Exhibit 10.1
AMERICAN TECHNOLOGY
CORPORATION
SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
May 3, 2002
TABLE OF CONTENTS
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Page
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1. Agreement To Sell And Purchase. ............................... 1
1.1 Authorization of Shares ................................ 1
1.2 Sale and Purchase ...................................... 1
2. Closing, Delivery And Payment ................................. 2
2.1 Delivery. .............................................. 2
2.2 Subsequent Sales of Shares ............................. 2
3. Representations, Warranties and Covenants of the Company ...... 2
3.1 Organization, Good Standing and Qualification .......... 2
3.2 Subsidiaries ........................................... 3
3.3 Capitalization; Voting Rights .......................... 3
3.4 Authorization; Binding Obligations ..................... 4
3.5 SEC Reports and Filings ................................ 4
3.6 Changes ................................................ 4
3.7 Title to Properties and Assets; Liens, etc. ............ 4
3.8 Compliance with Other Instruments ...................... 5
3.9 Litigation ............................................. 5
3.10 Employees .............................................. 5
3.11 Registration Rights .................................... 5
3.12 Compliance with Laws; Permits .......................... 5
3.13 Patents and Trademarks ................................. 6
3.14 Offering Valid ......................................... 6
3.15 Eligibility for Form S-3 ............................... 6
3.16 Reporting Status ....................................... 7
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TABLE OF CONTENTS
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(continued)
Page
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3.17 NASDAQ Small Cap Market ................................... 7
4. Representations And Warranties Of The Purchasers. ................ 7
4.1 Requisite Power and Authority .............................. 7
4.2 Investment Representations ................................. 7
5. Conditions To Closing. ........................................... 11
5.1 Conditions to Purchasers' Obligations at the Closing ....... 11
5.2 Conditions to Obligations of the Company ................... 12
6. Registration Rights .............................................. 12
6.1 Definitions ................................................ 12
6.2 Mandatory Registration. .................................... 13
6.3 Expenses of Registration ................................... 14
6.4 Obligations of the Company ................................. 14
6.5 Obligations of Holder. ..................................... 15
6.6 Indemnification ............................................ 16
6.7 Assignment of Registration Rights .......................... 18
7. Miscellaneous. ................................................... 18
7.1 Governing Law .............................................. 18
7.2 Survival ................................................... 18
7.3 Successors and Assigns ..................................... 18
7.4 Entire Agreement ........................................... 18
7.5 Severability ............................................... 19
7.6 Amendment and Waiver. ...................................... 19
7.7 Delays or Omissions ........................................ 19
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TABLE OF CONTENTS
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(continued)
Page
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7.8 Notices ............................................... 19
7.9 Expenses .............................................. 19
7.10 Attorneys' Fees ....................................... 19
7.11 Confidentiality ....................................... 20
7.12 Titles and Subtitles .................................. 20
7.13 Counterparts .......................................... 20
7.14 Broker's Fees ......................................... 20
7.15 Exculpation Among Purchasers .......................... 20
7.16 Pronouns .............................................. 20
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List of Exhibits
Schedule of Purchasers Exhibit A
Certificate of Designation Exhibit B
Warrant Agreement Exhibit C
Schedule of Exceptions Exhibit D
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AMERICAN TECHNOLOGY CORPORATION
SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"Agreement") is entered into as of April ____, 2002, by and among American
Technology Corporation, a Delaware corporation (the "Company"), and each of
those persons and entities, severally and not jointly, whose names are set forth
on the Schedule of Purchasers attached hereto as Exhibit A (which persons and
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entities are hereinafter collectively referred to as "Purchasers" and each
individually as a "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of up to two hundred fifty thousand (250,000) shares of its Series D
Preferred Stock (the "Shares") and warrants to purchase an aggregate of up to
five hundred fifty thousand (550,000) shares of its Common Stock (the
"Warrants," and together with the Shares, the "Securities");
WHEREAS, Purchasers desire to purchase the Securities on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Securities to
Purchasers on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (i) the sale and
issuance to Purchasers of the Securities, and (ii) the issuance of such shares
of Common Stock to be issued upon conversion or exercise, as the case may be, of
the Securities (the "Conversion Shares"). The Shares and the Conversion Shares
shall have the rights, preferences, privileges and restrictions set forth in the
Company's Certificate of Designation of Series D Preferred Stock, in the form
attached hereto as Exhibit B (the "Certificate of Designation") and in the
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Company's Certificate of Incorporation, as amended (collectively with the
Certificate of Designation, the "Charter").
1.2 Sale and Purchase. Subject to the terms and conditions
hereof, at the Closing (as hereinafter defined) the Company hereby agrees to
issue and sell to each Purchaser, severally and not jointly, and each Purchaser
agrees to purchase from the Company, severally and not jointly, the number of
Shares set forth opposite such Purchaser's name on Exhibit A, at a purchase
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price of Ten Dollars ($10.00) per share and a Warrant, in the form attached
hereto as Exhibit C, to purchase the number of shares of Common Stock set forth
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opposite such Purchaser's name on Exhibit A.
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2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of the
Securities under this Agreement (the "Closing") shall take place at 10:00 a.m.
on the date hereof, at the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time or
place as the Company and Purchasers may mutually agree (such date is hereinafter
referred to as the "Closing Date").
2.2 Delivery.
(a) Closing Deliveries. At the Closing, each Purchaser shall
pay the purchase price for the Securities as set forth next to such Purchaser's
name on Exhibit A hereto by delivering immediately available funds in United
States Dollars, along with an executed Stock Purchase Agreement, to the
Company's offices. The Company shall deliver certificates for the Shares and
Warrants, registered in the name of such Purchaser, to the Purchaser.
(b) Method of Payment. Payment of the purchase price for the
Securities shall be made by wire transfer of funds to:
US Bank
▇▇ ▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇-▇▇▇-▇▇▇-▇▇▇▇
ABA#: ▇▇▇▇▇▇▇▇▇
Account Name: American Technology Corporation
Account#: 165600532825
2.3 Subsequent Sales of Shares. At any time on or before the
60th day following the Closing, the Company may sell up to the balance of the
authorized shares of Series D Preferred Stock and Warrants not sold at the
Closing to such persons as may be approved by the Board of Directors of the
Company. All such sales shall be made on the terms and conditions set forth in
this Agreement, including, without limitation, the representations and
warranties by such Purchasers as set forth in Section 4. Any Shares of Series D
Preferred Stock sold pursuant to this Section 2.3 shall be deemed to be "Shares"
for all purposes under this Agreement, any Warrants sold pursuant to this
Section 2.3 shall be deemed "Warrants" for all purposes under this Agreement,
and any purchasers thereof shall be deemed to be "Purchasers" for all purposes
under this Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit D, the Company hereby represents and warrants to, and covenants with,
each Purchaser as of the date of this Agreement as follows:
3.1 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
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Delaware. The Company has all requisite corporate power and authority to own
and operate its properties and assets, to execute and deliver this Agreement and
the Warrants to issue and sell the Securities and the Conversion Shares and to
carry out the provisions of this Agreement, the Warrants and the Charter and to
carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
3.2 Subsidiaries. The Company owns no equity securities of any
other corporation, limited partnership or similar entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
3.3 Capitalization; Voting Rights. The authorized capital stock
of the Company consists of: (A) 20,000,000 shares of Common Stock, par value
$.00001 per share, of which, as of March 31, 2002 (the "Reference Date"), (i)
14,273,951 shares are issued and outstanding, (ii) 1,188,025 shares are subject
to outstanding options, (iii) 173,250 shares are reserved for future issuance to
employees, directors and consultants pursuant to the Company's stock option
plans, (iv) 1,487,500 shares are subject to outstanding warrants, and (v)
1,072,238 shares are issuable upon conversion of outstanding convertible
promissory notes; and (B) 5,000,000 shares of Preferred Stock, par value $.00001
per share, of which (i) 350,000 shares are designated Series A Preferred Stock,
no shares of which are issued and outstanding as of the Reference Date, (ii)
250,000 shares are designated Series B Preferred Stock, no shares of which are
issued and outstanding as of the Reference Date, (iii) 300,000 shares are
designated as Series C Preferred Stock, 10,000 shares of which are issued and
outstanding as of the Reference Date and are convertible into 39,042 shares of
Common Stock as of the Reference Date, and (iv) 250,000 shares are designated
Series D Preferred Stock, none of which, prior to the Closing, are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock (a)
have been duly authorized and validly issued, and (b) are fully paid and
nonassessable. The rights, preferences, privileges and restrictions of the
Shares are as stated in the Charter 1,138,889 shares of Common Stock have been
duly and validly reserved for issuance as Conversion Shares, and the Company
will take all reasonable measures to ensure that, at all times, a sufficient
number of shares of its Common Stock are reserved for issuance upon conversion
of the Shares and exercise of the Warrants. As of the Reference Date, other than
the shares of capital stock issuable upon exercise or conversion of the
foregoing outstanding options, warrants and convertible securities, and except
as may be granted pursuant to this Agreement or the Warrants, there are no
outstanding options, warrants, rights (including conversion, anti-dilution or
preemptive rights and rights of first refusal), proxy or stockholder agreements,
or agreements of any kind for the purchase or acquisition from the Company of
any of its securities. When issued in compliance with the provisions of this
Agreement and the Charter, the Securities and the Conversion Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.
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3.4 Authorization; Binding Obligations. All corporate action on
the part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement and the Warrants, the performance of all
obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Securities pursuant hereto and
the Conversion Shares pursuant to the Charter has been taken or will be taken
prior to the Closing. The Agreement, and the Warrants, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (b) general principles of equity
that restrict the availability of equitable remedies; and (c) to the extent that
the enforceability of the indemnification provisions in Section 6.6 of this
Agreement may be limited by applicable laws. The sale of the Securities and the
subsequent conversion or exercise of the Securities, as the case may be, into
Conversion Shares are not and will not be subject to any preemptive rights,
anti-dilution or rights of first refusal that have not been properly waived or
complied with.
3.5 SEC Reports and Filings. The Company has delivered to
Purchaser complete and accurate copies of (i) the Annual Report on Form 10-K for
the fiscal year ended September 30, 2001, (ii) the Quarterly Report on Form 10-Q
for the quarter ended December 31, 2001, and (iii) the Current Report on Form
8-K dated April 23, 2002, each as filed by the Company with the Securities and
Exchange Commission ("SEC") (the "SEC Documents"). The SEC Documents, including
the financial statements contained therein, (i) complied with the requirements
of the Securities Act of 1933, as amended (the "Securities Act") or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, at and as of the times they were filed (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
in all material respects and (ii) did not at and as of the time they were filed
(or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company has made all filings with the SEC
required under the Securities Act, the Exchange Act and all regulations
promulgated thereunder since January 1, 1997.
3.6 Changes. Since January 1, 2002, there has been no material
adverse change or disruption in the business, operations, prospects or financial
condition of the Company other than as disclosed in the SEC Documents.
3.7 Title to Properties and Assets; Liens, etc. 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 SEC
Documents, 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) minor 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. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and
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are reasonably fit and usable for the purposes for which they are being
used. The Company is in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
3.8 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Charter or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ or,
to its knowledge, any statute, rule or regulation applicable to the Company
which would materially and adversely affect the business, assets, liabilities,
financial condition or operations of the Company. The execution, delivery, and
performance of and compliance with this Agreement, and the Warrants, and the
issuance and sale of the Securities pursuant hereto and of the Conversion Shares
pursuant to the Certificate of Designations and the Charter, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
3.9 Litigation. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened in
writing against the Company that questions the validity of this Agreement or the
Warrants or the right of the Company to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, prospects, condition or affairs of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing.
3.10 Employees. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company.
3.11 Registration Rights. Except as required pursuant to this
Agreement and pursuant to the terms of an aggregate of $2,125,000 in principal
amount of 12% Convertible Subordinated Promissory Notes due December 31, 2002,
the Company is presently not under any obligation, and has not granted any
rights, to register (as defined in Section 6.1 of this Agreement) any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued.
3.12 Compliance with Laws; Permits. To its knowledge, the
Company is not in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof or any administrative or self-regulatory agency in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition or operations of the Company. No orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the
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Securities or the Conversion Shares, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. The Company has all franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
the Company and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
3.13 Patents and Trademarks. 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, information and other
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
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 communications
alleging that the Company has violated or, by conducting its business as
proposed, 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. 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 proposed to be
conducted. 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 proposed, 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. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned to
the Company.
3.14 Offering Valid. Assuming the accuracy of the
representations and warranties of the Purchasers contained in Section 4.2
hereof, the offer, sale and issuance of the Securities and the Conversion Shares
will be exempt from the registration requirements of the Securities Act and will
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Securities to any person or persons
so as to bring the sale of such Securities by the Company within the
registration provisions of the Securities Act or any state securities laws.
3.15 Eligibility for Form S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by the Purchaser of the
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Conversion Shares, and the Company shall file all reports required to be filed
by the Company with the SEC in a timely manner and take all other necessary
action so as to maintain such eligibility for the use of Form S-3.
3.16 Reporting Status. The Company's Common Stock is registered
under Section 12 of the Exchange Act. So long as any Purchaser beneficially owns
any of the Securities or Conversion Shares, the Company shall timely file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not voluntarily terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
3.17 NASDAQ Small Cap Market. The Company's Common Stock is
listed on the Nasdaq Small Cap Market maintained by the National Association of
Securities Dealers, Inc. ("NASD"), and for so long as any Purchaser owns any of
the Securities or Conversion Shares, the Company shall use its best efforts to
continue the listing and trading of its Common Stock on the Nasdaq SmallCap
Market or to secure and maintain listing and trading on the Nasdaq National
Market System, the New York Stock Exchange or the American Stock Exchange, and
shall comply in all respects with the Company's reporting filing and other
obligations under the bylaws or rules of such market or exchange. The Company is
not aware of any delisting or suspension proceeding regarding its Common Stock
or any SEC or NASD inquiries regarding the Company and does not reasonably
anticipate any such delisting, suspension or inquiry.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants, severally and not
jointly, to the Company as follows:
4.1 Requisite Power and Authority. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
Section 6.6 of this Agreement may be limited by applicable laws.
4.2 Investment Representations. Purchaser understands that
neither the Securities nor the Conversion Shares have been registered under the
Securities Act, and that the certificates representing the Shares and the
Conversion Shares will contain appropriate restrictive legends. Purchaser also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
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(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Securities (or the Conversion Shares)
are registered pursuant to the Securities Act, or an exemption from registration
is available. Purchaser understands that other than pursuant to the terms of
this Agreement the Company has no present intention of registering the
Securities, the Conversion Shares or any shares of its Common Stock. Purchaser
also understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the
Securities or the Conversion Shares under the circumstances, in the amounts or
at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Securities and the Conversion Shares for Purchaser's own account for investment
only, and not with a present view towards their distribution other than in
compliance with the Securities Act.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement.
(d) Accredited Investor. Unless Purchaser has initialed the
blank next to Section 4.2(h) below, Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
SEC Documents and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company and has had the opportunity to review the Company's operations and
facilities. Purchaser has also had the opportunity to ask questions of and
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the
Securities, and, if issued, the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Purchaser has been advised or is aware of
the provisions of Rule 144 promulgated under the Securities Act as in effect
from time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and (other than Rule 144(k)) the number of shares being sold during any
three-month period not exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the
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Purchaser is a partnership, corporation, limited liability company or other
entity, then the office or offices of the Purchaser in which its investment
decision was made is located at the address or addresses of the Purchaser set
forth on Exhibit A.
(Initial if applicable) _____ (h) Foreign Investors. Regulation S
Representations. The representations in this Section 4.2(h) apply only to
Purchasers who enter their initials next to this section. Purchaser understands
that the Company is relying on the following representations and warranties, and
other representations and warranties in the Section 4, for the purpose of
establishing that the offer and sale of the Securities is excluded from Section
5 of the Securities Act by virtue of Regulation S.
i. All offers and sales of securities to
Purchaser were made in an offshore transaction, as defined in Rule 902(h) of
Regulation S. Specifically, the offer to sell the Securities was made to
Purchaser who was located outside the United States at the time of such offer,
and this Agreement was executed by Purchaser or a duly authorized representative
of Purchaser located outside the United States at the time of execution.
ii. If Purchaser attempts to sell, transfer
or otherwise dispose of the Securities or the Conversion Shares prior to one
year after the Closing, such Purchaser agrees that:
a. Each "Distributor" (as defined in
Regulation S, Rule 902(d)) in connection with such resale agrees in writing (i)
that all offers and sales of the Securities and the Conversion Shares prior to
the expiration of the Distribution Compliance Period shall be made only in
accordance with the provisions of Regulation S, Rule 903 or Rule 904, pursuant
to registration of such securities under the Securities Act, or pursuant to an
available exemption from the registration requirements of the Securities Act;
and (ii) not to engage in hedging transactions with regard to such securities
prior to the expiration of the Distribution Compliance Period, unless in
compliance with the Securities Act.
b. All offering materials and
documents (other than press releases) used in connection with offers and sales
of the Securities and the Conversion Shares prior to the expiration of the
Distribution Compliance Period shall include statements to the effect that such
securities have not been registered under the Securities Act and may not be
offered or sold in the United States or to U.S. Persons (as defined in Section
4.2(h)(iii)), other than Distributors, unless the securities are registered
under the Securities Act, or an exemption from the registration requirements of
the Securities Act is available. Such offering materials and documents also must
state that hedging transactions involving those securities may not be conducted
unless in compliance with the Securities Act. Such statements shall appear (i)
on the cover or inside cover page of any prospectus or offering circular used in
connection with the offer or sale of the securities; (ii) in the underwriting
section of any prospectus or offering circular used in connection with the offer
or sale of the securities; and (iii) in any advertisement made or issued by the
Company, any Distributor, any of their respective affiliates, or any person
acting on behalf of any of the foregoing. Such statements may appear in summary
form on prospectus cover pages and in advertisements.
9
c. The offer or sale of the
Securities and the Conversion Shares by such Purchaser shall not be made to a
U.S. Person or for the account of a U.S. Person, other than a Distributor.
d. The offer and sale of the
Securities and the Conversion Shares shall also comply with the following
conditions (i) such Purchaser shall require that prior to the sale or transfer,
the purchaser of the Securities or the Conversion Shares (other than a
Distributor) certifies that it is not a U.S. Person and is not acquiring such
securities for the account or benefit of any U.S. Person or certifies that it is
a U.S. Person who purchased securities in a transaction that did not require
registration under the Securities Act; (ii) such Purchaser shall require that
prior to the sale or transfer, the purchaser of such securities agrees to resell
such securities only in accordance with the provisions of Regulation S, pursuant
to registration under the Securities Act, or pursuant to an available exemption
from registration; and agrees not to engage in hedging transactions with regard
to such securities unless in compliance with the Securities Act; (iii) such
Purchaser shall require each Distributor selling securities to a Distributor, a
dealer (as defined in Section 2(12) of the Securities Act), or a person
receiving a selling concession, fee or other remuneration, prior to the
expiration of the Distribution Compliance Period, to send a confirmation or
other notice to the purchaser stating that the purchaser is subject to the same
restrictions on offers and sales that apply to the Distributor.
e. Such Purchaser understands that
the Securities and the Conversion Shares will at all times, prior to the
expiration of the Distribution Compliance Period, contain a legend to the effect
that transfer is prohibited except in accordance with the provisions of
Regulation S, pursuant to registration under the Securities Act, or pursuant to
an available exemption from registration; and that hedging transactions
involving these securities may not be conducted unless in compliance with the
Securities Act.
f. Such Purchaser further understands
the Company, to comply with Regulation S, shall refuse to register any transfer
of the Securities or the Conversion Shares not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act,
or pursuant to an available exemption from registration.
iii. Such Purchaser is not a U.S. Person and
is not acquiring the Securities for the account or benefit of any U.S. Person.
The term "U.S. Person" means (i) any natural person resident in the United
States; (ii) any partnership or corporation organized or incorporated under the
laws of the United States; (iii) any estate of which any executor or
administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S.
Person; (v) any agency or branch of a foreign entity located in the United
States; (vi) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person; (vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated,
or (if an individual) resident in the United States; and (viii) any partnership
or corporation if: (1) organized or incorporated under the laws of any foreign
jurisdiction; and (2) formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Securities Act) who are not natural persons, estates or
trusts. Notwithstanding the foregoing definition of
10
"U.S. Person": (a) any discretionary account or similar account (other than an
estate or trust) held for the benefit or account of a non-U.S. Person by a
dealer or other professional fiduciary organized, incorporated, or (if an
individual) resident in the United States shall not be deemed a U.S. Person; (b)
any estate of which any professional fiduciary acting as executor or
administrator is a U.S. Person shall not be deemed a U.S. Person if: (1) an
executor or administrator of the estate who is not a U.S. Person has sole or
shared investment discretion with respect to the assets of the estate; and (2)
the estate is governed by foreign law; (c) any trust of which any professional
fiduciary acting as trustee is a U.S. Person shall not be deemed a U.S. Person
if a trustee who is not a U.S. Person has sole or shared investment discretion
with respect to the trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. Person; (d) an employee benefit
plan established and administered in accordance with the law of a country other
than the United States and customary practices and documentation of such country
shall not be deemed a U.S. Person; (e) any agency or branch of a U.S. Person
located outside the United States shall not be deemed a U.S. Person if: (1) the
agency or branch operates for valid business reasons; and (2) the agency or
branch is engaged in the business of insurance or banking and is subject to
substantive insurance or banking regulation, respectively, in the jurisdiction
where located; (f) the International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans shall not be deemed
U.S. Persons.
5. Conditions to Closing.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Securities at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and issuance
of the Securities and the proposed issuance of the Conversion Shares shall be
legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
(d) Filing of Certificate of Designation. The Certificate of
Designation shall have been filed with the Secretary of State of the State of
Delaware.
11
(e) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares and exercise of the Warrants shall have
been duly authorized and reserved for issuance upon such conversion or exercise.
(f) NASDAQ Small Cap Market. The Company's Common Stock shall be
currently trading on the Nasdaq Small Cap Market. The Company and Purchasers
shall not be aware of any delisting or suspension proceeding regarding the
Company's Common Stock or any SEC or NASD inquiries regarding the Company, nor
shall the Company or any Purchaser reasonably anticipate any such delisting,
suspension or inquiry.
(g) Size of Offering. Purchasers purchasing at least an aggregate
of $1,000,000 of the Securities pursuant to this Agreement shall have purchased,
or will be purchasing, such Securities prior to or concurrent with the Closing.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Securities at the Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties made in Section 4 hereof by those Purchasers acquiring Securities
shall be true and correct in all material respects at the date of the Closing,
with the same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Certificate of Designation. The Certificate of
Designation shall have been filed with the Secretary of State of the State of
Delaware.
(d) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
(e) Payment. Each Purchaser shall have delivered to the Company
immediately available funds as payment in full of an amount equal to the
purchase price of the Securities as set forth next to such Purchaser's name on
Exhibit A hereto in accordance with Section 2.2 hereof.
6. Registration Rights.
6.1 Definitions. As used in this Section 6, the following terms
shall have the following respective meanings:
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the
12
SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 6.7 hereof.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) Common Stock of the Company
issued or issuable upon exercise of the Warrants; and (c) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include (i) any Conversion Shares issued prior to the date
the Registration Statement covering such other Registrable Securities which is
required to be filed by the Company pursuant to the first sentence of Section
6.2(a) hereof is declared effective by the SEC, and (ii) any securities sold by
a person to the public either pursuant to a registration statement or Rule 144
or sold in a private transaction in which the transferor's rights under this
Section 6 are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 6 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
6.2 Mandatory Registration.
(a) The Company shall prepare and file with the SEC on or before
December 31, 2002 (the "SEC Filing Date") a Registration Statement on Form S-3
or, if Form S-3 is not available, on another appropriate form reasonably
acceptable to the Investors, which covers the resale of a number of shares of
Common Stock equal to at least the number of Registrable Securities issuable to
each Holder upon conversion of the Shares and exercise of the
13
Warrants, determined as if the Shares were converted in full (based on a $4.50
per share conversion price) and the Warrants were exercised in full on the first
anniversary of the Closing Date. If at any time the number of shares of Common
Stock included in the Registration Statement required to be filed as provided in
the first sentence of this Section 6.2(a) shall be insufficient to cover the
number of shares of Common Stock issuable on conversion in full of the
unconverted Shares and unexercised Warrants, then promptly, but in no event
later than 60 days after such insufficiency shall occur, the Company shall file
with the SEC an additional Registration Statement on Form S-3, or another
appropriate form (which shall not constitute a post-effective amendment to the
Registration Statement filed pursuant to the first sentence of this Section
6.2(a)) covering such number of shares of Common Stock as shall be sufficient to
permit such conversion and exercise. For all purposes of this Agreement such
additional Registration Statement shall be deemed to be the Registration
Statement required to be filed by the Company pursuant to this Section 6.2(a),
and the Company and the Holders shall have the same rights and obligations with
respect to such additional Registration Statement as they shall have with
respect to the initial Registration statement required to be filed by the
Company pursuant to this Section 6.2(a).
(b) Adjustment of Conversion Terms. If the Registration Statement
covering the Registrable Securities which is required to be filed by the Company
pursuant to the first sentence of Section 6.2(a) hereof is filed by December 31,
2002, the terms of conversion of the Shares shall be adjusted as provided in the
Certificate of Designation.
6.3 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 6.2 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered.
6.4 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall:
(a) Prepare and file with the SEC a Registration Statement on
Form S-3 with respect to the number of Registrable Securities provided in
Section 6.2(a), and thereafter to use all reasonable efforts to cause each
Registration Statement relating to Registrable Securities to become effective
and keep the Registration Statement effective for two years after the Closing
Date.
(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 for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary 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
14
Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided 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.
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and use its best efforts to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Holder as such
Holder may reasonably request.
(f) Use all reasonable efforts to prevent the issuance of stop
orders or any other suspensions in trading of the Company's Common Stock by the
SEC or any applicable exchange or market, and use its best efforts to have
removed or reversed any such stop order or suspension in trading that occurs.
6.5 Obligations of Holder.
(a) 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 Section 6.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 6.2 or 6.4 that each Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
(c) Each Holder by such Holder's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Holder has notified the Company in writing of
such Holder's election to waive all of such Holder's rights to register any
securities under this Section 6;
(d) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 6.4(e),
such Holder will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities and
all other transactions involving or relating to
15
the Company's securities until such Holder's receipt of copies of a supplemented
or amended prospectus and, if so directed by the Company, such Holder shall
deliver to the Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
6.6 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 6:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of 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, the Exchange Act or other federal or state law, 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") by the Company: (i) any untrue statement or alleged
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 or alleged 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 or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for 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 6.6
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 such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such
16
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 under an instrument duly executed
by such Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay as incurred any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 6.6 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 6.6 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 6.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own 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 materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6.6, 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 6.6.
(d) If the indemnification provided for in this Section 6.6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the 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 opportunity to correct or prevent such
statement or
17
omission; provided, that in no event shall any contribution by a Holder
hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 6.6 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
6.7 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 6 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member or retired member of a Holder, (b) is a Holder's family member or trust
for the benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
7. MISCELLANEOUS.
7.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
7.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
7.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.
7.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Warrants and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
18
7.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least fifty percent (50%) of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares or Warrants have been converted or exercised that have not been
sold to the public).
(b) The obligations of the Company and the rights of the
holders of the Shares, the Warrants and the Conversion Shares under the
Agreement may be waived only with the written consent of the holders of at least
fifty percent (50%) of the Shares (treated as if converted and including any
Conversion Shares into which the Shares or Warrants have been converted or
exercised that have not been sold to the public).
7.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Charter,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character on any Purchaser's part of any breach, default or
noncompliance under this Agreement or under the Charter or any waiver on such
party's part of any provisions or conditions of the Agreement or the Charter
must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement, the Charter by
law, or otherwise afforded to any party, shall be cumulative and not
alternative.
7.8 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then on the next business day;
(c) five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
7.9 Expenses. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement and the Warrants.
7.10 Attorneys' Fees. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to
19
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
7.11 Confidentiality. The Company shall not publicly disclose the
name or identity of any Purchaser unless (i) required by law or the rules and
regulations of the SEC, (ii) such Purchaser has given its prior written consent
or (iii) such information is already in the public domain.
7.12 Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.13 Counterparts. This Agreement may be executed in any number of
counterparts, by facsimile, or both, each of which shall be an original, but all
of which together shall constitute one instrument.
7.14 Broker's Fees. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Notwithstanding the foregoing, the Company
may pay finder's fees in cash equal to up to 5% of the purchase price of the
Securities for the introduction of qualified Purchasers accepted by the Company.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 7.14 being untrue.
7.15 Exculpation Among Purchasers. Each Purchaser acknowledges that
it is not relying upon any person, firm, or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities and
Conversion Shares.
7.16 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the parties hereto have executed the SERIES D PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
AMERICAN TECHNOLOGY CORPORATION ____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ [Print Name of Purchaser]
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
By: ______________________________ By:_________________________________
Name:
Title:
Title (if any):_____________________
AMERICAN TECHNOLOGY CORPORATION
SIGNATURE PAGE
TO SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SERIES D PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
AGGREGATE NUMBER SHARES OF
NAME AND ADDRESS PURCHASE OF COMMON STOCK
---------------- PRICE SHARES UNDERLYING
--------- ------ WARRANT
------------
[Purchaser]
____________________________ $________ _______ ____________
____________________________
TOTALS:
========= ======= ============
EXHIBIT C
FORM OF WARRANT AGREEMENT
EXHIBIT D
SCHEDULE OF EXCEPTIONS