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EXHIBIT 4.6
AMERICAN TECHNOLOGY CORPORATION
SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"Agreement") is entered into as of December ____1998, 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
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 B
Preferred Stock (the "Shares") and warrants to purchase an aggregate of up to
two hundred and fifty thousand (250,000) 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 Securities and the Conversion
Shares shall have the rights, preferences, privileges and restrictions set forth
in the Company's Corrected Certificate of Designations of Series B Preferred
Stock, in the form attached hereto as Exhibit B (the "Certificate of
Designation") and in the Company's Certificate of Incorporation (collectively,
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
price of ten dollars ($10.00) per share and a Warrant, in the form attached
hereto as
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Exhibit C, to purchase the number of shares of Common Stock set forth opposite
such Purchaser's name on Exhibit A.
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 Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx,
Xxxxx 0000, Xxx Xxxxx, XX 00000-0000 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) ESCROW. 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 to the escrow
agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached
hereto as Exhibit D (the "Joint Escrow Instructions"). The Company shall deliver
certificates for the Shares and Warrants, registered in the name of such
Purchaser, to the Escrow Agent. By signing this Agreement, the Purchaser and the
Company each agree to all of the terms and conditions of, and become parties to,
the Joint Escrow Instructions, all of the provisions of which are incorporated
herein by this reference as if set forth herein in full.
(b) METHOD OF PAYMENT. Payment of the purchase price for the
Securities shall be made by wire transfer of funds to:
Bank of Commerce - La Jolla Office
ABA#: 000000000
Credit: Scripps Escrow Company
A/C# 008-301171
Ref # 986080-ZN
2.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 120th day
following the Closing, the Company may sell up to the balance of the authorized
shares of Series B 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 B 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.
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3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit E, 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 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, except for 225,300
shares of Common Stock of Xxxxxx Communications, Inc. 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 20,000,000 shares of Common Stock, par value $.00001
per share, 11,364,314 shares of which are issued and outstanding, 1,334,600
shares which are subject to outstanding options and 339,056 shares of which are
reserved for future issuance to employees, directors and consultants pursuant to
the Company's stock option plans, and 5,000,000 shares of Preferred Stock, par
value $.00001 per share, 350,000 of which are designated Series A Preferred
Stock, none of which are issued and outstanding and 250,000 of which are
designated Series B 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. 1,075,000 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 December 2, 1998,
other than the 339,056 shares reserved for issuance under the Company's stock
option and stock compensation plans, 1,334,600 shares subject to outstanding
options and 355,000 shares subject to outstanding warrants 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
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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.
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, the Warrants and the Joint Escrow
Instructions, 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, the
Warrants and the Joint Escrow Instructions, 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 a complete and accurate copy (excluding copies of exhibits) of each
Annual Report on Form 10-KSB, Quarterly Report on Form 10-QSB, Form 8-K,
definitive proxy statement and annual report filed by the Company with the
Securities and Exchange Commission ("SEC") on or after January 1, 1997 (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, 1998, 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.
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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 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, the Warrants and the Joint
Escrow Instructions, 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 Stock Purchase Warrant Agreements with
Xxxxxxx Corporate Finance dated February 5, 1997, Xxxxxxxx Xxxx dated May 13,
1998, and L.H. Friend & Co. dated June 18, 1998, the Company is presently not
under any obligation, and has not granted any rights, to
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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 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
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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 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 OTC BULLETIN BOARD. The Company's Common Stock is traded on
the OTC Electronic Bulletin Board maintained by the National Association of
Securities Dealers, Inc., and for so long as any Purchaser owns any of the
Securities or Conversion Shares, the Company shall continue the listing and
trading of its Common Stock on the OTC Bulletin Board, the Nasdaq SmallCap
Market, the Nasdaq National Market System, the New York Stock Exchange or the
American Stock Exchange, secure and maintain listing and trading of the
Conversion Shares on such market or exchange, and 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 OTC Bulletin
Board inquiries regarding the Company and does not reasonably anticipate any
such delisting, suspension or inquiry.
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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. 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:
(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.
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(d) ACCREDITED INVESTOR. 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 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.
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.
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(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 with a copy provided to Purchasers.
(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) COMPLIANCE CERTIFICATE. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President or
Chief Financial Officer of the Company, dated the Closing Date, to the effect
that the conditions specified in subsections (a), (c), (d) and (e) of this
Section 5.1 have been satisfied.
(g) ESCROW. The Company shall have delivered to the Escrow
Agent certificates for the Shares and the Warrants in accordance with this
Agreement.
(h) OTC BULLETIN BOARD. The Company's Common Stock shall be
currently trading on the OTC Bulletin Board. The Company and Purchasers shall
not be aware of any delisting or suspension proceeding regarding the Company's
Common Stock or any SEC or OTC Bulletin Board inquiries regarding the Company,
nor shall the Company or any Purchaser reasonably anticipate any such delisting,
suspension or inquiry.
(i) 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 by those Purchasers acquiring Securities in Section 4 hereof
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.
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(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) ESCROW. Each Purchaser shall have delivered to the
Escrow Agent 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 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
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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 January 31, 1999 (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 Warrants,
determined as if the Shares were converted in full (based on a $3.50 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 not
effective by May 1, 1999, the terms of conversion of the Shares shall be
adjusted as provided in the Certificate of Designation.
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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 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
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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 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
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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 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.
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(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 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.
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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 twenty-five
thousand (25,000) 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.
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
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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 telex or 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 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.
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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.
7.12 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. 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 7.13 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.
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IN WITNESS WHEREOF, the parties hereto have executed the SERIES B
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT as of the date set forth in the
first paragraph hereof.
COMPANY: PURCHASER:
AMERICAN TECHNOLOGY CORPORATION
13114 Evening Creek Drive South --------------------------------
Xxx Xxxxx, Xxxxxxxxxx 00000 [Print name of purchaser]
By: /s/ XXXXXX XXXXXX By:
----------------------------- -----------------------------
Xxxxxx Xxxxxx
Assistant Secretary
Title:
--------------------------
