<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 87-0361799
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
13114 Evening Creek Drive South
San Diego, CA 92128
(619) 679-2114
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
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1997 STOCK OPTION PLAN
STOCK OPTIONS
(Full title of the plans)
----------
Cornelius J. Brosnan
President and Chief Executive Officer
AMERICAN TECHNOLOGY CORPORATION
13114 Evening Creek Drive South
San Diego, CA 92128
(619) 679-2114
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Jeremy D. Glaser, Esq.
Michael A. Newman, Esq.
COOLEY GODWARD LLP
4365 Executive Drive
San Diego, CA 92121
(619) 550-6000
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<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.00001 par value 670,000 $3.59375 - $5,003,137.50 $1,475.93
$16.00
=============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457. The price per share and aggregate
offering price are based upon (a) the actual exercise price for shares
subject to options previously granted under the Registrant's 1997 Stock
Option Plan (the "Plan"); (b) the average of the high and low sales price of
Registrant's Common Stock on July 23, 1998 as reported in the
over-the-counter market on the National Association of Securities Dealers
OTC Electronic Bulletin Board System for shares issuable under options
available for grant under the Plan, and (c) the actual exercise price for
shares subject to options granted outside the Plan. The following chart
shows the calculation of the registration fee.
<TABLE>
<CAPTION>
NUMBER OF OFFERING PRICE PER AGGREGATE OFFERING
TYPES OF SHARES SHARES SHARE PRICE
--------------- -------- ------------------ ------------------
<S> <C> <C> <C>
Shares issuable under 370,000 8.1875 3,029,375.00
options available for
grant
Shares subject to 30,000 3.59375 107,812.50
outstanding stock
options under the Plan 100,000 3.6875 368,750.00
Shares subject to 50,000 16.00 800,000.00
outstanding stock
options outside the
Plan 120,000 5.81 697,200.00
</TABLE>
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by American Technology Corporation (the
"Registrant") with the Securities and Exchange Commission are incorporated by
reference into this Registration Statement:
a) The Registrant's latest annual report on Form 10-KSB filed pursuant
to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or either (1) the Registrant's latest prospectus filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the
"Securities Act"), that contains audited consolidated financial statements for
the Registrant's latest fiscal year for which such statements have been filed,
or (2) the Registrant's effective registration statement on Form 10 or 20-F
filed under the Exchange Act containing audited consolidated financial
statements for the Registrant's latest fiscal year.
b) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual reports, the
prospectus or the registration statement referred to in (a) above.
c) The description of the Registrant's Common Stock which is contained
in a registration statement filed under the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
All documents filed by the Registrant with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Delaware law, the Company's Certificate of Incorporation
provides that the Company will indemnify its officers, directors, employees and
agents against attorneys' fees and other expenses and liabilities they incur to
defend, settle or satisfy any civil or criminal action brought against them
arising out of their association with or activities on behalf of the Company
unless, in any such action, the are adjudged to have acted with gross negligence
or to have engaged in willful misconduct. The Company may also bear the expenses
of such litigation for any such persons upon their promise to repay such sums if
it is ultimately determined that they are not entitled to indemnification. Such
expenditures could be substantial and may not be recouped, even if the Company
is so entitled. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
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.
1
<PAGE> 4
Pursuant to the General Corporation Law of Delaware, the Company's
Certificate of Incorporation excludes personal liability on the part of its
directors to the Company for monetary damages based upon any violation of their
fiduciary duties as directors, except as to liability for any breach of the duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of Section 174 of
the General Corporation Law of Delaware, or any transaction from which a
director receives an improper personal benefit. This exclusion of liability does
not limit any right which a director may have to be indemnified and does not
affect any director's liability under federal or applicable state securities
laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Registrant's Certificate of Incorporation (1)
4.2 Certificate of Amendment to the Certificate of Incorporation (2)
4.3 Registrant's Bylaws (1)
4.4 Specimen Stock Certificate
5.1 Opinion of Cooley Godward LLP
10.1 1997 Stock Option Plan
10.2 Special Stock Option Agreement dated October 2, 1997 between the
Company and Cornelius J. Brosnan
10.3 Stock Option Agreement dated September 1, 1997 between the
Company and Dale Williams (3)
10.4 Amendment to Stock Option Agreement between Dale Williams and
the Company dated as of June 12, 1998 (4)
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page 5.
</TABLE>
(1) Previously filed as an exhibit to the Registrant's Form 10-SB effective
August 1, 1994, and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Form 10-QSB dated
March 31, 1997, and incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's Form 10-KSB dated
September 30, 1997, and incorporated herein by reference.
(4) Previously filed as an exhibit to the Registrant's Form 8-K dated June
29, 1998, and incorporated herein by reference.
2
<PAGE> 5
ITEM 9. UNDERTAKINGS.
(a) Rule 415 Offering.
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:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b)
of this chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration Statement
or any material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if this
Registration Statement is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this 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 herein, and the
offering of such securities at that 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) Filings Incorporating Subsequent Exchange Act Documents By
Reference.
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 at that time shall be deemed to be the initial bona
fide offering thereof.
(h) Request for Acceleration of Effective Date or Filing of
Registration Statement on Form S-8.
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 foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the 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
3
<PAGE> 6
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 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 such issue.
4
<PAGE> 7
SIGNATURES
The Registrant. 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-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on July 23,
1998.
AMERICAN TECHNOLOGY CORPORATION
By /s/ CORNELIUS J. BROSNAN
_________________________________
Cornelius J. Brosnan
Chairman, President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Cornelius J. Brosnan and Robert Putnam
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any of
them, or his substitutes or substitute, may lawfully 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 by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ CORNELIUS J. BROSNAN
- ------------------------------- Chairman, President and Chief Executive July 23, 1998
Cornelius J. Brosnan Officer (Principal Executive Officer)
/S/ ROBERT PUTNAM
- ------------------------------- Vice President, Treasurer and Assistant July 23, 1998
Robert Putnam Secretary (Acting Principal Financial
and Accounting Officer)
/S/ RICHARD M. WAGNER
- ------------------------------- Director and Secretary July 23, 1998
Richard M. Wagner
/S/ ELWOOD G. NORRIS
- ------------------------------- Director and Chief Technology Officer July 23, 1998
Elwood G. Norris
- ------------------------------- Director July __, 1998
Joel A. Barker
</TABLE>
5
<PAGE> 8
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Registrant's Certificate of Incorporation (1)
4.2 Certificate of Amendment to the Certificate of Incorporation (2)
4.3 Registrant's Bylaws (1)
4.4 Specimen Stock Certificate
5.1 Opinion of Cooley Godward LLP
10.1 1997 Stock Option Plan
10.2 Special Stock Option Agreement dated October 2, 1997 between the
Company and Cornelius J. Brosnan
10.3 Stock Option Agreement dated September 1, 1997 between the
Company and Dale Williams (3)
10.4 Amendment to Stock Option Agreement between Dale Williams and
the Company dated as of June 12, 1998 (4)
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page 5.
</TABLE>
(1) Previously filed as an exhibit to the Registrant's Form 10-SB effective
August 1, 1994, and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Form 10-QSB dated
March 31, 1997, and incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's Form 10-KSB dated
September 30, 1997, and incorporated herein by reference.
(4) Previously filed as an exhibit to the Registrant's Form 8-K dated June
29, 1998, and incorporated herein by reference.
<PAGE> 1
EXHIBIT 4.4
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP NO. 030145 20 5
[NUMBER] [SHARES]
[AMERICAN TECHNOLOGY CORPORATION LOGO]
AUTHORIZED COMMON STOCK: 20,000,000 SHARES
PAR VALUE: $.00001
[SPECIMEN]
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
-- Shares of AMERICAN TECHNOLOGY CORPORATION Common Stock --
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized offers.
Dated:
[SIG] [SIG]
- ----------------------------- ---------------------------------
SECRETARY PRESIDENT
[AMERICAN TECHNOLOGY CORPORATION CORPORATE SEAL]
<PAGE> 2
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT...Custodian..
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as tenants Minors Act ___________
in common State
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,_________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_____________________
SPECIMEN
_______________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
<PAGE> 1
Exhibit 5.1
[COOLEY GODWARD LETTERHEAD]
July 24, 1998
American Technology Corporation
13114 Evening Creek Drive South
San Diego, CA 92128
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by American Technology Corporation (the "Company") of a
Registration Statement on Form S-8 (the "Registration Statement") with the
Securities and Exchange Commission covering the offering of an aggregate of
670,000 shares of the Company's Common Stock, $.00001 par value (the "Shares"),
consisting of up to 500,000 shares of the Company's Common Stock pursuant to its
1997 Stock Option Plan (the "Plan") and 170,000 shares of the Company's Common
Stock granted outside the Plan (the "Options").
In connection with this opinion, we have examined the Registration Statement,
the Plan, the Options, your Certificate of Incorporation, as amended, and
Bylaws, and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have assumed
the genuineness and authenticity of all documents submitted to us as originals,
the conformity to originals of all documents submitted to us as copies thereof,
and the due execution and delivery of all documents where due execution and
delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and the Plan or the Options, as applicable, will be validly issued,
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By:/S/ JEREMY D. GLASER
____________________
Jeremy D. Glaser
<PAGE> 1
EXHIBIT 10.1
AMERICAN TECHNOLOGY CORPORATION
1997 STOCK OPTION PLAN
ADOPTED JANUARY 23, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of, and Consultants to, the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
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(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means American Technology Corporation, a Delaware
corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT "means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board or the chief
executive officer of the Company may determine, in that party's sole discretion,
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
2
<PAGE> 3
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations.
(1) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Company's common stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable.
(2) If the common stock is quoted on the Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable.
(3) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
3
<PAGE> 4
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
4
<PAGE> 5
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "PLAN" means this American Technology Corporation 1997 Stock Option
Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
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<PAGE> 6
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to
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<PAGE> 7
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. Additionally, prior to the Listing
Date, and notwithstanding anything to the contrary contained herein, the Board
may delegate administration of the Plan to any person or persons, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary, the Board
or the Committee may delegate to a committee of one or more members of the Board
the authority to grant Options to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate five hundred thousand (500,000) shares of the Company's
common stock. If any Option shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the stock not
purchased under such Option shall revert to and again become available for
issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
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<PAGE> 8
(b) No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred fifty thousand (250,000) shares of the Company's common
stock in any twelve (12) month period. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, shall not apply until
(i) the earliest of: (A) the first material modification of the Plan (including
any increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of common
stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of stockholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
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<PAGE> 9
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, or
(B) in any other form of legal consideration that may be acceptable to the
Board. In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. The
person to whom the Option is granted
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<PAGE> 10
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option; provided, however, that an Option granted to an officer, director or
consultant (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company or of any of its Affiliates. The provisions of
this subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser
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<PAGE> 11
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to provide
such other representations, written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant, or such
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<PAGE> 12
longer or shorter period, (which shall not be less than thirty (30) days, unless
such termination is for cause) specified in the Option Agreement, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, which in no
event shall be less than six (6) months, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the
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<PAGE> 13
Optionee was entitled to exercise the Option as of the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period, which in no event shall be less than six (6)
months, specified in the Option Agreement), or (ii) the expiration of the term
of such Option as set forth in the Option Agreement. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right
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<PAGE> 14
shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares. Notwithstanding the foregoing, shares received on
exercise of an Option by an officer, director or consultant (within the meaning
of Section 260.140.41 of Title 10 of the California Code of Regulations) may be
subject to additional or greater restrictions.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company
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<PAGE> 15
shall be relieved from any liability for failure to issue and sell stock upon
exercise of such Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(b) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This section shall not apply (i) after the
Listing Date, or (ii) when issuance is limited to key employees whose duties in
connection with the Company assure them access to equivalent information.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's Bylaws and
the provisions of the General Corporation Law of the State of Delaware, or to
terminate the
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<PAGE> 16
relationship of any Consultant subject to the terms of that Consultant's
agreement with the Company or Affiliate to which such Consultant is providing
services.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) (1) The Board or the Committee shall have the authority to effect,
at any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of common stock, but having an exercise price per share not less than
eighty-five percent (85%) percent of the Fair Market Value (one hundred percent
(100%) of the Fair Market Value in the case of an Incentive Stock Option or, in
the case of a ten percent (10%) stockholder (as defined in subsection 5(b)), not
less than one hundred and ten percent (110%) of the Fair Market Value) per share
of common stock on the new grant date.
(2) Shares subject to an Option canceled under this subsection
9(e) shall continue to be counted, for the applicable period in which it was
granted, against the maximum award of Options permitted to be granted pursuant
to subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(e), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the
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<PAGE> 17
applicable period against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(e)(2) shall be applicable only to the extent required by Section
162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any twelve
(12) month period pursuant to subsection 5(c), and the outstanding Options will
be appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board or Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of
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Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then: (i) any surviving or acquiring corporation shall
assume any Options outstanding under the Plan or shall substitute similar
options (including an option to acquire the same consideration paid to the
stockholders in the transaction described in this Section 10(b)) for those
outstanding under the Plan, or (ii) in the event any surviving or acquiring
corporation refuses to assume such Options or to substitute similar options for
those outstanding under the Plan, (A) with respect to Options held by persons
then performing services as Employees, Directors or Consultants, the vesting of
such Options and the time during which such Options may be exercised shall be
accelerated prior to such event and the Options terminated if not exercised
after such acceleration and at or prior to such event, and (B) with respect to
any other Options outstanding under the Plan, such Options shall be terminated
if not exercised prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
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(2) Modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
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<PAGE> 20
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on January 22, 2008, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
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<PAGE> 1
EXHIBIT 10.2
AMERICAN TECHNOLOGY CORPORATION
- ------------------------------
Special Stock Option
- ----------------
Granted Under the Approval of the Board of Directors of American
Technology Corporation
THIS SPECIAL STOCK OPTION, dated as of October 2, 1997 (the "Date of
Grant"), is granted by AMERICAN TECHNOLOGY CORPORATION, a Delaware corporation
("Company"), to Cornelius J. Brosnan (the "Optionee"), whose status with the
Company is described on the signature page hereof below his signature.
WHEREAS, the Optionee is now a Director of the Company and the Company
desires to have the Optionee remain in its service and desires to encourage
stock ownership by the Optionee and to increase the Optionee's proprietary
interest in the Company's success; and as an inducement thereto has determined
to grant to the Optionee the option herein provided for, to the end that the
Optionee may thereby be assisted in obtaining an interest, or an increased
interest, as the case may be, in the stock ownership of the Company;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. GRANT. Pursuant to the Unanimous Consent of Directors of the Company
dated October 2, 1997, the Company hereby grants to the Optionee an option (the
"Option") to purchase 50,000 shares of the Company's common stock, $.00001 par
value per share (the "Option Shares") at the price of $16.00 per share (the
"Purchase Price" or "Exercise Price") and vesting 25,000 option shares on
October 2, 1998 and 25,000 option shares on October 2, 1999. This Option is
granted separately at the discretion of the Board of Directors and is not an
option pursuant to the 1992 option plans. Both the Purchase Price and the number
of Option Shares purchasable may be adjusted pursuant to Paragraph 10 hereof.
2. TERM. This Option is exercisable during the period beginning with the
Date of Grant and ending October 2, 2002, at 5:00 p.m. (Pacific Time), except as
provided in Paragraph 7 hereof.
3. EXERCISE OF OPTION. During the Optionee's life, this Option may only
be exercised by him or her. This Option may only be exercised by presentation at
the principal offices of the Company in San Diego, California of written notice
to the Company's Secretary advising the Company of the Optionee's election to
purchase Option Shares, specifying the number of Option Shares being purchased,
accompanied by payment. No Option Shares shall be issued until full payment is
made therefor. Payment shall be made in cash, represented by bank or cashier's
check, certified check or money order.
1.
<PAGE> 2
4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.
(a) Upon proper exercise of this Option, the Company shall mail
or deliver to the Optionee, as promptly as practicable, a stock certificate or
certificates representing the Option Shares purchased, subject to clause (b)
below. The Company shall not be required to sell or issue any shares under the
Option if the issuance of such shares shall constitute a violation of any
applicable law or regulation or of any requirements of any national securities
exchange upon which the Company's common stock may be listed.
(b) Upon any exercise of this Option, if a registration statement
under the Securities Act of 1933 (the "Act") is not in effect with respect to
the Option Shares, then the Company shall not be required to issue any Option
Shares unless the Company has received evidence reasonably satisfactory to it to
the effect that the Optionee is acquiring such shares for investment and not
with a view to the distribution thereof. Any reasonable determination in this
connection by the Company shall be final, binding and conclusive.
(c) Unless and until removed as provided below, each certificate
evidencing unregistered Option Shares shall bear a legend in substantially the
following form:
"The shares of stock represented by this certificate have
not been registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or transferred except
upon such registration or upon receipt by this Corporation of an opinion
or counsel satisfactory to this Corporation, in form and substance
satisfactory to this Corporation, that registration is not required for
such sale or transfer."
The Company shall issue a new certificate which does not contain such
legend if (i) the shares represented by such certificate are sold pursuant to a
registration statement (including a current prospectus) which has become
effective under the Act, or (ii) the staff of the Securities and Exchange
Commission shall have issued a "no action" letter, reasonably satisfactory to
the Company's counsel, to the effect that such shares may be freely sold and
thereafter traded publicly without registration under the Act, or (iii) the
Company's counsel, or other counsel acceptable to the Company, shall have
rendered an opinion satisfactory to the Company to the effect that such shares
may be freely sold and thereafter publicly traded without registration under the
Act. The Company may, but shall in no event by obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
the Option or the issuance of any Option Shares to comply with any law or
regulation of any governmental authority.
5. TRANSFER OF OPTION SHARES. Option Shares issued upon exercise of this
Option which have not been registered under the Act shall be transferable by a
holder thereof only upon compliance with the conditions in this Paragraph.
Before making any transfer of Option Shares, the holder of the shares shall give
written notice to the Company of the holder's intention to make the transfer,
describing the manner and circumstances of the transfer. If in the opinion of
the Company's counsel, or of other counsel acceptable to the Company, the
proposed transfer may be effected without registration under the Act, the
Company shall so notify the holder and the holder shall be entitled to transfer
such shares as described in the holder's notice to the Company. If such counsel
opines that the transfer may not be made without registration under
2.
<PAGE> 3
the Act, then the Company shall so notify the holder, in which event the holder
shall not be entitled to transfer the shares until (i) the Company notifies the
holder that it is permissible to proceed with the transfer, or (ii) registration
of the shares under the Act has become effective. The Company may issue "stop
transfer" instructions to its transfer agent with respect to any or all of the
Option Shares as it deems necessary to prevent any violation of the Act.
6. TRANSFER OR ENCUMBRANCE OF THIS OPTION PROHIBITED. This Option may
not be transferred or assigned in any manner by the Optionee, except by will or
trust upon the Optionee's death or by operation of law under the laws of descent
and distribution. The same restriction on transfer or assignment shall apply to
any heirs, devisees, beneficiaries or other persons acquiring this Option or an
interest herein under such an instrument or by operation of law. Further, this
Option may not be pledged, hypothecated or otherwise encumbered, by operation of
law or otherwise, nor shall it be subject to execution, attachment or similar
process.
7. TERMINATION OF SERVICE, DEATH, OR DISABILITY.
(a) Except as may be otherwise expressly provided in this
Agreement, this Option shall terminate as follows:
(i) Upon termination of the Optionee's directorship with
the Company for cause;
(ii) At the expiration of six (6) months from the date of
the Optionee's resignation or termination of the Optionee's directorship with
the Company without cause, for any reason other than death; provided, that if
the Optionee dies within such six-month period, subclause
(iii) below shall apply; or (iii) At the expiration of
fifteen (15) months after the date of death of the Optionee.
(b) This Option confers no right upon the Optionee with respect
to the continuation of his directorship (or his position as an officer, director
or other provider of services) with the Company or any parent or subsidiary of
the Company, and shall not interfere with the right of the Company, or any
parent or subsidiary Company, to terminate such relationship(s) at any time in
accordance with law and any agreements then in force.
8. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no rights as a
stockholder with respect to Option Shares until the date of issuance of a stock
certificate for such shares. No adjustment for dividends, or otherwise, except
as provided in Paragraph 9, shall be made if the record date therefor is prior
to the date of exercise of such Option.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of this
Option shall not limit or affect in any way the right or power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Option
Shares or the rights thereof, or the dissolution or liquidation of the Company,
or any sale
3.
<PAGE> 4
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise. However,
(a) If, prior to the Company's delivery of all the Option Shares
subject to this Option, the Company shall effect a subdivision (split) or
combination (reverse split) of shares or other capital readjustment, the payment
of a common stock dividend, or other increase or reduction of the number of
shares of common stock outstanding, without receiving compensation therefor in
money, services or property, then (i) in the event of an increase in the number
of such shares outstanding, the Purchase Price shall be proportionately reduced
and the number of Option Shares then still purchasable shall be proportionately
increased; and (ii) in the event of a reduction in the number of such shares
outstanding, the Purchase Price payable per share shall be proportionately
increased and the number of Option Shares then still purchasable shall be
proportionately reduced.
(b) If while this Option remains outstanding the Company is
reorganized, merged, consolidated or party to a plan of share exchange with
another corporation, or if the Company sells or otherwise disposes of all or
substantially all its property or assets to another corporation, then subject to
the provisions of clause (ii) below, (i) after the effective date of such
reorganization, merger, consolidation, exchange or sale, as the case may be, the
Optionee shall be entitled, upon exercise of this Option, to receive, in lieu of
the Option Shares, the number and class of shares of such stock, other
securities, cash and other property or rights as the holders of shares of the
Company's common stock received pursuant to the terms of the reorganization,
merger, consolidation, exchange or sale and to which he would have been entitled
if, immediately prior to such reorganization, merger, consolidation, exchange or
sale, he had been the holder of record of a number of shares of common stock
equal to the number of Option Shares as to which this Option shall be so
exercised; and (ii) this Option may be canceled by the Board of Directors of the
Company as of the effective date of any such reorganization, merger,
consolidation, exchange or sale; provided that (x) such reorganization, merger,
consolidation, exchange or sale results in a change in control of the Company
rather than a mere change of form or domicile of the Company, (y) written notice
of such cancellation is given to the Optionee or other holder of this Option not
less than 45 days prior to such effective date, and (z) the Options or other
holder shall have the right to exercise the Option in full during such 45-day
period preceding the effective date of such reorganization, merger,
consolidation, exchange or sale.
(c) In case the Company shall determine to offer to the holders
of its common stock rights to subscribe pro rata for any new or additional
shares of common stock, or any securities convertible into common stock, then
the Optionee shall be entitled to participate in such pro rata offering in the
same manner and to the same extent as if this Option had been exercised at the
Purchase Price then in effect and the number of Option Shares then purchasable
upon exercise hereof had been issued to the Optionee pursuant to the terms
hereof.
(d) Except as herein before expressly provided, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be
4.
<PAGE> 5
made with respect to, the Purchase Price or the number of Option Shares then
subject to this Option.
10. NOTIFICATION TO COMPANY OF CERTAIN SALES. The Optionee or other
holder of Option Shares who sells any of such shares shall notify the Company of
such fact in writing within 30 days after the date of sale, if:
(a) At the time the Option Shares were sold, less than ONE year
had elapsed since the date the Option Shares were purchased by the Optionee, and
less than TWO years had elapsed since the Date of Grant of this Option; or
(b) The Optionee was not an employee of the Company (or of a
parent or subsidiary thereof) at all times during the period beginning on the
Date of Grant of this Option and ending on the date three (3) months prior to
the date this Option was exercised to purchase the Option Shares sold.
The failure of the Optionee or other holder of Option Shares to promptly
give such notice to the Company shall entitle the Company to cancel this Option
forthwith, without prior notice to the holder hereof.
11. NOTICES, ETC. Any notice hereunder by the Optionee shall be given to
the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 13114 Evening Creek Drive South, San Diego, California
92128, or at such other address as the Company may designate by notice to the
Optionee. Any notice or other communication to the Optionee hereunder shall be
in writing and shall be deemed duly given or made if mailed or delivered to the
Optionee at the last address as the Optionee may have on file with the Company's
Secretary. This Option shall be governed under and construed in accordance with
the laws of the State of California. This address shall be binding on the
Company and the Optionee and all successors, assigns, heirs, devisees and
personal representatives thereof.
NOTE: This option must match the Control copy maintained by the Company,
in all particulars.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Special Stock
Option as of the day and year first above written.
AMERICAN TECHNOLOGY CORPORATION
By ________________________________________
Dale W. Williams, President
ATTEST:
By ______________________________
Richard Wagner, Secretary
OPTIONEE NAME and STATUS;
Cornelius J. Brosnan, Director
ORIGINAL to Optionee / COPY to Company
6.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
American Technology Corporation
San Diego, California
We hereby consent to the incorporation by reference in this Registration
Statement of our report dated November 5, 1997 relating to the financial
statements of American Technology Corporation, appearing on the Company's
Annual Report on Form 10-KSB for the year ended September 30, 1997.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Denver, Colorado
July 24, 1998
