EXHIBIT 10.1
AGREEMENT FOR THE
PURCHASE OF ASSETS
OF
HUCON LIMITED, XXXXX XXXXXXXXX, AND
XXXXXXX X. XXXXXXXX
BY
AMERICAN TECHNOLOGY CORPORATION
TABLE OF CONTENTS
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Page
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ARTICLE 1 PURCHASE AND SALE OF ASSETS................... 1
1.1 Transfer of Assets............................ 1
1.2 Liabilities................................... 2
1.3 Noncompete.................................... 2
1.4 Purchase Price................................ 2
1.5 Allocation of Consideration................... 3
ARTICLE 2 CLOSING....................................... 4
2.1 Closing....................................... 4
2.2 Conveyances at Closing........................ 4
2.3 Offset........................................ 5
2.4 Contracts..................................... 5
2.5 Possession.................................... 5
2.6 Liabilities and Costs......................... 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...... 5
3.1 Organization of Seller........................ 5
3.2 Authorization................................. 5
3.3 Taxes......................................... 6
3.4 No Undisclosed Liabilities.................... 6
3.5 Assets........................................ 6
3.6 Trademarks, Etc............................... 6
3.7 Title to Purchased Assets, Etc................ 6
3.8 Contracts and Commitments..................... 7
3.9 Litigation, Proceedings and Applicable Law.... 7
3.10 Compliance with Law........................... 7
3.11 No Conflict or Violation...................... 7
3.12 Insurance..................................... 8
3.13 Consents and Approvals........................ 8
3.14 Licenses, Permits and Authorizations.......... 8
3.15 Purchase Entirely for Own Account............. 8
3.16 Investment Experience......................... 8
3.17 Restricted Securities......................... 8
3.18 Receipt of Information........................ 9
3.19 Disclosure.................................... 9
3.20 Survival of Representations and Warranties.... 9
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TABLE OF CONTENTS
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(Continued)
Page
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER....... 9
4.1 Organization of Buyer......................... 9
4.2 Authorization................................. 9
ARTICLE 5 ACTIONS BY SELLER AND BUYER PRIOR TO
THE CLOSING................................... 10
5.1 Maintenance of Assets......................... 10
5.2 Investigation by Buyer........................ 10
5.3 Consents and Best Efforts..................... 10
ARTICLE 6 CONDITIONS TO BUYER'S OBLIGATIONS............. 10
6.1 Representations, Warranties and Covenants..... 10
6.2 Consents...................................... 11
6.3 Material Changes.............................. 11
6.4 No Governmental Proceeding or Litigation...... 11
6.5 Certificates.................................. 11
ARTICLE 7 ACTIONS BY SELLER AND BUYER AFTER
THE CLOSING................................... 11
7.1 Books, Records and Employees.................. 11
7.2 Indemnification............................... 12
7.3 Further Assurances............................ 13
7.4 Bulk Sales.................................... 13
7.5 Taxes and Other Costs......................... 13
7.6 Noncompetition................................ 13
ARTICLE 8 MISCELLANEOUS................................. 13
8.1 Termination................................... 13
8.2 Survival of Representations and Warranties.... 14
8.3 Assignment.................................... 14
8.4 Notices....................................... 14
8.5 Choice of Law................................. 14
8.6 Entire Agreement; Amendments and Waivers...... 14
8.7 Multiple Counterparts......................... 15
8.8 Expenses...................................... 15
8.9 Invalidity.................................... 15
8.10 Headings...................................... 15
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EXHIBITS
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Exhibit A Term Sheet
Exhibit B Technology License Agreement
Exhibit C Sub License
Exhibit D List of Assets
Exhibit E Xxxx of Sale
Exhibit F Assignment of Intangible Assets by Hucon Limited, Xxxxxxx X.
Xxxxxxxx and Xxxxx Xxxxxxxxx to American Technology Corporation
Exhibit F-1 Assignment of Intangible Assets by Xxxxx Xxxxxxxxx to American
Technology Corporation
Exhibit G Certificate of Performance
Exhibit H Assignment and Consent of License by Hucon Limited to American
Technology Corporation
Exhibit I Assignment and Consent of License by Xxxxxxxxx-Xxxxxxxxx
Corporation to American Technology Corporation
Exhibit J Trademark Assignment
SCHEDULES
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Schedule 3.4 Liabilities
Schedule 3.6 Trademarks, Etc.
Schedule 3.8 Contracts and Commitments
Schedule 3.12 Insurance Policies
Schedule 3.13 Consents and Approvals
Schedule 3.14 Licenses, Permits and Authorizations
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ASSET PURCHASE AGREEMENT
This agreement ("Agreement") is made as of April 11, 2000 at San Diego,
California by and between American Technology Corporation, a Delaware
corporation ("Buyer") Hucon Limited, a Washington corporation ("Hucon"), Xxxxxxx
X. Xxxxxxxx ("Xxxxxxxx") and Xxxxx Xxxxxxxxx ("Xxxxxxxxx"). Hucon, Xxxxxxxx and
Graebener shall collectively be referred to herein as "Seller".
RECITALS
A. Hucon, Buyer, Xxxxxxxx and Xxxxxxxxx have entered into that certain
binding Term Sheet dated February 25, 2000 attached hereto as Exhibit A (the
"Term Sheet") with regard to certain technology developed by Graebener and held
or owned by Seller, all as described therein (the "Technology"), and Hucon and
Xxxxxxxxx-Xxxxxxxxx Corporation ("BG") have entered into a Technology License
Agreement effective February 1, 2000, a copy of which is attached hereto as
Exhibit B (the "BG License").
B. Seller owns certain assets, proprietary rights and intellectual
property described in the Term Sheet, including all patent rights, trade
secrets, know how, trademarks, service marks, trade names and all intellectual
property rights to the Technology and to the BG License (collectively, the
"Proprietary Rights"), and the Seller wishes to transfer all of such assets and
rights to the Technology and the BG License to Buyer, and Buyer desires to
purchase such assets and rights.
C. The Technology, the Proprietary Rights, and the BG License shall all
collectively be referred to herein as the "Assets".
D. Seller desires to sell and assign, and Buyer desires to purchase
these Assets of Seller, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, including all other
documents incorporated by reference, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Transfer of Assets. Upon the terms and subject to the conditions
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contained herein, on the Closing Date (hereafter defined), Seller will sell,
convey, transfer, assign and deliver to Buyer, and Buyer will acquire, effective
as of the Closing Date, the Assets of Seller, which shall include:
(a) the Technology, as described in the Term Sheet;
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(b) the Proprietary Rights, as described in the Term Sheet, and any
other tangible personal property related thereto, including planar magnetic
transducer technologies that do not use strip laminated non-etched diaphragms
developed by Graebener;
(c) Seller's rights under the BG License, including the sole source
contract with Graphic Packaging, all of which is attached hereto and made a part
hereof by this reference as Exhibit B;
(d) Any and all intellectual property, including any such
intellectual property owned by Graebener, or owned by Hucon, or owned by
Xxxxxxxx, whether individually or in any collective manner, related to the
Technology, the Proprietary Rights and the BG License, including but not limited
to patent rights, trade secrets, trade names, trademark rights, trademarks,
market research, contact lists, marketing materials, business plans, and all
other rights and assets described and listed in the Terms Sheet under the bullet
points under the heading Technology Description in the Term Sheet, and all other
trade names, supplies, materials, contracts, licenses, deposits, and rights to
claims to refunds and adjustments of any kind relating to the Assets, and other
intangible assets used or related to the Assets.
All of the above shall collectively be referred to hereafter as the "Assets."
1.2 Liabilities. Buyer shall not assume any liabilities of Seller, and
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Seller shall indemnify Buyer against any unassumed liabilities of Seller as
provided in Section 7.2. Buyer may enter into a subLicense with BG under the
License for the Premises with Seller in the form attached hereto as Exhibit C.
Without limiting the foregoing, Buyer shall not be responsible for any business,
property, occupation, withholding, or similar tax, or any taxes of any kind
relating to any period before the Closing Date, or for payments of amounts due
under any contract or License for equipment, on or before the Closing Date.
1.3 Noncompete. As an essential part of this sale, and to protect the
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value of the assets being purchased, Hucon agrees not to compete with Buyer in
the sound, acoustic or a related systems business on the terms described in
Section 7.6 of this Agreement.
1.4 Purchase Price.
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(a) Upon the terms and subject to the conditions contained herein,
the purchase price to be paid by Buyer to Seller for the sale, transfer,
assignment, conveyance and delivery of the Assets, and which Seller shall
allocate among themselves as they shall agree, except as provided in Sections
1.4(a) 5 and (b) herein, shall be an amount equal to:
1. $50,000 paid to Hucon as a cash option fee, which Buyer
has already paid;
2. $50,000 cash at Closing to Hucon;
3. $100,000 cash paid directly to BG on behalf of Seller,
as the initial $100,000 payment required under the BG License, which payment has
already been paid by Buyer to BG;
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4. $100,000 cash to be paid to Seller within seven (7) days
from the date of Closing;
5. Two Hundred Thousand (200,000) shares of Buyer's common
stock for which certificates representing such common stock shall be issued and
registered to the following parties in the following amounts: One Hundred
Thousand (100,000) shares of common stock to Xxxxxxxx and One Hundred Thousand
(100,000) shares of common stock to Graebener, which is due to Seller upon
Buyer's receipt of (i) the fully executed BG License, (ii) a consent to the
transfer of the BG License, fully executed by BG, in the form attached hereto as
Exhibit I, and (iii) two fully executed full and unrestricted Transfer and
Assignment to Buyer of all rights of Graebener and Hucon/Xxxxxxxx in the Assets;
and (iv) a fully executed and notarized Trademark Assignment in the form
attached hereto as Exhibit J, and
(b) Subject to the performance milestones described below, Two
Hundred Thousand (200,000) shares of Buyer's common stock, for which
certificates representing such common stock shall be issued and registered to
the following parties in the following amounts: One Hundred Thousand (100,000)
shares of common stock to Xxxxxxxx and One Hundred Thousand (100,000) shares of
common stock to Graebener, provided that any of such shares which have not been
earned on or before the fourth anniversary date of this Agreement shall no
longer be due or owing to Seller, and in addition, Seller agrees to assume the
financial liabilities of Buyer to Xxxxxxxxx-Xxxxxxxxx Corporation assumed herein
under the Technology Transfer Agreement at Exhibit B herein by Buyer, and
provided further that Xxxxxxxx and Graebener shall agree to pledge to the
Company, which shall take possession of the certificates therefore and hold them
in escrow at the Company, such number of the Two Hundred Thousand (200,000)
shares of Buyer's common stock described herein as Buyer shall determine to
secure any monetary or financial defaults or liabilities of each of the Sellers
in connection with the Technology Transfer Agreement at Exhibit B in the event
of a default or failure to pay by any of the Sellers under the Technology
Transfer Agreement:
1. 50,000 shares shall be earned by Seller for each
$1,000,000 of gross revenues generated to Buyer from sales, licenses or other
proceeds generated from the Technology.
(c) On the Closing Date, Seller shall deliver all of the executed
documents and agreements required under this Agreement, and Buyer shall
deliver all payments due at the Closing.
1.5 Allocation of Consideration. The purchase price to be paid by Buyer
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pursuant to this Agreement shall be allocated to the assets purchased as
follows:
(a) for the Assets other than those listed below, all of the
consideration hereunder, less $20,000;
(b) for the noncompetition agreement, Buyer shall pay a total
consideration of $10,000; and
(c) for the trade name and other intangible assets, Buyer shall pay
a total consideration of $10,000;
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(d) Buyer and Seller agree that all transactions under this
Agreement shall be reported for federal and state tax purposes in accordance
with the allocations set out in this Section 1.5.
ARTICLE 2
CLOSING
2.1 Closing. The Closing of the transactions contemplated herein (the
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"Closing") shall be held at San Diego, California on April 11, 2000 (the
"Closing Date"), or on such other date as the parties mutually agree, at the
offices of Xxxxxxxx, Xxxx, Xxxxxxxxxx & Xxxxxxx LLP. (unless the parties hereto
otherwise agree).
2.2 Conveyances at Closing.
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(a) To effect the transfer of Assets referred to in Section 1.1
hereof, Seller will, on the Closing Date, deliver to Buyer:
(i) a xxxx of sale conveying in the aggregate all personal
property included in the Assets free and clear of all mortgages, liens, pledges,
encumbrances or claims, in the form of Exhibit E attached hereto;
(ii) assignments of all of the intangible property and
intellectual property included in the Assets, and any other contracts,
copyrights, trademarks, trade names, service marks, and applications for any of
the foregoing, substantially in the form of Exhibit F attached hereto;
(iii) all of the Seller's books, records and files relating to
the Assets;
(iv) the original subLicense (the "License") in the form as
attached hereto as Exhibit C;
(v) if requested by Buyer, an assignment and consent of
License, executed by Seller and Landlord, in the form attached hereto as Exhibit
H;
(vi) all documents necessary to transfer to Buyer the
fictitious business name "Great American Sound Company" and "The G.A.S.
Company"; and
(vii) all such other documents or instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Assets of the
Business in accordance with the provisions hereof.
(b) On and after the Closing Date, Buyer is irrevocably appointed
Seller's attorney-in-fact, without further notice to Seller, to collect all
accounts receivable arising from services performed and products sold relating
to the Assets on or after the Closing Date, to endorse Seller's name on such
receivables, and to take any other reasonable action to collect receivables
arising from the Assets as of the Closing Date.
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(c) All instruments executed and delivered to Buyer pursuant hereto
shall be in form and substance, and shall be executed in a manner, reasonably
satisfactory to Buyer.
2.3 Offset. On or after the Closing Date, Buyer shall have the right to
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offset against and deduct (i) first from the consideration for the Assets
described in Section 1.4(b), and then from any other consideration owed to
Seller (ii) second from any compensation due to Xxxxxxxx, and (iii) third from
any compensation due to Graebener, any amounts paid by, or to be paid by, Buyer
for the obligations of Seller not assumed by Buyer. In the event of offsets
under (ii) above, such offsets shall be deducted from the above amounts due to
Xxxxxxxx or Xxxxxxxxx under their employment agreements with Buyer, provided
such invoices or claims are first sent to Seller and Seller has had thirty (30)
days to pay such obligations. Such obligations shall include, but are not
limited to, any tax amounts owed by Seller arising from transactions on or
before the Closing Date, and from any losses arising from any breaches of
representations, warranties, indemnities or other provisions of this Agreement.
2.4 Contracts. Seller shall also take any action necessary to transfer to
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Buyer any contracts currently owned by Seller relating to the Assets.
2.5 Possession. Buyer shall take possession of the Assets on the Closing
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Date.
2.6 Liabilities and Costs. Seller shall pay all federal and state sales
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taxes and payroll taxes, including taxes owed to the Internal Revenue Service
and the state taxing agencies, through February 25, 2000, including any other
taxes which may adversely effect the transfer of the Assets from Seller to
Buyer. Personal property taxes, insurance, payroll taxes and other applicable
taxes are to be prorated to Closing Date, with Seller paying all such
obligations accruing prior to Closing Date and Buyer responsible for payment of
all obligations accruing after such Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Hucon, Xxxxxxxx and Graebener each hereby represent and warrant to Buyer:
3.1 Organization of Seller. Hucon is duly organized, validly existing and
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in good standing under the laws of the State of Washington and has full
corporate power and authority to conduct its business as it is presently being
conducted and to own and License the properties and Assets. The ownership of
none of the Assets requires any document, agreement, qualification, licensing or
approval which is not being transferred to Buyer under this Agreement.
3.2 Authorization. Seller has full power and authority to enter into this
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Agreement, to consummate the transactions contemplated hereby and to perform
their obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by Seller
have been duly authorized by all requisite corporate action on the part of
Hucon. This Agreement has been duly executed and delivered by Seller and is a
valid and binding obligation of Seller enforceable against it in accordance with
its terms.
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3.3 Taxes. Seller has duly and timely filed all federal, state and local
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tax reports and returns required to be filed by it in connection with the
Assets, and all taxes and levies of every kind, character or description, shown
by such reports or returns to be due and payable, or which were or are otherwise
due and payable, have been paid. No taxing authority has asserted any claim for
the assessment of any additional tax liability. Seller has duly withheld and, if
payable, paid all taxes which it is required to withhold from, and pay relating
to, salaries or compensation paid to employees of its business.
3.4 No Undisclosed Liabilities. There are no liabilities, obligations or
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commitments of any nature (absolute, accrued, contingent or otherwise) (herein
"Liabilities") relating to the Assets, except Liabilities which have been
disclosed in Schedule 3.4 attached hereto.
3.5 Assets. To the best of their knowledge, (i) the Technology has
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significant future value and no third party has any rights to the Technology or
rights to use, make or sell products based on the Technology, (ii) the rights of
Acoustic Technologies, Inc. and Dai Ichi do not interfere with or adversely
affect the rights of Buyer to the Technology or the Proprietary Rights, (iii)
the payment of the amounts set forth in the letter to Graphic Packaging to BG
dated February 11, 2000 shall provide Buyer with exclusive rights of BG under
the Co-Operation Agreement with Graphic Packaging (formerly with Fort Xxxxx
Corporation), and that the Co-Operation Agreement with Fort Xxxxx Corporation is
the only agreement governing the supply of the film diaphragm from Graphic
Packaging to BG, (iv) the supplier of the diaphragm is on a sole source basis
and such supplier cannot produce such material for use by others for the same
use, (v) the technology covered by the agreement with Acoustic Technologies,
Inc. covers technology other than the Technology and Proprietary Rights being
transferred by this Agreement, and (vi) the technology that is licensed by BG to
Dai Ichi and Acoustic Technologies, Inc. is mature and held in the public
domain. Exhibit D contains a list of all of the Assets. The Seller is in
possession and operating control of all of the Assets.
3.6 Trademarks, Etc. Schedule 3.6 hereto contains a list including all of
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Seller's trademarks, trade names, service marks and registered copyrights, and
applications therefor, including the name "The Great American Sound Company" and
"The GAS Company", which are or have been used in connection with the Assets.
Except as set forth on Schedule 3.6 hereto, Seller owns all items set forth on
Schedule 3.6 hereto, and such items are not subject to any licenses, liens,
mortgages, pledges, encumbrances, claims, restrictions or charges of any kind.
Except as set forth on Schedule 3.6 hereto, Seller has not been charged, nor to
its best knowledge is it threatened to be charged, with infringement of, nor to
its best knowledge has infringed, any unexpired patent, trademark, trademark
registration, trade name, service xxxx, copyright, copyright registration or,
other proprietary right of any party relating to or in connection with the
Assets. To the best of their knowledge, Seller and Graebener owns or has the
right to use without royalty or other charge, all know-how, processes, methods
and designs relating to the Assets. The consummation of the transactions
contemplated hereby will not alter or impair any of such rights.
3.7 Title to Purchased Assets, Etc. Seller has good and marketable title
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to all of the Assets described in this Agreement and listed on the attached
Exhibits. None of the Assets is or will be subject to any mortgage, deed of
trust, pledge, lien, security interest, encumbrance, claim, charge or material
adverse interest of any kind or character of any other person or entity.
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3.8 Contracts and Commitments. Schedule 3.8 sets forth every written or
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oral commitment, contract or agreement, including but not limited to any
license, License, permit, authorization or franchise, involving any obligation
or liability relating to the Assets. Commitments, contracts and agreements set
forth on Schedule 3.8 hereto are in full force and effect and have not been
modified or amended in any material respect. Neither Seller, Xxxxxxxx or
Xxxxxxxxx is (and to the best knowledge of Seller no other party is) in breach
or violation of, or default under, and there is no valid basis for a claim of
breach or violation of, or default under, any material agreement, instrument,
indenture, deed of trust, commitment, contract or other obligation of any type
to which Seller, Xxxxxxxx or Graebener is a party (or is bound) which relates to
the Assets or to which any of the Assets is subject, and no event has occurred
which constitutes or, with the lapse of time or the giving of notice, or both,
would constitute such a breach, violation or default by Seller, Xxxxxxxx or
Xxxxxxxxx thereunder. Schedule 3.8 hereto also contains a list and brief
description of all warranties and other commitments or obligations with respect
to the return of, or service relating to, products manufactured or sold by
Seller and relating to the Assets. Complete and correct copies of all contracts,
commitments, agreements and Licenses set forth on Schedule 3.8 hereto have been
delivered to Buyer.
3.9 Litigation, Proceedings and Applicable Law. There are no material
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actions, suits or proceedings pending or threatened, against or affecting any of
the Assets or the consummation of the transactions contemplated hereby, at law
or in equity or before or by any governmental authority or instrumentality or
before any arbitrator of any kind, and there is no valid basis for any such
action, proceeding or investigation. Buyer is assuming no liability with respect
to any such action, suit or proceeding arising out of transactions, acts or
omissions occurring prior to the Closing Date. No such action, suit or
proceeding will have a material adverse effect on the Assets or the condition
(financial or otherwise), business, operations, properties, assets, prospects,
technology or relations with customers, suppliers, distributors or employees of
Buyer as a result of the purchase of the Assets. There are no product liability,
warranty or similar claims, actions, litigation or other proceedings relating to
the Assets or products manufactured or sold, or services rendered, by the Seller
relating to the Assets which involve any claim for injunctive relief (whether
temporary or permanent) and which have arisen within three (3) years prior to
the date hereof.
3.10 Compliance with Law. Seller is in compliance, in all material
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respects, with all applicable statutes, rules, regulations, ordinances, codes,
orders, licenses, franchises, permits, authorizations and concessions, as such
apply to the Assets, including but not limited to, the intellectual property,
computer software and programs, and other intangible property, any applicable
state or federal patent, trademark, copyright, or other similar right or
filings. The Seller has received no notification alleging any violation of any
of the foregoing within the last three years or with respect to which adequate
corrective action has not been taken.
3.11 No Conflict or Violation. Neither the execution and delivery of this
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Agreement nor the consummation of the transactions contemplated hereby will
result in (i) a violation of or a conflict with any provision of the Articles of
Incorporation or Bylaws of Seller, (ii) a breach or default under any term or
provision of any contract, agreement, License, commitment, license, franchise,
permit, authorization or concession to which Seller is a party or by which the
Assets are bound, or an event which with notice, lapse of time, or both, would
result in any such breach or default, except for commitments, contracts or
agreements identified on Schedule 3.8 hereto
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and noted thereon as requiring the consent of a third party, (iii) a violation
by Seller of any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, or an event which with notice, lapse of time
or both would result in any such violation, or (iv) an imposition of any lien,
mortgage, pledge, easement, encumbrance, claim, restriction or charge on the
business of Seller or on any of the Assets, or an event which with notice, lapse
of time or both would result in any such imposition.
3.12 Insurance. Schedule 3.12 hereto contains a copy of each insurance
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policy maintained by Seller in connection with the Assets, if any, and a list of
individual claims in excess of One Thousand Dollars ($1,000), and similar claims
in excess, in the aggregate, of Five Thousand Dollars ($5,000) during any 12-
month period, made against the Assets within three (3) years prior to the date
hereof, under any insurance policies.
3.13 Consents and Approvals. Except as set forth on Schedule 3.13 hereto,
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no consent, approval or authorization of, or declaration or filing of
registration with, any governmental or regulatory authority, or any other person
or entity, is required to be made or obtained by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
3.14 Licenses, Permits and Authorizations. Schedule 3.14 hereto contains a
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list of all approvals, authorizations, consents, licenses, franchises, orders
and other permits of, and filings with, any governmental authority, whether
foreign, federal, state or local, which are required for the ownership of the
Assets. All such approvals, authorizations, consents, licenses, orders and
permits are in full force and effect.
3.15 Purchase Entirely for Own Account. All of the common stock to be
---------------------------------
acquired by Seller ("the Securities") is being acquired for investment for each
of Hucon's, Xxxxxxxx' and Xxxxxxxxx'x own accounts and not with a view to the
distribution of any part thereof. The Seller has no present intention of
selling, granting any participation in, or otherwise distributing the Securities
in a manner contrary to the Securities Act of 1933 ("Securities Act") or any
other applicable federal or state securities laws.
3.16 Investment Experience. Seller acknowledges that the Securities are a
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speculative risk and that Seller is able to fend for itself in the transactions
contemplated by this Agreement, can bear the economic risk of its investment
(including possible complete and total loss of such investment) for an
indefinite period of time, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
acquisition of the Securities in connection with this Agreement. Hucon
represents it has not been organized for the purpose of acquiring the
Securities. Seller understands that while Buyer has agreed to use its best
efforts to register the common stock of Buyer in accordance with the Term Sheet,
the Securities have not been registered under the Securities Act, or under the
securities laws of any jurisdiction, by reason of reliance upon certain
exemptions, and that the reliance of the Buyer on such exemptions is predicated
upon the accuracy of Seller's representations and warranties contained in this
Agreement.
3.17 Restricted Securities. The Seller understands that the Securities are
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characterized as "restricted securities" under the federal securities laws since
they are being acquired from
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Buyer in a transaction not involving a public offering and that, under such laws
and applicable regulations, such securities may be transferred or resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, the Seller represents that it is familiar with Securities and
Exchange Commission ("SEC") Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act and that a
standard legend will be placed on the certificates evidencing the Securities.
3.18 Receipt of Information. Seller has received all the information it
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considers necessary or appropriate for deciding whether to acquire the
Securities of Buyer pursuant to this Agreement. Hucon, Xxxxxxxx and Graebener
further represent that they have each had an opportunity to ask questions and
receive answers from the Buyer regarding the Securities of Buyer and the
business, properties, prospects and financial condition of the Buyer, have read
and reviewed the Buyer's Form 10-K Annual Report for the fiscal year ending
September 30, 1999, the Form 10-K/A Annual Report for the same period, and the
Form 10-Q for the quarter ended December 31, 1999 and all such other reports as
filed with the SEC as Seller has deemed necessary or desirable, and have had an
opportunity to obtain additional information (to the extent the Buyer possessed
such information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
3.19 Disclosure. No representation or warranty of Seller contained in this
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Agreement, and no statement contained in any certificate, schedule, list or
other writing furnished to Buyer pursuant hereto, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no fact
known to Seller which is not disclosed therein or in the Exhibits hereto which
materially and adversely affects the Assets.
3.20 Survival of Representations and Warranties. All covenants,
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representations and warranties shall survive the consummation of the
transactions contemplated hereunder and the termination of and disbursement of
common stock hereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 Organization of Buyer. Buyer is duly organized, validly existing and
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in good standing under the laws of the State of Delaware.
4.2 Authorization. Buyer has full corporate power and authority to enter
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into this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by Buyer and is a valid and binding obligation of Buyer enforceable
against it in accordance with its terms.
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ARTICLE 5
ACTIONS BY SELLER AND BUYER
PRIOR TO THE CLOSING
Seller and Buyer covenant as follows for the period from the date hereof
through the Closing Date:
5.1 Maintenance of Assets. Seller shall diligently preserve the Assets in
---------------------
the ordinary course and in the manner heretofore conducted and shall use its
best efforts to maintain the relationships and contacts with suppliers,
customers, potential customers and others having business relations regarding
the Assets. Without limiting the generality of the foregoing, Seller shall (i)
maintain the Assets in their current state of repair, (ii) in the event of
casualty loss to any of such assets, to the extent permitted under applicable
contracts or Licenses, and with Buyer's consent, transfer the insurance
proceeds, or the rights thereto, to Buyer at the Closing.
5.2 Investigation by Buyer. Seller shall allow Buyer, at its own expense,
----------------------
during regular business hours, prior to the Closing Date, through Buyer's
employees, agents and representatives, to make such investigation of the
business, properties, plants, books and records relating to the Assets, and
similar information, and to conduct such examination (including an examination
of the audit work papers of any independent accountant) of the condition
(financial or otherwise) of the Assets as Buyer deems necessary or advisable to
familiarize itself with such Assets, and to verify the representations and
warranties of Seller hereunder, and the purchase of the Assets shall be subject
to Buyer's approval of all of the above.
5.3 Consents and Best Efforts. Seller shall obtain all consents,
-------------------------
approvals and agreements of, and to give all notices and make all filings with,
any third parties, including governmental authorities, necessary to authorize,
approve or permit the full and complete sale, conveyance, assignment, or
transfer of all of the Assets. In addition, subject to the terms and conditions
herein provided, each of the parties hereto covenants and agrees to use its best
efforts to take, or cause to be taken, all action or do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated hereby.
ARTICLE 6
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for hereby
are subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
6.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Hucon, Xxxxxxxx and Xxxxxxxxx contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date,
Seller shall have performed all agreements and covenants required hereby to be
performed by them prior to or at the Closing Date. On the Closing Date,
10
there shall be delivered to Buyer a certificate (dated as of the Closing Date
and signed by Graebener and the President of Hucon to the foregoing effect,
substantially in the form of the certificate set forth in Exhibit G hereto.
6.2 Consents. All consents, approvals and waivers from third parties and
--------
governmental authorities and other parties, necessary to permit Seller to
transfer the Assets to Buyer as contemplated hereby, or necessary to permit
Buyer to fully own and use the Assets, shall have been obtained.
6.3 Material Changes. Since the date hereof, there shall not have been
----------------
any material adverse change in the condition (financial or otherwise) of the
Assets, liabilities, reserves, business, properties, operations, technology,
employee relations, customer, supplier or distributor relations, or prospects of
the Assets. For the purposes of this Agreement, a "material adverse change"
shall include, without limitation, any development or discovery of any material
contingent or other liability not described in the Schedules to this Agreement,
which might materially adversely affect the business, properties, assets,
operations, technology, prospects or relations with customers, suppliers, or
distributors relating to the Assets.
6.4 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental authority or
other person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be expected materially and
adversely to affect the right or ability of Buyer to own, operate or possess
after the closing, or the value after the Closing, of the Assets being acquired
by Buyer hereunder or which could reasonably be expected to result in any
material liability of Buyer.
6.5 Certificates. Seller shall furnish Buyer with such certificates of
------------
Seller's officers and others to evidence compliance with the conditions set
forth in this Article 6 as may be reasonably requested by Buyer.
ARTICLE 7
ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
7.1 Books, Records and Employees. Seller and Buyer agree that so long as
----------------------------
any books, records and files retained by Seller relating to the Assets, or the
books, records and files delivered to Buyer hereunder, to the extent that they
pertain to the Assets prior to the Closing Date, remain in existence and
available, each party (at its expense) shall have the right to inspect and to
make copies of the same at any time during business hours for any proper
purpose. Neither of the parties hereto will destroy, without first having
offered to deliver to the other party, any of such books, records and files for
a period of seven (7) years. Each party agrees that it will cooperate with and
make available to the other party, during normal business hours, all books,
records, information and employees (without substantial disruption of
employment) necessary and useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such books, records, information or employees for any reasonable
business purpose. The party requesting any such books, records, information or
employees shall bear all of the out-of-pocket costs and expenses (including
11
without limitation, attorneys' fees, but excluding reimbursement for the
salaries and employee benefits) reasonably incurred in connection with providing
such books, records, information or employees.
7.2 Indemnification.
---------------
(a) By Hucon, Xxxxxxxx and Xxxxxxxxx. Hucon, Xxxxxxxx and
--------------------------------
Graebener, jointly and severally, shall indemnify, save and hold harmless Buyer
and its and their respective employees, representatives, officers, directors and
agents from and against any and all costs, losses (including, without
limitation, diminution in value), liabilities, damages, lawsuits, deficiencies,
claims and expenses (whether or not arising out of third-party claims),
including without limitation, interest, penalties, reasonable attorneys' fees
and all amounts paid in investigation, defense or settlement of any of the
foregoing, incurred in connection with or arising out of or resulting from or
incident to: (i) any breach of any agreement, covenant or warranty, or the
inaccuracy of any representation, made by Seller or any of them in or pursuant
to this Agreement, or (ii) any liability, obligation or commitment of any nature
(absolute, accrued, contingent or otherwise) of Seller or relating to the Assets
and not specifically assumed by Buyer pursuant to this Agreement.
(b) Defense of Claims. If any lawsuit or enforcement action is
-----------------
filed against any party entitled to the benefit of indemnity hereunder, written
notice thereof shall be given to indemnifying party as promptly as practicable
(and in any event within fifteen (15) days after the service of the citation or
summons); provided that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
After such notice, if the indemnifying party shall acknowledge in writing to
such indemnified party that such indemnifying party shall be obligated under the
terms of its indemnity hereunder in connection with such lawsuit or action, then
the indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice to handle and defend the same, at the indemnifying
party's cost, risk and expense; and such indemnified party shall cooperate in
all reasonable respects, at its cost, risk and expense, with the indemnifying
party and such attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that indemnified
party may, at its own cost, participate in such investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom.
(c) Product and Warranty Liability. The provisions of this Section
------------------------------
7.2 shall cover, without limitation, all obligations and liabilities of
whatsoever kind, nature or description relating, directly or indirectly, to
product or warranty liability, litigation or claims against the Buyer in
connection with, arising out of, or relating to products sold or services
performed prior to the Closing Date.
(d) Brokers and Finders. Pursuant to the provisions of this Section
-------------------
7.2 Seller shall indemnify, hold harmless and defend Buyer from the payment of
any and all broker's and finder's expenses, commissions, fees or other forms of
other forms of compensation which may be due or payable from or by Seller, or
may have been earned by any third party acting on behalf
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of Seller in connection with the negotiation and execution hereof and the
consummation of the transactions contemplated hereby.
7.3 Further Assurances.
------------------
(a) On and after the Closing Date, Seller and Buyer will take all
appropriate action and execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
provisions hereof, including without limitation, putting Buyer in possession and
operating control of the Assets.
7.4 Bulk Sales. Buyer and Seller hereby waive compliance with Division 6
----------
of the California commercial code, of the bulk transfer contemplated by this
Agreement.
7.5 Taxes and Other Costs. Seller shall pay when due all foreign,
---------------------
federal, state or local taxes measured by or with respect to the income or gross
receipts of the Seller prior to the Closing Date or resulting from the sale to
Buyer of the Assets. Personal property taxes relating to the Assets shall be
prorated between Seller and Buyer as of the Closing Date (with Seller being
responsible for such items for all periods ending on or before the Closing Date
and Buyer being responsible for such items thereafter), and Seller and Buyer
each agree to pay its respective share of such items when due. Buyer shall not
be liable or responsible for any business, property, occupation, withholding or
similar tax, or any taxes of any kind related to any period before the Closing
Date, and Seller agrees to pay such charges on or before the Closing Date.
7.6 Noncompetition. Seller agrees that it shall not at any time within
--------------
the three (3) year period immediately following the Closing Date, directly or
indirectly, engage in, or have any interest in any person, firm, corporation or
business (whether as an employee, officer, director, agent, creditor,
consultant, or otherwise) that engages in (i) a business involving the direct or
indirect use of the "Assets" as defined herein and which Buyer is acquiring;
(ii) a business involving parametric speakers; or (iii) a business involving
electrostatic speakers, within the United States, Japan and Taiwan, or which is
otherwise the same as, similar to, or competitive with any activity now engaged
in by Seller.
ARTICLE 8
MISCELLANEOUS
8.1 Termination. If any condition precedent to Buyer's obligations
-----------
hereunder not satisfied and such condition is not waived by Buyer at or prior to
the Closing Date, Buyer may terminate this Agreement at its option by notice to
Seller. In the event of the termination of this Agreement, all cash or other
payments made to Seller or to BG on Seller's behalf shall be returned to Buyer,
and neither party shall have any further liability hereunder of any nature
whatsoever to the other party, including any liability for damages, unless
either party is in default under its obligations hereunder, in which event the
party in default shall be liable to the other party for such default. In the
event that a condition precedent to its obligations is not satisfied, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
Closing.
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8.2 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties contained in this Agreement and in any
Certificate delivered pursuant hereto shall survive the Closing.
8.3 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by Seller without the prior written
consent of Buyer, or by Buyer without the prior written consent of Seller,
provided that Buyer may assign such rights and obligations so long as such
assignee agrees in writing to be bound by the applicable terms and conditions of
this Agreement and Buyer remains liable for its obligations to Seller hereunder.
8.4 Notices. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by either party to the other
shall be in writing and delivered personally or mailed by certified mail,
postage prepaid, return receipt requested (such mailed notice to be effective on
the date such receipt is acknowledged), as follows:
If to Seller: Hucon Limited
0000 Xxxxx Xxxxxx, Xxx. 0000
Xxxxxxx Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, President
If to Buyer: American Technology Corporation
00000 Xxxxxxx Xxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxxxxx, President
With a copy to: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxx, Xxxx, Hargreaves and Savitch LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
8.5 Choice of Law. This Agreement shall be construed, interpreted and the
-------------
rights of the parties determined in accordance with the laws of the State of
California and the exclusive venue for any proceedings, suits or claims
hereunder shall be San Diego, California. Each party has consulted with, or has
had the opportunity to consult with, such party's legal counsel prior to signing
this Agreement.
8.6 Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto, constitutes the entire Agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver
14
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
8.7 Multiple Counterparts. This Agreement may be executed in one or more
---------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 Expenses. Except as set forth below, each party hereto shall pay its
--------
own expenses incident to this Agreement and to action taken in preparation for
carrying this Agreement into effect.
8.9 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
8.10 Headings. The headings of the Articles and Sections herein are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf by their respective officers, thereunto
duly authorized, in multiple originals, all as of the day and year first above
written.
SELLER
Hucon Limited
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxx Xxxxxxxxx
-------------------------
Xxxxx Xxxxxxxxx
BUYER
American Technology Corporation
By: /s/ Xxxxxxxxx X. Xxxxxxx
-------------------------
Xxxxxxxxx X. Xxxxxxx
15
