-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PoK1FslYs2U+HclswqVqLgC0KcTRb8cYBzfPB9/ZARr0E5WYC8x6Is7Yz3MxOPo4 MUXrUQ5teOMhZ3C1kba4Fg== /in/edgar/work/20000814/0001012870-00-004413/0001012870-00-004413.txt : 20000921 0001012870-00-004413.hdr.sgml : 20000921 ACCESSION NUMBER: 0001012870-00-004413 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATG INC CENTRAL INDEX KEY: 0001054000 STANDARD INDUSTRIAL CLASSIFICATION: [4955 ] IRS NUMBER: 942657762 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23781 FILM NUMBER: 699642 BUSINESS ADDRESS: STREET 1: 47375 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104903008 MAIL ADDRESS: STREET 1: 47375 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 0001.txt FORM 10-Q FOR PERIOD ENDED 06/30/2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000. [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______. Commission File Number 0-23781 ATG INC. (Exact name of registrant as specified in its charter) California 94-2657762 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 47375 Fremont Boulevard Fremont, California 94538 (Address of principal executive offices) (510) 490-3008 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days: Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at July 31, 2000 ----- ---------------------------- Common stock, no par value 16,867,678 1 ATG INC. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The actual results of ATG Inc. (the "Company") could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Certain Business Considerations" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in, or incorporated by reference into, this report on Form 10-Q and other documents and reports previously filed or hereafter filed by the Company from time to time with the Securities and Exchange Commission. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements.......................................... 3 Condensed Consolidated Balance Sheets......................... 3 Condensed Consolidated Statements of Operations............... 4 Condensed Consolidated Statements of Cash Flows............... 5 Notes to Condensed Consolidated Financial Statements.......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 22 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................. 22 Item 2. Changes in Securities and Use of Proceeds..................... 23 Item 3. Defaults Upon Senior Securities............................... 24 Item 4. Submission of Matters to a Vote of Security Holders........... 24 Item 5. Other Information............................................. 24 Item 6. Exhibits and Reports on Form 8-K.............................. 25 SIGNATURE..................................................... 26
2 PART I FINANCIAL INFORMATION Item 1. Financial Statements ATG INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, December 31, 2000 1999 ----------- ------------ (Unaudited) Current assets: Cash and cash equivalents $ 4,532 $ 2,776 Accounts receivable, net 22,122 24,488 Prepayments and other current assets 4,467 5,396 --------- --------- Total current assets 31,121 32,660 Property and equipment, net 93,402 80,428 Restricted cash 3,627 16,014 Intangible assets, net 2,174 2,203 Other assets, net 4,976 4,774 --------- --------- Total assets $ 135,300 $ 136,079 ========= ========= Current liabilities: Short-term borrowings $ 23,750 $ 1,721 Current portion of long-term debt and capital leases 4,304 4,259 Accounts payable 10,968 11,649 Accrued liabilities 10,042 15,197 --------- --------- Total current liabilities 49,064 32,826 Long-term debt and capitalized leases, net 36,298 56,595 --------- --------- Total liabilities 85,362 89,421 --------- --------- Common stock 47,029 42,137 Deferred compensation - (32) Retained earnings 2,909 4,553 --------- --------- Total shareholders' equity 49,938 46,658 --------- --------- Total liabilities and shareholders' equity $ 135,300 $ 136,079 ========= =========
3 ATG INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, ---------------------- ----------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenue $11,120 $16,060 $22,223 $29,004 Cost of revenue 7,186 9,808 13,873 17,550 -------- -------- -------- -------- Gross profit 3,934 6,252 8,350 11,454 Sales, general & administrative expenses 4,084 3,166 7,961 6,230 Stock-based compensation expense 2 30 32 60 Restructuring charge 2,400 - 2,400 - -------- -------- -------- -------- Operating income (2,552) 3,056 (2,043) 5,164 Other income 420 - 420 - Net interest income (expense) (618) (233) (1,117) (491) -------- -------- -------- -------- Income before provision for taxes (2,750) 2,823 (2,740) 4,673 Provision (benefit) for income taxes (1,100) 1,129 (1,096) 1,869 -------- -------- -------- -------- Net income (loss) $ (1,650) $ 1,694 $ (1,644) $ 2,804 ======== ======== ======== ======== Net income (loss) per share Basic $ (0.12) $ 0.12 $ (0.12) $ 0.20 Fully diluted $ (0.12) $ 0.12 $ (0.12) $ 0.19 Weighted average shares Basic 14,133 14,048 14,109 14,033 Fully diluted 14,133 14,628 14,109 14,658
4 ATG INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended --------------------------- June 30, June 30, 2000 1999 ---------- -------- Cash flows from operating activities: Net income (loss) $ (1,644) $ 2,804 Adjustments to reconcile net income with cash flow from operations: Depreciation and amortization 1,298 974 Compensation expense for shares issued and options granted 32 60 Change in current assets and liabilities: Accounts receivable 2,366 (1,006) Prepayment and other current assets 929 (1,521) Accounts payable and accrued liabilities (5,836) (378) --------- -------- Net cash used in operating activities (2,855) 933 --------- -------- Cash flows from investing activities: Property and equipment acquisitions (14,272) (9,393) Resticted cash 12,387 - Other assets (174) (1,498) --------- -------- Net cash used in investing activities (2,059) (10,891) --------- -------- Cash flows from financing activities: Borrowing (repayment) of long-term debt and capital leases 3,499 4,653 Short-term borrowing (repayment), net (1,721) 6,250 Proceeds from issuance of common stock 4,892 519 --------- -------- Net cash provided by financing activities 6,670 11,422 --------- -------- Decrease in cash and cash equivalents 1,756 1,464 Cash and cash equivalents, beginning of period 2,776 3,789 --------- -------- Cash and cash equivalents, end of period $ 4,532 $ 5,253 ========= ======== Supplemental cash flow information: Income taxes paid $ 65 $ 1,347 ========= ======== Interest paid, net of capitalized interest $ 1,326 $ 612 ========= ======== Acquisition of equipment with capital leases $ 376 $ 224 ========= ======== Reclassification of machinery and equipment to inventory $ - $ (426) ========= ======== Reclassification of other assets to property and equipment $ - $ 1,045 ========= ======== Reclassification of long-term debt to short-term borrowing $ 23,750 $ - ========= ========
5 ATG INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 (Unaudited) 1. Business of the Company ATG Inc. (the "Company" or "ATG") provides technical personnel and specialized services and products primarily to the U.S. government and the nuclear power industry throughout the United States. Services principally consist of compaction, reduction, decontamination, vitrification and disposal of low-level dry active nuclear, hazardous, and mixed wastes, dewatering and thermal treatment of ion exchange resins and site remediation and construction projects. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 1999 and the Audited Consolidated Financial Statements included therein. The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly, in all material respects, the financial position, results of operations and cash flows for the three months and six months ended June 30, 2000 and 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The results for the three months and six months ended June 30, 2000 are not necessarily indicative of the results for the full fiscal year. 2. Net Income Per Share Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed giving effect to all dilutive potential common shares that were outstanding 6 during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of stock options for all periods. A reconciliation of the numerator and denominator of basic and diluted net income per share is provided as follows (in thousands, except per share data):
Three Months Six Months Ended June 30, Ended June 30, --------------------------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Numerator - Basic and Diluted Income per share Net income ($1,650) $ 1,694 ($1,644) $ 2,804 ======= ======= ======= ======= Denominator - Basic Common shares outstanding 14,133 14,048 14,109 14,033 ------- ------- ------- ------- Basic net income per share ($ 0.12) $ 0.12 ($ 0.12) $ 0.20 ======= ======= ======= ======= Denominator - Diluted Denominator - Basic 14,133 14,048 14,109 14,033 Common stock options -- 580 -- 625 ------- ------- ------- ------- 14,133 14,628 14,109 14,658 ------- ------- ------- ------- Diluted net income per share ($ 0.12) $ 0.12 ($ 0.12) $ 0.19 ======= ======= ======= =======
Diluted net income per share for the three months ended and six months ended June 30, 2000, excludes options and warrants to acquire 961,000 and 974,000 shares of stock which were anti-dilutive. 3. Business Segments The Company manages its operations within two business segments: waste processing, conducted by its Fixed Facilities Group (FFG); and field services, conducted by its Field Engineering Group (FEG). FFG processes customer waste utilizing the Company's thermal and non-thermal technologies. FEG performs remediation, construction and various engineering services for customers under long-term contracts. The Company segregates revenue and gross profit by business segment. Selling, general and administrative expenses are not allocated to the business segments. 7
Segment Information (dollars in millions) -------------------- Three months ended June 30, 2000 FFG FEG Other Total --- --- ----- ----- Revenue......................................... $ 9.0 $2.1 $ -- $11.1 Gross Profit.................................... 3.5 0.4 -- 3.9 Sales, general & administrative expenses........ 4.1 Restructuring Charge............................ 2.4 2.4 Other Income.................................... 0.4 Interest expense, net........................... (0.6) Provision for income taxes...................... (1.1) ------ Net income.................................... (1.7) ====== Segment assets.................................. 94.9 0.7 3.5 $99.1 Expenditures for long-lived assets.............. 6.1 -- -- $ 6.1 ====== Three months ended June 30, 1999 FFG FEG Other Total --- --- ----- ----- Revenue......................................... $12.7 $3.4 $ -- $16.1 Gross Profit.................................... 5.8 0.5 -- 6.3 Sales, general & administrative expenses........ 3.2 Interest expense, net........................... (0.3) Provision for income taxes...................... 1.1 ------ Net income.................................... 1.7 ====== Segment assets.................................. 52.0 0.7 3.4 $56.1 Expenditures for long-lived assets.............. 5.9 -- -- $ 5.9 ====== Six months ended June 30, 2000 FFG FEG Other Total --- --- ----- ----- Revenue......................................... $17.6 $4.6 $ -- $22.2 Gross Profit.................................... 7.4 0.9 -- 8.3 Sales, general & administrative expenses........ 7.9 Restructuring Charge............................ 2.4 2.4 Other Income.................................... 0.4 Interest expense, net........................... (1.1) Provision for income taxes...................... (1.1) ------ Net income.................................... (1.6) ====== Segment assets.................................. 94.9 0.7 3.5 $99.1 Expenditures for long-lived assets.............. 6.1 -- -- $ 6.1 ====== Six months ended June 30, 2000 FFG FEG Other Total --- --- ----- ----- Revenue......................................... $23.0 $6.0 $ -- $29.0 Gross Profit.................................... 10.6 0.9 -- 11.5 Sales, general & administrative expenses........ 6.3 Interest expense, net........................... (0.5) Provision for income taxes...................... 1.9 ------ Net income.................................... $ 2.8 ====== Segment assets.................................. 52.0 0.7 3.4 $56.1 Expenditures for long-lived assets.............. 10.0 -- -- $10.0 ======
8 4. Recent Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities, and is effective for fiscal years beginning after June 15, 2000, as amended by SFAS No. 137. The Company believes that adoption of this pronouncement will have no material impact on the Company's financial position and results of operations. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements, which outlines the basic criteria that must be met to recognize revenue and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the SEC. The Company believes that adopting SAB 101 will not have a material impact on the Company's financial position and results of operations. 5. Commitments and Contingencies In June 1992, the Company entered into a contract with the U.S. Army under which the Company acted as the prime contractor to "surface clear" expended ordnance from a firing range at Fort Irwin, California (the "Fort Irwin Contract"). In March 1997, a piece of ordnance exploded on the premises of a scrap metal dealer (the "Scrap Dealer") in Fontana, California. An employee of the Scrap Dealer died in the accident. Although the Scrap Dealer had purchased expended ordnance and other military scrap metal from a number of military facilities, including Fort Irwin, the Scrap Dealer indicated that the ordnance which exploded was purchased from Fort Irwin. The U.S. Army contended that a subcontractor to the Company on the Fort Irwin Contract (the "Subcontractor") had improperly certified ordnance cleared from the Fort Irwin firing range as free of hazardous and explosive material prior to the sale of such ordnance to the Scrap Dealer. As a result, the U.S. Army terminated the Fort Irwin Contract for default, and demanded repayment from the Company of alleged reprocurement costs totaling $945,000. The Company believes it fully complied with the terms of the Fort Irwin Contract and applicable laws and regulations and challenged the default termination in an action against the U.S. Army filed in the Court of Federal Claims in July 1997. In July 1998, the U.S. Army and the Company settled the matter. The termination for default was rescinded and the Company agreed to no longer bid on surface-clearing work at active U.S. Army firing ranges. In connection with the accident, in March 1998 a wrongful death civil action was filed in San Bernardino County Superior Court against the Subcontractor, a supervisory employee of the Subcontractor, the owners of the premises occupied by the Scrap Dealer, and the Company, seeking damages in excess of $8 million, including exemplary damages of $5 million. A second action was filed at the same time in San Bernardino 9 County Superior Court against the same defendants by three other persons alleging physical injuries and emotional distress caused by the accident. The Company has tendered the defense of each of these actions to its insurance carrier, which is presently handling the matters for the Company, and the Company intends to vigorously contest all of the claims asserted in these actions. The Company believes that it acted properly with respect to the Fort Irwin Contract, and that it should not be liable for the injuries caused by the accident. The Company also intends to seek indemnification from the Subcontractor for the full amount of any costs, damages and liabilities which may be incurred by the Company in connection with or as a result of these lawsuits. The Subcontractor has advised the Company that the Subcontractor's comprehensive general liability insurance policy covers the claims asserted against the Subcontractor, and that the policy coverage limit is $7 million per occurrence. Although the Company believes that all of the claims asserted against the Company are without legal merit, the outcome of these lawsuits is uncertain. Any judgment of liability against the Company, especially to the extent damages exceed or are not covered by insurance or are not recoverable by the Company from the Subcontractor, could have a material adverse effect on the Company's business, financial condition and results of operations. From time to time the Company is a party to litigation or administrative proceedings relating to claims arising from its operations in the normal course of business. Management of the Company, on the advice of counsel, believes that the ultimate resolution of litigation currently pending against the Company is unlikely, either individually or in the aggregate, to have a material adverse effect on the Company's business, financial condition or results of operations. 6. Subsequent Events Restructuring Charge. During the quarter ended June 30, 2000, the Company announced and completed a restructuring plan, which included a workforce reduction of approximately 110 employees. The plan was primarily aimed at improving cost efficiencies and waste processing processes. The Company recorded a total charge of $ 2.4 million which included non cash charges of $800,000 for equipment taken out of service and $500,000 for a write-down of the maintenance supply inventory. The restructuring charge also included charges of $692,000 for severance costs and $408,000 for plant consolidation costs, of which $698,000 remains unpaid at June 30, 2000. 10 ATG INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains forward-looking statements that involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to differ materially from those indicated herein as a result of certain factors, including those set forth under "Certain Business Considerations." The Company undertakes no obligation to publicly release updates or revisions to these statements. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 1999 Annual Report on Form 10-K and Form 10-K/A. General The Company is a radioactive and hazardous waste management company that offers comprehensive treatment solutions for low level radioactive waste (LLRW), low level mixed waste (LLMW) and other waste generated by the Department of Defense (DOD), Department of Energy (DOE) and commercial entities such as nuclear power plants, medical facilities and research institutions. The Company principally derives its revenue from the waste treatment operations of its Fixed Facilities Group and the on-site remediation services of its Field Engineering Group. The Company focuses a significant portion of its business on SAFGLAS(TM) vitrification of LLRW and on its business interests in Tennessee for treating ion exchange resins (IERs) and on LLMW processing. During April 2000, the Company announced the consolidation of its Oak Ridge, Tennessee, operations and a workforce reduction of 110 employees. The announced workforce reduction was completed by the end of the second quarter of fiscal 2000. At the same time, the Company's Q-CEP thermal process is being replaced by a more cost effective non- thermal resin decontamination process. See the section entitled Revenue and Net Income for further discussion. The Company has historically relied upon the integration of proven technologies with the Company's know-how and processes, and has not incurred significant levels of research and development spending. Most of the research and development activities conducted to date have related to the design and construction of its fixed operating facilities, particularly in connection with the Company's SAFGLAS(TM) thermal treatment system. The Company anticipates that its research and development efforts will continue to be moderate and that the costs associated with future research and development will not be material to the Company's results of operations. 11 The Company increasingly pursues multi-year and longer term contracts as a method of achieving more predictable revenue, more consistent utilization of equipment and personnel, and greater leverage of sales and marketing costs. The Company currently focuses on large, multi-year site-specific and term contracts in the areas of LLRW and LLMW treatment, environmental restoration and decontamination and decommissioning of contaminated facilities, and has in recent years been awarded a number of large government term contracts which, in most cases, require several years to complete. Results of Operations Revenue and Net Income. Revenue for the second quarter of fiscal 2000 was $11.1 million, a decrease of 31% from the $16.1 million recorded in the comparable quarter in the prior year. The Company recorded a net loss of $1.7 million or $0.12 per share in the second quarter of fiscal 2000, compared to net income of $1.7 million, or $0.12 per share fully diluted, in the second quarter of fiscal 1999. For the six months ended June 30, 2000 revenue was $22.2 million, a decrease of 23% from the $29.0 million recorded for the same period in 1999. The Company recorded a net loss of $1.6 million, or $0.12 per share for the six months ended June 30, 2000, compared to net income of $2.8 million, or $0.19 per share fully diluted, for the same period in 1999. Excluding the pre-tax $2.4 million restructuring charge related to the Tennessee plant consolidation and workforce reduction and the $420,000 gain from the sale and leaseback of the Company's corporate offices, the Company's net loss from continuing operations would have been approximately $460,000 or $0.03 per share for the second quarter of fiscal 2000 and the six months ended June 30, 2000. The decrease in revenue is principally attributable to a major shortfall in spent ion exchange resin receipts at the Company's facility in Oak Ridge, Tennessee. The facility processes spent ion exchange resins from nuclear power plants, reducing the volume of waste going to final disposal. The processed resin waste is disposed of at the Barnwell waste disposal site in South Carolina. The operator of the Barnwell site offered customers a very deep discount to dispose of the resins without volume reduction, prior to the sale of the Barnwell operations in May 2000. The deep discount program by the Barnwell disposal site was completed by the end of the second quarter of 2000. This is anticpated to be the final quarter in which reveneus are impacted by this deep discounted pricing due to South Caolina legislation that removes the site operator's ability to set pricing and places that authority with a multi-state appointed oversight board. During April 2000, the Company announced the consolidation of its Oak Ridge, Tennessee, operations and a workforce reduction of 110 employees. The announced workforce reduction was completed by the end of the second quarter of fiscal 2000. At the same time, the Company's Q-CEP thermal process is being replaced by a more cost effective non-thermal resin decontamination process. As a result, the Company has recorded a $2.4 million charge in the second quarter of fiscal 2000 related to the plant consolidation and workforce reduction. Gross Profit. Gross profit for the second quarter of fiscal 2000 was $3.9 million or 35% of revenue, compared to $6.3 million or 39% of revenue in the comparable quarter in 12 1999. Gross profit for the six months ended June 30, 2000, was $8.4 million, or 38% of revenue, compared to $11.5 million, or 39% of revenue, for the comparable period in 1999. The gross profit percentage may change from year to year and is related to the varying mixes of business during these periods. Overall gross profit on waste processing services was approximately 39% in the three months and 42% in the six months ended June 30, 2000, compared to 45% in the three months and 46% in the six months ended June 30, 1999. The decrease in the three months ended June 30, 2000, is principally due to LLRW thermal capacity constraints at the Richland, Washington facilities which caused certain waste streams to be processed non- thermally resulting in increased waste disposal charges that unfavorably impacted gross profit. The Company is currently upgrading its Richland LLRW thermal facility and anticipates bringing increased capacity online by the end of the third quarter of fiscal 2000. The decrease in the six months ended June 30, 2000, was further impacted by decreased utilization of the Tennessee fixed facilities as discussed previously under the section entitled Revenue and Net Income. The fixed facilities operations generally have a larger percentage of fixed costs versus variable costs, so increases in utilization favorably impact gross profit while decreases in utilization unfavorably impact gross profit. Overall gross profit on field service projects was approximately 21% in both the three months and the six months ended June 30, 2000, compared to 15% in the three months and the six months ended June 30, 1999. The principal reason for the difference is the mix of projects and stage of completion as many projects were utilizing less subcontractor services in the current periods and the Company's margin is typically higher for contract services provided by the Company as compared to utilizing subcontractor services. Sales, General and Administrative Expenses. Sales, general and administrative expenses for the second quarter of fiscal 2000 were $4.1 million or 37% of revenue, compared to $3.2 million or 20% of revenue for the comparable period in 1999. These expenses for the six months ended June 30, 2000 were $8.0 million or 36% of revenue, compared to $6.2 million or 21% of revenue for the comparable period in 1999. The increase in spending from year to year is principally due to an increase in infrastructure at the Company's Richland facility. The increased infrastructure is required for the Company to meet its contractual obligations regarding the start-up of its mixed waste processing operations. The overall increase in sales, general and administrative expenses as a percentage of revenue is principally due to decreased utilization of the Tennessee fixed facilities as discussed previously under the section entitled Revenue and Net Income. Restructuring Charge. During April 2000, the Company announced the consolidation of its Oak Ridge, Tennessee, operations and a workforce reduction of 110 employees along with replacing its Q-CEP thermal process with a more cost effective non-thermal resin decontamination process. The announced workforce reduction was completed by the end of the second quarter of fiscal 2000 resulting in the Company recording a $2.4 million 13 charge in the second quarter of fiscal 2000 related to the plant consolidation and workforce reduction. See the section entitled Revenue and Net Income for further discussion. Other Income. During the second quarter of fiscal 2000, the Company completed the sale and leaseback of its corporate offices in Fremont, California, resulting in a pre-tax gain of $1.7 million. The gain is being recognized in equal increments of $420,000 each over the next four quarters beginning in the second quarter of fiscal 2000. Provision for Income Taxes. The Company provides for income taxes during interim periods at an estimated combined Federal and state annual rate to be expected for the full year. The actual rate for 1999 was approximately 40% and the Company and is providing for income taxes at this same rate. Liquidity and Capital Resources Total cash and cash equivalents were $4.5 million at June 30, 2000, an increase of $1.7 million from December 31, 1999. The working capital deficit of the Company was approximately $16.2 million at June 30, 2000, a decrease of $19.5 million from working capital of $3.3 million at December 31, 1999. The working capital excludes restricted cash of $3.6 million and accounts payable of $1.7 million at June 30, 2000, and restricted cash of $16.0 million and accounts payable of $3.5 million at December 31, 1999, that are exclusively for the construction of the Company's Low Level Mixed Waste facility. The decrease in working capital is due to the reclassification of $23.75 million of long-term debt to short-term borrowing pursuant to the lender's credit facility forbearance and consent agreement with the Company, dated June 1, 2000. See the section entitled Credit Facility for further discussion. During June and July 2000, the Company completed a $5.5 million private placement of 2.75 million shares of common stock at $2 per share. On June 30, 2000, the Company completed the first tranche of the private placement by issuing 2.62 million shares of common stock for an aggregate price of $5.24 million. On July 7, 2000, the Company completed the second tranche of the private placement, issuing 130,000 shares of common stock for an aggregate puchase price of $260,000. See Part II, Item 2, "Changes in Securities and Use of Proceeds." The Company received a total of approximately $5.1 million in net proceeds from this private placement. Significant outlays of cash have been needed to acquire property and equipment and to secure or expand regulatory licenses, permits and approvals, primarily for improvements to the Company's LLRW facility and construction of the LLMW facility in Richland, Washington, and for improvements and the restructuring of its fixed facilities in Oak Ridge, Tennessee. Property and equipment acquisitions totaled $14.3 million for the six months ended June 30, 2000. In addition, the Company used approximately $2.7 million of cash during the six months ended June 30, 2000, relating to the waste acquisition 14 accrued liability associated with its 1999 purchase accounting for its acquisition of the assets of Molten Metals Technology, Inc. (the "MMT Assets"). Credit Facility. The Company has a credit facility with a consortium of banks (the Banks). The credit facility agreement requires the Company to comply with certain covenants, including capital asset acquisition limits, limits on additional debt, minimum levels of tangible net worth, dividend payment restrictions and maintenance of certain financial ratios. The credit facility was temporarily increased to $24 million from March 27, 2000 through June 30, 2000, and reverts back to $18 million subsequent to June 30, 2000. At March 31, 2000 and June 30, 2000 the Company was in violation of the revised financial ratios under the credit facility. Pursuant to a forbearance and consent agreement dated as of June 1, 2000, the lenders agreed to forbear in the exercise of any of their rights or remedies with respect to March 31, 2000 covenant defaults until no later than June 30, 2000. This forbearance expired June 30, 2000. On June 30, 2000, the Company failed to make a required payment of principal in the approximate amount of $5,750,000 as a mandatory paydown under the revolving credit facility, to bring the total borrowings under that facility to the $18 million limit. As a result of these events, the Banks could elect (but to date have not done so) to declare all outstanding loans under the credit facility due and payable, which would have a material adverse effect on the Company's business and financial condition. The Company is in negotiations with the Banks to obtain a continuation of the forbearance in respect to these violations as of June 30, 2000: however, there is no assurance that these negotiations will be successful. Further, management believes that the Company will not be able, on a prospective basis, to comply with the financial covenants in the agreements governing the credit facility without significant accommodations from the Banks. The Company is negotiating with the lenders to modify the financial covenants and the time frame for the mandatory paydown. The Company is seeking alternative forms of financing in order to make the mandatory paydown. The Company is also reviewing its business plan with its financial advisors and lenders with the objective of seeking appropriate accommodations and to ascertain what actions can be taken to enhance liquidity and thereby generate cash to assist in paying the company's debt service. The Company is also evaluating potential changes in its capital structure and additional financial resources. It cannot be assured that the Company will be successful in any of the foregoing endeavors. If the Company is not successful in restructuring or refinancing its indebtedness or otherwise improving its liquidity and ability to service its indebtedness, the Company may be required to alter its business plans. There is no assurance that the Company can accomplish these objectives on favorable terms or in a timely manner. The Company utilized a significant amount of cash and line of credit borrowings to finance acquisition of property and equipment, the waste acquisition accrued liability of the MMT Assets, and normal operations of the Company. As previously discussed, the Company is currently reviewing additional sources of potential working capital. The Company believes that its current cash and cash equivalents, together with its credit facility (assuming the Banks continue their forbearance), cash generated from operations, and additional sources of working capital to which it has access will be sufficient to meet the Company's working capital requirements for the next 12 months. Depending on its rate of growth and profitability, the Company may require additional equity or debt financing to meet its future working capital or capital expenditure needs. There can be no assurance that such additional financing will be available or, if available, that such financing can be obtained on terms satisfactory to the Company. In the event that the Company is not successful in obtaining 15 additional sources of working capital and financing on terms satisfactory to the Company, then the Company's business, financial condition, and results of operations could be materially adversely affected. Certain Business Considerations The Company's business is subject to the following risks and uncertainties, in addition to those described elsewhere. Dependence on Government Licenses, Permits and Approvals The radioactive and hazardous waste management industry is highly regulated. The Company is required to have federal, state and local governmental licenses, permits and approvals for its waste treatment facilities and services. The Company must complete its thermal demonstration testing to receive approval to become fully operational at its LLMW processing facility in Richland, Washington. There can be no assurance as to the successful outcome of any pending application or demonstration testing by the Company for any such license, permit or approval, and the Company's existing licenses, permits and approvals are subject to revocation or modification under a variety of circumstances. Failure to obtain timely, or to comply with the conditions of, applicable licenses, permits or approvals could adversely affect the Company's business, financial condition and results of operations. As its business expands and as it introduces new technologies, the Company will be required to obtain additional operating licenses, permits or approvals. It may be required to obtain additional operating licenses, permits or approvals if new environmental legislation or regulations are enacted or promulgated or existing legislation or regulations are amended, re-interpreted or enforced differently than in the past. Any new requirements which raise compliance standards may require the Company to modify its waste treatment technologies to conform to more stringent regulatory requirements. There can be no assurance that the Company will be able to continue to comply with all of the environmental and other regulatory requirements applicable to its business. 16 No Assurance of Successful Development, Commercialization or Acceptance of Technologies The Company is in the process of developing, refining and implementing its technologies for the treatment of LLRW, LLMW and other wastes. The Company's future growth will be dependent in part upon the acceptance and implementation of these technologies, particularly its recently developed vitrification technologies for the thermal treatment of LLRW and LLMW and its recently acquired technologies for treatment of IER waste streams. There can be no assurance that successful development of all these technologies will occur in the near future, or even if successfully developed, that the Company will be able to successfully commercialize such technologies. The successful commercialization of the Company's vitrification technologies may depend in part on ongoing comparisons with other competing technologies and more traditional treatment, storage and disposal alternatives, as well as the continuing high cost and limited availability of commercial disposal options. There can be no assurance that the Company's vitrification and related technologies will prove to be commercially viable or cost-effective, or if commercially viable and cost- effective, that the Company will be successful in timely securing the requisite regulatory licenses, permits and approvals for such technologies or that such technologies will be selected for use in future waste treatment projects. The Company's LLMW thermal treatment contract with the DOE's-Hanford Reservation requires the Company to obtain all of the required licenses, permits and approvals for, and to build and place in operation, its LLMW treatment facility by November 10, 2000. The Company's inability to develop, commercialize or secure the requisite licenses, permits and approvals for its waste treatment technologies on a timely basis could have a material adverse effect on the Company's business, financial condition and results of operations. Dependence on Environmental Laws and Regulations A substantial portion of the Company's revenue is generated as a result of requirements arising under federal and state laws, regulations and programs related to protection of the environment. Environmental laws and regulations are, and will continue to be, a principal factor affecting demand for the services offered by the Company. The level of enforcement activities by federal, state and local environmental protection agencies and changes in such laws and regulations also affect the demand for such services. If the requirements of compliance with environmental laws and regulations were to be modified in the future, particularly those relating to the transportation, treatment, storage or disposal of LLRW, LLMW or other wastes, the demand for the Company's services, and its business, financial condition and results of operations, could be materially adversely affected. 17 Dependence on Federal Government; Limits on Government Spending; Government Contracting The Company expects that the percentage of its revenue attributable to federal government contracts will continue to be substantial for the foreseeable future. The Company's government contracts generally are subject to cancellation, delay or modification at the sole option of the government at any time, to annual funding limitations and public sector budget constraints and, in many cases, to actual delivery orders being released. The Company is dependent on government appropriations to fund many of its contracts. Efforts to reduce the federal budget deficit could adversely affect the availability and timing of government funding for the clean-up of DOE, DOD and other federal government sites. The failure by the government to fund future restoration of such sites could have an adverse effect on the Company's business, financial condition and results of operations. As a provider of services to federal and other government agencies, the Company also faces risks associated with government contracting, which include substantial fines and penalties for, among other matters, failure to follow procurement integrity and bidding rules and employing improper billing practices or otherwise failing to follow prescribed cost accounting standards. Government contracting requirements are complex, highly technical and subject to varying interpretations. As a result of its government contracting business, the Company has been, and expects to be in the future, the subject of audits, and may in the future be subject to investigations, by government agencies. Failure to comply with the terms of one or more of its government contracts could result in damage to the Company's business reputation and the Company's suspension or disqualification from future government contract projects for a significant period of time. The fines and penalties which could result from noncompliance with applicable standards and regulations, or the Company's suspension or disqualification, could have a material adverse effect on the Company's business, financial condition and results of operations. Need for Additional Capital The Company believes that it will need additional financing for working capital and capital expenditure requirements in order to implement its long-term business plan. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources". The Company successfully obtained approximately $27 million to finance the construction of its LLMW facility in Richland, Washington through the issuance of tax-exempt Solid Waste Revenue Bonds. There can be no assurance that the Company will successfully complete construction of the facility with the capital financing that it has raised or that if additional capital is required that it will be obtained on terms that are advantageous to the Company. If the Company is not 18 successful in raising additional capital, it will need to curtail or scale back its planned expansion, which could materially adversely affect the Company's business, financial condition and results of operations. Seasonality and Fluctuation in Quarterly Results The Company's revenue is dependent on its contract backlog and the timing and performance requirements of each contract. Revenue in the first and second quarters has historically been lower than in the third and fourth quarters, as the Company's customers have tended to ship waste during the months in which transportation is less likely to be adversely affected by weather conditions. The Company's revenue is also affected by the timing of its clients' planned remediation activities and need for waste treatment services, which generally increase during the third and fourth quarters. Due to this variation in demand, the Company's quarterly results fluctuate. Accordingly, specific quarterly or interim results should not be considered indicative of results to be expected for any future quarter or for the full year. Due to the foregoing factors, it is possible that in future quarters, the Company's operating results will not meet the expectations of securities analysts and investors. In such event, the price of the Common Stock could be materially adversely affected. Management of Growth Since 1994, the Company has experienced significant growth, attributable in large part to an increase in the number and size of contracts awarded. In December 1998, the Company acquired new business lines that contributed to increased growth in 1999. Also in 1999, the Company began construction of its new LLMW facility that is anticipated to contribute to increased growth in 2000 and beyond. The Company is currently pursuing a business plan intended to further expand its business domestically and internationally. The Company's historical growth has placed, and any future growth may place, significant demands on its operational, managerial and financial resources. There can be no assurance that the Company's current management and systems will be adequate to address any future expansion of the Company's business. In such event, any inability to manage the Company's growth effectively could have a material adverse effect on the Company's business, financial condition and results of operations. Equipment Performance; Safety and License Violations The Company's ability to perform under current waste treatment contracts and to successfully bid for future contracts is dependent upon the consistent performance of its waste treatment systems at its fixed facilities in conformity with safety and other requirements of the licenses under which the Company operates. The Company's fixed facilities are subject to frequent routine inspections by the regulatory authorities issuing such licenses. The Company's SAFGLAS(TM) system was shutdown from September 5 to September 28, 1999 due to an equipment failure, and the Company has experienced other shutdowns of its facilities for short periods of time in the past. In the event that any of 19 the Company's principal waste treatment systems were to be shut down for any appreciable period of time, either due to equipment breakdown or as the result of regulatory action in response to an alleged safety or other violation of the terms of the licenses under which the Company operates, the Company's business, financial condition and results of operations could be materially adversely affected. Competition In general, the market for radioactive and hazardous waste management services is highly competitive. The Company faces competition in its principal current and planned business lines from both established domestic companies and foreign companies attempting to introduce European waste treatment technologies into the United States. Many of the Company's competitors have greater financial, managerial, technical and marketing resources than the Company. To the extent that competitors possess or develop superior or more cost-effective waste treatment solutions or field service capabilities, or otherwise possess or acquire competitive advantages compared to the Company, the Company's ability to compete effectively could be materially adversely affected. Any increase in the number of licensed commercial LLRW and/or LLMW treatment facilities or disposal sites in the United States or any decrease in the treatment or disposal fees charged by such facilities or sites could increase the competition faced by the Company or reduce the competitive advantage of certain of the Company's treatment technologies. International Expansion A key component of the Company's long-term business plan is to expand its business into selected Pacific Rim markets. There can be no assurance that the Company or its strategic alliance partners will be able to market its technologies or services successfully in foreign markets. In addition, there are certain risks inherent in foreign operations, including general economic conditions in each country, varying regulations applicable to the Company's business, seasonal reductions in business activities, fluctuations in foreign currencies or the U.S. Dollar, expropriation, nationalization, war, insurrection, terrorism and other political risks, the overlap of different tax structures, risks of increases in taxes, tariffs and other governmental fees and involuntary renegotiation of contracts with foreign governments. In particular, recent economic instability in certain Pacific Rim countries could substantially impede the Company's targeted expansion into that region. In such event, the Company's business, financial condition and results of operations could be materially adversely affected. There can be no assurance that laws or administrative practices relating to taxation, foreign exchange or other matters of foreign countries within which the Company operates or will operate will not change. Any such change could have a material adverse effect on the Company's business, financial condition and results of operation. 20 Dependence on Key Personnel The Company's future success depends on its continuing ability to attract, retain and motivate highly qualified managerial, technical and marketing personnel. The Company is highly dependent upon the continuing contributions of its key managerial, technical and marketing personnel. The Company's employees may voluntarily terminate their employment with the Company at any time, and competition for qualified technical personnel, in particular, is intense. The loss of the services of any of the Company's managerial, technical or marketing personnel could materially adversely affect the Company's business, financial condition and results of operations. Focus on Larger Projects The Company increasingly pursues large, multi-year contracts as a method of achieving more predictable revenue, more consistent utilization of equipment and personnel, and greater leverage of sales and marketing costs. These larger projects impose significant risks if actual costs are higher than those estimated at the time of bid. A loss on one or more of such larger contracts could have a material adverse effect on the business, financial condition and results of operations of the Company. In addition, failure to obtain, or delay in obtaining, targeted large, multi-year contracts could result in significantly less revenue to the Company than anticipated. 21 Item 3. Quantitative and Qualitative Disclosures about Market Risk At June 30, 2000, there was no material change to the disclosures made under Item 7A of the Company's 1999 annual report on Form 10-K and 10-K/A. PART II OTHER INFORMATION Item 1. Legal Proceedings In June 1992, the Company entered into a contract with the U.S. Army under which the Company acted as the prime contractor to "surface clear" expended ordnance from a firing range at Fort Irwin, California (the "Fort Irwin Contract"). In March 1997, a piece of ordnance exploded on the premises of a scrap metal dealer (the "Scrap Dealer") in Fontana, California. An employee of the Scrap Dealer died in the accident. Although the Scrap Dealer had purchased expended ordnance and other military scrap metal from a number of military facilities, including Fort Irwin, the Scrap Dealer indicated that the ordnance which exploded was purchased from Fort Irwin. The U.S. Army contended that a subcontractor to the Company on the Fort Irwin Contract (the "Subcontractor") had improperly certified ordnance cleared from the Fort Irwin firing range as free of hazardous and explosive material prior to the sale of such ordnance to the Scrap Dealer. As a result, the U.S. Army terminated the Fort Irwin Contract for default, and demanded repayment from the Company of alleged reprocurement costs totaling $945,000. The Company believes it fully complied with the terms of the Fort Irwin Contract and applicable laws and regulations and challenged the default termination in an action against the U.S. Army filed in the Court of Federal Claims in July 1997. In July 1998, the U.S. Army and the Company settled the matter. The termination for default was rescinded and the Company agreed to no longer bid on surface-clearing work at active U.S. Army firing ranges. In connection with the accident, in March 1998 a wrongful death civil action was filed in San Bernardino County Superior Court against the Subcontractor, a supervisory employee of the Subcontractor, the owners of the premises occupied by the Scrap Dealer, and the Company, seeking damages in excess of $8 million, including exemplary damages of $5 million. A second action was filed at the same time in San Bernardino County Superior Court against the same defendants by three other persons alleging physical injuries and emotional distress caused by the accident. The Company has tendered the defense of each of these actions to its insurance carrier, which is presently handling the matters for the Company, and the Company intends to vigorously contest all 22 of the claims asserted in these actions. The Company believes that it acted properly with respect to the Fort Irwin Contract, and that it should not be liable for the injuries caused by the accident. The Company also intends to seek indemnification from the Subcontractor for the full amount of any costs, damages and liabilities which may be incurred by the Company in connection with or as a result of these lawsuits. The Subcontractor has advised the Company that the Subcontractor's comprehensive general liability insurance policy covers the claims asserted against the Subcontractor, and that the policy coverage limit is $7 million per occurrence. Although the Company believes that all of the claims asserted against the Company are without legal merit, the outcome of these lawsuits is uncertain. Any judgment of liability against the Company, especially to the extent damages exceed or are not covered by insurance or are not recoverable by the Company from the Subcontractor, could have a material adverse effect on the Company's business, financial condition and results of operations. From time to time the Company is a party to litigation or administrative proceedings relating to claims arising from its operations in the normal course of business. Management of the Company, on the advice of counsel, believes that the ultimate resolution of litigation currently pending against the Company is unlikely, either individually or in the aggregate, to have a material adverse effect on the Company's business, financial condition or results of operations. Item 2. Changes in Securities and Use of Proceeds During June and July 2000, the Company completed a $5.5 million private placement of 2.75 million shares of common stock at $2 per share. On June 30, 2000, the Company completed the first tranche of the private placement by issuing 2.62 million shares of common stock for an aggregate price of $5.24 million. On July 7, 2000, the Company completed the second tranche of the private placement, issuing 130,000 shares of common stock for an aggregate purchase price of $260,000. In connection with the private placement, the Company issued to the placement agent or its designees warrants to purchase a total of 192,500 shares of common stock. The warrants are exercisable at a price of $2.75 per share, subject to adjustment for certain events, and expire on June 30, 2005. The Company believes that the issuances of common stock and warrants described above were exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof and Rule 506 of Regulation D thereunder, and by virtue of Section 4(6) thereof. Private investors were contacted without any general advertising or general solicitation. Each investor represented to the Company that it was an accredited investor and was acquiring the securities for investment and without a view to distribution. The securities were issued subject to legend condition. Investors were provided with disclosure about the Company and were given the opportunity to ask questions of and receive answers from the Company prior to investing. 23 Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information None. 24 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 2.1 Final bankruptcy court bid dated November 13, 1998** 2.2 Form of letter agreement dated December 1, 1998, among the purchasers and the Trustee** 3.1 Articles of Incorporation of the Company * 3.2 Bylaws of the Company * 3.3 Certificate of Amendment of Articles of Incorporation * 4.1 Specimen Common Stock Certificate * 10.43 Credit and Reimbursement Agreement, dated November 1, 1999, among ATG Inc., Sanwa Bank California and Keybank National Association *** 10.44 Loan Agreement, dated November 1, 1999, between Port of Benton Economic Development Corporation and ATG Inc. *** 10.45 Form of First Amendment to Credit and Reimbursement Agreement dated as of March 27, 2000 among ATG Inc., Sanwa Bank and Keybank National Association 10.46 Form of Forbearance and Consent Agreement to Credit and Reimbursement Agreement dated as of June 1, 2000 among ATG Inc., Sanwa Bank and Keybank National Association 10.47 Form of Common Stock Purchase Agreement dated June __, 2000 between ATG Inc. and each of the subscribers named therein 10.48 Form of Common Stock Placement Agreement dated as of June __, 2000 between ATG Inc. and Taglich Brothers, Inc. 10.49 Form of Common Stock Purchase Warrant dated as of June __, 2000 issued by ATG Inc. to Taglich Brothers, Inc. or designees of Taglich Brothers, Inc. 27.1 Financial Data Schedule (b) Reports on Form 8-K None. ______ (*) Incorporated by reference to exhibits filed with the Registrant's Registration Statement on Form S-1 (No. 333-46107) which became effective May 6, 1998. (**) Incorporated by reference to exhibits filed with the Registrant's Form 8-K dated December 1, 1998. (***) Incorporated by reference to exhibits filed with the Registrant's Form 8-K dated February 22, 2000. 25 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ATG INC. Date: August 14, 2000 By: /s/ Danyal F. Mutman -------------------- Danyal F. Mutman Vice President - Chief Financial Officer (Principal Financial and Chief Accounting Officer) 26 EXHIBIT INDEX Exhibit Number Exhibit Description -------------- ------------------- 10.45 Form of First Amendment to Credit and Reimbursement Agreement dated as of March 27, 2000 among ATG Inc., Sanwa Bank and Keybank National Association 10.46 Form of Forbearance and Consent Agreement to Credit and Reimbursement Agreement dated as of June 1, 2000 among ATG Inc., Sanwa Bank and Keybank National Association 10.47 Form of Common Stock Purchase Agreement dated June __, 2000 between ATG Inc. and each of the subscribers named therein 10.48 Form of Common Stock Placement Agreement dated as of June __, 2000 between ATG Inc. and Taglich Brothers, Inc. 10.49 Form of Common Stock Purchase Warrant dated as of June __, 2000 issued by ATG Inc. to Taglich Brothers, Inc. or designees of Taglich Brothers, Inc. 27.1 Financial Data Schedule 27 EX-10.45 2 0002.txt FORM OF FIRST AM. TO CREDIT & REIMBURS. EXHIBIT 10.45 FIRST AMENDMENT TO CREDIT AND REIMBURSEMENT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AND REIMBURSEMENT AGREEMENT (the "Amendment") is made and dated as of the 27th day of March, 2000, by and among SANWA BANK CALIFORNIA ("Sanwa"), as agent (the "Agent") for the Lenders referenced below, KEYBANK NATIONAL ASSOCIATION, as Bond L/C Issuing Bank for the Bond Letter of Credit referred to below (in such capacity, the "Bond L/C Issuing Bank") and as co-agent (the "Co-Agent"), Sanwa Bank California, as issuing bank for the Standard Letters of Credit referred to below (the "Standard L/C Issuing Bank"), the Lenders from time to time party hereto, and ATG INC., a California corporation (the "Company"). RECITALS A. The Company, the Agent, the Lenders, the Bond L/C Issuing Bank and the Standard L/C Issuing Bank entered into a Credit and Reimbursement Agreement dated as of November 1, 1999 (as amended, modified, or waived, the "Agreement") pursuant to which the Lenders agreed to extend credit to the Company on the terms and conditions set forth therein. B. The Company has requested the Agent, the Lenders, the Bond L/C Issuing Bank and the Standard L/C Issuing Bank to: (1) Waive the Events of Default that have occurred as of December 31, 1999 under the Agreement by reason of (1) the failure of the Company to have a Current Ratio (as such term and all other capitalized terms used herein and not otherwise defined are defined in the Agreement) of at least 1.10:1.00 and (2) the failure of the Company to have a Net Funded Debt/EBITDA Ratio of not more than 3.50:1.00. (2) Consent to the sale of its headquarters building in Fremont, California in a sale-leaseback transaction prohibited by Paragraph 12(h) of the --------------- Agreement and to the incurrence by the Company of up to $15,000,000 of Subordinated Debt not otherwise permitted by Paragraph 12(b) of the Agreement. --------------- (3) Temporarily increase the Revolving Credit Limit by $6,000,000. (4) Amend the Agreement in certain other respects. C. The Agent, the Lenders, the Bond L/C Issuing Bank and the Standard L/C Issuing Bank have agreed to provide such waivers, consents, loans and amendments on the terms and conditions contained in this Amendment. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT 1. Inducement Representations by the Company and Waivers and --------------------------------------------------------- Consents. - -------- 1(a) Inducement Representations. In addition to the other -------------------------- representations and warranties contained in this Amendment and the other terms and provision hereof, to induce the other parties hereto to grant the waivers and consents requested by the Company and to enter into this Amendment, the Company hereby represents and warrants as of the Amendment Effective Date (as such term is defined in Paragraph 3 below): ----------- (1) As of December 31, 1999, its Current Ratio was 0.71:1.00. (2) As of December 31, 1999, its Net Funded Debt/EBITDA Ratio was 4.00:1.00. (3) Except for the breach of the covenants contained in Paragraph 12(m) of the Agreement as described in the foregoing clauses (1) --------------- and (2) (the "Existing Defaults"), no Events of Default or Potential Defaults have occurred under the Agreement. (4) The Company (i) has fully and accurately disclosed to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank, and the Lenders the terms and conditions on which the Company intends to sell its headquarters building in Fremont, CA and (ii) upon sale of such building, will cause to be repaid in full all Indebtedness secured, in whole or in part, by a Lien thereon and all such Liens will be terminated. (5) The Company (i) has fully and accurately disclosed to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank, and the Lenders the terms on which the Company intends to incur Subordinated Debt and (ii) will not incur Subordinated Debt on terms materially less advantageous to the Lenders than the terms contained in the draft commitment letter to the Company dated as of February 24, 2000 from Key Mezzanine, a copy of which has been delivered to each of the Lenders. 1(b) Waiver. As of the Amendment Effective Date and subject ------ to the terms and conditions of this Amendment, the Agent, the Lenders, the Bond L/C Issuing Bank and the Standard L/C Issuing Bank waive the Existing Defaults. 1(c) Consents. The Agent, the Lenders, the Bond L/C Issuing -------- Bank and the Standard L/C Issuing Bank (1) consent to the sale of the Company's headquarters building in Fremont, CA substantially on the terms and conditions described in Paragraph 1(a)(4) above and (2) consent to the incurrence of ----------------- Subordinated Debt by the Company in an amount not less than $12,500,000 and not greater than $15,000,000 substantially on the terms and conditions described in Paragraph 1(a)(5) above ----------------- and otherwise on terms and conditions satisfactory to the Agent. 2. Amendments. As of the Amendment Effective Date, the ---------- Agreement is amended as follows: 2(a) Principal Repayment of Revolving Loans from Proceeds of ------------------------------------------------------- Subordinated Debt. To require the Company to repay outstanding Revolving Loans - ----------------- from the proceeds of Subordinated Debt, Paragraph 2(b) is amended to read as -------------- follows : "2(b) Principal Repayment of Revolving Loans. The --------------------------------------- Company shall (i) finally repay the principal amount of each Revolving Loan on the Revolving Loan Maturity Date and (ii) subject to reborrowing in accordance with the other terms and conditions of this Agreement, upon receipt of Net Proceeds of Subordinated Debt, repay outstanding Revolving Loans in an amount equal to such Net Proceeds." 2(b) Conditions to Disbursement of Richland Advances. To add ------------------------------------------------ certain conditions precedent to the disbursement of the Richland Facility Reserved Amount, the introductory paragraph to Paragraph 9(c) is amended to read -------------- as follows: "9(c) Conditions to disbursements of funds from ----------------------------------------- Disbursement Account. As conditions precedent to -------------------- disbursement (i) from the Disbursement Account established in Section 11(m) hereof and (ii) of Richland Facility Advances to or for the account of the Company, unless waived by the Lenders, each of the following conditions shall have been fulfilled to the Agent's satisfaction:" 2(c) Accounts Receivable Aging. To require the Company to --------------------------- deliver accounts aging reports, Paragraph 11(a) of the Agreement is amended to --------------- replace the period (.) at the end of Paragraph 11(a)(5) with a semicolon (;) and ------------------ to insert thereafter a new Paragraph 11(a)(6) to read as follows: ------------------ "(6) Within twenty (20) days after the end of each fiscal quarter, an accounts receivable aging report (in form and substance satisfactory to the Agent) for the accounts receivable of the Company and its Subsidiaries as of the end of such fiscal quarter." 2(d) Capital Expenditures. To increase the Capital -------------------- Expenditures that the Company may make in fiscal year 2000, to provide for yearly adjustments thereafter and to require delivery of periodic budgets therefor, Paragraph 12(i) of the Agreement is amended to read as follows: --------------- "12(i) Capital Expenditures. Make or commit to make -------------------- Capital Expenditures in any year in excess of the amount budgeted therefor as set forth in a budget (which shall be in form and substance satisfactory to the Agent) which the Company shall deliver to the Agent at least ninety (90) days prior to the beginning of such fiscal year but, in any event, not in excess of, (i) in fiscal year 2000, (a) $7,000,000 plus (b) the aggregate amount of Richland Facility Advances made under this Agreement plus (c) the principal amount of the proceeds of the Bonds disbursed to the Company pursuant to the Indenture during such year or (ii) in any fiscal year thereafter, an amount acceptable to the Required Lenders." 2(e) Financial Covenants. To modify the financial ------------------- covenants relating to the Net Funded Debt/EBITDA Ratio, Debt Service Ratio, and Current Ratio consistent with the waivers contained in this Amendment, Paragraphs 12 of the Agreement are amended to read as follows: - ------------- "12(m) Financial Covenants. On a consolidated basis, ------------------- permit (or incur or agree to incur Indebtedness or become liable in respect of any Contractual Obligation that is reasonably likely to result in the Company, on a consolidated basis, permitting): "(1) As at the end of any fiscal quarter, the Net Funded Debt/ EBITDA Ratio to exceed (i) as of March 31, 2000, 4.50: 1.00; (ii) as of June 30, 2000, 4.00:1.00; (iii) as of September 30, 2000, 3.50:1.00; (iv) as of December 31, 2000. March 31, 2001, June 30, 2001, and September 30, 2001, 3.00:1.00; and (v) as of December 31, 2001 and thereafter, 2.50:1.00. "(2) As of the end of any fiscal quarter, the Debt Service Ratio to be less than 1.25: 1.00. "(3) As of the end of any fiscal quarter, the Current Ratio to be less than (i) as of March 31, 2000, 0.70:1.00; (ii) as of June 30, 2000 and September 30, 2000, 1.10:1.00; and (iii) thereafter, 1.20:1.00. "(4) At any time, the Tangible Net Worth to be less than the Company's Tangible Net Worth as at December 31, 1999 plus, as of the end of each fiscal year thereafter, Net Profit after Tax plus an amount equal to Net Proceeds of Equity Securities Issuances." 2(f) Definitions. To (1) temporarily reduce Obligations ----------- incurred under the Revolving Credit Limit that are included in the definition of "Current Liabilities," (2) exclude Subordinated Debt from the definition of "Net Funded Debt," (3) temporarily increase the amount defined as the "Revolving Credit Limit," and (5) add definitions of "Richland Facility Advance," "Richland Facility Reserved Amount, " such definitions are amended or added, as appropriate, to Paragraph 16 of the Agreement to read as follows: ------------ "Current Liabilities shall mean, as of any date of ------------------- determination, the total liabilities of the Company and its Subsidiaries, determined on a consolidated basis, which would be shown as current liabilities on a balance sheet prepared in accordance with GAAP, plus the principal amount of outstanding Revolving Loans less (a) until and including September 30, 2000, $6,000,000; (b) from October 1, 2000 through and including March 31, 2001, $4,000,000; (c) from April 1, 2001 through and including September 30, 2001, $2,000,000; and (d) thereafter, $0.00." "Net Funded Debt' shall mean, as of any date, (i) the sum of --------------- Funded Debt and the face amount of Standard Letters of Credit Outstanding minus (ii) Subordinated Debt minus (iii) the amount then on deposit in the Disbursement Account, the Sinking Fund Account, and the Excess Cash Account." "'Revolving Credit Limit' shall mean: ---------------------- "(i) until but not including June 30, 2000, $24,000,000 and, thereafter, $18,000.000; minus "(ii) on receipt, an amount equal to 100% of the Net Proceeds of Subordinated Debt received by the Company and its Subsidiaries; provided, however, in no event shall the Revolving Credit Limit be reduced below $18,000,000 by reason of such Net Proceeds. "(iii) any amount by which the Revolving Credit Limit may be reduced in accordance with the written request of the Company delivered to the Agent not less than five (5) Business Days prior to the proposed effectiveness of such reduction; provided, that any such reduction shall be in a minimum amount of $500,000 and in increments of $500,000 in excess thereof." "'Richland Facility Advance' shall mean a Revolving Loan ------------------------- requested by the Company to complete the Project. Revolving Loans requested by the Company shall be deemed Richland Facility Advances (and be subject to the additional conditions precedent to the disbursement thereof provided in this Agreement) if, after making such Revolving Loans, the aggregate outstanding Revolving Loans plus Standard Letters of Credit otherwise would exceed the Revolving Credit Limit minus the Richland Facility Reserved Amount." "'Richland Facility Reserved Amount' shall mean One and One --------------------------------- Half Millions Dollars ($1,500,000) minus the aggregate amount of Richland Facility Advances made under this Agreement." 2(g) Interest, Fee and Percentage Share Schedules. To modify -------------------------------------------- the interest and fees payable by the Company under the Agreement and to modify the Percentage Shares of the Lenders, Appendix I and Schedule 2 to the Agreement ---------- ---------- are amended to read as set forth on Appendix I and Schedule 2 to this Amendment. ---------- ---------- Such amendment to Appendix I and Schedule 2 shall be effective April 3, 2000. ---------- ---------- 3. Conditions. This Amendment shall not be effective until the date ---------- (the "Amendment Effective Date") that each of the following conditions shall have been satisfied or waived: 3(a) The Company shall have delivered or shall have had delivered to the Agent, in form and substance satisfactory to the Agent and its counsel, each of the following (with sufficient copies for each of the Lenders): (1) A duly executed copy of this Amendment (2) A duly executed acknowledgment of this Amendment from each of the Guarantors; (3) Such credit applications, financial statements, authorizations and such information concerning the Company, the Guarantors and their respective business, operations and condition (financial and otherwise) as any Lender may reasonably request; (4) Certified copies of resolutions of the Board of Directors of the Company approving the execution and delivery of this Amendment; and (5) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to sign this Amendment. (6) An opinion of counsel to the Company and the Guarantors, in form and substance satisfactory to the Agent, with respect to the due execution, delivery and enforceability of this Amendment and the enforceability of the Agreement as amended hereby 3(b) All acts and conditions (including, without limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened precedent to the execution, delivery and performance of this Amendment and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws. 3(c) All documentation, including, without limitation, documentation for corporate and legal proceedings in connection with the transactions contemplated by this Amendment shall be satisfactory in form and substance to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank, the Lenders and their counsel. 3(d) The Company shall have paid to the Agent for the pro rata account of each of the Lenders a fee equal to $120,000, and all reasonable out-of pocket expenses (including fees and disbursements of counsel) of the Agent incurred in connection with the preparation and negotiation of this Amendment shall have been paid. 4. Representations and Warranties of the Company. In addition to the --------------------------------------------- other representations and warranties of the Company contained in this Amendment, as an inducement to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and each Lender to enter into this Amendment, the Company represents and warrants to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and each Lender that: 4(a) Financial Condition. The financial statements, dated ------------------- December 31, 1999, copies of which have heretofore been furnished to each Lender by the Agent, are complete and correct and present fairly in accordance with GAAP the financial condition of the Company and its consolidated Subsidiaries at such dates and the consolidated and consolidating results of their operations and changes in financial position for the fiscal periods then ended . 4(b) No Change. Since December 31, 1999, there has been no --------- material adverse change in the business, operations, assets or financial or other condition of the Company or the Company and its Subsidiaries taken as a whole. 4(c) Corporate Power; Authorization; Enforceable ------------------------------------------- Obligations. The Company and each of its Subsidiaries has the corporate power - ----------- and authority and the legal right to execute and deliver this Amendment and to perform the Agreement as amended hereby and has taken all necessary corporate action to authorize the execution, delivery and performance of such Loan Documents. This Amendment duly executed and delivered on behalf of the Company and each of its Subsidiaries and constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity. 4(d) No Legal Bar. The execution, delivery and performance ------------ of this Amendment and the Agreement as amended hereby will not violate any Requirement of Law or any Contractual Obligation of the Company or any of its Subsidiaries the violation of which could have a Material Adverse Effect or result in the creation of any Lien on any assets of the Company or any of its Subsidiaries. 4(e) Accuracy of Representations in Agreement. As of the ---------------------------------------- Amendment Effective Date, all of the representations and warranties contained in the Agreement and each of the other Loan Documents are true and correct in all material respects except to the extent relating solely to an earlier date. 4(f) No Events of Default or Potential Defaults. Except for ------------------------------------------ the Existing Defaults, no Events of Default or Potential Defaults have occurred under the Agreement. 5. Miscellaneous Provisions. ------------------------ 5(a) Cumulative Rights; Waivers Limited. The rights, powers ---------------------------------- and remedies of the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and the Lenders hereunder are cumulative and in addition to all rights, power and remedies provided under any and all agreements between the Company and any of such Persons relating hereto, at law, in equity or otherwise. The waivers and consents granted by this Amendment are specific and limited to their terms. Neither such waivers or consents or any delay or failure by the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank or the Lenders to exercise any right, power or remedy shall constitute a waiver of any right, power or privilege by such Persons (other than as specifically provided in this Amendment), and no single or partial exercise by any of such Persons of any right, power or remedy shall preclude other or further exercise thereof or any exercise of any other rights, powers or remedies. 5(b) Entire Agreement. This Amendment embodies the entire ---------------- agreement and understanding between the parties hereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 5(c) Survival. All representations, warranties, covenants -------- and agreements herein contained on the part of the Company shall survive the termination of this Amendment and shall be effective until the Obligations are paid and performed in full or longer as expressly provided herein. 5(d) Governing Law. This Amendment shall be governed by and ------------- construed in accordance with the internal laws of the State of California without giving effect to its choice of law rules. 5(e) Counterparts. This Amendment may be executed in any ------------ number of counterparts, all of which together shall constitute one agreement. 5(f) Severability. The illegality or unenforceability of ------------ any provision of this Amendment or any instrument or agreement required hereunder or thereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions hereof or thereof. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written. ATG INC., a California corporation By:__________________________________________ Name: Frank Chiu_____________________________ Title: Executive Vice President______________ SANWA BANK CALIFORNIA, as Agent By___________________________________________ Name: Rochelle F. Dineen_____________________ Title: Vice President________________________ SANWA BANK CALIFORNIA, as Standard L/C Issuing Bank and a Lender By___________________________________________ Name: Rochelle F. Dineen_____________________ Title: Vice President________________________ KEYBANK NATIONAL ASSOCIATION, as Bond L/C Issuing Bank,Co-Agent and a Lender By:__________________________________________ Name: Jill Scheuermann_______________________ Title: Vice President________________________ FIRST BANK OF CALIFORNIA, as a Lender By:__________________________________________ Name: Michael G. Barker______________________ Title: Vice President________________________ IMPERIAL BANK, as a Lender By:__________________________________________ Name: Stephanie Arnold_______________________ Title: Vice President________________________ GENERAL BANK, as a Lender By:__________________________________________ Name:________________________________________ Title: Vice President________________________ CONSENT OF GUARANTORS --------------------- Each of the undersigned Guarantors hereby consents to the execution, delivery and performance of the foregoing Amendment and the Agreement as amended thereby and reaffirms its Guaranty of the Obligations as of the Amendment Effective Date as though such Guaranty were executed and delivered as of such date. ATG RICHLAND CORPORATION, a Washington corporation By:__________________________________________ Name: Frank Chiu_____________________________ Title: Executive Vice President______________ ATG NUCLEAR SERVICES LLC, a Delaware limited liability company By:__________________________________________ Name: Frank Chiu_____________________________ Title: Executive Vice President______________ ATG CATALYTICS LLC, a Delaware limited liability company By:__________________________________________ Name: Frank Chiu_____________________________ Title: Executive Vice President______________ APPENDIX I PRICING SCHEDULE The LIBOR Spread, Base Rate Spread, Bond Letter of Credit Fee Percentage and Standard Letter of Credit Fee Percentage shall be calculated according to the following schedule, beginning on the 181st day after the date of this Agreement, based on the Net Funded Debt/EBITDA Ratio as set forth in the Compliance Certificate most recently delivered to the Lenders pursuant to Paragraph 11(a) of this Agreement. - --------------- If a Compliance Certificate is not delivered in accordance with Paragraph --------- 11(a) of this Agreement, the LIBOR Spread, Base Rate Spread, Bond Letter of - ----- Credit Fee Percentage and Standard Letter of Credit Fee Percentage shall be calculated according to the following schedule based on the assumption that the Net Funded Debt/EBITDA Ratio is 4.00 to 1.00 or greater.
- --------------------------------------------------------------------------------------------------------------------------- If the Net Funded Debt/EBITDA Ratio The LIBOR Spread The Base Rate The Bond Letter of The Standard Letter - ----------------------------------- ---------------- ------------- ------------------ ------------------- is: is: Spread is: Credit Fee of Credit Fee - -- -- --------- ----------- ------------- Percentage is: Percentage is: ------------ -------------- - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 4.00 to 1.00 3.25% 1.25% 3.25% 2.75% - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 3.50 to 3.00% 1.00% 3.00% 2.50% 1.00 but less than 4.00 to 1.00 - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 3.00 to 2.75% .75% 2.75% 2.25% 1.00 but less than 3.50 to 1.00 - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 2.50 to 2.50% 0.50% 2.50% 1.50% 1.00 but less than 3.00 to 1.00 - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 2.00 to 2.25% 0.25% 2.25% 1.75% 1.00 but less than 2.50 to 1.00 - --------------------------------------------------------------------------------------------------------------------------- Equal to or greater than 1.50 to 2.00% 0.00% 2,00% 1.50% 1.00 but less than 2.00 to 1.00 - --------------------------------------------------------------------------------------------------------------------------- Less than 1.50 to 1.00 1.75% 0.00% 1.75% 1.25% - ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE 2 (Percentage Shares) Except in respect of the Revolving Credit Limit, Revolving Loans, Standard Letters of Credit, Revolving Credit Limit facility fees payable pursuant to Paragraph 7(b), and Standard Letter of Credit fees payable pursuant to Paragraph - -------------- --------- 7(c)(1), the Percentage Shares of the Lenders shall be: - -------
- ------------------------------------------------------------------------------------- LENDER PERCENTAGE SHARE ------ ---------------- - ------------------------------------------------------------------------------------- Sanwa Bank California 26.666666667% - ------------------------------------------------------------------------------------- Key Bank 22.222222222% - ------------------------------------------------------------------------------------- General Bank 18.888888889% - ------------------------------------------------------------------------------------- Imperial Bank 18.888888889% - ------------------------------------------------------------------------------------- First Bank of California 13.333333333% - -------------------------------------------------------------------------------------
In respect of the Revolving Credit Limit, Revolving Loans, Standard Letters of Credit, Revolving Credit Limit facility fees payable pursuant to Paragraph 7(b) and Standard Letter of Credit fees payable pursuant to Paragraph 7(c)(1), the Percentage Shares of the Lenders shall be:
- ------------------------------------------------------------------------------------ LENDER PERCENTAGE SHARE ------ ---------------- - ------------------------------------------------------------------------------------ Sanwa Bank California 26.6666667% - ------------------------------------------------------------------------------------ Key Bank 22.2222222% - ------------------------------------------------------------------------------------ Imperial Bank 18.8888889% - ------------------------------------------------------------------------------------ First Bank of California 18.0555555% - ------------------------------------------------------------------------------------ General Bank 14.1666667% - ------------------------------------------------------------------------------------
EX-10.46 3 0003.txt FORM OF FORBEARANCE & CONSENT AGR. Exhibit 10.46 FORBEARANCE AND CONSENT AGREEMENT TO CREDIT AND REIMBURSEMENT AGREEMENT THIS FORBEARANCE AND CONSENT AGREEMENT TO CREDIT AND REIMBURSEMENT AGREEMENT (the "Forbearance Agreement") is made and dated as of the ___ day of June, 2000, by and among SANWA BANK CALIFORNIA ("Sanwa"), as agent (the "Agent") for the Lenders referenced below, KEYBANK NATIONAL ASSOCIATION, as Bond L/C Issuing Bank for the Bond Letter of Credit (in such capacity, the "Bond L/C Issuing Bank") and as co-agent (the "Co-Agent"), Sanwa Bank California, as issuing bank for the Standard Letters of Credit (the "Standard L/C Issuing Bank"), the Lenders from time to time party hereto, and ATG INC., a California corporation (the "Company"). RECITALS A. The Company, the Agent, the Lenders, the Bond L/C Issuing Bank and the Standard L/C Issuing Bank entered into a Credit and Reimbursement Agreement dated as of November 1, 1999 (as amended by a First Amendment to Credit and Reimbursement Agreement dated as of March 27, 2000 and as further amended, modified, or waived, the "Credit Agreement") pursuant to which the Lenders agreed to extend credit to the Company on the terms and conditions set forth therein. B. At the request of the Company and subject to the terms and conditions contained in this Forbearance Agreement, the Lenders have agreed to forbear until June 30, 2000 in the exercise of their rights under the Credit Agreement upon the occurrence of Events of Default (as such term and all other capitalized terms used herein and not otherwise defined are defined in the Credit Agreement) under Paragraph 13(c) of the Reimbursement Agreement as a --------------- result of the following events (the "Existing Events of Default"): (1) In breach of its covenant in Paragraph 12(m)(1) of the ------------------ Reimbursement Agreement, the Company failed to have a Net Funded Debt/EBITDA Ratio of not more than 4.50:1.00 as of March 31, 2000; and (2) In breach of its covenant in Paragraph 12(m)(3) of the ------------------ Reimbursement Agreement, the Company failed to have a Current Ratio of at least 0.70:1.00 as of March 31, 2000. C. At the request of the Company and subject to the terms and conditions contained in this Forbearance Agreement, the Lenders have agreed to consent to disbursements from the Disbursement Account without satisfaction of the certain conditions in respect of the Richland Facility Reserved Amount. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT 1. Inducement Representations by the Company. In addition to the ----------------------------------------- other representations and warranties contained in this Forbearance Agreement and the other terms and provisions hereof, to induce the other parties hereto to grant the forbearances and consent requested by the Company and to enter into this Forbearance Agreement, the Company hereby represents and warrants as of the Forbearance Effective Date (as such term is defined in Paragraph 4 below): 1(a) The Company reasonably anticipates receiving net proceeds of not less than $3,000,000 from the issuance of preferred stock no later than June 30, 2000. 1(b) As of March 31, 2000, its Net Funded Debt/EBITDA Ratio was 5.19:1.00. 1(c) As of March 31, 2000, its Current Ratio was 0.63:1:00. 1(d) Except for the Existing Events of Default, no Events of Default or Potential Defaults have occurred under the Reimbursement Agreement. 2. Forbearance. ----------- 2(a) Agreement to Forbear. For the term described in -------------------- Paragraph 2(b) below, the Lenders hereby agree to forbear in the exercise of any rights or remedies under the Reimbursement Agreement and any Loan Documents by reason of the Existing Events of Default. 2(b) Terms of Forbearance. The agreement of the Lenders to -------------------- forbear in the exercise of their rights shall terminate on the earlier of (i) June 30, 2000, (ii) the date that any Potential Default or Event of Default (in addition to an Existing Event of Default) shall occur under the Reimbursement Agreement or (iii) the date on which any material adverse change shall occur in the financial or other condition of the Company. The Company agrees that upon expiration of the term of the forbearance in accordance with this Paragraph 2(b), the Lenders may, in their sole discretion and without further notice to the Company, exercise any and all remedies available to them under the Reimbursement Agreement and the Loan Documents by reason of the occurrence of any Events of Default thereunder. 3. Consent. In accordance with Paragraph 9(c) of the Agreement, the ------- -------------- Lenders agree that the conditions set forth in Paragraph 9(c) shall not be -------------- conditions to the disbursement of Richland Advances made after the date of this Forbearance Agreement. 4. Conditions. This Forbearance Agreement shall not be effective ---------- until the date (the "Forbearance Agreement Effective Date") that each of the following conditions shall have been satisfied or waived: 4(a) The Company shall have delivered or shall have had delivered to the Agent, in form and substance satisfactory to the Agent and its counsel, each of the following (with sufficient copies for each of the Lenders): (1) A duly executed copy of this Forbearance Agreement; (2) A duly executed acknowledgment of this Forbearance Agreement from each of the Guarantors; (3) Such credit applications, financial statements, authorizations and such information concerning the Company, the Guarantors and their respective business, operations and condition (financial and otherwise) as any Lender may reasonably request; 4(b) All acts and conditions (including, without limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened precedent to the execution, delivery and performance of this Forbearance Agreement and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws. 4(c) All documentation, including, without limitation, documentation for corporate and legal proceedings in connection with the transactions contemplated by this Forbearance Agreement shall be satisfactory in form and substance to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank, the Lenders and their counsel. 4(d) The Company shall have paid to the Agent for the pro rata account of each of the Lenders all reasonable out-of pocket expenses (including fees and disbursements of counsel) of the Agent incurred in connection with the preparation and negotiation of this Forbearance Agreement. 5. Representations and Warranties of the Company. In addition to the --------------------------------------------- other representations and warranties of the Company contained in this Forbearance Agreement, as an inducement to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and each Lender to enter into this Forbearance Agreement, the Company represents and warrants to the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and each Lender that: 5(a) Financial Condition. The financial statements, dated ------------------- March 31, 2000, copies of which have heretofore been furnished to each Lender by the Agent, are complete and correct and present fairly in accordance with GAAP the financial condition of the Company and its consolidated Subsidiaries at such dates and the consolidated and consolidating results of their operations and changes in financial position for the fiscal periods then ended. 5(b) No Change. Except as previously disclosed to the --------- Lenders, since March 31, 2000, there has been no material adverse change in the business, operations, assets or financial or other condition of the Company or the Company and its Subsidiaries taken as a whole. 5(c) Corporate Power; Authorization; Enforceable Obligations. The ------------------------------------------------------- Company and each of its Subsidiaries has the corporate power and authority and the legal right to execute and deliver this Forbearance Agreement and to perform the Reimbursement Agreement as modified hereby and has taken all necessary corporate action to authorize the execution, delivery and performance of such Loan Documents. This Forbearance Agreement duly executed and delivered on behalf of the Company and each of its Subsidiaries and constitutes the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity. 5(d) No Legal Bar. The execution, delivery and performance of ------------ this Forbearance Agreement and the Forbearance Agreement as modified hereby will not violate any Requirement of Law or any Contractual Obligation of the Company or any of its Subsidiaries the violation of which could have a Material Adverse Effect or result in the creation of any Lien on any assets of the Company or any of its Subsidiaries. 5(e) Accuracy of Representations in Agreement. As of the ---------------------------------------- Forbearance Agreement Effective Date, all of the representations and warranties contained in the Reimbursement Agreement and each of the other Loan Documents are true and correct in all material respects except to the extent relating solely to an earlier date. 6. Miscellaneous Provisions. ------------------------ 6(a) Cumulative Rights; Waivers Limited. The rights, powers and ---------------------------------- remedies of the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank and the Lenders hereunder are cumulative and in addition to all rights, power and remedies provided under any and all agreements between the Company and any of such Persons relating hereto, at law, in equity or otherwise. The consent granted by this Forbearance Agreement is specific and limited to its terms. Neither such consent or any delay or failure by the Agent, the Bond L/C Issuing Bank, the Standard L/C Issuing Bank or the Lenders to exercise any right, power or remedy shall constitute a waiver of any right, power or privilege by such Persons (other than as specifically provided in this Forbearance Agreement), and no single or partial exercise by any of such Persons of any right, power or remedy shall preclude other or further exercise thereof or any exercise of any other rights, powers or remedies. 6(b) Entire Agreement. This Forbearance Agreement embodies the ---------------- entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 6(c) Survival. All representations, warranties, covenants and -------- agreements herein contained on the part of the Company shall survive the termination of this Forbearance Agreement and shall be effective until the Obligations are paid and performed in full or longer as expressly provided herein. 6(d) Governing Law. This Forbearance Agreement shall be governed ------------- by and construed in accordance with the internal laws of the State of California without giving effect to its choice of law rules. 6(e) Counterparts. This Forbearance Agreement may be executed in ------------ any number of counterparts, all of which together shall constitute one agreement. 6(f) Severability. The illegality or unenforceability of any ------------ provision of this Forbearance Agreement or any instrument or agreement required hereunder or thereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions hereof or thereof. IN WITNESS WHEREOF, the parties hereto have caused this Forbearance Agreement to be executed as of the day and year first above written. ATG INC., a California corporation By:_________________________________________ Name: Frank Chiu____________________________ Title: Executive Vice President_____________ SANWA BANK CALIFORNIA, as Agent By__________________________________________ Name: Rochelle F. Dineen____________________ Title: Vice President_______________________ SANWA BANK CALIFORNIA, as Standard L/C Issuing Bank and a Lender By__________________________________________ Name: Rochelle F. Dineen____________________ Title: Vice President_______________________ KEYBANK NATIONAL ASSOCIATION, as Bond L/C Issuing Bank, Co-Agent and a Lender By:_________________________________________ Name: Jill Scheuermann______________________ Title: Vice President_______________________ FIRST BANK OF CALIFORNIA, as a Lender By:_________________________________________ Name: Michael G. Barker_____________________ Title: Vice President_______________________ IMPERIAL BANK, as a Lender By:_________________________________________ Name: Stephanie Arnold______________________ Title: Vice President_______________________ GENERAL BANK, as a Lender By:_________________________________________ Name:_______________________________________ Title:______________________________________ CONSENT OF GUARANTORS --------------------- Each of the undersigned Guarantors hereby consents to the execution, delivery and performance of the foregoing Forbearance Agreement and reaffirms its Guaranty of the Obligations as of the Forbearance Agreement Effective Date as though such Guaranty were executed and delivered as of such date. ATG RICHLAND CORPORATION, a Washington corporation By:_________________________________________ Name: Frank Chiu____________________________ Title: Executive Vice President_____________ ATG NUCLEAR SERVICES LLC, a Delaware limited liability company By:_________________________________________ Name: Frank Chiu____________________________ Title: Executive Vice President_____________ ATG CATALYTICS LLC, a Delaware limited liability company By:_________________________________________ Name: Frank Chiu____________________________ Title: Executive Vice President_____________ EX-10.47 4 0004.txt FORM OF COMMON STOCK PURCHASE AGR. EXHIBIT 10.47 COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT ("Agreement") made as of this ____ day of June, 2000 between ATG INC., a California corporation, with its principal offices at 47375 Fremont Boulevard, Fremont, California 94538 (the "Company") and the undersigned (the "Subscriber"). W I T N E S S E T H : ------------------- WHEREAS, the Company desires to issue shares of its common stock, no par value per share (the "Common Stock"), at $2.00 per share, with a minimum aggregate purchase price of $4,500,000 and, in one or more tranches, a maximum aggregate purchase price of $5,500,000; and WHEREAS, the Company and the Common Stock are described in the Company's Confidential Private Placement Memorandum dated June 26, 2000, together with all exhibits thereto, as same may thereafter be supplemented and/or amended (collectively, the "Memorandum"); and WHEREAS, Subscriber desires to acquire shares of Common Stock having an aggregate purchase price set forth on the signature page hereof (the "Purchase Price"). NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows: 1. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER. 1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company for $2.00 per share, shares of Common Stock aggregating the Purchase Price and the Company agrees to sell such Common Stock to the Subscriber for the Purchase Price, subject to the Company's right to sell to the Subscriber such lesser amount of Common Stock as it may, in its sole discretion, deem necessary or desirable. The Purchase Price is payable by wire transfer or by check, subject to collection, as set forth in the "INSTRUCTIONS TO SUBSCRIBERS" contained in the Subscription Documents Booklet of which this Agreement is a part. 1.2 The Subscriber recognizes that the purchase of the Common Stock involves a high degree of risk in that (i) the Common Stock sold pursuant to the Memorandum has not been registered under the Securities Act of 1933, as amended (the "1933 Act"), and the Company has no obligation to register the Common Stock except as set forth in Section 3 below, (ii) an investment in the Common Stock is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the Company and the Common Stock; (iii) the Subscriber may not be able to liquidate the Subscriber's investment as and when the Subscriber wishes to; and (iv) the Subscriber could sustain the loss of Subscriber's entire investment. Such risks are more fully set forth in the Memorandum. 1.3 The private placement of the Common Stock by the Company (the "Offering") pursuant to the Memorandum shall continue for a period commencing on the date of the Memorandum and ending on the date set forth in the Memorandum. 1.4 The Subscriber hereby represents as follows: (a) The Subscriber represents that the Subscriber is an Accredited Investor (as defined in Rule 501 of Regulation D promulgated under the 1933 Act) as indicated by the Subscriber's responses to the Confidential Investor Questionnaire, a copy of which is included in the Subscription Documents Booklet, and that the Subscriber is able to bear the economic risk of an investment in the Common Stock. (b) The Subscriber acknowledges that the Subscriber has significant prior investment experience, including investment in non-listed and non-registered securities. The Subscriber recognizes the highly speculative nature of this investment. The Subscriber acknowledges that the Subscriber has carefully read the Memorandum, including, but not limited to, the Company's Form 10-K for the fiscal year ended December 31, 1999, the Company's Form 10-K/A for the fiscal year ended December 31, 1999, the Company's Form 10-Q for the fiscal quarter ended March 31, 2000, and the description of the Common Stock contained in the Memorandum and fully understands the contents thereof. (c) The Subscriber hereby acknowledges that the Offering, the Common Stock and the Memorandum have not been reviewed by the United States Securities and Exchange Commission ("SEC") or by any state securities regulator because it is intended to be a nonpublic offering pursuant to Sections 4(2) and 4(6) of the 1933 Act and Rule 506 of Regulation D promulgated thereunder. The Subscriber represents that the Common Stock is being purchased for the Subscriber's own account, for investment purposes only and not for distribution or resale to others. The Subscriber agrees that the Subscriber will not sell or otherwise transfer the shares of the Common Stock purchased by the Subscriber unless they are registered under the 1933 Act or unless an exemption from such registration is available. (d) The Subscriber understands that the shares of Common Stock have not been registered under the 1933 Act by reason of a claimed exemption under the provisions of the 1933 Act which depends, in part, upon the Subscriber's investment intention. In this connection, the Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if the Subscriber's representation merely meant that the Subscriber's present intention was to hold the Common Stock for a short period, such as the capital gains period of tax statutes, for a deferred sale, for a market rise, or for any other fixed period. The Subscriber realizes that, in the view of the SEC, a purchase now with an intent to resell after a pre- -2- determined amount of time would represent a purchase with an intent inconsistent with the Subscriber's representation to the Company, and the SEC might regard such a sale or disposition as a deferred sale to which such exemptions are not available. (e) The Subscriber understands that Rule 144 (the "Rule") promulgated by the SEC under the 1933 Act requires, among other conditions, a one year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the 1933 Act. The Subscriber understands that the Company is under no obligation to register the shares of the Common Stock purchased by the Subscriber under the 1933 Act, with the exception of certain registration rights set forth in Section 3 below. The Subscriber acknowledges that the Company may, if it desires, permit the transfer of such shares of the Common Stock out of the Subscriber's name only when the Subscriber's request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the 1933 Act or any applicable state "blue sky" laws and subject to the provisions of Section 1.4(f) hereof. (f) The Subscriber consents to the placement of a legend on any certificate or other document evidencing the shares of the Common Stock purchased by the Subscriber stating that they have not been registered under the 1933 Act and under applicable state securities laws and setting forth or referring to the restrictions on transferability and sale thereof. (g) The Subscriber understands that the Company will review this Agreement and the Confidential Investor Questionnaire; and it is further agreed that the Company reserves the unrestricted right to reject or limit any subscription and to close the Offering at any time. (h) The Subscriber hereby represents that the address of Subscriber furnished by the Subscriber at the end of this Agreement is the Subscriber's principal residence, if the Subscriber is an individual, or its principal business address, if the Subscriber is a corporation or other entity. (i) The Subscriber has had a reasonable opportunity to ask questions of and receive answers from the Company concerning the Company and the Offering, and all such questions, if any, have been answered to the full satisfaction of the Subscriber; and the Company shall provide Subscriber with the opportunity to ask additional questions of and receive answers (all of which information shall be limited to information in the public realm) from the Company concerning the Company during the period which the Subscriber owns the Common Stock purchased in the Offering. (j) The Subscriber has such knowledge and expertise in financial and business matters that the Subscriber is capable of evaluating the merits and risks involved in an investment in the Common Stock. -3- (k) The Subscriber has full power and authority to execute and deliver this Agreement and to perform the obligations of the undersigned hereunder; and this Agreement is a legally binding obligation of the Subscriber enforceable in accordance with its terms. (l) Except as set forth in this Agreement and the Memorandum, no representations or warranties have been made to the Subscriber by the Company, the Placement Agent (as defined in the Memorandum) or any of their respective agents, employees or affiliates, and in entering into this transaction, the Subscriber is not relying on any information, other than that contained in the Memorandum and the public documents of the Company (e.g., the Form 10-K for the fiscal year ended December 31, 1999, the Form 10-K/A for the fiscal year ended December 31, 1999 and the Form 10-Q for the fiscal quarter ended March 31, 2000), and the results of an independent investigation by the Subscriber. (m) The Subscriber agrees that Subscriber will not sell or otherwise transfer the shares of the Common Stock unless they are registered under the 1933 Act and applicable state "blue sky" laws or unless an exemption from such registration is available. The Subscriber represents that (i) the Subscriber has adequate means of providing for the Subscriber's current needs and possible personal contingencies, (ii) the Subscriber has no need for liquidity in this investment, (iii) the Subscriber is able to bear the substantial economic risk of an investment in the Common Stock for an indefinite period, and (iv) at the present time the Subscriber could afford a complete loss of such investment. (n) It is understood that all documents, records and books pertaining to this investment have been made available for inspection by the Subscriber's attorney and/or accountant and the Subscriber. 2. TERMS OF SUBSCRIPTION. (a) The Offering of the Common Stock is being made on a "best efforts" basis as more particularly set forth in the Memorandum. (b) Within ninety (90) days of the Final Closing Date (as defined in the Memorandum), the Company will use its reasonable best efforts to raise an additional $3,000,000 in the aggregate by closing on the sale of convertible securities on terms mutually acceptable to the Company and Placement Agent (the "Additional Offering"); provided, however, that if the Company obtains additional financing of at least $3,000,000 during such ninety (90) day period from an institution, including, without limitation, a bank, insurance company or leasing company, the Company will not be required to use its reasonable best efforts to close on the Additional Offering. The Company shall, prior to the first closing of any such sale of convertible securities, provide written notice to the Subscriber. Such notice shall include a description of the proposed transaction and all documents relating thereto and shall afford the Subscriber the right to participate in such transaction by exchanging the shares of Common Stock sold to the Subscriber pursuant to the Memorandum for such convertible securities. The Subscriber shall have fifteen (15) days after -4- receiving notice from the Company to deliver written notice to the Company (together with the original Common Stock and such other documents as the Company shall reasonably request) that such Subscriber desires to participate in the transaction. In order to participate, the Subscriber must do so as to all but not less than all of the Purchase Price paid for the Common Stock. After receipt by the Company of the Subscriber's notice to participate, the Company will promptly deliver to the Subscriber the convertible securities against surrender by the Subscriber of the original shares of Common Stock. (c) If one or more Subscribers (which Subscribers, if more than one, must be affiliates as such term is defined in Rule 405 promulgated under the 1933 Act), purchases a minimum of 2,000,000 shares of Common Stock pursuant to this Offering for an aggregate investment of at least $4,000,000, such Subscribers shall be have the right (but not the obligation) to nominate one (1) director to the Board of Directors of the Company (the "Right to Nominate"). If such Right to Nominate is exercised within ninety (90) days after the Final Closing Date, the Company shall appoint such Subscribers' nominee as an observer to the Board of Directors and, after ninety (90) days following the Final Closing Date, the Company shall appoint such Subscribers' nominee to the Board of Directors. If such Right to Nominate is exercised more than ninety (90) days after the Final Closing Date, the Company shall appoint such Subscribers' nominee to the Board of Directors at that time. The Company shall thereafter include such Subscribers' nominee in the slate of nominees recommended by the Company's Board of Directors to shareholders for election as a director at each subsequent meeting at which directors are elected; provided, however, that if at any time such Subscribers hold in the aggregate less than 50% of the shares of Common Stock acquired by such Subscribers in the aggregate pursuant to the Memorandum, such Subscribers shall permanently lose the Right to Nominate. Such Subscribers' written designation of the nominee to be appointed to the Board of Directors or included in the slate of directors recommended for election shall include all information regarding such nominee that is required by Item 7 of Schedule 14A of Regulation 14A of the Securities Exchange Act of 1934, as amended (the "1934 Act"), as well as such other information regarding such nominee as the Company shall reasonably request. 3. REGISTRATION RIGHTS. (a) As soon as possible after the Initial Closing Date (as defined in the Memorandum), but in no event later than 45 days after the Initial Closing Date (regardless of whether the maximum number of shares of Common Stock shall have been sold), the Company shall, at its sole cost and expense, file a registration statement ("Registration Statement") on the appropriate form under the 1933 Act with the SEC with respect to the shares of Common Stock and Additional Shares (as defined below), if any (collectively, the "Registrable Securities"), time being of the essence. The Company will use its best efforts to have such Registration Statement declared effective as soon as possible after filing, and to keep such Registration Statement current and effective for at least three (3) years from the Initial Closing Date or until such earlier date as all of the Registrable Securities registered pursuant to such Registration Statement shall have been sold. Notwithstanding anything to the contrary contained herein, if such Registration Statement shall not be filed with the SEC within 45 days after the Initial Closing Date or the Registration Statement shall not be declared effective within 120 days after the Initial Closing Date (regardless of whether the maximum number of shares of Common Stock shall have been sold), then (i) with respect to the failure to file the Registration Statement within 45 days of the Initial Closing Date, the registered -5- holders of such Registrable Securities (including transferees authorized under applicable securities laws; hereinafter, collectively the "Registered Holders") shall be entitled at no cost to additional shares of Common Stock from the Company ("Additional Shares") equal to the product of three (3%) percent of the number of Registrable Securities owned by each such holder, and the number of thirty (30) day periods, or any part thereof, beyond said forty-five (45) day period, until the initial Registration Statement described herein covering the Registrable Securities is filed with the SEC, and/or (ii) with respect to the Registration Statement not being declared effective within 120 days of the Initial Closing Date, the Registered Holders shall be entitled at no cost to Additional Shares equal to the product of two (2%) percent of the number of Registrable Securities owned by each such holder, and the number of thirty (30) day periods, or any part thereof, beyond said 120 day period, until the initial Registration Statement described herein covering the Registrable Securities is declared effective. The maximum number of Additional Shares issuable pursuant to this provision shall be thirty-six (36%) percent. (b) If the Company effects any registration under the 1933 Act of any Registrable Securities pursuant to Section 3(a) above or 3(g) below, the Company shall indemnify, to the extent permitted by law, and hold harmless any person or entity whose Registrable Securities are included in such Registration Statement (each, a "Seller"), any underwriter, any officer, director, affiliate, shareholder, employee or agent of any Seller or underwriter, and each other person, if any, who controls any Seller or underwriter within the meaning of Section 15 of the 1933 Act, against any losses, claims, damages, liabilities, judgment, fines, penalties, costs and expenses, joint or several, or actions in respect thereof (collectively, the "Claims"), to which each such indemnified party becomes subject, under the 1933 Act or otherwise, insofar as such Claims arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement or prospectus or any amendment or supplement thereto or any document filed under a state securities or blue sky law (collectively, the "Registration Documents") or insofar as such Claims arise out of or are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in investigating or defending any such Claim; provided that the Company shall not be liable in any such case to a particular indemnified party to the extent such Claim is based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use in the preparation of such Registration Document. (c) In connection with any registration statement in which any Seller is participating, each Seller, severally and not jointly, shall indemnify, to the extent permitted by law, and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each other person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, each other Seller and each underwriter, any officer, director, affiliate, shareholder, employee or agent of any such other Seller or underwriter and each other person, if any, who controls such other Seller or underwriter within the meaning of Section 15 of the 1933 Act against any Claims to which each such indemnified party may become subject under the 1933 Act or otherwise, insofar as such Claims (or actions in respect thereof) are based upon any untrue -6- statement or alleged untrue statement of any material fact contained in any Registration Document, or insofar as any Claims are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in investigating or defending any such Claim; provided, however, that such indemnification or reimbursement shall be payable only if, and to the extent that, any such Claim arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by the Seller specifically for use in the preparation thereof. (d) Any person entitled to indemnification under Section 3(b) or 3(c) above shall notify promptly the indemnifying party in writing of the commencement of any Claim if a claim for indemnification in respect thereof is to be made against an indemnifying party under this Section 3(d), but the omission of such notice shall not relieve the indemnifying party from any liability which it may have to any indemnified party under Section 3(b) or 3(c) above, except to the extent that such failure shall materially adversely affect any indemnifying party or its rights hereunder. In case any action is brought against the indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it chooses, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party; and, after notice from the indemnifying party to the indemnified party that it so chooses, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the Claim within twenty (20) days after receiving notice from the indemnified party such that the indemnified party believes it has failed to do so; (ii) if the indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there are legal defenses available to the indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties, except to the extent any indemnified party or parties reasonably shall have concluded that there are legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any reasonable expenses therefor; provided, that no indemnifying party shall be subject to any liability for any settlement of a Claim made without its consent (which may not be unreasonably withheld, delayed or conditioned). If the indemnifying party assumes the defense of any Claim hereunder, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party. (e) If for any reason the indemnity provided in Section 3(b) or 3(c) above is unavailable, or is insufficient to hold harmless, an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party -7- on the one hand and the indemnified party on the other from the transactions contemplated by this Agreement. If, however, the allocation provided in the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. Notwithstanding the foregoing, no underwriter or controlling person thereof, if any, shall be required to contribute, in respect of such underwriter's participation as an underwriter in the offering, any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligation of any underwriters to contribute pursuant to this paragraph (e) shall be several in proportion to their respective underwriting commitments and not joint. (f) The provisions of Section 3(b) through 3(e) of this Agreement shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party. (g) The Registered Holders shall have certain "piggy-back" registration rights with respect to the Registrable Securities as hereinafter provided: A. If at any time after the date of the Final Closing Date and prior to the date that the Registrable Securities are registered under the 1933 Act pursuant to Section 3(a) above, the Company shall file with the SEC a registration statement under the 1933 Act (other than a registration statement on Form S-4 or Form S-8, or any successor thereto, or filed in connection with an exchange offer or an offering of securities solely to the Company's existing shareholders) registering any shares of Common Stock, the Company shall give written notice to each Registered Holder thereof prior to such filing. B. Within fifteen (15) days after such notice from the Company, each Registered Holder shall give written notice to the Company as to whether or not the Registered Holder desires to have all or any of the Registered Holder's Registrable Securities included in the registration statement. If a Registered Holder fails to give such notice within such period, such Registered Holder shall not have the right to have such Registered Holder's Registrable Securities registered pursuant to such registration statement. If a Registered Holder gives such -8- notice, then the Company shall include such Registered Holder's Registrable Securities in the registration statement, at the Company's sole cost and expense, subject to the remaining terms of this Section 3(g); provided, however, that each Registered Holder shall pay all underwriting discounts, commissions and transfer taxes as well as his, her or its own counsel fees, if any, relating to the sale of such Registered Holder's Registrable Securities. C. If the registration statement relates to an underwritten offering, and the underwriter shall determine in writing that the total number of shares of Common Stock to be included in the offering, including the Registrable Securities, shall exceed the amount which the underwriter in its sole discretion deems to be appropriate for the offering, the number of shares of the Registrable Securities shall be reduced pro rata (based on the number of Registrable Securities requested to be included). The Registered Holders participating in the offering shall enter into such agreements as may be reasonably required by the underwriters. D. The Registered Holders shall have two (2) opportunities to have the Registrable Securities registered under this Section 3(g); provided however that their Registrable Securities are not sooner registered under the 1933 Act pursuant to Section 3(a) above. E. The Registered Holder shall furnish in writing to the Company such information as the Company shall reasonably require in connection with a registration statement. F. The Company may, at any time and in its sole discretion, decide not to proceed with the filing of a registration statement which may have give rise to "piggy back" rights under this Section 3(g) or may at any time terminate or suspend such registration, in which event each Registered Holder's rights under this Section 3(g) as to the number of opportunities to "piggy-back" shall be reset. (h) If and whenever the Company is required by the provisions of this Section 3 to use its best efforts to register any Registrable Securities under the 1933 Act, the Company shall, as expeditiously as possible under the circumstances and subject to the terms of this Section 3: A. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective as soon as possible after filing and remain effective. B. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement current and effective and to comply with the provisions of the 1933 Act, and any regulations promulgated thereunder, with respect to the sale or disposition of all Registrable Securities covered by the registration statement required to effect the distribution of the securities, but in no event shall the Company be required to do so for a period of more than three (3) years following the Final Closing Date. -9- C. Furnish to the Sellers participating in the offering, copies (in reasonable quantities) of summary, preliminary, final, amended or supplemented prospectuses, in conformity with the requirements of the 1933 Act and any regulations promulgated thereunder, and other documents as reasonably may be required in order to facilitate the disposition of the securities, but only while the Company is required under the provisions hereof to keep the registration statement current. D. Use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions of the United States as the Sellers participating in the offering shall reasonably request, and do any and all other acts and things which may be reasonably necessary to enable each participating Seller to consummate the disposition of the Registrable Securities in such jurisdictions. E. Notify each Seller selling Registrable Securities, at any time when a prospectus relating to any such Registrable Securities covered by such registration statement is required to be delivered under the 1933 Act, of the Company's becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly prepare and furnish to each such Seller selling Registrable Securities a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. F. As soon as practicable after the effective date of the registration statement, and in any event within eighteen (18) months thereafter, make generally available to Sellers participating in the offering an earnings statement (which need not be audited) covering a period of at least twelve (12) consecutive months beginning after the effective date of the registration statement which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including, at the Company's option, Rule 158 thereunder. To the extent that the Company files such information with the SEC in satisfaction of the foregoing, the Company need not deliver the above referenced earnings statements to Sellers. G. Upon request, deliver promptly to councel of each Seller participating in the offering copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and permit each such Seller to do such investigation at such Seller's sole cost and expense, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary. Each Seller agrees that it will use its best efforts not to interfere unreasonably with the Company's business when conducting any such investigation and each Seller shall keep any such information received pursuant to this Section confidential. -10- H. Provide a transfer agent located in the United States for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement. I. List the Registrable Securities covered by such registration statement on such exchanges and/or on the NASDAQ as the Common Stock is then currently listed upon. J. Pay all Registration Expenses incurred in connection with a registration of Registrable Securities, whether or not such registration statement shall become effective; provided that each Seller shall pay all underwriting discounts, commissions and transfer taxes, and its own counsel fees, if any, relating to the sale or disposition of such Seller's Registrable Securities pursuant to a registration statement. As used herein, "Registration Expenses" means any and all reasonable and customary expenses incident to performance of or compliance with the registration rights set forth herein, including, without limitation, (i) all SEC and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses of complying with state securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities, but no other expenses of the underwriters or their counsel), (iii) all printing, messenger and delivery expenses, and (iv) the reasonable fees and disbursements of counsel for the Company and the Company's independent public accountants. (i) The Company acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 3 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 3 may be specifically enforced. In the event that the Company shall fail to file such registration statement when required pursuant to Section 3(a) above or to keep any registration statement effective as provided in this Section 3 or otherwise fails to comply with its obligations and agreements in this Section 3, then, in addition to any other rights or remedies the Registered Holders may have at law or in equity, including without limitation, the right of rescission, the Company shall indemnify and hold harmless the Registered Holders from and against any and all manner or loss which they may incur as a result of such failure. In addition, the Company shall also reimburse the Registered Holders for any and all reasonable legal fees and expenses incurred by them in successfully enforcing their rights pursuant to this Section 3, regardless of whether any litigation was commenced. 4. MISCELLANEOUS. 4.1 The Company agrees to use its best efforts to file timely all reports required to be filed by it pursuant to Sections 13 or 15 of the 1934 Act, and to provide such information as will permit the holder to sell the Common Stock acquired by it pursuant to the Offering in accordance with Rule 144 under the 1933 Act. 4.2 All notices, consents and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) one business day after the business day of transmission if sent by telecopier (with receipt confirmed), -11- provided that a copy is mailed by certified mail, return receipt requested, or (c) one business day after the business day of deposit with the carrier, if sent for next business day delivery by Express Mail, Federal Express or other recognized express delivery service (receipt requested), in each case addressed to the Company at the address indicated on the first page of this Agreement marked "Attention: Doreen Chiu, Chief Executive Officer", and to the Subscriber at the Subscriber's address indicated on the last page of this Agreement (or to such other addresses and telecopier numbers as a party may designate as to itself by notice to the other parties). 4.3 This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 4.4 This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 4.5 Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the State of New York. The parties hereby agree that any dispute which may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in New York and they hereby submit to the exclusive jurisdiction of the courts of the State of New York and of the federal courts in New York with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in case of the address set forth below or such other address as the undersigned shall furnish in writing to the other. 4.6 This Agreement may be executed in counterparts. Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of the Common Stock as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or to delete other persons as subscribers. 4.7 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. 4.8 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party. -12- 4.9 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement. -13- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. TO BE COMPLETED BY SUBSCRIBER _____________________________________ Print Name Signature for Individual Subscriber Signature of Subscriber Other than Individual _____________________________ By: _______________________________________ Signature Name: Title:
_____________________________________ Address _____________________________________ City State Zip Code _________________________________________ Aggregate Purchase Price for Common Stock __________________________________________ Social Security or Employer Identification Number SUBSCRIPTION ACCEPTED: ATG INC. By:_______________________________________ Name: Doreen Chiu Title: Chief Executive Officer Date:_____________________________________ -14- EX-10.48 5 0005.txt FORM OF COMMON STOCK PLACEMENT AGR. Exhibit 10.48 COMMON STOCK PLACEMENT AGREEMENT COMMON STOCK PLACEMENT AGREEMENT ("Agreement") dated as of June ___, 2000, by and between ATG INC., a California corporation (the "Company"), and TAGLICH BROTHERS, INC. ("Placement Agent"). W I T N E S S E T H : ------------------- WHEREAS, in reliance upon the representations, warranties, terms and conditions hereinafter set forth, Placement Agent will use its best efforts to privately place shares of common stock, no par value per share, of the Company (the "Common Stock") for a minimum aggregate purchase price of $4,500,000 ("Minimum Amount") and a maximum aggregate purchase price of $5,500,000 ("Maximum Amount"), at a price of $2.00 per share (the "Purchase Price"), with the persons and entities so purchasing the Common Stock from time to time and the number of shares of Common Stock being so purchased being as listed on Exhibit A to this Agreement (such persons and entities being referred to individually as "Purchaser" and collectively, as "Purchasers"); and WHEREAS, the shares of Common Stock are being issued pursuant to the Company's Confidential Private Placement Memorandum and Exhibits thereto dated June 26, 2000, as the same may be amended and/or supplemented from time to time (collectively, the "Memorandum"); and WHEREAS, the shares of Common Stock are being issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "1933 Act"). NOW, THEREFORE, in consideration of the premises and the respective promises hereinafter set forth, the Company and the Placement Agent hereby agree as follows: 1. Sale and Purchase of Common Stock. --------------------------------- (a) Subject to the terms and conditions of this Agreement, the Company shall sell to the Purchasers a minimum of $4,500,000 and a maximum of $5,500,000 of the Common Stock at the Purchase Price per share for an aggregate purchase price of not less than the Minimum Amount nor greater than the Maximum Amount, respectively. (b) The initial sale and purchase described in Section 1(a) of this Agreement shall take place at a closing ("Closing") at the offices of ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN, LLP, 1290 Avenue of the Americas, New York, New York 10104 or such other place as shall be acceptable to the Company and Placement Agent on such date or dates as Placement Agent shall advise the Company on two (2) business days notice or such shorter notice as shall be reasonably acceptable to the Company. In no event shall the Initial Closing (as defined below) occur unless the Minimum Amount is sold. Subsequent sales and purchases of Common Stock up to the Maximum Amount shall take place at one or more Closings held on such dates as the Company and Placement Agent shall mutually determine. All Closings pursuant to this Agreement shall occur not later than June 30, 2000 unless such date is extended for up to ten (10) days by mutual agreement of the Company and the Placement Agent, in their sole and absolute discretion. The initial Closing hereunder shall be referred to as "Initial Closing", the final Closing hereunder shall be referred to as "Final Closing" and the date of the Final Closing shall be referred to as the "Final Closing Date". (c) All defined terms used in this Agreement which are not otherwise defined shall have the meanings ascribed to them in the Memorandum. 2. Payment. At each Closing, the Company shall deliver to Placement ------- Agent, on behalf of the Purchasers, the original executed and sealed Common Stock certificates evidencing the shares of Common Stock being purchased by the Purchasers, against its receipt of payment therefor by certified or bank check drawn on a bank located in the United States, or by Federal wire transfer, in the amount of the aggregate purchase price for such Common Stock being sold, less the amount of fees payable to Placement Agent pursuant to Section 10(a) of this Agreement. All Common Stock being purchased by the Purchasers shall be issued in the respective names of the Purchasers in accordance with instructions provided by Placement Agent not later than the day of Closing. 3. Representations and Warranties of the Company. The Company hereby --------------------------------------------- represents and warrants to and covenants and agrees with the Placement Agent, as of the date hereof and as of the date of each Closing, as follows: (a) The Company is a corporation duly organized and validly existing under the laws of the State of California and is qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted by the Company or the property owned or leased by the Company requires such qualification, except where the failure to be so qualified has not had or will not have a material adverse effect on the business, financial condition or results of operations of the Company ("Material Adverse Effect"). Except as set forth in the Memorandum, the Company has no subsidiaries and does not own any equity interest in and has not made any loans or advances to or guarantees of indebtedness to any person, corporation, partnership or other entity. (b) The authorized capital of the Company consists of 20,000,000 shares of Common Stock, of which, (i) as of April 28, 2000, 14,104,457 shares are issued and outstanding, and (ii) as of March 31, 2000, 1,517,000 shares of have been reserved for issuance upon exercise of outstanding debentures, options, warrants and other rights to acquire Common Stock and upon the exercise of options granted pursuant to the Company's stock option plans and pursuant to other agreements, excluding the shares of Common Stock (the "PAW Exercise Shares") issuable upon exercise of the Placement Agent Warrants (as defined below). Except as set forth in the preceding sentence or in the Memorandum, the Company is not a party to any agreement to issue, nor has it issued, any warrants, options or rights or preferred stock, notes or other evidence of indebtedness -2- or other securities, instruments or agreements upon the exercise or conversion of which or pursuant to the terms of which additional shares of capital stock of the Company may become issuable. No holder of any of the Company's securities has preemptive rights or contractual rights of first refusal. (c) The Company has the full right, power and authority to execute, deliver and perform under this Agreement, the Common Stock and the Placement Agent Warrants. This Agreement has been duly executed by the Company and, at each Closing, the Common Stock and the Placement Agent Warrants being issued will have been duly executed by the Company, and this Agreement, the Common Stock and the Placement Agent Warrants and the transactions contemplated by this Agreement, the Common Stock and Placement Agent Warrants have been duly authorized by all necessary corporate action and each constitute, the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms. (d) All of the issued and outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable, with no personal liability attaching to the holders thereof, and such shares of Common Stock have not been issued in violation of the preemptive rights or rights of first refusal of any holder of securities of the Company. All of the issued and outstanding shares of Common Stock have been issued pursuant to either a current effective registration statement under the 1933 Act or an exemption from the registration requirements of the 1933 Act and were issued in accordance with all applicable Federal and state securities laws. (e) The shares of Common Stock included in the PAW Exercise Shares have been authorized for issuance and, when issued pursuant to this Agreement and the terms of the Placement Agent Warrants, will be duly authorized and validly issued, fully paid and nonassessable and free from preemptive rights or rights of first refusal held by any person. (f) The following financial statements of the Company (hereinafter collectively, the "Financial Statements") are included in the Memorandum (i) consolidated balance sheets as at December 31, 1999, and consolidated statements of shareholders' equity for the fiscal year ended December 31, 1999, and the related notes thereto, which have been audited by PriceWaterhouseCooopers LLP, an independent certified public accountant; (ii) consolidated balance sheets as at December 31, 1998, and consolidated statements of shareholders' equity for the fiscal year ended December 31, 1998, and the related notes thereto, which have been audited by PriceWaterhouseCoopers LLP, an independent certified public accountant; and (iii) unaudited consolidated balance sheets as at March 31, 2000 and unaudited consolidated statements of income and cash flows for the fiscal quarter ended March 31, 2000, and the related notes thereto, which have been prepared by the Company. The Financial Statements, which are included in the Company's Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 1999 ("Form 10-K"), and the Company's Form 10-Q Quarterly Report for the fiscal quarter ended March 31, 2000 ("Form 10-Q") were prepared in accordance with generally accepted accounting principles consistently applied and present and reflect fairly the financial position of the Company at the respective balance sheet dates and the results of its operations, changes in shareholders' equity and -3- cash flows for the applicable periods; provided, however, that the financial statements included in the Form 10-Q are subject to normal year-end adjustments and lack footnotes and other presentation items. During the period of PriceWaterhouseCoopers LLP's engagement as the Company's independent certified public accountants, there has been no material disagreements between the accounting firm and the Company on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure and no reportable events relating to the relationship between the Company and the accounting firm. The Company has made and kept books and records and accounts which are in reasonable detail and which fairly and accurately reflect the activities of the Company, subject only to year-end adjustments. (g) The Company has good and marketable title to all of its property and assets and, except as set forth in the Memorandum or reflected in the Financial Statements, none of such property or assets of the Company is subject to any lien, mortgage, pledge, encumbrance or other security interest, other than such liens, mortgages, pledges, encumbrances or other security interests, other than incurred in the ordinary course of the Company's business or the foreclosure of which would not have a Material Adverse Effect. (h) Except as may be disclosed in the Memorandum, since March 31, 2000 there has not been any material adverse change in the financial condition or in the operations, or business of the Company from that reflected in the Financial Statements or any damage or destruction, not covered by insurance, which materially affects the business, property or assets of the Company. (i) Except as set forth in the Exhibits to the Memorandum, the Company has not filed any Current Reports on Form 8-K or other reports filed with the Securities and Exchange Commission (the "SEC") subsequent to March 31, 2000. (j) Neither the execution or delivery of this Agreement, the Common Stock or the Placement Agent Warrants by the Company nor the performance by the Company of the transactions contemplated by this Agreement, the Common Stock or the Placement Agent Warrants: (i) requires the consent, waiver, approval, license or authorization of or filing with or notice to any person, entity or public authority (except any filings required by Federal or state securities laws); (ii) violates or constitutes a default under or breach of any law, rule or regulation applicable to the Company; or (iii) conflicts with or results in a breach or termination of any provision of, or constitutes a default under, or will result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Company with or without the giving of notice, the passage of time or both, pursuant to (A) the Company's restated and amended articles of incorporation or restated and amended by-laws, (B) any mortgage, deed of trust, indenture, note, loan agreement, security agreement, contract, lease, license, alliance agreement, joint venture agreement, or other agreement or instrument, or (C) any order, judgment, decree, statute, regulation or any other restriction of any kind or character to which the Company is a party or by which any of the assets of the Company may be bound. -4- (k) The Company has no indebtedness to any officer, director, 5% shareholder or other Affiliate (as defined in the Rules and Regulations of the SEC under the 1933 Act) of the Company. (l) The Company is in compliance with all laws, rules and regulations of all Federal, state and local government agencies having jurisdiction over the Company or affecting the business, assets or properties of the Company, except where the failure to be in compliance has not had and will not have a Material Adverse Effect. The Company possess all licenses, permits, consents, approvals and agreements which are required to be issued by any and all applicable Federal, state or local authorities necessary for the operation of its business and/or in connection with its assets or properties, except where the failure to possess such licenses, permits, consents, approvals and agreements has not had and will not have a Material Adverse Effect. (m) The Company is not in default under any note, loan agreement, security agreement, mortgage, contract, franchise agreement, distribution agreement, lease, alliance agreement, joint venture agreement, agreement, license, permit, consent, approval or instrument to which it is a party, and no event has occurred which, with or without the lapse of time or giving of notice, or both, would constitute such default thereof by the Company or would cause acceleration of any obligation of the Company or would adversely affect the business, operations or financial condition of the Company, except where such default or event, whether with or without the lapse of time or giving of notice, or both, has not and will not have a Material Adverse Effect. To the knowledge of the Company, no party to any note, loan agreement, security agreement, mortgage, contract, franchise agreement, distribution agreement, lease, alliance agreement, joint venture agreement, agreement, license, permit, consent, approval or instrument with or given to the Company is in default thereunder and no event has occurred with respect to such party, which, with or without the lapse of time or giving of notice, or both, would constitute a default by such party or would cause acceleration of any obligations of such party. (n) To the best of the Company's knowledge, except as set forth in the Memorandum, no officer, director or 5% shareholder of the Company and no Affiliate of any such person either (i) holds any interest in any corporation, partnership, business, trust, sole proprietorship or any other entity which is engaged in a business substantially similar to that conducted by the Company (other than a passive immaterial interest in a public company engaged in any such business) or (ii) engages in business with the Company. (o) Except as set forth in the Memorandum, there are no material (i.e., involving an asserted liability that reasonably could be expected to result in a judgement in excess of two hundred fifty thousand dollars ($250,000)) claims, actions, suits, proceedings or labor disputes, inquiries or investigations (whether or not purportedly on behalf of the Company), pending or, to the best of the Company's knowledge, threatened, against the Company, at law or in equity or by or before any Federal, state, county, municipal or other governmental department, SEC, National Association of Securities Dealers, Inc., board, bureau, agency or instrumentality, domestic or foreign, whether legal or administrative or in arbitration or mediation, nor to the best of the -5- Company's knowledge is there any basis for any such action or proceeding. Neither the Company nor any of its assets are subject to, nor is the Company in default with respect to, any order, writ, injunction, judgment or decree that could have a Material Adverse Effect. (p) The accounts receivable of the Company represent receivables generated from the sale of goods and services in the ordinary course of business. The Company knows of no material disputes concerning accounts receivable of the Company. (q) Except as set forth in the Memorandum, the Company has (i) no written employment contracts and no oral employment contracts not terminable at will by the Company, with any 5% percent shareholder, officer or director of the Company, (ii) no consulting agreement or other compensation agreement with any 5% percent shareholder, officer or director of the Company, or (iii) no agreement or contract with any 5% percent shareholder, officer or director of the Company, that will result in the payment by the Company, or the creation of any commitment or obligation (absolute or contingent), of the Company, to pay any severance, termination, "golden parachute", or similar payment to any present or former personnel of the Company, following termination of employment, other than a severance policy applicable to the Company's rank and file employees and Change-In-Control Agreements to which three of the Company's senior executives are party. No director or executive officer of the Company has advised the Company that he or she intends to resign as director and/or executive officer of the Company or to terminate his or her employment with the Company. (r) The accounts payable of the Company represent bona fide payables to third parties incurred in the ordinary course of business and represent bona fide debts for services and/or goods provided to the Company. (s) Except as set forth in the Memorandum, the Company is not a party to a labor agreement with respect to any of its employees with any labor organization, union, group or association and there are no employee unions (nor any similar labor or employee organizations). There is no labor strike or labor stoppage or slowdown pending, or, to the best knowledge of the Company, threatened against the Company nor has the Company experienced in the last five (5) years any work stoppage or other labor difficulty. The Company is in compliance in all material respects with all applicable laws, rules and regulations regarding employment practices, employee documentation, terms or conditions of employment and wage and hours and the Company is not engaged in any unfair labor practices. There are no unfair labor practices charges or complaints against the Company pending before the National Labor Relations Board or any other governmental agency. (t) Except as set forth in the Memorandum, there are no employee pension, retirement or other benefit plans, maintained, contributed to or required to be contributed to by the Company covering any employee or former employee of the Company and the Company has no liability or obligation of any kind or nature, whether accrued or contingent, matured or unmatured, known or unknown, under any provision of the Employee Retirement Income Security Act of 1974, -6- as amended ("ERISA") or any provision of the Internal Revenue Code of 1986, as amended, specifically relating to persons subject to ERISA. (u) The Company has timely filed with the appropriate taxing authorities all returns in respect of taxes required to be filed through the date hereof and has timely paid all taxes that it is required to pay or has established an adequate reserve therefor, except where the Company has timely filed for extensions. There are no pending or, to the best knowledge of the Company, threatened audits, investigations or claims for or relating to any liability of the Company in respect of taxes. (v) There are no finder's fees or brokerage commissions payable with respect to the transactions contemplated by this Agreement, except as provided in Section 10 of this Agreement, and the Company agrees to indemnify and hold harmless the Placement Agent from and against any and all cost, damage, liability, judgment and expense (including reasonable fees and expenses of counsel) arising out of or relating to claims for such fees or commissions. (w) The Company is not currently and has not during the past six (6) months been engaged in substantive negotiations (as compared with informal discussions) with respect to: (i) any merger or consolidation of the Company where the Company would not be the surviving entity; or (ii) the sale of the Company or any of its assets other than sales in the ordinary course of business. (x) The Company has the right to conduct its business in the manner in which its business has been heretofore conducted. The conduct of such businesses by the Company does not, except to the extent that it would not have a Material Adverse Effect, violate or infringe upon the patent, copyright, trade secret or other proprietary rights of any third party, and the Company has not received any notice of any claim of any such violation or infringement. (y) The Company is currently in compliance in all material respects with all applicable Environmental Laws (as defined below), including, without limitation, obtaining and maintaining in effect all permits, licenses, consents and other authorizations required by applicable Environmental Laws and the Company is currently in compliance in all material respects with all such permits, licenses, consents and other authorizations. The Company has not received notice from any property owner, landlord, tenant or Governmental Authority (as defined below) that Hazardous Wastes (as defined below) are being improperly used, stored or disposed of at any property currently or formerly owned or leased by the Company or that any soil or ground water contamination has emanated from any such property. For purposes hereof, the term "Environmental Laws" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. For purposes -7- hereof, the term "Governmental Authority" shall mean the Federal Government of the United States of America, any state or any political subdivision of the Federal Government or any state, including but not limited to courts, departments, commissions, boards, bureaus, agencies, ministries or other instrumentalities. For purposes hereof, the term "Hazardous Waste" shall mean any regulated quantity of hazardous substances as listed by the United States Environmental Protection Agency ("EPA") and the list of toxic pollutants designated by the United States Congress and/or the EPA or defined by any other Federal, state or local statute, law, ordinance, code, rule, regulation, order, or decree regulating, relating to or imposing liability for standards of conduct concerning any hazardous or toxic substance or material. (z) The information contained in the Financial Statements and the Memorandum, taken together, does not contain any misstatement of a material fact or omit to state a material fact necessary to make the information not misleading. (aa) There has not been any material adverse change to any agreement to which the Company is party which contemplates gross receipts to the Company over the life of such agreement in excess of $2,000,000 (a "Significant Contract"). Each Significant Contract listed on Exhibit B hereto is a legal, --------- valid and binding obligation of the Company and remains in full force and effect. 4. Survival of Representations and Warranties and Indemnification. The -------------------------------------------------------------- representations and warranties of the Company set forth in Section 3 of this Agreement shall survive the execution and delivery of the Common Stock. The indemnification obligations of the Company as set forth in the indemnification rider identified as Exhibit B (the "Indemnification Rider") to the May 15, 2000 engagement letter between the Company and the Placement Agent, as same shall be supplemented and/or amended, is hereby incorporated herein by reference in its entirety as if fully set forth herein and the provisions of the Indemnification Rider shall apply and be applicable to, among other things, all representations and warranties of the Company contained herein. 5. Use of Proceeds. The net proceeds from the sale of the Common Stock --------------- will be used by the Company as disclosed in the Memorandum. 6. Unregistered Securities. Neither the Common Stock, Placement Agent ----------------------- Warrants nor PAW Exercise Shares have been registered under the 1933 Act, in reliance upon the applicability of Section 3(b), 4(2), 4(6) and/or Rule 506 of Regulation D of the 1933 Act to the transactions contemplated hereby. The certificates representing the Common Stock and Placement Agent Warrants will bear an investment legend and the certificates representing the PAW Exercise Shares issued prior to their respective registration under the 1933 Act and will also bear investment legends. -8- 7. Registration Rights and "Piggy-Back" Registration Rights. -------------------------------------------------------- (a) Within forty-five (45) days after the Final Closing Date (regardless of whether the Maximum Amount shall have been sold), the Company shall, at its sole cost and expense, prepare and file a registration statement ("Registration Statement") on the appropriate form with the SEC with respect to the shares of Common Stock sold pursuant to the Memorandum and the PAW Exercise Shares, and such additional shares of Common Stock that may be issued pursuant to the anti-dilution rights contained in the Placement Agent Warrants and as set forth below in this Section 7(a) (collectively, the "Registrable Securities"), time being of the essence. The Company will use its best efforts to have such Registration Statement declared effective as soon as possible after filing, and to keep such Registration Statement current and effective for at least three (3) years from the Final Closing Date or until such earlier date as all of the Registrable Securities registered pursuant to such Registration Statement shall have been sold. Notwithstanding anything to the contrary contained herein, if such Registration Statement shall not be filed with the SEC within 45days after the Final Closing Date or the Registration Statement shall not be declared effective within 120 days after the Final Closing Date (regardless of whether the Maximum Amount shall have been sold), then (i) with respect to the failure to file the Registration Statement within 45 days of the Final Closing Date, the registered holders of such Registrable Securities (including transferees authorized under applicable securities laws; hereinafter, collectively the "Registered Holders") shall be entitled at no cost to additional shares of Common Stock from the Company ("Additional Shares") equal to the product of three (3%) percent of the number of Registrable Securities owned by each such holder, and the number of thirty (30) day periods, or any part thereof, beyond said forty-five (45) day period, until the initial Registration Statement described herein covering the Registrable Securities is filed with the SEC, and/or (ii) with respect to the Registration Statement not being declared effective within 120 days of the Final Closing Date, the Registered Holders shall be entitled at no cost to Additional Shares equal to the product of two (2%) percent of the number of Registrable Securities owned by each such holder, and the number of thirty (30) day periods, or any part thereof, beyond said 120 day period, until the initial Registration Statement described herein covering the Registrable Securities is declared effective. The maximum number of Additional Shares issuable pursuant to this provision is 36%. (b) In the event the Company effects any registration under the 1933 Act of any Registrable Securities pursuant to Sections 7(a) above or 7(g) below, the Company shall indemnify, to the extent permitted by law, and hold harmless any Registered Holder whose Registrable Securities are included in such registration statement (each, a "Seller"), any underwriter, any officer, director, employee or agent of any Seller or underwriter, and each other person, if any, who controls any Seller or underwriter within the meaning of Section 15 of the 1933 Act, against any losses, claims, damages or liabilities, judgment, fines, penalties, costs and expenses, joint or several, or actions in respect thereof (collectively, the "Claims"), to which each such indemnified party becomes subject, under the 1933 Act or otherwise, insofar as such Claims arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or any amendment or supplement thereto or any document filed under a state securities or blue sky law (collectively, the "Registration Documents") or insofar as such Claims -9- arise out of or are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in investigating or defending any such Claim; provided that the Company shall not be liable in any such case to a particular indemnified party to the extent such Claim is based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use in the preparation of such Registration Document. (c) In connection with any registration statement in which any Seller is participating, each Seller, severally and not jointly, shall indemnify, to the extent permitted by law, and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each other person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, each other Seller and each underwriter, any officer, director, employee or agent of any such other Seller or underwriter and each other person, if any, who controls such other Seller or underwriter within the meaning of Section 15 of the 1933 Act against any Claims to which each such indemnified party may become subject under the 1933 Act or otherwise, insofar as such Claims (or actions in respect thereof) are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Document, or insofar as any Claims are based upon the omission or alleged omission to state in any Registration Document a material fact required to be stated therein or necessary to make the statements made therein not misleading, and will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in investigating or defending any such Claim; provided, however, that such indemnification or reimbursement shall be payable only if, and to the extent that, any such Claim arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Document in reliance upon and in conformity with written information furnished to the Company by the Seller specifically for use in the preparation thereof. (d) Any person entitled to indemnification under Sections 7(b) or 7(c) above shall notify promptly the indemnifying party in writing of the commencement of any Claim if a claim for indemnification in respect thereof is to be made against an indemnifying party under this Section 7(d), but the omission of such notice shall not relieve the indemnifying party from any liability which it may have to any indemnified party under Sections 7(b) or 7(c) above, except to the extent that such failure shall materially adversely affect any indemnifying party or its rights hereunder. In case any action is brought against the indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it chooses, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party; and, after notice from the indemnifying party to the indemnified party that it so chooses, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the Claim -10- within twenty (20) days after receiving notice from the indemnified party such that the indemnified party believes it has failed to do so; (ii) if the indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there are legal defenses available to the indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties, except to the extent any indemnified party or parties reasonably shall have concluded that there are legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any reasonable expenses therefor; provided, that no indemnifying party shall be subject to any liability for any settlement of a Claim made without its consent (which may not be unreasonably withheld, delayed or conditioned). If the indemnifying party assumes the defense of any Claim hereunder, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party. (e) If for any reason the indemnity provided in Sections 7(b) or 7(c) above is unavailable, or is insufficient to hold harmless, an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other from the transactions contemplated by this Agreement. If, however, the allocation provided in the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. Notwithstanding the foregoing, no underwriter or controlling person thereof, if any, shall be required to contribute, in respect of such underwriter's participation as an underwriter in the offering, any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The -11- obligation of any underwriters to contribute pursuant to this Section 7(e) shall be several in proportion to their respective underwriting commitments and not joint. (f) The provisions of Sections 7(b) through 7(e) of this Agreement shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party. (g) The Sellers shall have certain "piggy-back" registration rights with respect to the Registrable Securities as hereinafter provided: A. If at any time after the Final Closing Date and prior to the date that the Registrable Securities are registered under the 1933 Act pursuant to Section 7(a) above, the Company shall file with the SEC a registration statement under the 1933 Act (other than a registration statement on Form S-4 or Form S-8 or any successor thereof, or filed in connection with an exchange offer or an offer of securities solely to the Company's existing shareholders) registering any shares of Common Stock, the Company shall give written notice to each Seller thereof prior to such filing. B. Within fifteen (15) days after such notice from the Company, each Seller shall give written notice to the Company whether or not the Seller desires to have all of the Seller's Registrable Securities included in the registration statement. If a Seller fails to give such notice within such period, such Seller shall not have the right to have Seller's Registrable Securities registered pursuant to such registration statement. If a Seller gives such notice, then the Company shall include such Seller's Registrable Securities in the registration statement, at the Company's sole cost and expense, subject to the remaining terms of this Section 7(g); provided, however, that each Seller shall pay all underwriting discounts, commissions, and transfer taxes relating to the sale of such Seller's Registrable Securities, as well as his, her or its own counsel fees, if any, relating to the sale of the Seller's Registrable Securities. C. If the registration statement relates to an underwritten offering, and the underwriter in its sole discretion shall determine in writing that the total number of shares of Common Stock to be included in the offering, including the Registrable Securities, shall exceed the amount which the underwriter in its sole discretion deems to be appropriate for the offering, the number of shares of the Registrable Securities shall be reduced pro rata (based on the number of Registered Securities requested to be included). The Sellers shall enter into such agreements as may be reasonably required by the underwriters. D. The Sellers each shall have two (2) opportunities to have the Registrable Securities registered under this Section 7(g). -12- E. The Sellers shall furnish in writing to the Company such information as the Company shall reasonably require in connection with a registration statement. F. The Company may, at any time and in its sole discretion, decide not to proceed with the filing of a registration statement which may have given rise to "piggy-back" rights under this Section 7(g) or may at any time terminate or suspend such registration, in which event each Seller's rights under this Section 7 as to the number of opportunities to "piggy-back" shall be reset. (h) If and whenever the Company is required by the provisions of Section 7(a) to use its best efforts to register any Registrable Securities under the 1933 Act, the Company shall, as expeditiously as possible under the circumstances and subject to the terms of this Section 7: A. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective as soon as possible after filing and remain effective. B. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement current and effective and to comply with the provisions of the 1933 Act, and any regulations promulgated thereunder, with respect to the sale or disposition of all Registrable Securities covered by the registration statement required to effect the distribution of the securities, but in no event shall the Company be required to do so for a period of more than three (3) years following the Final Closing Date. C. Furnish to the Sellers participating in the offering, copies (in reasonable quantities) of summary, preliminary, final, amended or supplemented prospectuses, in conformity with the requirements of the 1933 Act and any regulations promulgated thereunder, and other documents as reasonably may be required in order to facilitate the disposition of the securities, but only while the Company is required under the provisions hereof to keep the registration statement current. D. Use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions of the United States as the Sellers participating in the offering shall reasonably request, and do any and all other acts and things which may be reasonably necessary to enable each participating Seller to consummate the disposition of the Registrable Securities in such jurisdictions. E. Notify each Seller selling Registrable Securities, at any time when a prospectus relating to any such Registrable Securities covered by such registration statement is required to be delivered under the 1933 Act, of the Company's becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the -13- statements therein not misleading in the light of the circumstances then existing, and promptly prepare and furnish to each such Seller selling Registrable Securities a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. F. As soon as practicable after the effective date of the registration statement, and in any event within eighteen (18) months thereafter, make generally available to Sellers participating in the offering an earnings statement (which need not be audited) covering a period of at least twelve (12) consecutive months beginning after the effective date of the registration statement which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including, at the Company's option, Rule 158 thereunder. To the extent that the Company files such information with the SEC in satisfaction of the foregoing, the Company need not deliver the above referenced earnings statement to Sellers. G. Upon request, deliver promptly to counsel of each Seller participating in the offering copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and permit each such Seller to do such investigation at such Seller's sole cost and expense, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary. Each Seller agrees that it will use its best efforts not to interfere unreasonably with the Company's business when conducting any such investigation and each Seller shall keep any such information received pursuant to this Section 7(h)G confidential. H. Provide a transfer agent located in the United States for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement. I. List the Registrable Securities covered by such registration statement on such market or exchanges and/or on Nasdaq as the Common Stock is then currently listed upon. J. Pay all Registration Expenses (as defined below) incurred in connection with a registration of Registrable Securities, whether or not such registration statement shall become effective; provided that each Seller shall pay all underwriting discounts, commissions and transfer taxes, and their own counsel fees, if any, relating to the sale or disposition of such Seller's Registrable Securities pursuant to a registration statement. As used herein, "Registration Expenses" means any and all reasonable and customary expenses incident to performance of or compliance with the registration rights set forth herein, including, without limitation, (i) all SEC and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses of complying with state securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the -14- Registrable Securities but no other expenses of the underwriters or their counsel), (iii) all printing, messenger and delivery expenses, and (iv) the reasonable fees and disbursements of counsel for the Company and the Company's independent public accountants. (i) The Company acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 7 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 7 may be specifically enforced. In the event that the Company shall fail to file such registration statement when required pursuant to Section 7(a) above or to keep any registration statement effective as provided in this Section or otherwise fails to comply with its obligations and agreements in this Section 7, then, in addition to any other rights or remedies Sellers may have at law or in equity, including without limitation, the right of rescission, the Company shall indemnify and hold harmless each holder of Placement Agent Warrants from and against any and all manner or loss which they may incur as a result of such failure. In addition, the Company shall also reimburse such holders for any and all reasonable legal fees and expenses incurred by them in successfully enforcing their rights pursuant to this Section 7, regardless of whether any litigation was commenced; provided, however, that the Company shall not be liable for the fees and expenses of more than one law firm, which firm shall be designated by the Placement Agent. 8. Conditions. The following obligations of the Company shall be ---------- satisfied or fulfilled on or prior to the date of each Closing, unless otherwise agreed to in writing by the Placement Agent: (a) The Company shall have delivered to the Placement Agent, at the Initial Closing, (i) a currently-dated long-form good standing or comparable certificate or telegram from the Secretary of State or other appropriate authority where the Company is incorporated and each other jurisdiction in which the Company is qualified to do business as a foreign corporation; (ii) the restated and amended articles of incorporation of the Company, as currently in effect, certified by the Secretary of State or other appropriate authority of the state where the Company is incorporated; (iii) by-laws of the Company certified by the secretary of the Company, as currently in effect; and (iv) certified resolutions of the Board of Directors of the Company approving this Agreement, the execution and delivery of the Common Stock and the Placement Agent Warrants, the registration of the Registrable Securities and the other transactions contemplated by this Agreement and the Memorandum. (b) There shall have occurred no material adverse event affecting the Company or any of its businesses or assets or the Company's securities since the date of this Agreement. (c) No litigation or administrative proceeding shall have been threatened or commenced against the Company which (i) seeks to enjoin or otherwise prohibit or restrict the consummation of the transactions contemplated by this Agreement or (ii) if adversely determined, would have a Material Adverse Effect or have a material adverse effect on the Company's assets or upon its securities. -15- (d) The Company shall have delivered to the Placement Agent a certificate of its principal executive and financial officers as to the matters set forth in Sections 8(a), (b) and (c) of this Agreement and to the further effect that (i) the Company is not in default, in any respect, under any note, loan agreement, security agreement, mortgage, deed of trust, indenture, contract, alliance agreement, lease, license, joint venture agreement, agreement or other instrument to which it is a party; (ii) the Company's representations and warranties contained in this Agreement are true and correct in all respects on such date with the same force and effect as if made on such date; (iii) there has been no amendment or changes to the Company's charter or by-laws or authorizing resolutions from those delivered pursuant to Section 8(a) of this Agreement; and (iv) no event has occurred which, with or without the lapse of time or giving of notice, or both, would constitute a breach or default thereof by the Company or would cause acceleration of any obligation of the Company, or could adversely affect the business, operations or financial condition of the company. (e) The Placement Agent shall have received the opinion of Miller & Holguin, counsel for the Company, dated as of the closing date in form and substance reasonably satisfactory to the Placement Agent and its counsel. (f) The Company shall have prepared and filed or delivered to counsel for filing with the SEC and any states in which such filing is required, a Form D relating to the sale of the Common Stock and such other documents and certificates as are required. (g) Subscriptions for at least the Minimum Amount of Common Stock shall have been accepted by the Company. (h) In addition to the right of the Placement Agent to terminate this Agreement and not consummate the transactions contemplated by this Agreement as a result of the failure of the Company to comply with any of its obligations set forth in this Agreement, this Agreement may be terminated by the Placement Agent by written notice to the Company at any time prior to the Initial Closing if, in the Placement Agent's sole judgment, (i) the Company shall have sustained a loss that is material to the Company, whether or not insured, by reason of fire, earthquake, flood, accident or other calamity, or from any labor dispute or court or government action, order or decree; (ii) trading in securities on any exchange or system shall have been suspended or limited either generally or specifically with respect to the Common Stock; (iii) material governmental restrictions have been imposed on trading in securities generally or specifically with respect to the Common Stock (not in force and effect on the date of this Agreement); (iv) a banking moratorium shall have been declared by Federal or New York State authorities; (v) an outbreak of major international hostilities or other national or international calamity shall have occurred; (vi) the Congress of the United States or any state legislative body shall have passed or taken any action or measure, or such bodies or any governmental body or any authoritative accounting institute, or board, or any governmental executive shall have adopted any orders, rules or regulations, which the Placement Agent reasonably believes is likely to have a material adverse effect on the business, financial condition or financial statements of the Company or the market for the Common Stock; (vii) the Common Stock shall have been delisted from Nasdaq; or (viii) there shall have been, in the Placement Agent's judgment, a -16- material decline in the Dow Jones Industrial Index or the market price of the Common Stock at any time subsequent to the date of this Agreement. 9. Covenants of the Company. ------------------------ (a) The Company agrees at all times as long as the Placement Agent Warrants may be exercised, to keep reserved from the authorized and unissued Common Stock, such number of shares of Common Stock as may be, from time to time, issuable upon exercise the Placement Agent Warrants. (b) Within ninety (90) days of the Final Closing Date, the Company will use its reasonable best efforts to raise an additional $3,000,000 in the aggregate by closing on the sale of convertible securities on terms mutually acceptable to the Company and Placement Agent (the "Additional Offering"); provided, however, that if the Company obtains additional financing of at least $3,000,000 during such ninety (90) day period from an institution, including, without limitation, a bank, insurance company or leasing company, the Company will not be required to use its reasonable best efforts to close on the Additional Offering. The Company shall, prior to the first closing of any such sale of convertible securities, provide written notice to all holders of the Common Stock sold pursuant to the Memorandum. Such notice shall include a description of the proposed transaction and all documents relating thereto and shall afford each holder of such Common Stock the right to participate in such transaction by exchanging all of the shares of such Common Stock purchased by the holder for such convertible securities. Each holder of such Common Stock shall have fifteen (15) days after receiving notice from the Company to deliver written notice to the Company (together with the original Common Stock and such other documents as the Company shall reasonably request) that such holder desires to participate in such transaction. Any holder desiring to participate must do so as to all but not less than all of the Purchase Price paid for such Common Stock. After receipt by the Company of the holder's notice to participate, the Company will promptly deliver to such holder the convertible securities against surrender by the holder of all shares of such Common Stock. 10. Fees. ---- (a) Upon the receipt by the Company of the payments from the Purchasers, the Company shall pay to the Placement Agent a fee equal to seven (7%) percent of the gross proceeds from the Common Stock sold pursuant to this Agreement. In addition, the Company shall issue at the Final Closing, five (5) year warrants to purchase an amount of Common Stock equal to seven (7%) of the number of shares of Common Stock sold pursuant to the Memorandum, at an exercise price per share of 137.5% of the Purchase Price, subject to adjustment (the "Placement Agent Warrants"), a portion or all of which may be allotted by the Placement Agent to employees of the Placement Agent. The persons in whose name the Placement Agent Warrants are issued shall all be "accredited investors" as defined in the regulations promulgated under the 1933 Act and such persons shall acquire such warrants for investment purposes only and not with a view towards the redistribution thereof. The Company shall reimburse the Placement Agent for up to $25,000 of its -17- reasonable costs and expenses, which amount includes the reasonable fees and expenses of counsel to the Placement Agent, if and when a closing occurs. (b) The Company shall pay any fees required in connection with the qualification of the sale of the Common Stock under the state securities or blue sky laws of any state which the Placement Agent reasonably deems necessary and any other out-of-pocket expenses incurred by the Company in connection with the transaction contemplated by this Agreement. (c) All payments in connection with the sale of the Common Stock shall be made pursuant to the terms and conditions of the Escrow Agreement dated as of June 22, 2000 between Placement Agent and American Stock Transfer & Trust Company, an executed copy of which has been delivered to and acknowledged by the Company. 11. Notices. All notices provided for in this Agreement shall be in ------- writing signed by the party giving such notice, and delivered personally or sent by overnight courier or messenger against receipt thereof or sent by registered or certified mail, return receipt requested, or by facsimile transmission, if confirmed by mail as provided in this Section 11. Notices shall be deemed to have been received on the date of personal delivery or facsimile or, if sent by certified or registered mail, return receipt requested, shall be deemed to be delivered on the third business day after the date of mailing. Notices shall be sent to the following addresses: To the Company: ATG INC. 47375 Fremont Boulevard Fremont, CA 94538 Telecopier: (510) 651-3731 Telephone: (510) 490-3008 Attention: Ms. Doreen Chiu With a copy to: MILLER & HOLGUIN 1801 Century Park East Telecopier: (310) 557-2205 Telephone: (310) 556-1990 Attention: Brian A. Sullivan -18- To Placement Agent: TAGLICH BROTHERS, INC. 1370 Avenue of the Americas 31 /st/ Floor New York, NY 10019 Telecopier: (212) 265-4111 Telephone: (212) 265-4744 Attention: Mr. Michael N. Taglich With a copy to: ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP 1290 Avenue of the Americas New York, New York 10104 Telecopier: (212) 541-1412 Telephone: (212) 541-2266 Attention: Robert G. Leonard, Esq. or to such other address as any party shall designate in the manner provided in this Paragraph 11. 12. Miscellaneous. ------------- (a) This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof, superseding any and all prior or contemporaneous oral and prior written agreements and understandings. This Agreement may not be modified or amended nor may any right be waived except by a writing which expressly refers to this Agreement, states that it is a modification, amendment or waiver and is signed by all parties with respect to a modification or amendment or the party granting the waiver with respect to a waiver. No course of conduct or dealing and no trade custom or usage shall modify any provisions of this Agreement. (b) This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state. Each party hereby consents to the exclusive jurisdiction of the Federal and State Courts situated in New York County, New York in connection with any action arising out of or based upon this Agreement and the transaction contemplated by this Agreement. (c) This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective personal representatives, successors and permitted assigns. (d) In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision. -19- (e) Each party shall, without payment of any additional consideration by any other party, at any time on or after the date of any Closings take such further action and execute such other and further documents and instruments as the other party may request in order to provide the other party with the benefits of this Agreement. (f) The captions and headings contained herein are solely for convenience and reference and do not constitute a part of this Agreement. (g) All references to any gender shall be deemed to include the masculine, feminine or neuter gender, the singular shall include the plural and the plural shall include the singular. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document. -20- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first aforesaid. ATG INC. TAGLICH BROTHERS, INC. By:_______________________________ By:_______________________________________ Name: Doreen Chiu Name: Richard C. Oh Title: Chief Executive Officer Title: Vice President EXHIBIT A --------- Name, Address and Social Security Number of Shares or Employer Identification Number of Common Stock of Purchasers ---------------- - --------------------------------- EXHIBIT B --------- Name of Parties (other than the Company) to Significant Contracts Amount of Contract - --------------------------- ------------------ EX-10.49 6 0006.txt FORM OF COMMON STOCK PURCHASE WARRANT EXHIBIT 10.49 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT") OR ANY STATE SECURITIES LAWS AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS. ATG INC. Common Stock Purchase Warrant to Purchase _______ Shares of Common Stock This Common Stock Purchase Warrant is issued to: [Insert Name] c/o Taglich Brothers, Inc. 1370 Avenue of the Americas New York, NY 10019 by ATG Inc., a California corporation (hereinafter called the "Company," which term shall include its successors and assigns). FOR VALUE RECEIVED and subject to the terms and conditions hereinafter set out, the registered holder of this Warrant as set forth on the books and records of the Company (the "Holder") is entitled upon surrender of this Warrant to purchase from the Company _______ fully paid and nonassessable shares of Common Stock, no par value (the "Common Stock"), at the Exercise Price (as defined below) per share. This Warrant shall expire at the close of business on June 30, 2005. 1. (a) The right to purchase shares of Common Stock represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (properly endorsed if required) at the principal office of the Company at 47375 Fremont Boulevard, Fremont, California 94538 (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), and upon payment to the Company, by cash or by certified check or bank draft, of the Exercise Price for such shares. The Company agrees that the shares of Common Stock so purchased shall be deemed to be issued to the Holder as the record owner of such shares of Common Stock as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares of Common Stock as aforesaid. Certificates for the shares of Common Stock so purchased (together with a cash adjustment in lieu of any fraction of a share) shall be delivered to the Holder within a reasonable time, not exceeding ten (10) business days, after the rights represented by this Warrant shall have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised, in all other respects identical with this Warrant, shall also be issued and delivered to the Holder within such time, or, at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. (b) This Warrant may be exercised to acquire, from and after the date hereof, the number of shares of Common Stock set forth on the first page hereof; provided, however, the right hereunder to purchase such shares of Common Stock shall expire at the close of business on June 30, 2005. 2. This Warrant is being issued by the Company to Taglich Brothers, Inc. ("Taglich Brothers"), or its designee, pursuant to a Common Stock Placement Agreement between the Company and Taglich Brothers, dated as of June 30, 2000 (the "Placement Agreement"), whereby the Company agreed to issue a five (5) year warrant, exercisable at the Exercise Price per share to Taglich Brothers or its designee, to purchase that number of shares of Common Stock equal to seven percent (7%) percent of the total number of shares of Common Stock sold by Taglich Brothers in a Private Placement pursuant to the Company's Confidential Private Placement Memorandum dated June 26, 2000, as amended (the "Memorandum"). 3. The Company covenants and agrees that all Common Stock upon issuance against payment in full of the Exercise Price by the Holder pursuant to this Warrant will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will have at all times authorized, and reserved for the purpose of issue or transfer upon exercise of the rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant, and will procure at its sole expense upon each such reservation of shares the listing thereof (subject to issuance or notice of issuance) on all stock exchanges on which the Common Stock is then listed or inter-dealer trading systems on which the Common Stock is then traded. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock may be listed or inter-dealer trading system on which the Common Stock is then traded. The Company will not take any action which would result in any adjustment in the number of shares of Common Stock purchasable hereunder if the total number of shares of Common Stock issuable pursuant to the terms of this Warrant after such action upon full exercise of this Warrant and, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon exercise of all options and other rights to purchase shares of Common Stock then outstanding, would exceed the total number of -2- shares of Common Stock then authorized by the Company's Amended and Restated Articles of Incorporation, as then amended. 4. The initial exercise price is $2.75 per share of Common Stock (the "Initial Exercise Price"). The Initial Exercise Price shall be adjusted as provided for below in this Section 4 (the Initial Exercise Price, and the Initial Exercise Price as thereafter then adjusted, shall be referred to as the "Exercise Price") and the Exercise Price from time to time shall be further adjusted as provided for below in this Section 4. Upon each adjustment of the Exercise Price, the Holder shall thereafter be entitled to receive upon exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock obtained by (i) multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable hereunder immediately prior to such adjustment, and (ii) dividing the product thereof by the Exercise Price resulting from such adjustment. The Exercise Price shall be adjusted as follows: (i) In the case of any amendment to the Amended and Restated Articles of Incorporation of the Company to change the rights, privileges, restrictions or conditions in respect to the Common Stock or division of the Common Stock, this Warrant shall be adjusted so as to provide that upon exercise thereof, the Holder shall receive, in lieu of each Common Stock theretofore issuable upon such exercise, the kind and amount of shares, other securities, money and property receivable upon such, change or division by the Holder issuable upon such exercise had the exercise occurred immediately prior to such designation, change or division. This Warrant shall be deemed thereafter to provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this Subsection 4(i) shall apply in the same manner to successive reclassifications, changes, consolidations and mergers. (ii) If the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, or declare a dividend or make any other distribution upon the Common Stock payable in shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision or dividend or other distribution shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Price in effect immediately prior to such combination shall be proportionately increased. (iii) If any capital reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with another corporation or entity, or the sale of all or substantially all of the Company's assets to another corporation or other entity shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stocks, securities, other evidence of equity -3- ownership or assets with respect to or in exchange for shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale (except as otherwise provided below in this Section 4), lawful and adequate provisions shall be made whereby the Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein, such shares of stock, securities, other evidence of equity ownership or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of this Warrant under this Section 4 had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares of Common Stock receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, other evidence of equity ownership or assets thereafter deliverable upon the exercise hereof (including an immediate adjustment, by reason of such consolidation or merger, of the Exercise Price to the value for the Common Stock reflected by the terms of such consolidation or merger if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation or merger). Subject to the terms of this Warrant, in the event of a merger or consolidation of the Company with or into another corporation or other entity as a result of which the number of shares of common stock of the surviving corporation or other entity issuable to holders of Common Stock of the Company, is greater or lesser than the number of shares of Common Stock of the Company outstanding immediately prior to such merger or consolidation, then the Exercise Price in effect immediately prior to such merger or consolidation shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Common Stock of the Company. The Company shall not effect any such consolidation, merger or sale, unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities, other evidence of equity ownership or assets as, in accordance with the foregoing provisions, the Holder may be entitled to receive or otherwise acquire. If a purchase, tender or exchange offer is made to and accepted by the holders of more than fifty (50%) percent of the outstanding shares of Common Stock of the Company, the Company shall not effect any consolidation, merger or sale with the person having made such offer or with any Affiliate of such person, unless prior to the consummation of such consolidation, merger or sale the Holder of this Warrant shall have been given a reasonable opportunity to then elect to receive upon the exercise of this Warrant the amount of stock, securities, other evidence of equity ownership or assets then issuable with respect to the number of shares of Common Stock of the Corporation in accordance with such offer. -4- Whenever the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall issue a certificate signed by its President or Vice President and by its Chief Executive Officer, Chief Financial Officer, Assistant Treasurer, Secretary or Assistant Secretary, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company made any determination hereunder), and the Exercise Price after giving effect to such adjustment, and shall cause copies of such certificates to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant. No fractional shares of Common Stock shall be issued in connection with any exercise of this Warrant, but in lieu of such fractional shares, the Company shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the Exercise Price then in effect. Notwithstanding anything herein to the contrary, in no event shall the Exercise Price be less than the market or book value of the Common Stock. 5. In the event the Company grants rights to all shareholders to purchase Common Stock, the Holder shall have the same rights as if this Warrant had been exercised immediately prior to such grant. 6. The Holder shall, with respect to the shares of Common Stock issuable upon the exercise of this Warrant, have the registration rights and "piggy back" registration rights set forth in the Placement Agreement. Such registration rights and "piggy back" registration rights are incorporated herein by this reference as if such provisions had been set forth herein in full. 7. This Warrant need not be changed because of any change in the Exercise Price or in the number of shares of Common Stock purchased hereunder. 8. The terms defined in this paragraph, whenever used in this Warrant, shall, unless the context otherwise requires, have the respective meanings hereinafter specified. The term "Common Stock" shall mean and include the Company's Common Stock, no par value per share, authorized on the date of the original issue of this Warrant and shall also include in case of any reorganization, reclassification, consolidation, merger or sale of assets of the character referred to in paragraph 4 hereof, the stock, securities or assets provided for in such paragraph. The term "Company" shall also include any successor corporation to ATG Inc. by merger, consolidation or otherwise. The term "outstanding" when used with reference to Common Stock shall mean at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company. The term "1933 Act" shall mean the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission, or any other Federal agency then administering such securities act, thereunder, all as the same shall be in effect at the time. -5- 9. This Warrant is exchangeable, upon the surrender hereby by the Holder at the office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number of shares of Common Stock as shall be designated by the Holder at the time of such surrender. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any such new Warrants and, in the case of any such loss, theft, or destruction, upon delivery of a bond of indemnity, reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender or cancellation of this Warrant or such new Warrants, the Company will issue to the Holder a new Warrant of like tenor, in lieu of this Warrant or such new Warrants, representing the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder. 10. The Company agrees to use its best efforts to file timely all reports required to be filed by it pursuant to Sections 13 or 15 of the Securities Exchange Act of 1934, as amended, and to provide such information as will permit the Holder to sell this Warrant or any shares of Common Stock acquired upon exercise of this Warrant in accordance with Rule 144 under the 1933 Act. 11. The Company will at no time close its transfer books against the transfer of this Warrant or of any shares of Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. This Warrant shall not entitle the Holder to any voting rights or any rights as a stockholder of the Company. The rights and obligations of the Company, of the Holder, and of any holder of shares of Common Stock issuable hereunder, shall survive the exercise of this Warrant. 12. This Warrant sets forth the entire agreement of the Company and the Holder, with respect to the rights of the Holder and the Common Stock issuable upon the exercise of this Warrant, notwithstanding any other agreement or the provisions of any agreement, whether or not known to the Holder, and the Company represents that there are no agreements inconsistent with the terms hereof or which purport in any way to bind the Holder of this Warrant or the Common Stock. 13. The validity, interpretation and performance of this Warrant and each of its terms and provisions shall be governed by the laws of the State of New York. -6- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer under its corporate seal and dated as of June 30, 2000. ATG INC. By:_______________________________________ Doreen Chiu, Chief Executive Officer [CORPORATE SEAL] -7- EX-27.1 7 0007.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from this Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 APR-01-2000 JUN-30-2000 4,532 0 23,644 1,522 0 31,121 99,083 5,681 135,300 49,064 0 0 0 47,029 2,909 135,300 22,223 22,223 13,873 13,873 9,973 0 (1,117) (2,740) (1,096) (1,644) 0 0 0 (1,644) (0.12) (0.12)
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