<PAGE>
As filed with the Securities and Exchange Commission on May 26, 2000
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------
AMERICAN TECHNOLOGIES GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 95-4307525
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
JOHN M. DAB, ESQ.
General Counsel
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
Telecopy: (626) 357-4464
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] If delivery of the prospectus is expected
to be made pursuant to Rule 434 please check the following box.[ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Amount to be Price per Offering Registration
Title of Securities to be Registered Registered Share (1) Price (1) Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 3,547,384 shares $0.17 $603,055 $159.21
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value (2) 5,953,334 shares $0.17 $1,012,067 $267.19
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total 9,500,718 shares $1,615,122 $426.40
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c).
(2) Issuable upon exercise of warrants or options to purchase shares of
common stock. In addition to the shares set forth in the table, pursuant to Rule
416 under the Securities Act of 1933, as amended, this Registration Statement
also covers an indeterminate number of additional shares of common stock as may
become issuable as a result of stock splits, stock dividends and or similar
transactions.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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SUBJECT TO COMPLETION; DATED MAY 26, 2000
PROSPECTUS
9,500,718 SHARES OF COMMON STOCK
AMERICAN TECHNOLOGIES GROUP INC.
The 9,500,718 shares of common stock being offered by this prospectus
are being offered by certain selling securityholders their respective pledgees,
donees, transferees and other successors in interest. See "Selling
Securityholders" on page 15.
The selling securityholders may offer these shares from time to time in
transactions on the OTC Bulletin Board or in privately negotiated transactions
as described under the "Plan of Distribution" on page 17. We will not receive
any of the proceeds from this offering.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"ATEG." On May 25, 2000, the closing sale price of the common stock on the OTC
Bulletin Board was $0.17.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May 26, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT AMERICAN TECHNOLOGIES ..................................................4
Business Summary ........................................................4
Proposed Financing ......................................................6
End of Merger Talks with Commodore
Separation Technologies Inc .........................................6
RISK FACTORS .................................................................7
Financial Risk Factors .......................................................7
We have a History of Losses Which Will Continue Through
the End of the Current Fiscal Year...................................7
We have Experienced Substantial Difficulty Generating
Sufficient Working Capital...........................................7
Our Sales of Securities Convertible into Common Stock at
a Discount to the Market Price May Cause the Market
Value of Our Common Stock to Drop ...................................8
Lack of Listing on a Major Exchange May Make It
Difficult for Investors to Dispose of Our Common
Stock ...............................................................8
Because Our Common Stock is a "Penny Stock," Trading in it is
Subject to the Penny Stock Rules Which Could Affect Your
Ability to Resell the Stock in the Market ...........................9
Business Risk Factors .......................................................10
We May Not Find Customers for Our Products .............................10
There May Be Unforeseen Regulatory Requirements which
Impede the Marketing and Sale of Our Products ......................10
We May Not Be Able to Obtain the Patents or Trademarks
Needed to Protect the Value of Our Technologies ....................11
WHERE YOU CAN FIND MORE INFORMATION .........................................12
FORWARD-LOOKING STATEMENTS ..................................................13
2
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DESCRIPTION OF COMMON STOCK .................................................13
USE OF PROCEEDS FROM SALE OF COMMON STOCK ...................................14
USE OF PROCEEDS FROM EXERCISE OF WARRANTS AND OPTIONS .......................14
SELLING SECURITYHOLDERS .....................................................15
PLAN OF DISTRIBUTION ........................................................17
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES ..............................18
EXPERTS .....................................................................19
LEGAL MATTERS ...............................................................19
</TABLE>
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ABOUT AMERICAN TECHNOLOGIES
Business Summary
American Technologies develops and sells products based upon on our
patented and proprietary technologies. The goal of our efforts is to develop
products that have a positive impact on the environment. Our address and
telephone number are: 1017 South Mountain Avenue, Monrovia, California
91016, (626) 357-5000.
We concentrate on technology discovery and development efforts in three
areas:
- I(E)-TM- (Catalyst) Technology
- Water Purification
- Particle Beams
Our I(E) (Catalyst) Technology refers to a proprietary process which
produces water solutions containing water clusters that are stable at room
temperature. The clusters are groups of water molecules configured in such a way
so as to produce relatively large plus/minus polarity. We believe this polarity
is what gives the clusters their catalytic properties. We can produce different
kinds of water solutions for different applications.
Tests indicate that these water clusters improve the performance of
various chemical, physical and biological processes, including combustion
enhancement, descaling, enzyme processes and de-coking. For example, in internal
combustion engines the clusters attract hydrocarbons and oxygen resulting in a
more complete burning of the fuel. This results in improved efficiency and
reduced carbon deposits in the combustion chamber.
Independent researchers observe these water clusters by different
standard research tools including:
- Laser autocorrelation
- Electron microscope
- Atomic force microscope
- UV spectroscopy
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American Technologies sells these water solutions for use in several
product lines including household cleaning products. We also use them in our
combustion enhancers.
Our laboratory results on various applications of our I(E) (Catalyst)
Technology to combustion have been confirmed by independent tests conducted by a
variety of potential customers. These tests include positive results in a gas
turbine electric generation power plant, successful testing by a foreign company
of the combustion catalyst with ethanol directly into gasoline, and positive
results over five months of testing at a diesel electric power generation
facility in China.
During the fiscal year ended July 31, 1999, revenue from the sale of
these water solutions for use in products manufactured by others was nominal
and revenue from the sale of The Force-Registered Trademark- combustion
enhancer was $248,000. During the same period, American Technologies had
incurred net losses of approximately $10.8 million.
During the six months ended January 31, 2000, revenue from the sale of
The Force was $127,450 and we incurred a loss of approximately $3.5 million.
During the six months ended January 31, 1999, revenue from the sale of The Force
was $96,480 and we incurred a loss of approximately $5.1 million.
In the water purification area, our low pressure vacuum distillation
system is undergoing tooling design for a home use version for introduction to
the marketplace in late 2000. Our vacuum distiller utilizes a proprietary method
to provide the principal advantage of vacuum distillers - boiling water at low
temperatures which avoids mineral deposits and scaling - without the need for
expensive and noisy vacuum pumps. We are currently soliciting bids for the
manufacturing of the distiller.
The third technology is the particle beam project which produces a beam
of heavy particles. The development of the particle beam has been conducted
through an American Technologies sponsored research program with the California
Institute of Technology. The development of this technology is likely to require
a minimum of three to five years and expenditure of substantial sums of money,
likely to be in excess of $10,000,000, on research and development. We submitted
a proposal to the Department of Energy for a $6,000,000 joint venture grant to
produce a small pilot plant based on the current prototype located at CalTech.
The proposal describes the potential of our particle beam to turn harmful
nuclear waste
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into harmless components. The DOE has reviewed the proposal and discussions
are underway regarding funding of the project. The particle beam project has
been on hold pending receipt of significant funding to continue its
development
Dr. Lo, our Director of Research and Development, has developed certain
particle beam theories. According to these theories, the proposed particle beam
may be able to break down molecules or even atoms and their nuclei, or be used
for rock drilling or precision cutting of metals without distortion or excessive
heat. No evidence exists to substantiate these potential applications.
Proposed Financing
We have entered into a letter Agreement with Bristol Capital LLC under
which Bristol will move forward in negotiating and establishing directly or
through an affiliated company a $12 million equity line of credit. Under the
line of credit, upon the effectiveness of a registration statement covering the
shares of common stock to be purchased by Bristol under the financing, the
Company can draw up to $12 million in monthly increments over 3 years. However,
there can be no assurance that we can consummate this transaction in a timely
manner, if at all.
In exchange for Bristol's commitment to use its reasonable best efforts
to accomplish this financing, the Company issued Bristol warrants to purchase
3,000,000 shares of common stock at the lower of $0.35 and 76% of the average of
the closing bid prices on each of the five trading days immediately prior to
exercise of the warrants. The Company has the right to call the warrants upon
ten days notice once the registration statement which incorporates this
prospectus is declared effective by the Securities and Exchange Commission and
provided the closing bid price on the tenth day is at least equal to 125% of the
exercise price of the warrants. The maximum monthly call by the Company is
$150,000.
End of Merger Talks with Commodore Separation Technologies Inc.
In February 1999, we signed a letter of intent which contains terms for
our acquisition of Commodore Separation Technologies. Recently we notified
Commodore Separation Technologies that we no longer desire to continue to pursue
the possible merger.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are the only
material risks facing us of which we are currently aware. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.
Financial Risk Factors
WE HAVE A HISTORY OF FINANCIAL LOSSES WHICH WILL CONTINUE THROUGH THE END OF THE
CURRENT FISCAL YEAR
We have operated at a loss throughout our history. Net losses for the
six months ended January 31, 2000 were approximately 3.5 million and for the
fiscal year ended July 31, 1999 were approximately $10.8 million. Net losses for
the fiscal year ended July 31, 1998 were approximately $9.44 million. At January
31, 1999 we had an accumulated deficit of approximately $50.9 million.
Net cash used in operation declined by over $1.1 million from fiscal
1998 to fiscal 1999. We anticipate that we will be able to continue our reduced
cash out flow during fiscal 2000, except to the extent of expenses associated
with marketing and production of products. The amount of net losses and the time
required to reach profitability are uncertain. There can be no assurance that we
will ever be able to generate sufficient revenue from our products now ready for
market or from those under development to achieve profitability on a sustained
basis.
WE HAVE EXPERIENCED SUBSTANTIAL DIFFICULTY GENERATING SUFFICIENT WORKING CAPITAL
We have been experiencing difficulty in maintaining sufficient working
capital needed to ensure stability and continued existence. Only a small portion
of the capital expended to date has come from actual revenue generation, and we
find it increasingly difficult to raise investment capital. We are at a critical
juncture in our history. It is absolutely
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essential to begin to generate significant revenues in order to maintain our
existence. While plans are in place and being executed to accomplish this
end, there can be no guarantee that these plans will prove to be successful.
Our current cash monthly operating expenses are approximately $225,000.
We believe the $12 million equity line of credit to be obtained pursuant to a
letter of intent dated December 10, 1999, along with anticipated minimum
projected revenues of $2,000,000 for fiscal 2000, will be sufficient for us to
operate in the normal course for the next 12 months. However, if revenues are
less than projected or the equity line of credit is not finalized, our ability
to continue operations will be dependent upon additional financing activities,
of which there can be no assurance.
The report by Corbin & Wertz on our financial statements for the fiscal
year ending July 31, 1999 contains an explanatory paragraph indicating that
there were operating losses which raised substantial doubt about the ability of
American Technologies to continue as a going concern. This going concern
qualification may adversely affect our perception by prospective customers and
suppliers.
OUR SALES OF SECURITIES CONVERTIBLE INTO COMMON STOCK AT A DISCOUNT TO THE
MARKET PRICE MAY CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DROP
As a result of our poor financial condition, several times over the
past few years we have sold securities that are convertible into our common
stock at a discount to the market price for the common stock. This has resulted
in the issuance of a significant amount of additional shares of common stock at
prices below market. It is possible that this method of financing operations has
contributed to the decline in the market price of the common stock. If we need
to obtain financing in the future in the same manner, this may again have an
adverse affect on the market price for our common stock.
LACK OF LISTING ON A MAJOR EXCHANGE MAY MAKE IT DIFFICULT FOR INVESTORS TO
DISPOSE OF OUR COMMON STOCK
Our common stock is quoted on the OTC Bulletin Board system. The OTC
Bulletin Board generally supports quotations for companies that do not meet the
NASDAQ SmallCap Market listing requirements. As a result, investors may find it
more difficult to dispose of or to obtain accurate price quotations
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<PAGE>
of our common stock than they would if the stock were quoted on the SmallCap
Market. In addition, quotation on the bulletin board depends on the
willingness of broker-dealers to make a market in our common stock. There can
be no assurance that the stock will continue to be quoted on the bulletin
board or that there will continue to be a market for the buying and selling
of our common stock.
There are currently 15 firms making a market in our common stock,
although there can be no assurance that any or all of them will continue to do
so in the future. The current market makers are:
M. H. Meyerson & Co., Inc. Knight Securities, L.P.
Wm. V. Frankel & Co., Incorporated Sharpe Capital, Inc.
Speer, Leeds & Kellogg Capital Markets Olsen Payne & Company
Hill Thompson Magid & Co. Inc. Wien Securities Corp.
Herzog, Heine, Geduld, Inc. Wilson-Davis & Co., Inc.
Paragon Capital Corp. Mayer & Schweitzer, Inc.
North American Institutional Brokers GVR Company
USCC Trading, a Division of Fleet Securities
BECAUSE OUR COMMON STOCK IS A "PENNY STOCK," TRADING IN IT IS SUBJECT TO THE
PENNY STOCK RULES WHICH COULD AFFECT YOUR ABILITY TO RESELL THE STOCK IN THE
MARKET.
The Securities Enforcement and Penny Stock Reform Act of 1990 imposes
restrictions when making trades in any stock such as our common stock which is
defined as a "penny stock." The SEC's regulations generally define a penny stock
as an equity security that has a price of less than $5.00 per share, other than
securities which are traded on markets such as the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market. As a result of being a penny
stock, the market liquidity for our common stock may be adversely affected since
the regulations on penny stocks could limit the ability of broker-dealers to
sell our common stock and thus your ability to sell our common stock in the
secondary market. The regulations restricting trades in penny stock include:
- a requirement that stock brokers deliver to their customers, prior to any
transaction involving a penny stock, a disclosure schedule explaining the penny
stock market and the risks associated with the penny stock market; and
- a requirement that broker-dealers who recommend penny stocks to persons
other than their established customers and a
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limited class of accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement
to the transaction prior to the sale of the securities.
Business Risk Factors
As we are engaged in the development and marketing of products based on
new technologies, there are significant risks associated with its potential
success.
WE MAY NOT FIND CUSTOMERS FOR OUR PRODUCTS
None of our current products enjoy widespread distribution or customer
acceptance. While we do have a number of products that are past the development
stage, we have yet to establish major, stable markets for them. Although we
believe we have the expertise to commercialize these products, any or all of our
products may fail to prove to have widespread customer appeal. Various marketing
strategies and alliances are now in place. Current significant distributors
include Hungarofek and Market One.
THERE MAY BE UNFORESEEN REGULATORY REQUIREMENTS WHICH IMPEDE THE MARKETING AND
SALE OF OUR PRODUCTS
Most of our current products are being sold directly to the consumer in
markets that are not generally regulated by government agencies. In the case of
consumer products for enhancing engine performance, such as The Force or the
F420 fuel additive, registration of these products with CARB (California Air
Resources Board) and EPA (Environmental Protection Agency) is required and has
been done.
Since the F420 additive's chemical contents fall within the
restrictions of the EPA regulations, there are no known impediments to
maintaining this registration. We have also registered The Force airborne
combustion enhancer as an add-on device with CARB. Currently, we are not aware
of any reason why CARB would withdraw that registration.
In the case of bulk fuel additives, there are strong industry
regulations in the United States. Extensive testing is required to meet these
industry regulations prior to domestic sale of the additive and there is no
guarantee that our bulk additive products can meet all of these industry
regulations.
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Foreign markets have only recently begun to impose significant regulations on
the petroleum industry to lessen the industry's effect on the environment. With
less testing required for the sale of new products in certain of these foreign
markets, we are able to introduce our products in these markets quicker. We are
therefore directing a substantial marketing effort towards these foreign
markets.
WE MAY NOT BE ABLE TO OBTAIN THE PATENTS OR TRADEMARKS NEEDED TO PROTECT THE
VALUE OF OUR TECHNOLOGIES
Our success will depend, in part, on whether we can obtain patent and
trademark protection for our technologies and products. We cannot guarantee that
we will be able to secure these protections. If we fail to do so, there is no
guarantee that our technologies will not be subject to copying by other
entities. This would result in a level of competition which could well prevent
us from being successful. Although we have taken steps, including entering into
confidentiality agreements with our employees and third parties to protect our
trade secrets and unpatented know-how, other third parties may still be able to
obtain such information.
We have applied for a number of patents on our particle beam, vacuum
distiller and I(E) catalyst technologies. Some have been approved. The status is
as follows:
- Particle Beam Approved Patents
We are maintaining 7 granted U.S. patents and 9 foreign patents issued
on particle beam technology. Additionally, there are 3 U.S. and 6
foreign patent applications pending.
- IE Catalyst Technology
We have been granted 1 U.S. patent on the I(E) Technology and 7 U.S.
patent applications are in various stages of prosecution. Foreign
patent applications to protect this technology are also in progress.
- Vacuum Distiller
We have been granted 1 U.S. patent on the vacuum distiller technology
and there are 2 U.S. patent applications pending. Foreign applications
to protect the technology are also in process.
All of our products currently offered for sale are protected by patents
in the U.S. The group of patent applications currently in process have
sufficient overlap to
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offer protection to our current commercial applications. We file applications
with the U.S. Patent and Trademark Office once we perceive a new significant
commercial application, and prior to public disclosure of the technology.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at www.ateg.com or at the SEC's web site at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling securityholders sell all the shares. This
prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-____).
The following documents are hereby incorporated by reference in this
Registration Statement:
- - Annual Report on Form 10-KSB for the year ended July 31, 1999.
- - Quarterly Report on Form 10-QSB for the three months ended October 31, 1999.
- - Quarterly Report on Form 10-QSB for the three months ended January 31, 2000.
- - Current Report of Form 8-K dated August 30, 1999.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Corporate Secretary
American Technologies Group, Inc.
1017 South Mountain Avenue
Monrovia, California 91016
(626) 357-5000
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You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. The selling securityholders will not make an
offer of these shares in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of such documents.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in the
documents which are incorporated by reference. Forward-looking statements are
subject to risks and uncertainties and include information concerning possible
or assumed future results of our operations. When we use words such as
"believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. You should note that an investment in our securities
involves certain risks and uncertainties that could affect our future financial
results. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
set forth in "Risk Factors" and elsewhere in this prospectus.
DESCRIPTION OF COMMON STOCK
We have 100,000,000 shares of common stock authorized of which
38,500,871 shares are outstanding as of May 15, 2000. The holders of shares of
common stock are entitled to dividends when and as declared by the Board of
Directors from funds legally available therefore, and, upon liquidation, are
entitled to share pro rata in any distribution to holders of common stock. There
are no preemptive, conversion or redemption privileges, nor sinking fund
provisions with respect to the common stock, however, our Articles of
Incorporation, as amended, provide that "Each shareholder shall have the same
rights as any individual to purchase said stock [shares of Common Stock], but
shall not have any pre-emptive rights as that term is defined under NRS 78.265."
All of the outstanding shares of common stock are duly authorized, validly
issued, fully paid and non-assessable. Under Nevada law, the law of the state of
incorporation of American Technologies, and the our Articles of Incorporation,
each holder of a share of common stock is entitled to one vote
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for each matter submitted for a vote. Additionally, under Nevada law
cumulative voting is allowed for the election of directors, if provided for
in the Articles of Incorporation. Our Articles of Incorporation do not
provide for cumulative voting. However, California law requires companies
meeting certain requirements, which we meet, to permit shareholders to elect
to cumulate their votes for directors.
USE OF PROCEEDS FROM SALE OF COMMON STOCK
American Technologies will not receive any of the proceeds from the
sale of the shares of common stock by the selling securityholders.
USE OF PROCEEDS FROM EXERCISE OF WARRANTS AND OPTIONS
The 3,000,000 warrants issued to Bristal Capital are exercisable at
the lower of $0.35 and 76% of the average of the closing bid prices on each
of the five trading days immediately prior to exercise of the warrants. The
remaining 1,583,334 warrants are exercisable at $0.25 per share. Options as to
220,000 shares of common stock are exercisable at $0.25 per share and options
as to 50,000 shares of common stock are exercisable at $0.50 per share.
If all of the warrants and options for which the underlying shares
of common stock are included in this prospectus were exercised as of May 25,
2000, we will receive a maximum of approximately $895,834 in net proceeds. We
intend to use these funds for working capital and the payment of certain
trade payables.
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SELLING SECURITYHOLDERS
The following table sets forth as of May 15, 2000, the following:
(i) the name of each selling stockholder;
(ii) the number of shares of our common stock and the percentage of our
outstanding common stock beneficially owned by each such selling stockholder
before this offering;
(iii) the number of shares that each selling stockholder may offer and
sell pursuant to this prospectus; and
(iv) the number of shares of our common stock and the percentage of our
outstanding common stock beneficially owned by each such selling stockholder
after this offering.
The shares registered pursuant to this prospectus may be offered from
time to time by any of the selling stockholders named below or by those
individuals and entities to which they or their transferees, devisees, donees or
distributees may transfer devise, gift or distribute the shares. See "Plan of
Distribution" on page 17.
Except as described below, each of the selling stockholders has sole
voting and investment power with respect to the shares beneficially owned by
them. In addition, except as described below, none of the selling stockholders
has had any material relationship with Company or any of our predecessors or
affiliates within the past three years.
Since each selling stockholder may sell all, some or none of its shares
registered under this prospectus, no estimate can be made of the aggregate
number or percentage of shares of common stock that each selling stockholder
will beneficially own upon completion of this offering. Thus, for purposes of
the table set forth below, we have assumed that the selling stockholders will
sell all of the shares of common stock registered for them under this
prospectus.
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<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED AFTER
NUMBER OF SHARES THE OFFERING (A)
BENEFICIALLY OWNED PRIOR NUMBER OF --------------------------
NAME TO OFFERING (A) SHARES OFFERED NUMBER PERCENTAGE
- ---- --------------- -------------- ------ ----------
<S> <C> <C> <C> <C>
Bristol Capital LLC. 3,700,000 (1) 3,600,000 100,000 *
MacCaughern Trade Develop. 1,002,500 1,000,000 2,500 *
Nimbus Holding Inc. 1,333,334 (2) 1,333,334 0 0
The Charles Ltd. Pship. 1,333,334 (2) 1,333,334 0 0
Susan Schad(3) 1,750,400 (4) 500,000 (5) 1,250,400 3.2
Express Success Int'l LLC. 500,000 (56) 500,000 0 0
In-Finn-Ity Prod., Inc. 500,000 500,000 0 0
John Collins(7) 1,775,000 (8) 200,000 (6) 1,575,000 4.0
FNG & Assoc., Inc. 140,000 100,000 40,000 *
David MacKichan 546,000 125,000 421,000 1.1
Michael Fort 100,000 (9) 92,500 7,500 0
James Hennen(10) 214,050 (9)(11) 36,550 177,500 *
John Demoleas 70,000 (6) 50,000 20,000 *
Michael Keating 352,161 (12) 50,000 302,161 *
Michael Alexander 70,000 (11) 50,000 20,000 *
Joseph Charney 85,000 (11) 30,000 (11) 55,000 *
</TABLE>
- --------------------------------------
* Less than 1%.
(A) As required by the regulations of the SEC, the number of shares shown as
beneficially owned includes shares which can be purchased within 60 days.
1. Represents an estimate of the number of shares of common stock to be
offered by Bristol Capital; the actual number of shares of common stock
issuable upon exercise of warrants is indeterminate, is subject to
adjustment and could be materially more than such estimated number
depending on factors which cannot be predicted by us at this time. The
actual number of shares of common stock offered in this prospectus, and
included in the registration statement of which this prospectus is a
part, includes such additional number of shares of common stock as may
be issued or issuable upon exercise of warrants by reason of any stock
split, stock dividend or similar transaction involving the common stock,
in accordance with Rule 416 under the Securities Act. Under the terms
of the warrants, the warrants are exercisable by any holder only to the
extent that the number of shares of common stock issuable pursuant to
such securities, together with the number of shares of common stock
owned by such holder and its affiliates (but not including shares of
common stock underlying unexercised portions of the warrants) would not
exceed 4.9% of the then outstanding common stock as determined in
accordance with Section 13(d) of the Exchange Act. Accordingly, the
number of shares of common stock set forth in the table for Bristol
Capital exceeds the number of shares of common stock that Bristol
Capital could own beneficially at any given time through their ownership
of warrants. In that regard, the beneficial ownership of the common
stock by Bristol Capital set forth in the table is not determined in
accordance with Rule 13d-3 under the Exchange Act.
2. Includes 666,667 shares of common stock issuable upon the exercise of
warrants.
3. Mrs. Schad husband has been a director since September 1999.
4. Includes 254,500 shares of common stock issuable upon the exercise of
stock options or warrants held by Mr. Schad and shares held directly and
indirectly by members of Mrs. Schad's immediate family.
5. Includes 250,000 shares of common stock issuable upon the exercise of
warrants.
6. Represents shares of common stock issuable upon the exercise of stock
options.
7. Mr. Collins was Chairman of the Board and Chief Executive Officer from
1991 until November 1998.
8. Includes 575,000 shares of common stock issuable upon the exercise of
stock options and 300,000 shares held by Mr. Collins for the benefit of
his ex-wife as to which shares he disclaims beneficial ownership.
9. Includes warrants to purchase 7,500 shares of common stock.
10. Mr. Hennen was a director from September 1999 until May 2000.
11. Includes 20,000 shares of common stock issuable upon the exercise of
stock options.
12. Includes 100,000 shares of common stock issuable upon the exercise of
stock options.
16
<PAGE>
Registration Rights
In connection with the sale of the warrants, we entered into a
registration rights agreement which requires us to register 1.2 times the number
of shares of common stock issuable on exercise of the warrants. We are also
obligated to register and qualify the shares under such state securities laws as
the selling securityholders may request.
We are obligated to use our best efforts to cause the registration
statement to become effective and to keep the registration statement effective
for two years or until the selling securityholders may sell all registerable
securities under Rule 144 or until the selling securityholders no longer own any
shares, whichever occurs first.
The registration rights agreement provides for certain payments to
Bristol Capital if we are unable to have the registration statement declared
effective by the SEC within 90 days from the date of the issuance of the
warrants.
PLAN OF DISTRIBUTION
The selling securityholders and their pledgees, donees, transferees and
other successors in interest may offer the shares of common stock received upon
exercise of the warrants at various times in one or more of the following
transactions, which may include block transactions:
- in the over-the-counter market;
- on any exchange where our common stock is then listed;
- with broker-dealers or third parties other than in the
over-the-counter market or on an exchange, including block sales;
- through the writing of options or short sales; or
- involving a combination of such methods or other methods.
The selling securityholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, at fixed prices or such other prices as the
selling securityholders determine from time to time.
17
<PAGE>
The selling securityholders may use dealers, agents or underwriters to
sell their shares. If this happens, the dealers, agents or underwriters may
receive compensation in the form of discounts or commissions from the selling
securityholders or from the purchasers of shares or from both. The compensation
to a particular broker may be in excess of customary compensation.
The selling securityholders and any dealers, agents or underwriters
that participate with the selling securityholders in the distribution of the
shares may be deemed to be "underwriters" as this term is defined in the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such persons, and any profits received on the resale of the shares of our
common stock offered by this prospectus, may be deemed to be underwriting
commissions or discounts under the Securities Act.
We will pay most expenses related to the offer and sale of the shares
offered by the selling securityholders using this prospectus. The selling
securityholders, however, will pay any underwriting discounts and selling
commissions.
Any shares covered by this prospectus which qualify for sale under Rule
144 of the Securities Act may be sold under that Rule rather than under this
prospectus.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our bylaws, as amended, provide that we shall indemnify our directors
and officers to the fullest extent permitted by Nevada law, including
circumstances in which indemnification is otherwise discretionary under Nevada
law.
In addition, American Technologies and each selling securityholder have
agreed to indemnify each other against certain liabilities, including certain
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons, we been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
18
<PAGE>
EXPERTS
Our audited financial statements as of and for the year ended July 31, 1999
incorporated by reference in this prospectus and elsewhere in this registration
statement have been audited by Corbin & Wertz, independent public accountants,
as indicated in their report with respect thereto, and are incorporated herein
by reference in reliance upon the authority of said firm as experts in giving
said reports. Reference is made to said report, which includes an explanatory
paragraph with respect to the uncertainty regarding our ability to continue as a
going concern as discussed in Note 1 to the financial statements.
Our audited financial statements as of and for the year ended July 31, 1998
incorporated by reference in this prospectus and elsewhere in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report, which includes
an explanatory paragraph with respect to the uncertainty regarding our ability
to continue as a going concern as discussed in Note 1 to the financial
statements.
LEGAL MATTERS
For the purpose of this offering, John M. Dab, our General Counsel, is
giving his opinion on the validity of the shares.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
SEC Registration Fee $ 426.40
Accountant's Fees and Expenses $ 4,000.00
Financial Printers $ 1,500.00
Miscellaneous $ 200.00
----------
Total $ 6,126.40
- ------------------ ----------
----------
</TABLE>
* Represents expenses relating to the distribution by the selling
securityholders under this prospectus prepared in accordance with the
requirements of Form S-3. These expenses will be borne by us on behalf of the
selling securityholders. All amounts are estimates except for the SEC
Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 78.751 of the Nevada General Corporation Law,
Article VI of our Amended Bylaws provides for the indemnification by American
Technologies, including suits brought by or on behalf of American
Technologies, of each director, officer, employee or agent thereof to the
fullest extent permitted by Nevada law.
As permitted by the Nevada General Corporation Law and Article VI of our
Amended Bylaws, American Technologies maintains director's and officer's
liability for its directors and officers against certain liabilities.
20
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<C> <S>
4.1 Warrant issued by Registrant dated May 23, 2000.
5.1 Opinion of John M. Dab.
23.1 Consent of John M. Dab (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Corbin & Wertz.
24.1 Power of Attorney (included on page 23)
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities
21
<PAGE>
at that time shall be deemed to be an initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Nevada Revised Statutes, the Certificate of
Incorporation of the Registrant, the Bylaws of the Registrant, Indemnification
Agreements entered into between the Registrant and it officers and directors, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of the such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Monrovia, State of California, on
this 25th day of May, 2000.
AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/ Lawrence J. Brady
----------------------
Lawrence J. Brady
Chairman of the Board and
Chief Executive Officer
22
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Lawrence J. Brady
and Charles McCarthy, and each one of them, individually and without the other,
his attorney-in-fact, each with full power of substitution, for him in any and
all capacities, to sign any and all amendments to this Registration Statement on
From S-3, and to file the same, with the exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lawrence J, Brady Chairman of the Board,
- --------------------- Chief Executive Officer May 25, 2000
LAWRENCE J. BRADY
/s/ Yan Lin Acting Chief Financial
- ----------- Officer and Treasurer May 25, 2000
YAN LIN (Principal Financial and
Accounting Officer)
Director of Research and
- ----------------- Development and a Director
SHUI YIN LO
/s/ Charles McCarthy Director
- -------------------- May 25, 2000
CHARLES MC CARTHY
/s/ William Odom Director
- ---------------- May 25, 2000
WILLIAM ODOM
/s/ Larry Pressler Director
- ------------------ May 25, 2000
LARRY PRESSLER
Director
- -------------
ALAN BROOKS
/s/ Lawrence Schad Director
- ------------------ May 25, 2000
LAWRENCE SCHAD
</TABLE>
23
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Numbers Description
- ------- -----------
<S> <C>
4.1 Warrant issued by Registrant dated May 23, 2000.
5.1 Opinion of John M. Dab.
23.1 Consent of John M. Dab (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Corbin & Wertz.
24.1 Power of Attorney (included on page 23)
</TABLE>
24
<PAGE>
EXHIBIT 4.1
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
Right to
Purchase
3,000,000
Shares of
Common Stock,
par value
$0.001 per
share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Bristol Capital, LLC, or its
registered assigns (the "Holder"), is entitled to purchase from American
Technologies Group, Inc., a Nevada corporation (the "Company"), at any time or
from time to time during the period specified in Paragraph 2 hereof, Three
Million (3,000,000) fully paid and nonassessable shares of the Company's Common
Stock, par value $0.001 per share (the "Common Stock"), at an exercise price
equal to the lesser of (i) $.35 and (ii) 76% of the average of the lowest
Closing Bid Prices (as defined herein) during the five (5) Trading Days (as
defined herein) immediately preceding the date of delivery of an Exercise
Agreement (as defined in Section 1 hereof) (the "Exercise Price"). The term
"Closing Bid Price" means the closing bid price of the Common Stock on the
Over-the-Counter Bulletin Board (the "OTC BB") as reported by Bloomberg
Financial Markets or an equivalent, reliable reporting service mutually
acceptable to the Company and the Holder ("Bloomberg") or, if the OTC BB is not
the principal trading market for such security, the closing bid price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg. "Trading Day" shall mean
any day on which the Common Stock is traded for any period on the OTC BB, or on
the principal securities
-1-
<PAGE>
exchange or other securities market on which the Common Stock is then being
traded. The term "Warrant Shares," as used herein, refers to the shares of
Common Stock purchasable hereunder. The Warrant Shares and the Exercise Price
are subject to adjustment as provided in Paragraph 4 hereof. The term
"Warrants" means this Warrant and the other warrants issued pursuant to that
certain letter agreement, dated as of May 23, 2000, by and among the Company
and the Holder (the "Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the Holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon payment to
the Company in cash, by certified or official bank check or by wire transfer for
the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the Holder hereof or such Holder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement shall
have been delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the Holder
hereof and shall be registered in the name of such Holder or such other name as
shall be designated by such Holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the Holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in no
event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or
portions thereof) upon exercise of which the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through
the ownership of the unexercised Warrants and the unexercised or unconverted
portion of any other securities of the Company) subject to a limitation on
conversion or exercise analagous to the limitation contained herein) and (ii)
the number of shares of Common Stock issuable upon exercise of the Warrants
(or portions thereof) with respect to which the determination described
herein is being made, would result in beneficial ownership by the Holder and
its affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) herein.
-2-
<PAGE>
2. PERIOD OF EXERCISE.
(a) EXERCISE PERIOD. This Warrant is exercisable at any time
or from time to time on or after the date on which this Warrant is issued (the
"Issue Date") and delivered before 5:00 p.m., New York City time on the fifth
(5th) anniversary of the Issue Date (the "Exercise Period").
(b) MANDATORY EXERCISE RIGHT. The Company shall be entitled,
on any day following the Issue Date on which the average Closing Bid Price of
the Common Stock during the ten (10) consecutive trading day period ending on
the trading day immediately preceding such date (the "Calculation Date") is
equal to or greater than 125% of the Exercise Price (subject to adjustment in
accordance with Section 4 hereof), to deliver a written notice (the "Mandatory
Exercise Notice") to the Holder requiring such Holder to exercise this Warrant
in accordance with Section 1 hereof on the date which is ten (10) calendar days
following the date of such Mandatory Exercise Notice (the "Exercise Date");
PROVIDED, HOWEVER, that the Company shall have such right if and only if, at all
times during such ten (10) consecutive calendar day period of time and
continuing through the Exercise Date, the Warrant Shares issuable upon exercise
of the Warrants are (i) authorized and reserved for issuance, (ii) registered
for resale under the Securities Act of 1933, as amended, by the Holder of this
Warrant (or may otherwise be resold publicly without restriction) and sales of
the Warrant Shares may be made continuously thereunder during such time periods,
and (iii) listed for trading on each principal exchange or market on which the
shares of Common Stock of the Company were then traded; and PROVIDED, FURTHER,
HOWEVER, that on the Exercise Date, the Closing Bid Price of the Common Stock is
equal to or greater than 125% of the Exercise Price (subject to adjustment in
accordance with Section 4 hereof). In exercising this Warrant, the Holder shall
pay to the Company an aggregate exercise price of no more than $150,000 each
month for the Warrant Shares.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of the Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice
of issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the
-3-
<PAGE>
exercise of this Warrant if and so long as any shares of the same class shall
be listed on such national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the Holder of
this Warrant in order to protect the exercise privilege of the Holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection therewith)
less than the Market Price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance
divided by the Market Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
-4-
<PAGE>
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the
Company in any manner issues or grants any warrants, rights or options,
whether or not immediately exercisable, to subscribe for or to purchase
Common Stock or other securities convertible into or exchangeable for Common
Stock ("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter referred to
as "Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance or grant of such Options, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will, as of the
date of the issuance or grant of such Options, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of
such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
the purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such conversion or exchange" is determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
-5-
<PAGE>
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect will be readjusted to the
Exercise Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; (iii) upon the exercise of the Warrants; or
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<PAGE>
(iv) upon the issuance of securities pursuant to that certain Proposed Term
Sheet for a Structured Equity Line of Flexible Financing dated May 23, 2000.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price
in effect immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price
in effect immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the Holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the Holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the Holder may be entitled to
acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall
declare or make any distribution of its assets (including cash) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise, then, after the date of record for determining stockholders
entitled to such distribution, but prior to the date of distribution, the
Holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have
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<PAGE>
been payable to the Holder had such Holder been the holder of such shares of
Common Stock on the record date for the determination of stockholders
entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the Holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the Chief Executive Officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment
of the Exercise Price shall be made in an amount of less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise required to
be made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to not less
than 1% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a
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<PAGE>
reasonable approximation thereof by the Company) when the same shall take
place. Such notice shall also specify the date on which the holders of Common
Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed
in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not
expressly provided for by such provisions, the Company will give notice of
such event as provided in Paragraph 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the Holder shall be neither enhanced nor diminished by
such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean
the number of shares of Common Stock actually outstanding (not including
shares of Common Stock held in the treasury of the Company), plus (x)
pursuant to Paragraph 4(b)(i) hereof, the maximum total number of shares of
Common Stock issuable upon the exercise of Options, as of the date of such
issuance or grant of such Options, if any, and (y) pursuant to Paragraph
4(b)(ii) hereof, the maximum total number of shares of Common Stock issuable
upon conversion or exchange of Convertible Securities, as of the date of
issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock on the
OTC BB for the five (5) trading days immediately preceding such date as reported
by Bloomberg, or (ii) if the OTC BB is not the principal trading market for the
shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, at the option of a majority-in-interest of the holders of the
outstanding Warrants, by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder.
(iii) "COMMON STOCK," for purposes of this Paragraph
4, includes the Common Stock, par value $0.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only shares of Common Stock, par value $0.001 per
share, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization,
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<PAGE>
reclassification, consolidation, merger, or sale of the character referred to
in Paragraph 4(e) hereof, the stock or other securities or property provided
for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the Holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Paragraph 7(f) hereof. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered Holder hereof as the owner and Holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of the Registration Rights Agreement.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the Holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the Holder hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other
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<PAGE>
than securities transfer taxes) and all other expenses (other than legal
expenses, if any, incurred by the holder or transferees) and charges payable
in connection with the preparation, execution, and delivery of Warrants
pursuant to this Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the
time of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the case of any
exercise, the Warrant Shares issuable hereunder), shall not be registered
under the Securities Act of 1933, as amended (the "Securities Act") and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws, (ii) that the Holder or transferee execute
and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under
the Securities Act. The first Holder of this Warrant, by taking and holding
the same, represents to the Company that such Holder is acquiring this
Warrant for investment and not with a view to the distribution thereof.
8. REGISTRATION RIGHTS. The initial Holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.
9. NOTICES. All notices, requests, and other communications
required or permitted to be given or delivered hereunder to the holder of
this Warrant shall be in writing, and shall be personally delivered, or shall
be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to such Holder at the address shown
for such Holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such Holder. All
notices, requests, and other communications required or permitted to be given
or delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to the
office of the Company at 1017 South Mountain Avenue, Monrovia, California
91016, Attention: Chief Executive Officer, or at such other address as shall
have been furnished to the holder of this Warrant by notice from the Company.
Any such notice, request, or other communication may be sent by facsimile,
but shall in such case be subsequently confirmed by a writing personally
delivered or sent by certified or registered mail or by recognized overnight
mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt
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<PAGE>
thereof by the person entitled to receive such notice at the address of such
person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier, upon deposit with
the United States Post Office or such overnight mail courier, if postage is
prepaid and the mailing is properly addressed, as the case may be.
10. ARBITRATION. Any dispute under this Agreement shall be
submitted to arbitration and shall be finally and conclusively determined by
the decision of one (1) arbitrator (the "Arbitrator") selected as hereinafter
provided. The Company and the Initial Investors and/or any other Indemnified
Party shall select the Arbitrator, or if the Company and the Initial
Investors and/or any other Indemnified Party fail to reach agreement on the
Arbitrator within twenty (20) days, the Arbitrator shall thereafter be
selected by the American Arbitration Association upon application made to it
for such purpose by the Company and the Initial Investors and/or any other
Indemnified Party. The Arbitrator shall reach and render a decision in
writing. To the extent practicable, decisions of the Arbitrator shall be
rendered no more than thirty (30) calendar days following commencement of
proceedings with respect thereto. The Arbitrator shall cause its written
decision to be delivered to the Company and the Initial Investors and/or any
other Indemnified Party. Any decision made by the Arbitrator (either prior to
or after the expiration of such thirty (30) calendar day period) shall be
final, binding and conclusive on the Company and the Initial Investors and/or
any other Indemnified Party and entitled to be enforced to the fullest extent
permitted by law and entered in any court of competent jurisdiction. The
non-prevailing party to any arbitration, if any, as determined by the
arbitrator, shall bear the expense of both parties in relation thereto,
including but not limited to the parties' attorneys' fees, if any, and the
expenses and fees of the Arbitrator.
Subject to the preceding paragraph, this Agreement shall be enforced,
governed by and construed in accordance with the laws of the State of California
applicable to agreements made and to be performed entirely within such State. In
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal Courts located
in Los Angeles, California with respect to any dispute arising under this
Agreement or the transactions contemplated hereby. The party which does not
prevail in any dispute arising under this Agreement shall be responsible for all
fees and expenses, including attorneys' fees, incurred by the prevailing party
in connection with such dispute.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may
only be amended by an instrument in writing signed by the Company and the
Holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/ Lawrence J. Brady
--------------------------------------
Lawrence J. Brady
Chairman and Chief Executive Officer
Dated as of May 23, 2000
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FORM OF EXERCISE AGREEMENT
Dated: ________ __, 200_
To: American Technologies Group, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
-----------------------------
Signature:
-----------------------
Address:
-----------------------
-----------------------
-----------------------
Note: The above signature
should correspond
exactly with the name
on the face of the
within Warrant, if
applicable.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS NO OF SHARES
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
, and hereby irrevocably constitutes and appoints ___________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: ________ __, 200_
In the presence of:
Name:
----------------------------------------
Signature:
----------------------------------------
Title of Signing Officer or Agent (if any):
----------------------------------------
Address:
----------------------------------------
----------------------------------------
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant, if applicable.
<PAGE>
EXHIBIT 5.1
May 26, 2000
Board of Directors
American Technologies Group, Inc.
1017 S. Mountain Ave.
Monrovia, California 91016
Gentlemen:
As General Counsel for American Technologies Group, Inc. (the
"Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission on or about May 26, 2000 intended to register 5,953,334 shares of
the common stock of the Company issuable upon the exercise of options or
warrants and an additional 3,547,384 shares of common stock (collectively,
the "Shares"), as more fully described in the Registration Statement, I have
examined such corporate records and other documents and such questions of law
as I have considered necessary or appropriate for the purposes of this
opinion and, on the basis of such examination, advise you that in my opinion
the Shares will be, when issued as specified in the Registration Statement,
validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. This consent is not to be construed as an admission
that I am a person whose consent is required to be filed with the Registration
Statement under the provisions of the Securities Act of 1933, as amended.
Very truly yours,
/s/ John M. Dab
John M. Dab
General Counsel
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Technologies Group, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 registration statement of our report dated
November 10, 1998 included in the Company's Form 10-KSB for the year ended
July 31, 1998 and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
May 26, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Form S-3
Registration Statement of our report dated November 9, 1999 included in
American Technologies Group Inc.'s Form 10K-SB for the year ended July 31,
1999. We also consent to all references to our firm included in this
Registration Statement.
CORBIN & WERTZ
Irvine, California
May 26, 2000
