SECURITIES PURCHASE AGREEMENT
Exhibit
99.1
This
Securities Purchase Agreement (the “Purchase Agreement”) contains certain
representations and warranties (the “Representations”) by American Technology
Corporation (the “Company”) in favor of the Purchasers named therein (the
“Purchasers”). The Purchase Agreement states in Section 5.7 that no person,
other than the parties to the agreement, is entitled to rely on the
Representations contained in the Purchase Agreement. The Purchase Agreement
is
filed in accordance with the rules of the Securities and Exchange Commission
as
a material agreement, and is intended by the Company solely as a record of
the
material agreement the Company has reached with the Purchasers. The filing
of
the Purchase Agreement is not intended to waive or modify Section 5.7 thereof,
or as a mechanism to update, supersede or otherwise modify prior disclosures
of
information and risks concerning the Company which the Company has made to
its
stockholders.
Investors
and potential investors should also be aware that the Representations are
qualified by information in confidential disclosure schedules that American
Technology Corporation has delivered to the Purchasers (the “Disclosure
Schedules”). The Disclosure Schedules contain information that modifies,
qualifies and creates exceptions to the Representations.
Investors
and potential investors should also be aware that certain Representations
made
to the Purchasers are not intended to be affirmative representations of facts,
situations or circumstances, but are instead designed and intended to allocate
certain risks between the Company, on the one hand, and the Purchasers, on
the
other hand. The use of representations and warranties to allocate risk is
a
standard device in investment and other commercial
contracts.
Accordingly,
stockholders should not rely on the Representations as affirmations or
characterizations of information concerning the Company as of the date of
the
Purchase Agreement, or as of any other date.
This
Securities Purchase Agreement (this “Agreement”) is dated as of July 14, 2005,
among American Technology Corporation, a Delaware corporation (the “Company”),
and the purchasers identified on the signature pages hereto (each, a “Purchaser”
and collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the Company
certain securities of the Company, as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms shall have the meanings indicated in this
Section
1.1:
“Action”
means any action, suit, inquiry, notice of violation, proceeding (including
any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144. With respect
to
a Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.
“Business
Day” means any day except Saturday, Sunday and any day which shall be a federal
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to
close.
“Change
of Control” means the occurrence of either of the following in one or a series
of related transactions consummation of a “Rule 13e-3 transaction” as defined in
Rule 13e-3 under the Exchange Act with respect to the Company.
“Closing”
means the closing of the purchase and sale of the Securities pursuant to
Section
2.
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“Closing
Date” means the date of the Closing.
“Commission”
means the Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, $.00001 par value per share, and
any securities into which such common stock may hereafter be
reclassified.
“Common
Stock Equivalents” means any securities of the Company or any Subsidiary which
entitle the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for,
or
otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common
Stock.
“Company
Counsel” means Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP.
“Eligible
Market” means any of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ National Market or the NASDAQ SmallCap Market.
“Effective
Date” means the date that the Registration Statement is first declared effective
by the Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Investment
Amount” means, with respect to each Purchaser, the investment amount set forth
under such Purchaser’s name on the signature pages hereof next to the label
“Investment Amount”.
“Lien”
means any lien, charge, encumbrance, security interest, right of first refusal
or other restrictions of any kind, but excluding any restriction imposed under
applicable securities laws.
“Per
Unit
Purchase Price” equals $4.88.
“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Purchaser
Percentage” means, with respect to a Purchaser, the percentage equal to the
product of (x) a fraction, the numerator of which shall be the Investment Amount
paid by such Purchaser on the Closing Date and the denominator of which shall
be
the aggregate Investment Amount paid by all Purchasers on the Closing Date
times
(y) 100.
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“Qualified
Institutional Buyer” means a “qualified institutional buyer” as such term is
defined in Rule 144A promulgated under the Securities Act.
“Registration
Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale by the Purchasers
of
the Shares and the Warrant Shares.
“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the date
of this Agreement, among the Company and the Purchasers, in the form of
Exhibit
B
hereto.
“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
“Securities”
means the Shares, the Warrants and the Warrant Shares.
“Securities
Act” means the Securities Act of 1933, as amended.
“Shares”
means the shares of Common Stock issued or issuable to the Purchasers at the
Closing pursuant to this Agreement.
“Strategic
Transaction” means a transaction or relationship in which the Company issues
shares of Common Stock or Common Stock Equivalents (i) to a Person which is,
itself or through its Subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising working capital or to an entity whose primary business is investing
in securities, (ii) to a Person in connection with any equipment lease or other
asset-based lending transaction approved by the Company’s Board of Directors in
accordance with reasonable business practices; or (iii) in connection with
a
bona fide settlement of a dispute or claim.
“Subsidiary”
means any subsidiary of the Company that is required to be listed in
Schedule
3.1(a).
“Trading
Day” means (a) any day on which the Common Stock is listed or quoted and traded
on its primary Trading Market, or (b) if the Common Stock is not then listed
or
quoted and traded on its primary Trading Market, then a day on which trading
occurs on an Eligible Market (or any successor thereto), or (c) if trading
ceases to occur on an Eligible Market (or any successor thereto), any Business
Day.
“Trading
Market” means whichever of the Eligible Markets on which the Common Stock is
listed or quoted for trading on the date in question.
“Transaction
Documents” means this Agreement, the Warrants, the Registration Rights
Agreement, the Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
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“Transfer
Agent Instructions” means the Company’s Transfer Agent Instructions in the form
of Exhibit
C.
“Voting
Agreement” means the Voting Agreement in the form of Exhibit
D.
“Warrant-A”
means the Common Stock purchase warrants, each in the form of Exhibit
A-1,
which
are issuable to the Purchasers at the Closing.
“Warrant-B”
means the Common Stock purchase warrants, each in the form of Exhibit
A-2,
which
are issuable to the Purchasers at the Closing.
“Warrants”
means, collectively, the Warrant-A and Warrant-B.
“Warrant
Shares” means, collectively, the shares of Common Stock issuable upon exercise
of each applicable Warrant.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing.
Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, the Shares and the
Warrants representing such Purchaser’s Investment Amount. The Closing shall take
place at the offices of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, XX 00000
on
the date this Agreement is executed and delivered by the parties or at such
other location or time as the parties may agree.
2.2 Closing
Deliveries.
i) At
the Closing, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i) a
certificate, registered in the name of such Purchaser; evidencing the number
of
Shares as set forth under such Purchaser’s name on the signature pages hereof
next to the label “Shares”;
(ii) a
Warrant-A, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire the number of shares of Common Stock
as set forth under such Purchaser’s name on the signature pages hereof next to
the label “Warrant-A Shares”;
(iii) a
Warrant-B, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire the number of shares of Common Stock
as set forth under such Purchaser’s name on the signature pages hereof next to
the label “Warrant-B Shares”;
(iv) the
legal
opinion of Company Counsel, in agreed form, addressed to the
Purchasers;
(v) the
Registration Rights Agreement duly executed by the Company;
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(vi) the
Transfer Agent Instructions executed by the Company and delivered to and
acknowledged by the Company’s transfer agent; and
(vii) the
Voting Agreement executed by Xxxxxx X. Xxxxxx.
(b) At
the
Closing, each Purchaser shall deliver or cause to be delivered to the Company
the following:
(i) such
Purchaser’s Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by the
Company for such purpose; and
(ii) the
Registration Rights Agreement duly executed by such Purchaser.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to each
Purchaser:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than those listed in
Schedule
3.1(a).
Except
as disclosed in Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.
(b) Organization
and Qualification.
Each of
the Company and each Subsidiary is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and each Subsidiary is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, have or reasonably be expected to result
in
(i) an adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material and adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise)
of
the Company and the Subsidiaries, taken as a whole, or (iii) an adverse
impairment to the Company’s ability to perform on a timely basis its obligations
under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”).
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it
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of
the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company in connection therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms.
(d) No
Conflicts.
Except
as disclosed in Schedule
3.1(d),
the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected, or (iii) assuming the accuracy of
Purchasers’ representations and warranties and compliance by the Purchasers of
their respective covenants as set forth in this Agreement, result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing with the Commission of one
or
more Registration Statements in accordance with the requirements Registration
Rights Agreement and (ii) the application(s) to the Nasdaq Stock Market for
the
listing of the Shares and Warrant Shares for trading thereon if required under
the rules of the Nasdaq Stock Market.
(f) Issuance
of the Securities.
The
Securities have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens. The Company has reserved from its
duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants in order to issue the
full
number of Warrant Shares as are or may become issuable in accordance with the
Warrants.
(g) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company is set forth in Schedule
3.1(g).
Except
as set forth in Schedule
3.1(g),
no
securities of the Company are entitled to preemptive or similar rights, and
no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a
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result
of
the purchase and sale of the Securities and except as disclosed in Schedule
3.1(g),
there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as set forth in Schedule
3.1(g),
the
issue and sale of the Securities will not, immediately or with the passage
of
time, obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right of
any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities. To the knowledge of the Company, except
as
specifically disclosed in Schedule
3.1(g),
no
Person or group of related Persons beneficially owns (as determined pursuant
to
Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement
with or by obligation binding upon the Company, beneficial ownership of in
excess of 5% of the outstanding Common Stock, ignoring for such purposes any
limitation on the number of shares of Common Stock that may be owned at any
single time.
(h) SEC
Reports; Financial Statements.
The
Company has filed all reports required to be filed by it under the Exchange
Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required
by
law to file such reports) (the foregoing materials being collectively referred
to herein as the “SEC Reports” and, together with the Schedules to this
Agreement, the “Disclosure Materials”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to
the
expiration of any such extension. The Company has delivered or made accessible
to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. Except as may have been corrected or supplemented in a
subsequent SEC Report, as of their respective dates, the SEC Reports complied
in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted 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. Except as may
have
been corrected or supplemented in a subsequent SEC Report, the financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
Except as may have been corrected or supplemented in a subsequent SEC Report,
such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto, or, in the case of unaudited
financial statements, as permitted by Rule 10-01 of Regulation S-X promulgated
under the Securities Act and the Exchange Act, and fairly present in all
material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations
and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
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(i) Press
Releases.
The
press releases disseminated by the Company during the one (1) year preceding
the
date of this Agreement taken as a whole (and in the context of other public
disclosures by the Company available at the time of each press release,
including without limitation in the SEC Reports) do not 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.
(j) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A)
trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
materially altered its method of accounting or the identity of its auditors,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for confidential
treatment of information.
(k) Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or
has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending
or
contemplated, any investigation by the Commission involving the Company or
any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(l) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(m) Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
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(n) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits would not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect (“Material Permits”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any Material Permit.
(o) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to their respective businesses
and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by
them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(p) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights
of
any Person. Except as set forth in the SEC Reports, to the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is
no
existing infringement by another Person of any of the Intellectual Property
Rights.
(q) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged. The Company has no reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(r) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner.
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(s) Internal
Control Over Financial Accounting.
The
Company and the Subsidiaries maintain a system of internal controls over
financial reporting sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
(t) Solvency.
Based
on the financial condition of the Company giving effect to the closing of the
transactions contemplated herein: (i) the Company’s fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect
of
the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts
are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(u) Certain
Fees.
Except
as described in Schedule
3.1(u),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by a Purchaser pursuant to written agreements executed by
such
Purchaser which fees or commissions shall be the sole responsibility of such
Purchaser) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(v) Certain
Registration Matters.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section
3.2(b)-(g),
no
registration under the Securities Act is required for the offer and sale of
the
Shares and Warrant Shares by the Company to the Purchasers under the Transaction
Documents. The Company is eligible to register the resale of its Common Stock
for resale by the Purchasers under Form S-3 promulgated under the Securities
Act. Except as described in Schedule
3.1(v),
the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have
not
been satisfied.
-10-
(w) Listing
and Maintenance Requirements.
The
Company has not, in the two years preceding the date hereof, received notice
(written or oral) from the Nasdaq SmallCap Market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof.
The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Common Stock on the Nasdaq SmallCap
Market. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Nasdaq Stock Market and no approval of the
shareholders of the Company is required for the Company to issue and deliver
to
the Purchasers the maximum number of Securities contemplated by Transaction
Documents.
(x) Investment
Company.
The
Company is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
(y) Application
of Takeover Protections.
The
Company has taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including
any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(z) No
Additional Agreements.
The
Company does not have any agreement or understanding with any Purchaser with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in this Agreement.
(aa) Disclosure.
The
Company confirms that neither it nor any Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that the Company believes constitutes material, non-public information. The
Company understands and confirms that the Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, furnished by or on behalf
of
the Company (including the Company’s representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement
of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were
made, not misleading.
(bb) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with applicable requirements of the Xxxxxxxx-Xxxxx
Act
of 2002 and applicable rules and regulations promulgated by the Commission
thereunder in effect as of the date of this Agreement, except where such
noncompliance could not be reasonably expected to have, individually
or in
the aggregate, a Material Adverse Effect.
-11-
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
to the Company as follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the applicable Transaction Documents and otherwise
to carry out its obligations thereunder. The execution, delivery and performance
by such Purchaser of the Transaction Documents to which it is a party and the
consummation by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or, if such
Purchaser is not a corporation, such partnership, limited liability company
or
other applicable like action, on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with terms hereof,
will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.
(b) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises the Warrants it will be, an
“accredited investor” as defined in Rule 501(a) under the Securities Act. Such
Purchaser is not a registered broker-dealer under Section 15 of the Exchange
Act. If such Purchaser has checked the box marked “Yes” on the signature page
hereto, such Purchaser is a Qualified Institutional Buyer.
(c) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(d) Access
to Information.
Such
Purchaser acknowledges that it has reviewed the Disclosure Materials and has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares and the merits
and risks of investing in the Securities; (ii) access to information about
the
Company and the Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents.
(e) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
-12-
(f) Restrictions
on Securities.
Each
Purchaser understands that the Securities have not been registered under the
Securities Act and may not be offered, resold, pledged or otherwise transferred
except (a) pursuant to an exemption from registration under the Securities
Act
or pursuant to an effective registration statement in compliance with Section
5
under the Securities Act and (b) in accordance with all applicable securities
laws of the states of the United States and other jurisdictions.
(g) Investment
Intent.
Such
Purchaser is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Purchaser’s right at all times to sell or otherwise dispose of all or any part
of such Securities in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty
by
such Purchaser to hold the Securities for any period of time. Such Purchaser
is
acquiring the Securities hereunder in the ordinary course of its business.
Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
(h) No
Prior Short Selling.
At no
time during the 30 days prior to the Closing Date has such Purchaser engaged
in
or effected, in any manner whatsoever, directly or indirectly, any sale of
Common Stock which such Purchaser is not deemed to own under the provisions
of
Rule 200(b) of Regulation SHO promulgated under the Exchange Act.
(i) Compliance
with Laws.
Each
Purchaser represents and warrants to the Company that it is in compliance with
all securities laws applicable to it in connection with the transactions
contemplated by the Transaction Documents, including all securities laws, rules
and regulations in respect of the stabilization or manipulation of the price
of
the Common Stock.
(j) Private
Placement.
Each
Purchaser understands and acknowledges that (i) the Securities are offered
and
sold without registration under the Securities Act in a private placement that
is exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption depends in part on, and that the Company and
its
counsel will rely upon, the accuracy and truthfulness of the foregoing
representations and each Purchaser hereby consents to such
reliance.
(k) Registration
Statement Questionnaire.
Such
Purchaser has completed or caused to be completed the Registration Statement
Questionnaire attached hereto as Appendix I, for use in preparation of the
Registration Statement, and the answers thereto are true and correct as of
the
date hereof and will be true and correct as of the effective date of the
Registration Statement, or as applicable, any amendment thereto, and such
Purchaser will notify the Company immediately of any material change in any
such
information provided in the Registration Statement Questionnaire until such
time
as the Registration Statement has been declared effective.
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
-13-
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 (a)
Securities may
only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend, so long as is
required by this Section
4.1(b):
[NEITHER]
THESE SECURITIES [NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES]
HAVE [NOT] BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED
IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin account and, if required under the terms of
such
account, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to
the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but the legend shall remain on the pledged Securities and such legal
opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. Further, no notice shall
be
required of such pledge. At the appropriate Purchaser’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of
Selling Stockholders thereunder.
-14-
(c) Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section
4.1(b)):
(i)
while a registration statement (including the Registration Statement) covering
the resale of such Shares and Warrant Shares is effective under the Securities
Act, or (ii) following any sale of such Shares or Warrant Shares pursuant to
Rule 144, or (iii) if such Shares or Warrant Shares are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company’s transfer agent on the Effective Date. Following
the Effective Date or at such earlier time as a legend is no longer required
for
the Shares and Warrant Shares under this Section
4.1(c),
the
Company will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company’s transfer agent of a certificate
representing Shares or Warrant Shares containing a restrictive legend, deliver
or cause to be delivered to such Purchaser a certificate representing such
Shares or Warrant Shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.
4.2 Furnishing
of Information.
As long
as any Purchaser owns the Securities, the Company covenants to use its best
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act which are required to be
filed in order to satisfy the current public information requirements of Rule
144(c)(1). As long as any Purchaser owns Securities, if the Company is no longer
subject to the periodic reporting requirements of the Exchange Act and Rule
144(k) is not available to any Purchaser with respect to any Securities held,
the Company will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c)(2) such information as is required
for
the Purchasers to sell the Shares and Warrant Shares under Rule
144.
4.3 Integration.
The
Company shall not, and shall use its best efforts to ensure that no Affiliate
of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that the transaction contemplated hereby would violate
any
such rule or regulations.
4.4 Subsequent
Registrations; Subsequent Placements.
(a) Other
than the Registration Statement, prior to the Effective Date, the Company may
not file any registration statement (other than on Form S-8) with the Commission
with respect to any securities of the Company.
-15-
(b) Prior
to
the one year anniversary of the Effective Date, the Company will not, directly
or indirectly, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition of any of Common Stock or Common Stock Equivalents or any of its
Subsidiaries’ equity or Common Stock Equivalents pursuant to a private placement
or a shelf registration statement in accordance with Rule 415 under the
Securities Act, (such offer, sale, grant, disposition or announcement being
referred to as “Subsequent Placement”), unless: (i) the Company delivers to each
Purchaser a written notice (the “Subsequent Placement Notice”) of its intention
to effect such Subsequent Placement, which specifies in reasonable detail all
of
the material terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the names of the investors (including the investment
manager of such investors, if any) and the investment bankers with whom such
Subsequent Placement is proposed to be effected, and attached to which shall
be
a term sheet or similar document and (ii) Purchasers shall not have notified
the
Company by 6:30 p.m. (New York City time) on the fifth Trading Day after their
respective receipt of the Subsequent Placement Notice of the willingness to
provide (or to cause any one their respective designees to provide), subject
to
completion of mutually acceptable documentation, all or part of such financing
to the Company on the same terms set forth in the Subsequent Placement Notice.
If the Purchasers shall fail to so notify the Company of their willingness
to
participate in full in the Subsequent Placement, the Company may consummate
the
remaining portion of such Subsequent Placement on the terms and to the Persons
set forth in the Subsequent Placement Notice. The Company shall provide each
Purchaser with a second Subsequent Placement Notice and each Purchaser will
again have the right of first refusal set forth in this Section
4.4(b),
if the
Subsequent Placement subject to the initial Subsequent Placement Notice is
not
consummated for any reason on the terms set forth in such Subsequent Notice
within 30 Trading Days after the date of the initial Subsequent Placement Notice
with the Person(s) identified in the Subsequent Placement Notice. If the
Purchasers indicate in the aggregate a willingness to provide financing in
excess of the amount set forth in the Subsequent Placement Notice, then each
Purchaser will be entitled to provide financing pursuant to such Subsequent
Placement Notice up to an amount equal to such Purchaser’s Purchaser Percentage
of the financing, but the Company shall not be required to accept financing
from
the Purchasers in an amount in excess of the amount set forth in the Subsequent
Placement Notice.
(c) The
period set forth in the first sentence of Section
4.4(b)
shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, or (ii) following the
Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for
the
resale of the Common Stock and the Warrant Shares.
(d) The
Company’s obligations under Section
4.4(b)
shall
not apply to any grant or issuance by the Company of any of the following:
(i)
the issuance of securities upon the exercise or conversion of any Common Stock
Equivalents issued by the Company prior to the date of this Agreement (or to
any
amendments or modifications thereof), (ii) the grant of options or warrants,
or
the issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan, including any inducement
grant to a new executive officer or director, (iii) the issuance of Common
Stock
or Common Stock Equivalents pursuant to a Strategic Transaction or (iv) the
issuance of securities pursuant to a firm commitment underwriting (excluding
an
equity line of credit and similar transactions) which results in net proceeds
to
the Company in an amount equal to or in excess of $10,000,000.
-16-
4.5 Securities
Laws Disclosure; Publicity.
The
Company shall, on or before 8:30 a.m., New York City time, on July 18, 2005,
issue a press release acceptable to the Purchasers disclosing all material
terms
of the transactions contemplated hereby. Within two Trading Days of the Closing
Date, the Company shall file a Current Report on Form 8-K with the Commission
(the “8-K
Filing”) describing
the terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K this Agreement and
the
form of the Warrants, in the form required by the Exchange Act. Thereafter,
the
Company shall timely file any Transaction Filings. Except
with respect to the 8-K Filing and the press release referenced above (a copy
of
which will be provided to the Special Counsel (as such term is defined in the
Registration Rights Agreement) for its review as early as practicable prior
to
its filing), the
Company
shall, at least two Trading Days prior to the filing or dissemination of any
disclosure required by this paragraph, provide a copy thereof to the Purchasers
for their review. The Company and the Purchasers shall consult with each other
in issuing any press releases or otherwise making public statements or
Transaction Filings and other written communications with the Commission or
any
regulatory agency or Trading Market specifically with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, Transaction Filing or
other
written communication without the prior consent of the other, except if such
disclosure is required by law or Trading Market regulations, in which case
the
disclosing party shall promptly provide the other party with prior notice of
such public statement, Transaction Filing or other written communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure (but not any
disclosure as to the controlling Persons thereof) is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers
with
prior notice of such disclosure. For purposes of this Section 4.5, “Transaction
Filings” means any filings and notices required by the Commission or applicable
law specifically with respect to the transactions contemplated hereby, it being
understood and agreed that periodic reports, registration statements,
prospectuses and other such filings and notices which do not relate specifically
to, and are not required to be filed specifically as a result of, such
transactions are not filings and notices required by the Commission or
applicable law specifically with respect to such transactions.
4.6 Indemnification
of Purchasers.
In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Purchasers and their directors, officers,
shareholders, partners, employees and agents (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”) that any such Purchaser Party may suffer
or incur as a result of or relating to any misrepresentation, breach or
inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any Transaction Document; provided, that such indemnity (other than
as to any indemnity called for under the Registration Rights Agreement) does
not
exceed, in the aggregate, the Investment Amount of such Purchaser together
with
its reasonable attorneys’ fees and costs of investigation subject to
indemnification above. Except as set forth above, the mechanics and procedures
with respect to the rights and obligations under this Section
4.6
will be
the same as those set forth in the Registration Rights Agreement.
-17-
4.7 Non-Public
Information.
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
4.8 Use
of
Proceeds.
The
Company shall use up to forty percent (40%) of the net proceeds from the sale
of
the Securities hereunder for prepayment of all outstanding principal and accrued
interest on subordinated promissory notes not exceeding in aggregate a principal
amount of $2 million issued in December 2004 and described in the SEC Reports,
and shall use the balance of the net proceeds from the sale of the Securities
hereunder for working capital purposes, and not to redeem any Company equity
or
equity-equivalent securities or to settle any outstanding Action with such
proceeds.
4.9 Certain
Trading Restrictions.
(a) Restrictions.
So long
as a Purchaser continues to hold any Shares acquired hereunder, such Purchaser
will not engage in any “short sale” of Common Stock as such term is defined in
Rule 200(a) of Regulation SHO promulgated under the Exchange Act (a “Short
Sale”), except on those days (each a “Permitted Day”) on which the aggregate
short position with respect to the Common Stock of such Purchaser prior to
giving effect to any Short Sales by such Purchaser on such Permitted Day does
not exceed such Purchaser’s Permitted Share Position (as defined below) on such
Permitted Day; provided,
however, that a Purchaser will only be entitled to engage in transactions that
constitute Short Sales on a Permitted Day to the extent that following such
transaction, the aggregate short position with respect to the Common Stock
of
such Purchaser does not exceed such Purchaser’s Permitted Share Position. For
purposes of this Section
4.9,
a
Purchaser’s “Permitted Share Position” means, with respect to any date of
determination, the number of shares of Common Stock owned by such Purchaser
(including Shares) plus the maximum number of Warrant Shares then issuable
(including as to portions of Warrants not yet exercised and without regard
to
any exercise caps or other exercise restrictions applicable to the Warrants)
to
such Purchaser.
(b) Other
Transactions Permitted.
Subject
to Section
4.9(a)
and
applicable securities laws, the Company acknowledges and agrees that nothing
in
this Section
4.9
or
elsewhere in any Transaction Document prohibits any Purchaser from, and each
Purchaser is permitted to, engage, directly or indirectly, in hedging
transactions involving the Securities and the Common Stock (including, without
limitation, by way of short sales, purchases and sales of options, swap
transactions and synthetic transactions) at any time.
4.10 Proxy
Statement; Stockholders Meeting.
(a) The
Company shall take all action necessary to call a meeting of its stockholders
(the “Stockholders Meeting”), which meeting shall occur not later than June 30,
2006 (the “Stockholders Meeting Deadline”) (and shall use its commercially
reasonable efforts to call the Stockholders Meeting prior to May 15, 2006),
for
the purpose, inter
alia,
of
seeking the approval of the Company’s stockholders to permit, in compliance with
Rule 43520(i) of the
-18-
NASDAQ
Marketplace Rules, the exercise price of the Warrants to be reduced to a price
less than the closing bid price of the Common Stock on the Trading Day
immediately preceding the Closing Date pursuant to Section 9 of the Warrants
(the “Proposal”). In connection therewith, a reasonable period of time prior to
the Stockholders Meeting Deadline, the Company shall prepare and file with
the
SEC proxy materials (including a proxy statement and form of proxy) for use
at
the Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company. The Company shall comply with Section 14(a) of
the
Exchange Act and the rules promulgated thereunder in relation to any proxy
statement (as amended or supplemented, the “Proxy Statement”) and any form of
proxy to be sent to the stockholders of the Company in connection with the
Stockholders Meeting, and the Proxy Statement shall not, on the date that the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein not false or misleading, or omit
to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or the Stockholders
Meeting which has become false or misleading; provided
that the
Company shall not be responsible for any information (i) provided by an Investor
for inclusion in the Proxy Statement and relied upon by the Company in good
faith, or (ii) required to be provided by any Investor for inclusion
in the
Proxy Statement pursuant to Section 4.10(b) but not so provided.
(b) Each
Investor shall promptly furnish in writing to the Company such information
relating to such Investor and its investment in the Company as the Company
may
reasonably request for inclusion in the Proxy Statement.
(c) Subject
to their fiduciary obligations under applicable law (as determined in good
faith
by the Company’s Board of Directors after consultation with the Company’s
outside counsel), the Company’s Board of Directors shall recommend to the
Company’s stockholders that the stockholders vote in favor of the Proposal (the
“Company Board Recommendation”) and shall take all commercially reasonable
action (including, without limitation, the hiring of a proxy solicitation firm
of nationally recognized standing) to solicit the approval of the stockholders
for the Proposal unless the Board of Directors shall have modified, amended
or
withdrawn the Company Board Recommendation pursuant to the provisions of the
immediately succeeding sentence. The Company covenants that the Board of
Directors of the Company shall not modify, amend or withdraw the Company Board
Recommendation unless the Board of Directors (after consultation with the
Company’s outside counsel) shall determine in the good faith exercise of its
business judgment that maintaining the Company Board Recommendation would
violate its fiduciary duties to the Company’s stockholders. Whether or not the
Company’s Board of Directors modifies, amends or withdraws the Company Board
Recommendation pursuant to the immediately preceding sentence, the Company
shall
in accordance with Section 146 of the Delaware General Corporation Law and
the
provisions of its Certificate of Incorporation and Amended and Restated Bylaws,
(i) take all action necessary to convene the Stockholders Meeting as promptly
as
practicable, but no later than the Stockholders Meeting Deadline, to consider
and vote upon the approval of the Proposal, and (ii) submit the Proposal at
the
Stockholders Meeting to the stockholders of the Company for their
approval.
-19-
(d) Each
Investor acknowledges, covenants and agrees that it (i) may not vote
any
Shares or Warrant Shares at the Stockholder’s Meeting or any other meeting of
the stockholders of the Company, whether in person or by proxy, for, or take
any
stockholder action by written consent in respect of the Shares or Warrant Shares
to approve, the Proposal or any other proposal to approve the financing
contemplated hereby, (ii) shall abstain from voting, and shall direct
any
proxy to abstain from voting, any of its Shares and Warrant Shares on, and
shall
refrain from acting by written consent in respect of any of its Shares and
Warrant Shares to approve, the Proposal or any other proposal to approve the
financing contemplated hereby. Each Investor hereby directs the Company not
to
tally, count or validate any Shares or Warrant Shares voted, whether in person
or by proxy, and to reject any written consent signed, in contravention of
this
Section 4.10(d).
ARTICLE
V.
MISCELLANEOUS
5.1 Fees
and Expenses.
At the
Closing, the Company shall pay to Iroquois Master Fund Ltd. an
aggregate of $15,000 for its
legal
fees and expenses
incurred in connection with its
due diligence and the
preparation and negotiation of the Transaction Documents.
The
parties hereto acknowledge that Iroquois Master Fund Ltd. has previously been
paid $10,000 of such amount, and Iroquois Master Fund Ltd. acknowledges receipt
thereof. In lieu of making the remaining payment due $5,000, Iroquois Master
Fund Ltd. may retain such amount at the Closing. Except as expressly set forth
in the Transaction Documents to the contrary, each party shall pay the fees
and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
5.2 Entire
Agreement.
The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.3 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day that
is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt
by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
-20-
|
If
to the Company:
|
American
Technology Corporation
00000
Xxxxxxx Xxxxx Xxxxx Xxxxx
Xxx
Xxxxx, XX 00000
Attn:
Chief Financial Officer
Facsimile
No.: 000-000-0000
|
|
|
|
|
|
|
With
a copy to:
|
Sheppard,
Mullin, Xxxxxxx & Xxxxxxx LLP
00000
Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attn:
Xxxx X. Xxxxxxx, Esq.
Facsimile
No.: (000) 000-0000
|
|
|
|
|
|
|
If
to a Purchaser:
|
To
the address set forth under such Purchaser’s
name on the signature pages hereof; |
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
5.4 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and one or more
Purchasers holding no less than 66 2/3% of the outstanding Shares
(provided, however, that any such amendment that adversely affects any Purchaser
or class of Purchasers that in a manner that does not apply uniformly to all
Purchasers, Shares, Warrants or Warrant Shares, as applicable, shall require
the
written consent of such adversely affected Purchaser or class) or, in the case
of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or
a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
5.5 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
5.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply
to
the “Purchasers.”
-21-
5.7 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section
4.6.
5.8 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction
of
any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Agreement and agrees that such service
shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives,
to
the fullest extent permitted by applicable law, any and all right to trial
by
jury in any legal proceeding arising out of or relating to this Agreement or
the
transactions contemplated hereby. If either party shall commence a Proceeding
to
enforce any provisions of a Transaction Document, then the prevailing party
in
such Proceeding shall be reimbursed by the other party for its attorney’s fees
and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
5.9 Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares, as
applicable.
5.10 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile or
electronic transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or electronic
signature page were an original thereof.
5.11 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
-22-
5.12 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
5.13 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities.
If a replacement certificate or instrument evidencing any Securities is
requested due to a mutilation thereof, the Company may require delivery of
such
mutilated certificate or instrument as a condition precedent to any issuance
of
a replacement.
5.14 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
5.15 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.16 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of the Subsidiary which may have
been
made or given by any other Purchaser or by any agent or
-23-
employee
of any other Purchaser, and no Purchaser or any of its agents or employees
shall
have any liability to any other Purchaser (or any other Person) relating to
or
arising from any such information, materials, statements or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or
as
a group with respect to such obligations or the transactions contemplated by
the
Transaction Document. The Company hereby confirms that it understands and agrees
that the Purchasers are not acting as a “group” as that term is used in Section
13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall
be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser
to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents each party represents and confirms and that Proskauer Rose LLP
represents only Iroquois Master Fund Ltd. in connection with this Agreement
and
the Transaction Documents.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
-24-
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories
as of
the date first indicated above.
| AMERICAN TECHNOLOGY CORPORATION | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxx | |
|
Name: Xxxxxx X. Xxxxxx Title: Chairman |
||
|
SPECIAL
SITUATIONS FUND III, L.P.
|
||||||||||
|
By:
|
/s/
Xxxxxx X. Xxxxx
|
|||||||||
|
Name:
Xxxxxx X. Xxxxx
|
||||||||||
|
Title:
General Partner
|
||||||||||
|
Investment
Amount: $3,500,000
|
||||||||||
|
Shares:
717,213
|
||||||||||
|
Warrant
- A Shares: 179,303
|
||||||||||
|
Warrant
- B Shares: 216,176
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
000
X. 00xx
Xxxxxx, 00xx
Xxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000
|
||||||||||
|
Copy
to:
|
||||||||||
|
Xxxxxxxxxx
Xxxxxxx PC
|
||||||||||
|
00
Xxxxxxxxxx Xxxxxx
|
||||||||||
|
Xxxxxxxx,
XX 00000
|
||||||||||
|
Attention:
Xxxx X. Xxxxxxxx
|
||||||||||
|
SPECIAL
SITUATIONS PRIVATE EQUITY FUND, L.P.
|
||||||||||
|
By:
|
/s/
Xxxxxx X. Xxxxx
|
|||||||||
|
Name:
Xxxxxx X. Xxxxx
|
||||||||||
|
Title:
General Partner
|
||||||||||
|
Investment
Amount: $1,470,000
|
||||||||||
|
Shares:
301,229
|
||||||||||
|
Warrant
- A Shares: 75,307
|
||||||||||
|
Warrant
- B Shares: 90,794
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
000
X. 00xx
Xxxxxx, 00xx
Xxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000
|
||||||||||
|
Copy
to:
|
||||||||||
|
Xxxxxxxxxx
Xxxxxxx PC
|
||||||||||
|
00
Xxxxxxxxxx Xxxxxx
|
||||||||||
|
Xxxxxxxx,
XX 00000
|
||||||||||
|
Attention:
Xxxx X. Xxxxxxxx
|
||||||||||
|
SPECIAL
SITUATIONS TECHNOLOGY FUND II, L.P.
|
||||||||||
|
By:
|
/s/
Xxxxxx X. Xxxxx
|
|||||||||
|
Name:
Xxxxxx X. Xxxxx
|
||||||||||
|
Title:
General Partner
|
||||||||||
|
Investment
Amount: $1,750,000
|
||||||||||
|
Shares:
358,606
|
||||||||||
|
Warrant
- A Shares: 89,651
|
||||||||||
|
Warrant
- B Shares: 108,088
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
000
X. 00xx
Xxxxxx, 00xx
Xxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000
|
||||||||||
|
SPECIAL
SITUATIONS TECHNOLOGY FUND, L.P.
|
||||||||||
|
By:
|
/s/
Xxxxxx X. Xxxxx
|
|||||||||
|
Name:
Xxxxxx X. Xxxxx
|
||||||||||
|
Title:
General Partner
|
||||||||||
|
Investment
Amount: $280,000
|
||||||||||
|
Shares:
57,377
|
||||||||||
|
Warrant
- A Shares: 14,344
|
||||||||||
|
Warrant
- B Shares: 17,294
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
000
X. 00xx
Xxxxxx, 00xx
Xxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000
|
||||||||||
|
Copy
to:
|
||||||||||
|
Xxxxxxxxxx
Xxxxxxx PC
|
||||||||||
|
00
Xxxxxxxxxx Xxxxxx
|
||||||||||
|
Xxxxxxxx,
XX 00000
|
||||||||||
|
Attention:
Xxxx X. Xxxxxxxx
|
||||||||||
|
SDS
CAPITAL GROUP SPC, LTD.
|
||||||||||
|
By:
|
/s/
Xxxxx Xxxxx
|
|||||||||
|
Name:
Xxxxx Xxxxx
|
||||||||||
|
Title:
Managing Member
|
||||||||||
|
Investment
Amount: $1,000,000
|
||||||||||
|
Shares:
204,918
|
||||||||||
|
Warrant
- A Shares: 51,230
|
||||||||||
|
Warrant
- B Shares: 61,765
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
SDS
Capital Group SPC, Ltd.
|
||||||||||
|
c/o
SDS Management, LLC
|
||||||||||
|
00
Xxxxxx Xxxxxx, 0xx Xxxxx
|
||||||||||
|
Xxx
Xxxxxxxxx, XX 00000
|
||||||||||
|
Facsimile
No.: (000) 000-0000
|
||||||||||
|
Telephone
No.: (000) 000-0000
|
||||||||||
|
Attn:
Xxxxx Xxxxx
|
||||||||||
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories
as of
the date first indicated above.
|
IROQUOIS
MASTER FUND LTD
|
||||||||||
|
/s/
Xxxxxx Xxxxxxxxx
|
||||||||||
|
Name:
Xxxxxx Xxxxxxxxx
|
||||||||||
|
Title:
Authorized Signatory
|
||||||||||
|
Investment
Amount: $3,000,000
|
||||||||||
|
Shares:
614,754
|
||||||||||
|
Warrant
- A Shares: 153,689
|
||||||||||
|
Warrant
- B Shares: 185,294
|
||||||||||
|
Qualified
Institutional Buyer:
|
[
]
|
Yes
|
||||||||
|
[X]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
Iroquois
Master Fund Ltd
|
||||||||||
|
000
Xxxxxxxxx Xxxxxx, 00xx Xxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000
|
||||||||||
|
Facsimile
No.: (000) 000-0000
|
||||||||||
|
Telephone
No.: (000) 000-0000
|
||||||||||
|
Attn:
Xxxxxx Xxxxxxxxx
|
||||||||||
|
With
a copy to:
|
Proskauer
Rose LLP
|
|||||||||
|
0000
Xxxxxxxx
|
||||||||||
|
Xxx
Xxxx, XX 00000-0000
|
||||||||||
|
Facsimile
No.: (000) 000-0000
|
||||||||||
|
Telephone
No.: (000) 000-0000
|
||||||||||
|
Attn:
Xxxx X. Xxxxxxx, Esq.
|
||||||||||
|
PEQUOT
SCOUT FUND, L.P.
|
||||||||||
|
By:
|
Pequot
Capital Management, Inc. as
Investment
Manager
|
|||||||||
|
By:
|
/s/
Xxxxx Xxxxx
|
|||||||||
|
Name:
Xxxxx Xxxxx
|
||||||||||
|
Title:
COO - General Counsel
|
||||||||||
|
Investment
Amount: $1,976,512.24
|
||||||||||
|
Shares:
405,023
|
||||||||||
|
Warrant
- A Shares: 101,256
|
||||||||||
|
Warrant
- B Shares: 122,079
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
Attn:
Xxxxx Xxxxxx
|
||||||||||
|
c/o
Pequot Capital Management, Inc.
|
||||||||||
|
000
Xxxxx Xxxx Xxxx
|
||||||||||
|
Xxxxxxxx,
Xxxxxxxxxxx 00000
|
||||||||||
|
PEQUOT
MARINER MASTER FUND, L.P.
|
||||||||||
|
By:
|
/s/
Xxxxx Xxxxx
|
|||||||||
|
Name:
Xxxxx Xxxxx
|
||||||||||
|
Title:
General Counsel - COO
|
||||||||||
|
Investment
Amount: $1,023,487.28
|
||||||||||
|
Shares:
209,731
|
||||||||||
|
Warrant
- A Shares: 52,433
|
||||||||||
|
Warrant
- B Shares: 63,216
|
||||||||||
|
Qualified
Institutional Buyer:
|
X
|
Yes
|
||||||||
|
[
]
|
No
|
|||||||||
|
Address
for Notice:
|
||||||||||
|
Attn:
Xxxxx Xxxxxx
|
||||||||||
|
c/o
Pequot Capital Management, Inc.
|
||||||||||
|
000
Xxxxx Xxxx Xxxx
|
||||||||||
|
Xxxxxxxx,
Xxxxxxxxxxx 00000
|
||||||||||
Appendix
1
Registration
Statement Questionnaire
American
Technology Corporation
REGISTRATION
STATEMENT QUESTIONNAIRE
In
connection with the preparation of the Registration Statement, please provide
us
with the following information:
SECTION
1. Pursuant
to the “Selling Stockholder” section of the Registration Statement, please state
your or your organization’s name exactly as it should appear in the Registration
Statement:
SECTION
2. Please
provide the number of shares of the Company's Common Stock that you or your
organization will "beneficially" own (see definition below) immediately after
Closing, including those Shares purchased by you or your organization pursuant
to this Purchase Agreement, those Warrant Shares you have the right to purchase,
and those shares purchased by you or your organization through other
transactions:
|
Shares
purchased under Purchase Agreement:
|
_____________ |
|
Warrant
Shares subject to Purchase Agreement:
|
_____________ |
Other
shares of Common Stock beneficially owned (please describe):
SECTION
3. Have
you
or your organization had any position, office or other material relationship
within the past three years with the Company or its affiliates?
_____
Yes _____ No
If
yes,
please indicate the nature of any such relationships below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
SECTION
4. As
to the
shares of Common Stock indicated as being beneficially owned in Section 2
above, does any person other than the person identified in Section 1
have:
4.1 the
sole
or shared power to vote or to direct the vote of any such
securities?
Yes
_____ No
_____
-1-
Or
4.2 the
sole
or shared power to dispose or to direct the disposition of any such securities
(referred to as “dispositive power”)?
Yes
_____ No
_____
If
the
answer is “Yes” to either of the foregoing questions, please set forth below the
name and address of each person who has either such power or with whom the
indicated beneficial owner shares such power, together with such number of
shares to which such rights relates.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Please
read the following carefully if you are an entity or a
trust:
If
you are an entity or a trust,
you
must
list the
name of each natural person associated with your entity or trust who has or
shares voting or dispositive power with respect to the shares indicated as
being
beneficially owned in the answer to Section 2. For an investment or
holding
company, the investment manager(s) would normally be the person(s) who hold(s)
or share(s) voting and dispositive power. For a trust, the natural person(s)
holding or sharing voting or dispositive power would normally be the trustee(s).
For other types of entities, the natural person(s) holding or sharing voting
or
dispositive power would normally be the officer(s) empowered by the board of
directors to make such decisions, or if there is no such officer, each of the
directors. Disclosure is required for each natural person who in practice has
voting or dispositive power, regardless of that person’s formal title or
position within the organization.
|
Name
of Natural Person
|
Type
of Power: Voting/Dispositive/Both
|
Address
|
Position
or Title
|
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SECTION
5. In
any
pending legal proceeding, are you or your organization, or any "affiliates"
(see
definition below) of you or your organization, a party, or do you or your
organization, or any such "associate" (see definition below) of you or your
organization, have an interest, adverse to the Company or any affiliate of
the
Company?
Yes
_____ No
_____
If
the
answer is “Yes,” please describe, and state the nature and amount of, such
interest.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
SECTION
6. Are
you
(i) an NASD Member (see definition), (ii) a Controlling (see definition)
shareholder of an NASD Member, (iii) a Person Associated with a Member of the
NASD (see definition), or (iv) an Underwriter or a Related Person (see
definition) with respect to the proposed offering; or (b) do you own any shares
or other securities of any NASD Member not purchased in the open market; or
(c)
have you made any outstanding subordinated loans to any NASD
Member?
____
Yes ____ No
If
“yes,”
please describe below
_________________________________________________________________
_________________________________________________________________
If
the
answer is Yes, please respond to each of the questions below:
Please
describe your affiliation or association with a NASD Member, or if you are
a
NASD Member, please so state.
Did
you
purchase the Shares under the Purchase Agreement to be registered in the
ordinary course of business?
Yes
_____ No
_____
-3-
At
the
time of the purchase of the shares of Common Stock to be registered, did you
have any agreements or understandings, directly or indirectly, with any person
to distribute such shares?
Yes
_____ No
_____
If
the
answer is yes, please describe such arrangements or understandings
below.
If
you
are a broker-dealer, it is frequently the position of the Staff of the Division
of Corporation Finance of the Securities and Exchange Commission that you must
be named as an underwriter in the Registration Statement. Do you consent to
be
named as an underwriter?
Yes
_____ No
_____
The
answers supplied to the questions in this questionnaire are true, complete,
and
correct to the best knowledge of the selling stockholder named below after
reasonable inquiry. The selling stockholder named below will promptly notify
the
Company if any event of which it becomes aware should occur between now and
the
termination of the distribution of securities pursuant to the proposed public
offering that would cause the answer to any question to change or cause the
Registration Statement to contain a misrepresentation or omission of a material
fact.
Name
of
Selling Stockholder:
___________________________________________________________________________
By:
__________________________________________________________________
Print
Name: ____________________________________________________________
Title:
________________________________________________________________
Date:
________________________________________________________________
-4-
Definitions
Affiliate:
An
“affiliate” of a specified person is a person that directly, or through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the person specified.
Associate:
The term
“associate” means (1) any corporation or organization (except the Company and
its subsidiaries) of which you are an officer or partner, or of which you are,
directly or indirectly, the owner beneficially of 10% or more of any class
of
equity securities, (2) any trust or other estate in which you have a beneficial
interest or as to which you serve as trustee or in a similar fiduciary capacity,
or (3) your spouse, or any relative of yours or of your spouse who shares your
home or who is a director or officer of the Company.
Beneficially:
The term
“beneficially” as applied to an interest in securities describes any interest in
the securities in question which entitles you to any of the rights or benefits
of ownership, even though you are not the holder or owner of record. Interests
in securities held in an estate, trust, or partnership, or by a nominee, are
examples of beneficial interests.
If
you
have any contract, understanding, relationship, agreement, or other arrangement
with any other person with respect to securities, pursuant to which you obtain
benefits substantially equivalent to the ownership of securities, you should
consider such securities as “beneficially owned” by you. For purposes of this
questionnaire, you will be regarded as having benefits substantially equivalent
to ownership of securities if:
(a) directly
or indirectly, through any contract, arrangement, understanding, relationship,
or otherwise you have or share:
|
(i)
|
voting
power, which includes the power to vote, or to direct the voting
of, the
security; or
|
|
(ii)
|
investment
power, which includes the power to dispose of, or to direct the
disposition of, the security;
|
(b) you
have
the right to acquire beneficial ownership of the security, including but not
limited to any right to acquire:
|
(i)
|
through
the exercise of any option, warrant, or
right;
|
|
(ii)
|
through
the conversion of a security;
|
|
(iii)
|
pursuant
to a power to revoke a trust, discretionary account, or similar
arrangement; or
|
|
(iv)
|
pursuant
to the automatic termination of a trust, discretionary account, or
similar
arrangement.
|
-5-
You
are
also considered to be the beneficial owner of a security if you, directly or
indirectly, create or use a trust, proxy, power of attorney, pooling
arrangement, or any other contract, arrangement, or device with the purpose
or
effect of divesting yourself of beneficial ownership of such security or
preventing the vesting of such beneficial ownership as part of a plan or scheme
to evade the reporting requirements of Section 13(d) or 13(g) of the Securities
Exchange Act.
If
you
have any reason to believe that any interest you have in securities, however
remote, might be described as a beneficial interest, please describe such
interest.
The
Securities and Exchange Commission has taken the view, with which some courts
have agreed, that a person may be regarded as the beneficial owner of securities
held in the name of the person’s spouse, minor children, or other relatives of
the person or the person’s spouse who share the person’s home, if such
relationship results in such person obtaining benefits substantially equivalent
to ownership of such securities. We will assume, however, that you do not
consider that you beneficially own any securities you list in answer to Section
2 as being owned by such persons. If you do consider that you are the beneficial
owner of such securities, please list them as being owned by both you and such
other person, and indicate that such securities are listed more than
once.
Broker-Dealer.
The
term “broker-dealer” includes “brokers,” as that term is defined in Section
3(a)(4) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and “dealers” as that term is defined in Section 3(a)(5) of the Exchange
Act.
Control.
The
term “control” (including the terms “controlling,”“controlled by” and “under
common control with”) means the possession, direct or indirect, of the power,
either individually or with others, to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. (Rule 405 under the Securities Act of
1933, as amended)
NASD
Member.
The
term “NASD member” means any broker-dealer admitted to membership in the
National Association of Securities Dealers, Inc. (“NASD”). (NASD Manual, By-laws
Article I, Definitions)
Person
Associated with a member of the NASD.
The
term “person associated with a member of the NASD” means every sole proprietor,
partner, officer, director, branch manager or executive representative of any
NASD Member, or any natural person occupying a similar status or performing
similar functions, or any natural person engaged in the investment banking
or
securities business who is directly or indirectly controlling or controlled
by a
NASD Member, whether or not such person is registered or exempt from
registration with the NASD pursuant to its bylaws. (NASD Manual, By-laws Article
I, Definitions)
Underwriter
or a Related Person.
The
term “underwriter or a related person” means, with respect to a proposed
offering, underwriters, underwriters’ counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and
all
other persons associated with or related to any of such persons. (NASD
Interpretation)
-6-
