or on behalf of the Company.
2.10 Intellectual Property.
(a) To the best of its knowledge, the Company owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes necessary for its business as now conducted and as presently
proposed to be conducted, without any known infringement of the rights of
others. Except as disclosed in the 34 Act Reports, there are no material
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any
material options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising from the
purchase of "off the shelf" or standard products. The Company has not received
any written communications alleging that the Company has violated or, by
conducting its business as presently proposed to be conducted, would violate any
of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity.
(b) Except as disclosed in the 34 Act Reports, the Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company or that would conflict with the
Company's business as presently conducted.
(c) Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as presently conducted, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated.
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(d) To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business conducted by
the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any written notice alleging that any such violation has
occurred. Except as described in the 34 Act Reports, no employee of the Company
has been granted the right to continued employment by the Company or to any
compensation following termination of employment with the Company except for any
of the same which would not have a material adverse effect on the business of
the Company. The Company is not aware that any officer, key employee or group of
employees intends to terminate his, her or their employment with the Company,
nor does the Company have a present intention to terminate the employment of any
officer, key employee or group of employees.
2.11 Title to Properties and Assets; Liens, Etc. Except as described in
the 34 Act Reports, the Company has good and marketable title to its properties
and assets, including the properties and assets reflected in the most recent
balance sheet included in the Company's financial statements, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent; (b) liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company; and (c) those that have otherwise arisen in the
ordinary course of business. The Company is in compliance with all material
terms of each lease to which it is a party or is otherwise bound.
2.12 Obligations to Related Parties. Except as described in the 34 Act
Reports, and, there are no obligations of the Company to officers, directors,
stockholders, or employees of the Company other than (a) for payment of salary
or other compensation for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company). Except as may be disclosed in the 34 Act Reports, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
III. TERMS OF SUBSCRIPTION
3.1 All funds shall be submitted directly to the Company's account
identified in Section 1.1 hereof.
3.2 Certificates representing the Series E Convertible Preferred Stock
purchased by the Subscriber pursuant to this Agreement will be prepared for
delivery to the Subscriber within 15 business days following the closing at
which such purchase takes place. The Subscriber hereby authorizes and directs
the Company to deliver the certificates representing the Series E Convertible
Preferred Stock purchased by the Subscriber pursuant to this Agreement directly
to the Subscriber's residential or business address indicated on the signature
page hereto.
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IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscriber's obligation to purchase the Shares at the closing at
which such purchase is to be consummated is subject to the fulfillment on or
prior to such closing of the following conditions, which conditions may be
waived at the option of each Subscriber to the extent permitted by law:
(a) Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the date of such
closing shall have been performed or complied with in all material respects.
(b) No Legal Order Pending. There shall not then be in effect any
legal or other order enjoining or restraining the transactions contemplated by
this Agreement.
(c) No Law Prohibiting or Restricting Such Sale. There shall not be
in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person, which shall not have been
obtained, to issue the Shares (except as otherwise provided in this Agreement).
V. REGISTRATION RIGHTS
5.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings.
(a) The term "Holder" shall mean any person owning or having the
right to acquire Registrable Securities or any permitted transferee of a Holder.
(b) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
order of effectiveness of such registration statement or document.
(c) The term "Registrable Securities" shall mean the common shares
of stock issuable upon conversion of the Series E Preferred Stock; provided,
however, that securities shall only be treated as Registrable Securities if and
only for so long as they (A) have not been disposed of pursuant to a
registration statement declared effective by the SEC; (B) have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale; (C) are
held by a Holder or a permitted transferee of a Holder pursuant to Section 5.10;
and (D) may not be disposed of under Rule 144(k) under the Securities Act
without restriction.
(d) the term "Filing Date" means, with respect to the Registration
Statement required to be filed hereunder, the 90th day following the date of the
first closing under this Agreement.
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(e) the term "Effectiveness Date" means, with respect to the
Registration Statement required to be filed hereunder, the 120th calendar day
following the date of the first closing under this Agreement.
5.2 Registration.
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission the Registration Statement covering the resale of all
of the Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement required hereunder 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 the Registration shall be on
another appropriate form in accordance herewith). Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the date when
all Registrable Securities covered by the Registration Statement have been sold
or may be sold without volume restrictions pursuant to Rule 144(k) as determined
by the counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company's transfer agent and the
affected Holders (the "Effectiveness Period").
(b) If: (i) a Registration Statement is not filed on or prior to the
Filing Date or declared effective by the Effectiveness Date, then in addition to
any other rights the Subscribers may have hereunder or under applicable law,
then, on each such date and on each monthly anniversary of each such date until
the registration is filed, the Company shall pay to each Subscriber an amount in
cash or stock, at the Company's election, as partial liquidated damages and not
as a penalty, equal to 1.0% of the aggregate purchase price paid by such
Subscriber pursuant to this Agreement for any Registrable Securities then held
by such Subscriber.
5.3 Registration Procedures. Whenever required under this Article V to
include Registrable Securities in a Company registration statement, the Company
shall, as expeditiously as reasonably possible:
(a) Use best efforts to (i) cause such registration statement to
become effective, and (ii) cause such registration statement to remain effective
until the earliest to occur of (A) such date as the sellers of Registrable
Securities (the "Selling Holders") have completed the distribution described in
the registration statement and (B) such time that all of such Registrable
Securities are no longer, by reason of Rule 144(k) under the Securities Act,
required to be registered for the sale thereof by such Holders. The Company will
also use its best efforts to, during the period that such registration statement
is required to be maintained hereunder, file such post-effective amendments and
supplements thereto as may be required by the Securities Act and the rules and
regulations thereunder or otherwise to ensure that the registration statement
does not contain any untrue statement of material fact or omit to state a fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that if applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permits, in lieu of
filing a post-effective amendment that (i) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (ii) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the Company may incorporate by reference information
required to be included in (i) and (ii) above to the extent such information is
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement.
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(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Make available for inspection upon reasonable notice during the
Company's regular business hours by each Selling Holder, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such Selling Holder or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Selling
Holder, underwriter, attorney, accountant or agent in connection with such
registration statement.
(d) Furnish to the Selling Holders such numbers of copies of a final
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(e) Use best efforts to register and qualify the securities covered
by such registration statement under such other federal or state securities laws
of such jurisdictions as shall be reasonably requested by the Selling Holders;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act.
5.4 Furnish Information. It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any Selling Holder that such Holder
shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
effect the registration of such Holder's Registrable Securities.
5.5 Registration Expenses. The Company shall bear and pay all Registration
Expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to registrations pursuant to Section 5.2
for each Subscriber, but excluding underwriting discounts and commissions
relating to Registrable Securities and excluding any professional fees or costs
of accounting, financial or legal advisors to any of the Subscribers.
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5.6 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 5.2 to include any of the Holders' Registrable
Securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder who is a holder of
Registrable Securities and is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
5.7 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article.
5.8 Indemnification. In the event that any Registrable Securities are
included in a registration statement under this Article V:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or the Exchange Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation by the Company of the Securities Act, the
Exchange Act, or any rule or regulation promulgated under the Securities Act, or
the Exchange Act, and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 5.8(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
12
(b) To the extent permitted by law, each Selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 5.8(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 5.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that, in no event shall any
indemnity under this Section 5.8(b) exceed the greater of the cash value of the
(i) gross proceeds from the Offering received by such Holder or (ii) such
Holder's investment pursuant to this Agreement as set forth on the signature
page attached hereto.
(c) Promptly after receipt by an indemnified party under this
Section 5.8 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 5.8,
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 notified, to assume the defense thereof with counsel selected by
the indemnifying party and approved by the indemnified party (whose approval
shall not be unreasonably withheld); provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5.8.
13
(d) If the indemnification provided for in this Section 5.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportSharey to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in such underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
5.8 shall survive the completion of the Offering.
5.9 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3 (or other applicable form), the Company agrees to:
(a) file with the SEC all reports and other documents required of
the Company under the Securities Act and the Exchange Act; and
(b) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) 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 (ii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
5.10 Permitted Transferees. The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Article
V may be assigned in full by a Holder in connection with a transfer by such
Holder of its Registrable Securities if: (a) such Holder gives prior written
notice to the Company; (b) such transferee agrees to comply with the terms and
provisions of this Agreement; (c) such transfer is otherwise in compliance with
this Agreement; and (d) such transfer is otherwise effected in accordance with
applicable securities laws. Except as specifically permitted by this Section
5.10, the rights of a Holder with respect to Registrable Securities as set out
herein shall not be transferable to any other Person, and any attempted transfer
shall cause all rights of such Holder therein to be forfeited.
14
5.11 Termination of Registration Rights The right of any Holder to request
inclusion in any registration pursuant to Section 5.2 shall terminate if all
shares of Registrable Securities held by such Holder may immediately be sold
under Rule 144(k).
VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed as follows:
if to the Company, to it at:
American Technologies Group, Inc.
_______________________________
_______________________________
Attn: ________________________
With a copy to (which shall not constitute notice):
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
if to the Subscriber, to the Subscriber's address indicated on the
signature page of this Agreement.
Notices shall be deemed to have been given or delivered on the date of mailing,
except notices of change of address, which shall be deemed to have been given or
delivered when received.
6.2 Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.10, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns. This Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of Shares as herein provided, subject, however, to the right
hereby reserved by the Company to enter into the same agreements with other
subscribers and to add and/or delete other persons as subscribers.
15
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STATE'S PRINCIPLES OF CONFLICTS
OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR
RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE COURTS
STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR
SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
6.6 In order to discourage frivolous claims the parties agree that unless
a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover from such
claimant all of its/their reasonable legal costs and expenses relating to such
proceeding and/or incurred in preparation therefor.
6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
6.9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
6.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.11 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A __ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include equity
in personal property and real estate, including your principal
residence, cash, short-term investments, stock and securities.
Equity in personal property and real estate should be based on
the fair market value of such property less debt secured by
such property.
Category B __ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of $200,000 in
each of the two most recent years, or joint income with his or
her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any income of
other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income
level in the current year.
Category C __ The undersigned is a director or executive officer of the
Company which is issuing and selling the Shares.
Category D __ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or registered
investment advisor, or (b) the plan has total assets in excess
of $5,000,000 or (c) is a self directed plan with investment
decisions made solely by persons that are accredited
investors. (describe entity)
Category E __ The undersigned is a private business development company as
defined in section 202(a)(22) of the Investment Advisors Act
of 1940. (describe entity)
______________________________________________________________
______________________________________________________________
17
Category F __ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific purpose
of acquiring the Shares and with total assets in excess of
$5,000,000. (describe entity)
______________________________________________________________
______________________________________________________________
Category G __ The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Shares, where the purchase is directed by a "sophisticated
investor" as defined in Regulation 506(b)(2)(ii) under the
Act.
Category H __ The undersigned is an entity (other than a trust) in which all
of the equity owners are "accredited investors" within one or
more of the above categories. If relying upon this Category
alone, each equity owner must complete a separate copy of this
Agreement. (describe entity)
______________________________________________________________
______________________________________________________________
Category I __ The undersigned is not within any of the categories above and
is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the
Company at any time on or prior to the closing in the event
that the representations and warranties in this Agreement
shall cease to be true, accurate and complete.
7.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(c) For all Subscribers, please list types of prior investments:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
18
(d) For all Subscribers, please state whether you have participated in
other private placements before:
YES_______ NO_______
(e) If your answer to question (d) above was "YES", please indicate
frequency of such prior participation in private placements of:
Public or Private Companies
Public Private with no, or insignificant,
Companies Companies assets and operations
--------- --------- ---------------------
Frequently _______________ _______________ ________________________
Occasionally _______________ _______________ ________________________
Never _______________ _______________ ________________________
(f) For individual Subscribers, do you expect your current level of income
to significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional Subscribers,
do you expect your total assets to significantly decrease in the foreseeable
future:
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) CommSharey Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
19
(f) Company*
(g) Trust*
(h) Other*
*If Securities are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
7.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
__________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
7.5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Article VII and such answers have been provided
under the assumption that the Company will rely on them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
23
NUMBER OF SHARES _________ X $100.00 = $_________ (the "Purchase Price")
___________________________________ ________________________________________
Signature Signature (if purchasing jointly)
___________________________________ ________________________________________
Name Typed or Printed Name Typed or Printed
___________________________________ ________________________________________
Title (if Subscriber is an Entity) Title (if Subscriber is an Entity)
___________________________________ ________________________________________
Entity Name (if applicable) Entity Name (if applicable
___________________________________ ________________________________________
___________________________________ ________________________________________
Address Address
___________________________________ ________________________________________
City, State and Zip Code City, State and Zip Code
___________________________________ ________________________________________
Telephone-Business Telephone-Business
___________________________________ ________________________________________
Telephone-Residence Telephone-Residence
___________________________________ ________________________________________
Facsimile-Business Facsimile-Business
___________________________________ ________________________________________
Facsimile-Residence Facsimile-Residence
___________________________________ ________________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: ________________________________
Dated: _________________, 2005
This Subscription Agreement is agreed to and accepted as of
________________ , 2005.
AMERICAN TECHNOLOGIES GROUP, INC.
By:_______________________________
Name: ▇▇. ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
21
CERTIFICATE OF SIGNATORY
(To be completed if Securities are
being subscribed for by an entity)
I, ____________________________, am the ____________________________ of
__________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
shares of Series E Preferred Stock, and certify further that the Subscription
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ________ day of ______________, 200_
___________________________________
(Signature)
22