EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 15, 2005,
(the "EXECUTION DATE") by and among Defense Industries International, Inc., a
corporation organized under the laws of the State of Nevada, USA with its
principal executive offices at 8 Brussels St. Sderot, X.X. Xxx 000, Xxxxxxxx
00000, Xxxxxx (the "COMPANY"), and the buyers listed in EXHIBIT A, attached
hereto (each a "BUYER" and collectively hereinafter referred to as the
"BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and Rule 506 of
Regulation D ("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act;
B. The Buyers wish to purchase, and the Company wishes to issue and sell to
each of the Buyers, upon the terms and conditions stated in this Agreement: (a)
that number of shares of common stock of the Company, $0.0001 par value each
(the "COMMON STOCK") set forth opposite each such Buyer's name on EXHIBIT A
attached hereto (1,833,334 shares of Common Stock in the aggregate, hereinafter
the "SHARES"), which together with the Maximum Protection Shares (as defined in
Section 1(e) below) shall be referred to as the "PURCHASED SHARES"; and (b)
warrants to purchase additional 547,500 shares of Common Stock, as specified in
Section 1(a)(i) below; and
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Stockholders Agreement,
substantially in the form attached hereto as EXHIBIT B (the "STOCKHOLDERS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Purchased Shares and the shares to be
issued upon exercise of the Warrants (as defined below) under the 1933 Act and
the rules and regulations promulgated thereunder. The Purchased Shares and the
Warrants are also referred to herein as the "SECURITIES".
NOW, THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES AND GRANT OF WARRANTS.
(a) PURCHASE OF PURCHASED SHARES, ESCROW AGREEMENT AND GRANT OF WARRANTS
(i) Subject to the satisfaction of the obligations set forth in Sections 6
and 7 below: (a) the Company shall issue and sell to each Buyer, and each Buyer
agrees to purchase from the Company the Shares in such amounts as set forth
opposite each such Buyer's name on EXHIBIT A attached hereto in consideration
for the Purchase Price (as defined below); and (b) the Company shall issue to
the Buyers warrants in such amounts as set forth opposite each such Buyer's name
on EXHIBIT A attached hereto, in the form attached hereto as EXHIBIT C
("WARRANTS A") and EXHIBIT D ("WARRANTS B") (the "WARRANTS"), pursuant to which
the Buyers shall have the option to purchase an aggregate of additional 547,500
shares of Common Stock (the "WARRANT SHARES") upon the terms set forth in
Exhibit C and Exhibit D, such actions sales and issuances to occur
simultaneously with the signing of this Agreement.
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(ii) PURCHASE PRICE. The purchase price for the Shares to be purchased by
the Buyers shall be $1,100,000 (the "PURCHASE PRICE"), which will reflect a
price per share of $0.60.
(iii) In consideration for their services in connection with this
transaction the Company shall issue additional 82,133 shares of Common Stock to
the persons listed in EXHIBIT E, (the "TRANSACTION SHARES") and warrants to
purchase additional 80,000 shares of Common Stock (the "TRANSACTION WARRANTS"
and the "TRANSACTION WARRANT SHARES" respectively), which shell be placed in
Escrow pursuant to Section (b) hereunder. The Transaction Shares shall be
considered as Shares, the Transaction Warrants Shares shall be considered as
Warrant Shares and the persons listed in Exhibit E shall be considered as Buyers
for all purposes.
(b) On the Execution Date: (i) each Buyer shall transfer its portion of the
Purchase Price to Xxxxxx Xxxxxxx & Xxxxxxx LLP (the "TRUSTEE"), which shall act
as trustee in accordance with the terms of the Escrow Agreement as attached
hereto as EXHIBIT F; (ii) the Company shall issue the Trustee: (a) 3,283,658
shares of Common Stock of the Company registered in the name of the Trustee; and
(b) the Warrants; all to be held in accordance with the terms of the Escrow
Agreement (the "ESCROW").
(c) If on the 180th day from the Execution Date, the Trustee has not
received from the parties a notice confirming the registration of the Purchased
Shares and the Warrant Shares (collectively, the "REGISTRABLE SECURITIES"),
then, as a sole and exclusive remedy to all parties, on the 7th business day
thereafter: (i) the Purchase Price will be returned by the Company to the Buyers
as follow: (a) the Trustee shall transfer to the Buyers the remainder of the
Purchase Price (the "ESCROW AMOUNT"); and (b) the Company shall transfer to the
Buyers an amount equal to $1,100,000 less the Escrow Amount and $55,000 (a sum
equal to 5% interest of the Purchase Price - the "INTEREST AMOUNT"); and (ii)
the Purchased Shares, the Warrants and any interest yield with regards to the
Purchase Price held by the Trustee will be transferred to the Company.
(d) Notwithstanding the above, in the event that the Registrable Securities
are not registered, within 180 days from the Execution Date, then the Buyers
will be entitled, by notifying the Trustee in writing (with a copy to the
Company) within 5 business days from the end of such 180-day period, to receive
the Shares and Warrants, and in such event the Company shall fulfill the
Transfer Conditions (as defined below) and the Trustee will transfer the Shares
and Warrants to the Buyers (the "BUYERS' OPTION"). In such event the Trustee
shall transfer the Purchase Price and any interest yield with respect to the
Purchase Price held by the Trustee to the Company and all of the terms and
conditions of this Agreement and the Stockholders Agreement and any other
agreement attached hereto shall remain in full force and effect with all
necessary conforming changes. In addition, it is hereby agreed that in the event
that the Buyers shall choose to exercise the Buyers' Option, the failure of the
Company to have the registration statement covering the Registrable Securities
declared effective shall not be regarded as a breach of this Agreement.
(e) In the event that before the elapse of 180 days from the Execution
Date, the Trustee receives from the parties a notice confirming the
effectiveness of the registration statement registering the Registrable
Securities, the Company shall fulfill the Transfer Conditions (as defined below)
and the Trustee will forward to the Buyers, within 3 business days, 1,915,467
shares of Common Stock from the Escrow and the Warrants and the Purchase Price
and any interest yield with regards to the Purchase Price, will be delivered to
the Company. In such event the remaining 1,368,191 shares of Common Stock (the
"MAXIMUM PROTECTION SHARES") will remain in Escrow for the purpose of the Price
Protection, as specified in Section (g) below and in the Escrow Agreement.
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(f) The Company hereby undertakes that contemporaneously with any transfer
of Shares, Warrants and Protection Shares from the Trustee to the Buyers (the
"TRANSFER DATE"), the Company shall provide the Buyers with (the "TRANSFER
CONDITIONS"): (i) Shares Certificates (in a form to the satisfactory of the
Buyers), and Warrant Certificates (in the form of Exhibits C and D) covering the
Shares, the Warrants and the Protection Shares, as the case may be, issued in
the names of the Buyers.
(g) The Buyers shall be entitled to price protection with respect to the
price per share paid by them for the Purchased Shares, as follows (the "PRICE
PROTECTION"):
On the one year anniversary of the Execution Date (the "FIRST
ANNIVERSARY"), in the event that the Share's Price will have declined below
$0.60, the Trustee will transfer to each of the Buyers from the Escrow
additional shares (the "PROTECTION SHARES") which number shall be equal to:
($0.60 less the Share Price (which shall not be less than $0.35)) times the
remaining number of Shares held by each of the Buyers at the First
Anniversary), divided by the Share's Price.
For the purposes of this Agreement, the "SHARE PRICE" shall mean the
average last price of the Common Stock of the Company on the Over the Counter
Bulletin Board (the "OTCBB") as reported by the OTCBB at the end of each such
trading day during the 30 trading days prior to the First Anniversary.
On the same date, the Trustee shall return to the Company all the remaining
of the Protection Shares held by it, if any.
For the purpose of calculation of the amount of the Protection Shares,
Buyers undertake, that after the transfer of the Shares from the Trustee to the
Buyers, they will, until the First Anniversary: (i) hold the Purchased Shares in
a separate brokerage or bank account under such Buyer's name; (ii) not buy any
of the Company's shares through such bank account (however, in the event that
the Buyers will buy Company's shares through that bank or brokerage account,
such shares shall not be taken into account for the purposes of the Price
Protection).
On the First Anniversary, the Buyers shall present the Company with written
confirmation specifying the details of all transactions (purchases and / or
sales) of the Company's Common Stock made by them during the one year term from
the Execution Date until the First Anniversary with respect to the number of
shares of the Company's Common Stock held by them in such bank account (the
"CONFIRMATION"). The number of the shares of the Common Stock that appears in
the Confirmation less all shares bought by the Buyers through such bank account,
if any, shall be considered the remaining number of the Purchased Shares held by
the Buyers at the First Anniversary.
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(h) The Buyers undertake not to sell any shares of the Company's Common
Stock: (i) during the last 30 trading days before the First Anniversary; or (ii)
during the one year term from the Execution Date until the First Anniversary,
for a price which is less than $0.60 per share.
(i) Notwithstanding Section 1(b) above, during the 180 days period
mentioned in Section 1 (c) above, the Company may draw up to $550,000 from the
Escrow for the purpose of purchasing fixed assets as set forth in EXHIBIT H
attached hereto, according to the sole discretion of the Board of Directors of
the Company (the "MONEY FOR THE M&A PURPOSE"). Upon notice from the Company to
the Trustee with a copy to the Buyers, the Trustee shall deliver to the Company
an amount specified in such notice, which shall not exceed $550,000 in the
aggregate, provided that prior to the transfer of any of such funds the M&A
Condition (as defined below) was fulfilled.
As a condition to the delivery of the Money for the M&A Purpose by the
Trustee to the Company (the "M&A CONDITION"), the Company shall execute a
first-ranking fixed pledge agreement and all pledge registration documents
(as needed) in favor of the Buyers (to be registered by the Company in the
US and, to the extent possible, in Israel as soon as possible after the
purchase of the assets) with respect to all assets purchased by the Company
in consideration for the Money for the M&A Purpose, provided that such
assets will be free and clear from of all mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, option,
proxies, rights or other security interest of any kind or nature whatsoever
(the "PLEDGE" and the "PLEDGED ASSETS"). The creation and registration of
the Pledge will be made pursuant to a pledge agreement, to be executed by
the parties as a condition of the release of the Money for the M&A Purpose,
in such form that is satisfactory to the parties (the "PLEDGE AGREEMENT").
If the Purchase Price, including Interest Amount, shall be returned to the
Buyers in accordance with sub-section 1(c) above, then within 7 business days
from the end of such 180-day period, the Company shall return the Money for the
M&A Purpose to the Buyers;The Company hereby undertakes that until the earlier
of (a) any date during 180 days from the Execution Date or (b) the date of the
effectiveness of the registration statement registering the Registrable
Securities (the "RESTRICTION PERIOD"): (a) it shall not mortgage any or all of
its assets by manner of a floating charge or otherwise in a manner that will
contradict the Company's obligations under this Agreement or make it impossible
to create the Pledge on the Pledged Assets; and (b) the Company shall not
derogate any right attached to the Shares during the Restriction Period, while
the Shares are being held in Escrow, and the Buyers arenot entitled to vote such
Shares.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants that:
a. ACCREDITED INVESTOR; NO PUBLIC SALE OR DISTRIBUTION. The Buyer is an
"accredited investor" as that term is defined in Rule 501 of Regulation D, and
is acquiring the Securities in the ordinary course of its business, solely for
its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; PROVIDED, HOWEVER, that by making the
representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 0000 Xxx. The Buyer does not have any
agreement or understanding, directly or indirectly, with any person to
distribute any of the Securities.
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b. INFORMATION. The Buyer and its advisors, if any, have been furnished
with all information relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities, which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management such
Buyer deems relevant in making an informed decision with respect to its purchase
of the Purchased Shares. Neither such inquiries nor any other due diligence
investigations conducted by the Buyer or its advisors, if any, or its
representatives shall modify, amend or affect the Buyer's right to rely on the
Company's representations and warranties contained herein. The Buyer understands
that its investment in the Securities involves a high degree of risk. The Buyer
has had the opportunity to seek such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
c. NO GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
d. TRANSFER OR RESALE. The Buyer understands that except as provided in the
Stockholders Agreement: (i) the Securities have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) the Buyer shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
the Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the 1933 Act (or a successor rule thereto) (collectively,
"RULE 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which the
seller (or the Person (as defined in Section 3(s)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
e. LEGENDS AND LIMITATIONS ON TRANSFERRING. The Buyer understands that the
certificates representing the Purchased Shares and the Warrant Shares issuable
upon exercise of the Warrants, until such time as (i) the resale of the
Purchased Shares and the Warrant Shares have been registered under the 1933 Act,
which may include as contemplated by the Stockholders Agreement, and applicable
state securities laws (if any); and (ii) the Buyer has confirmed in writing to
the Company that it has delivered the prospectus contained in the relevant
registration statement, which may include the registration statement filed
pursuant to the Stockholders Agreement (the "REGISTRATION STATEMENT"), as the
same may have been supplemented by the Company, to any Person to whom such Buyer
is transferring any of the Securities, except as set forth below, shall bear any
legend as required by the "blue sky" laws of any state (if any) and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
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THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, OFFERED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED AND APPLICABLE STATE SECURITIES LAWS, OR (B) AN
OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act and such Buyer has
confirmed in writing to the Company that it has delivered the prospectus
contained in the Registration Statement, as the same may have been supplemented
by the Company, to any Person to whom such Buyer is transferring any of the
Securities, (ii) in connection with a sale, assignment or other transfer, such
holder provides the Company with an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such sale, assignment or transfer
of the Securities may be made without registration under the applicable
requirements of the 1933 Act, or (iii) such holder provides the Company with
reasonable assurance that the Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A.
f. ORGANIZATION; VALIDITY; ENFORCEMENT. If not a natural person - the Buyer
is an entity duly organized and validly existing, with the requisite corporate
or other power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Stockholders Agreement and otherwise to
carry out its obligations thereunder. This Agreement, the Stockholders Agreement
and the Registration Rights Agreement to which such Buyer is a party have been
duly and validly authorized, executed and delivered on behalf of such Buyer and
shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies).
g. NO CONFLICTS. The execution, delivery and performance by the Buyer of
this Agreement and the Stockholders Agreement to which such Buyer is a party and
the consummation by such Buyer of the transactions contemplated hereby and
thereby will not (i) if a corporation - result in a violation of the
organizational documents of such Buyer or (ii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clause (ii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
h. RESIDENCY. The Buyer is a resident of the State of Israel.
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i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. The Buyer
represents and warrants that he/it is acting solely in the capacity of an arm's
length purchaser with respect to the transactions contemplated hereby and that
he/it is not (i) an officer or director of the Company, (ii) an "affiliate" of
the Company (as defined in Rule 144) or (iii) a "beneficial owner" of more than
10% of shares of the Company (as defined for purposes of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "1934 ACT")). The Buyer further
represents and warrants that it is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to
transactions contemplated hereby, and any advice given by it or any of its
representatives or agents in connection with the transactions contemplated
hereby is merely incidental to its purchase of the Securities. The Buyer further
represents to the Company that such Buyer's decision to enter into this
Agreement has been based solely on the independent evaluation by such Buyer and
its representatives. Neither such evaluation nor any other due diligence
investigations conducted by the Buyer or its representatives shall modify, amend
or affect the Buyer's right to rely on the Company's representations and
warranties contained herein
j. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of federal and state securities laws and that the
Company is relying on the truth and accuracy of the representations and
warranties of The Buyer set forth in this Section 2 in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.
k. NO GENERAL SOLICITATION. The Buyer did not learn of the investment
contemplated by this Agreement as a result of any public advertising or general
solicitation.
l. CERTAIN TRADING ACTIVITIES. Neither the Buyer nor any person acting on
his/its behalf or at his/its direction has engaged in any transactions in
securities of the Company (including, without limitations, any Short Sales
involving the Company's securities) since the time that such Buyer was first
contacted by the Company regarding the investment contemplated by this
Agreement. For purposes of this Section 2 (l), "SHORT SALES" include, without
limitation, any "short sales" (as defined in Rule 3b-3 of the 0000 Xxx) and all
types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, short sales, swaps and similar arrangements (including on a total
return basis), and sales and other transactions through US broker dealers or
foreign regulated brokers having the effect of hedging the Securities or an
investment made under this Agreement. The Buyer agrees that neither he/it nor
any Person acting on his/its behalf or at his/its direction will engage in any
transactions in securities of the Company (including Short Sales) prior to the
time that the transactions contemplated by this Agreement are publicly
disclosed. Such Buyer is not an "Affiliate" of a registered broker-dealer.
m. CERTAIN FEES. No brokerage or finder's fees or commissions are or will
be payable by the Buyers to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. To the knowledge of the Buyers, the
Company shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by
this Agreement.
n. DISCLOSURE. The Buyer acknowledges and agrees that the Company does not
make nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3, including but not limited to the disclosures in the SEC Documents (as
defined below).
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyers that:
(a) The Company and its "SUBSIDIARIES" (which for purposes of this
Agreement means any entity in which the Company, directly or indirectly, owns
more than 50% of the capital stock or holds a more than 50% equity or similar
interest) are entities duly organized and validly existing and (in jurisdictions
in which such concept is relevant) in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted. No proceeding has been instituted by any authority for the
dissolution of the Company and any of the Subsidiaries. Each of the Company and
its Subsidiaries is duly qualified as a foreign entity to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, condition (financial or otherwise) of
the Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents (as defined below) or by
the agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on SCHEDULE 3(A).
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement, the Stockholders Rights Agreement and the Escrow Agreement and any
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS") and to issue the Securities and Warrant Shares in accordance with
the terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Securities and Warrant Shares, have been duly authorized by the Company's
Board of Directors and (other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Stockholders
Rights Agreement, and (ii) all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States) no further filing, consent, or authorization
is required by the Company, its Board of Directors or its shareholders. This
Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) ISSUANCE OF SECURITIES. On the Execution Date, the Securities are duly
authorized and validly issued, and the Purchased Shares are fully paid and
non-assessable. There is no tax, levy, impost, duty, fee, assessment or other
governmental charge, or any deduction or withholding, imposed by any
governmental agency or authority in or of the United States either (A) on or by
virtue of the execution or delivery of the Transaction Documents, (B) the
issuance of the Securities and Warrant Shares pursuant hereto or (C) on any
payment to be made by Company pursuant to the Transaction Documents. A number of
shares of Common Stock have been duly authorized and reserved for issuance which
equals the maximum number of shares issuable upon exercise of the Warrants. Upon
the due exercise of the Warrants, the Warrant Shares will be duly authorized,
validly issued, fully paid and non-assessable The offer and issuance by the
Company of the Securities and the Warrant Shares are exempt from registration
under the 1933 Act, and neither the Company nor anyone acting on its behalf will
take any affirmative action hereafter that would cause the loss of such
exemption.
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(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Purchased Shares and, upon exercise of the Warrants, the
issuance of additional shares of Common Stock) will not (i) result in a
violation of the Company's Certificate of Incorporation and By Laws, each as
amended (the "INCORPORATION DOCUMENTS") or the Articles of Association or the
Memorandum of Association of any of its Subsidiaries; or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the OTCBB applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected.
(e) CONSENTS. The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for (i) the filing of a Form D with the
SEC, and (ii) such filings, consents and approvals listed in Section 3(b) above.
All consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and the Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES. Based on the
Buyers' representation under Section 2(h)(i) above, the Company acknowledges and
agrees that each Buyer is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that such Buyer is not (i) an officer or
director of the Company, (ii) an "affiliate" of the Company (as defined in Rule
144) or (iii) to the knowledge of the Company, a "beneficial owner" of more than
10% of Ordinary Shares (as defined for purposes of Rule 13d-3 of the 1934 Act).
The Company further acknowledges that each Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby,
and any advice given by each Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to the Buyers that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
9
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. Neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities.
The Company shall be responsible for the payment of placement agent's fees,
financial advisory fees, or brokers' commissions, if any, and shall pay at the
Effective Date the Buyers' legal and accounting fees plus disbursements of
counsels in connection with the transactions under this Agreement and the
Stockholders Agreement, in an amount not to exceed $20,000 plus Value Added Tax
thereon. The Company shall pay, and hold the Buyers harmless against, any
liability, loss or expense (including, without limitation, attorney's fees and
out-of-pocket expenses) arising in connection with any such claim. The Company
acknowledges that it has not engaged any placement agent in connection with the
sale of the Securities.
(h) NO INTEGRATED OFFERING. None of the Company, its Subsidiaries, any of
their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act.
None of the Company, its Subsidiaries, their affiliates and any Person acting on
their behalf will take any action or steps referred to in the preceding sentence
that would require registration of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings.
(i) DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Warrant Shares will increase in certain circumstances. The Company
further acknowledges that its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement is not in any manner
diminished due to any dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
(j) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The Company has
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Incorporation Documents which is or could become applicable to the Buyers as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities. The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of shares
or a change in control of the Company.
(k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 2002, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (collectively, the "SEC DOCUMENTS"). The Company has made
available to the Buyers or their respective representatives true, correct and
complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
10
(l) ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(L), since
March 31, 2005, there has been no Material Adverse Effect and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations of the Company or its
Subsidiaries. Since December 31, 2003, the Company has not (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $300,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $300,000. The
Company has not taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company is not as of the date hereof Insolvent (as defined below). For purposes
of this Section 3(l), "INSOLVENT" means (i) the present fair saleable value of
the Company's assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(r)), (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature.
(m) CONDUCT OF BUSINESS; REGULATORY PERMITS.
Neither the Company nor its Subsidiaries is in material violation of any
term of or in default under its Incorporation Documents, Articles of Association
or Memorandum of Association, respectively. To the best of its knowledge,
neither the Company nor any of its Subsidiaries is in violation of any judgment,
decree or order or any statute, ordinance, rule or regulation applicable to the
Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except for
possible violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Since December 31, 2002, (i) the shares of Common Stock
of the Company have been quoted on the OTCBB, and (ii) trading in the shares of
the Company has not been suspended by the SEC or the OTCBB. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(n) FOREIGN CORRUPT PRACTICES. To the best of the Company's knowledge,
neither the Company, nor any of its Subsidiaries, nor any director, officer,
agent, employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
11
(o) XXXXXXXX-XXXXX ACT. The Company is in compliance with all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 as are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
(p) TRANSACTIONS WITH AFFILIATES. Except as disclosed in SCHEDULE 3(P),
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any of its Subsidiaries (other than for
ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner.
(q) EQUITY CAPITALIZATION. As of the date of this Agreement, the authorized
share capital of the Company consists of 50,000,000 shares of Preferred Stock,
par value $0.0001 per share (the "PREFERRED STOCK") non of which has been
issued, and 250,000,000 shares of Common Stock, par value $0.0001 per share (the
"COMMON STOCK"), of which 25,350,000 are issued and outstanding. IN ADDITION, on
February 28, 2005, the Company has entered into an agreement to acquire all of
the outstanding shares of Xxxx Xxxxx Company in consideration for cash and
issuance of shares of Common Stock of the Company, as reported by the Company on
March 3 2005. In addition: (a) the Company has granted one of its employees an
option for the issuance of an undefined number of shares, as reported in the
Company's annual report on Form 10-KSB for the fiscal year ended December 31,
2004; and (b) the Company is negotiating with a third party with respect to a
transaction pursuant to which the Company will issue that number of shares of
Common Stock which shall represent a total value of $750,000. All of such
outstanding shares have been, or upon issuance will be: (a) validly issued,
fully paid and nonassessable, and (b) been offered, issued, sold and delivered
by the Company in compliance with all applicable federal and state securities
laws. Except as disclosed above or hereunder or in the Company's filings with
the SEC available on XXXXX: (i) none of the Company's Common Stock is subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any share capital of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional share capital of the Company or any of its Subsidiaries or options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any share capital of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt instruments, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act;
(vi) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement; and (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents but not
so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company's or its Subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
12
(r) INDEBTEDNESS AND OTHER CONTRACTS. As of December 31 2004, except as
disclosed in SCHEDULE 3(R), neither the Company nor any of its Subsidiaries (i)
has any outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument would
result in a Material Adverse Effect, (iii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which has or is expected to have a Material Adverse Effect.
SCHEDULE 3(R) provides a detailed list description of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "INDEBTEDNESS" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) "CONTINGENT OBLIGATION" means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
13
(s) ABSENCE OF LITIGATION. Except as disclosed in SCHEDULE 3(S), there is
no material: action, suit, proceeding, inquiry or investigation before any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, and
the Company has no knowledge of any unasserted claim, the assertion of which is
likely and which, if asserted, will seek damages, an injunction or other legal,
equitable, monetary or non-monetary relief which claim individually or
collectively with other such unasserted claims if granted would be material..
For purposes of this Section 3(t) "material" means having a potential value or
cost to the Company in excess of $50,000 or questioning the validity of this
Agreement or any action taken or to be taken pursuant hereto.
(t) INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged, and all such policies are in full force and effect. Neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(u) EMPLOYEE RELATIONS.
(i). Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union. The Company
and its Subsidiaries believe that their relations with their employees are good.
No executive officer of the Company (as defined in Rule 501(f) of the 0000 Xxx)
has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company. No executive
officer of the Company, to the knowledge of the Company, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
(i) Except to the extent applicable to employers and employees generally in
Israel, neither the Company nor any of its Subsidiaries is subject to, nor do
any of its employees benefit from, extension orders ("TZAVEI HARCHAVA") or any
agreement, arrangement, understanding or custom with respect to employment
(including, without limitation, termination thereof). The severance pay due to
the Employees is fully funded or reserved against in accordance with generally
accepted accounting principles, consistently applied.
(ii) The Company and its Subsidiaries are in compliance with all Israeli,
U.S. federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect
(b) TITLE. The Company has good and marketable title to all personal
property owned by it which is material to the business of the Company, free and
clear of all liens, encumbrances and defects except such as do not materially
interfere with the use made and proposed to be made of such property by the
Company. Any real property and facilities held under lease by the Company is
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
14
(c) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights ("INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct their respective businesses as now conducted. Except for
trademarks no longer being used, none of the Company's Intellectual Property
Rights have expired or terminated, or are expected to expire or terminate,
within three years from the date of this Agreement. The Company does not have
any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened,
against the Company or its Subsidiaries regarding its Intellectual Property
Rights. The Company is unaware of any facts or circumstances which might give
rise to any of the foregoing infringements or claims, actions or proceedings.
The Company and its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights.
(d) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval, where the failure to so comply in each of the foregoing clauses (i),
(ii) and (iii) could be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(e) SUBSIDIARY RIGHTS. The Company or any one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(v) TAX STATUS. The Company and each of its Subsidiaries (i) has made or
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
15
(w) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets and incurrence of liabilities is
permitted only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets and liabilities is compared with
the existing assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any differences. The Company has established
disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's most recently
filed periodic report under the 1934 Act, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of the
Company's controls and procedures as of the date prior to the filing date of the
most recently filed periodic report under the 1934 Act (such date, the
"EVALUATION DATE"). The Company presented in its most recently filed periodic
report under the 1934 Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the 0000 Xxx) or, to the
Company's knowledge, in other factors that would significantly affect the
Company's internal controls.
(x) FORM S-3 ELIGIBILITY. The Company is eligible to register the resale by
the Buyer of the Purchased Shares and the Warrant Shares acquired pursuant to
this Agreement on a registration statement on Form S-3 under the 0000 Xxx.
(y) TAXES. No tax, levy, impost, duty, fee, assessment or other
governmental charge or any deduction or withholding imposed by any United States
or foreign governmental agency or authority is payable by or on behalf of the
Buyer or any assignee of any of the Buyer as a result of the execution, delivery
or performance by the Company of any of the Transaction Documents, including,
but not limited to, the issuance by the Company of the Securities.
(z) ENCRYPTION. Neither the Company, nor any of its Subsidiaries "engage"
in any "means of encryption" as such terms are defined in the Control of
Products and Services Declaration (Engagement in Encryption), 1974, as amended,
promulgated under the Law for Control of Products and Services of 1957.
(aa) FINANCIAL POSITION. The Company shall not be subject to receipt from
the Company's independent auditors of inclusion of a "going concern" or other
qualification in their opinion with respect to Company's financial statements
for the year ended December 31, 2004.
(bb) DISCLOSURE. This Agreement does not contain any untrue statement of a
material fact and does not omit to state a material fact necessary in order to
make the statements contained herein not misleading.
(cc) EFFECTIVENESS; SURVIVAL. Each representation and warranty in this
Section 3 is deemed to be made on the date of this Agreement. Each
representation and warranty in this Section 3 made by the Company shall survive
the execution, delivery and performance of this Agreement and remain in full
force and effect after the date hereof. Each representation and warranty in this
Section 3 made by the Company shall in no way be effected by any investigation
of the subject matter thereof made by or on behalf of the Buyers.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
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(b) FORM D AND BLUE SKY. The Company shall file a Form D with respect to
the Securities as required under Regulation D and provide a copy thereof to the
Buyer promptly after such filing. The Company shall on or before the Execution
Date take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Securities for sale to the
Buyers pursuant to this Agreement under applicable securities or "Blue Sky" laws
of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or before the Execution Date. The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the relevant states of the United
States following the Execution Date.
(c) REPORTING STATUS. During the period in which the Company is required to
maintain the effectiveness of a resale registration statement under the
Stockholders Rights Agreement (the "REPORTING PERIOD"), the Company shall file
all reports required to be filed with the SEC pursuant to the 1934 Act, and,
except as the Company may determine in the case of a business combination
transaction with a third party, the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Securities for any purpose which shall be approved by the Board of Directors and
in accordance with a budget for the year 2005 to be approved by the Board of
Directors of the Company within 60 days from the Execution Date. In addition,
not later than March 31, 2006 and 2007, the Board of Directors of the Company
shall adopt a budget for the years 2006 and 2007.
(e) FINANCIAL INFORMATION. For as long as the Buyers owns in the aggregate
2.5% of the outstanding shares of the Company, and the Buyers have not nominated
an observer to the Company's Board of Directors, the Company agrees to send the
following to each Buyer during the Reporting Period unless the following are
filed with the SEC through XXXXX and are available to the public through the
XXXXX system: (i) within five (5) Business Days after the filing thereof with
the SEC, a copy of its Annual Reports on Form 10-KSB, any interim reports or any
consolidated balance sheets, income statements, shareholders' equity statements
and/or cash flow statements for any period other than annual, any Reports on
Form 8-K and any registration statements (other than those for benefit plans or
dividend or interest reinvestment plans) or amendments filed pursuant to the
1933 Act, and (ii) copies of any notices and other information made available or
given to the stockholders of the Company generally, contemporaneously with the
making available or giving thereof to the stockholders.
(f) LISTING. To the extent required in the Stockholders Agreement, the
Company shall secure the listing of all of the Registrable Securities (as
defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock are
then listed and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall pay all
fees and expenses imposed on the Company by any relevant national securities
exchange and automated quotation system (including the OTCBB) in connection with
satisfying its obligations under this Section 4(f).
Notwithstanding the abovementioned, for a period of 12 calendar months from
the date that a Registration Statement on Form S-3 covering the Registrable
Securities (as defined in the Stockholders Rights Agreement) has been declared
effective by the SEC (the "EFFECTIVE DATE"), Buyers collectively shall not sell
more than 900,000 shares of the Purchased Shares, and, within the first two
months following the Effective Date, not more than 70,000 Shares per month.
17
(g) FEES. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or broker's commissions (including for
Persons engaged by the Buyers) and shall pay at the Effective Date the Buyers'
legal and accounting fees plus disbursements of counsels in connection with the
transactions under this Agreement and the Stockholders Agreement, in an amount
not to exceed $20,000 plus Value Added Tax thereon. The Company shall pay, and
hold the Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney's fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Securities to the
Buyer.
(h) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or before
4:00 p.m., US Eastern Standard Time, on May [__], 2005, and subject to any
necessary approval of the content thereof, the Company shall issue a press
release describing the terms of the transactions contemplated by the Transaction
Documents and on or before 8:30 a.m., New York Time, on _____________, the
Company shall file a Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching the material Transaction Documents (including, without limitation,
this Agreement (and all schedules to this Agreement and the Registration Rights
Agreement) as exhibits to such filing (including all attachments, the "8-K
FILING"). Subject to the foregoing, neither the Company nor the Buyers shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; PROVIDED, HOWEVER, that the Company shall be
entitled, without the prior approval of the Buyers, to make any press release or
other public disclosure with respect to such transactions as is determined by
the Company to be necessary to comply with applicable law and regulations.
(i) CORPORATE EXISTENCE. So long as the Buyer beneficially owns any shares
of the Company, the Company shall take all reasonable measures to maintain its
corporate existence.
(j) RESERVATION OF SHARES. The Company shall take all actions necessary to
at all times have authorized, and reserved for the purpose of issuance, from and
after the Execution Date the number of shares of Common Stock issuable upon
exercise or conversion of the Warrants.
(k) CONDUCT OF BUSINESS. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
(l) NOMINATION OF AN OBSERVER. For as long as the Buyers collectively as a
group hold at least 2.5% of the Company's outstanding shares of Common Stock,
the Buyers may nominate one observer to attend all meetings of the Board of
Directors of the Company (the "BOARD") in a non-voting capacity. Such observer
shall be entitled to receive notice and other information of all meetings of the
Board and any of its committees and to attend all such meetings however, the
observer shall not be entitled to receive any remuneration from the Company.
18
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) REGISTER. The Company shall record the name and address of all Buyers
in the Company's register and the number of shares of Common Stock issuable upon
exercise of the Warrants. The Company shall keep the register open and available
at all times during business hours for inspection of the Buyers or their legal
representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust Company
("DTC"), registered in the name of each of the Buyers or their respective
nominee(s), for the Securities issued hereunder. The Company warrants that the
Securities shall be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the other Transaction
Documents, and in accordance with applicable law. If any of the Buyers effects a
sale, assignment or transfer of the Securities in accordance with Section 2(e),
the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment. Following the date that
a Registration Statement is declared effective and upon the delivery to such
Buyer of any certificate representing Securities, such Buyer agrees that any
sale of such Securities shall be made pursuant to the Registration Statement and
in accordance with the plan of distribution described therein or pursuant to an
available exemption from the registration requirements of the 1933 Act. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that each of the Buyers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. BUYERS' OBLIGATION.
At or before the Execution Date:
(i). The Buyers shall have executed each of the Transaction Documents to
which there are party and delivered the same to the Company.
(ii). The Buyers shall have delivered to the Trustee the Purchase Price for
the Purchased Shares.
(iii). The Trustee shall sign the Escrow Agreement.
7. THE COMPANY'S OBLIGATION.
At or before the Execution Date:
(i). The Company shall issue to the Trustee the Purchased Shares;
(ii). The Company shall have executed and delivered to the Trustee the
following documents, with a copy to the Buyers: (a) the Transaction Documents,
(b) certificates for the Purchased Shares; and (c) the Warrants according to
Exhibits C and D.
19
(iii). The Company shall have delivered to the Buyers the opinion of Xxxxxx
Xxxxxxx & Xxxxxxx LLP and of McDonald, Carano, Xxxxxx LLP, the Company's United
States special counsels, dated as of the Execution Date, in the forms attached
hereto as EXHIBIT H.
(iv). The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Purchased
Shares and the grant of the Warrants.
(v). The Company shall have delivered to the Buyers documentation of all
necessary corporate and other proceedings in connection with the transactions
contemplated hereby.
(vi). The Trustee shall sign the Escrow Agreement.
8. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Israel or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(b) COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
20
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates and
Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Buyers. No provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought.
(f) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company: Defense Industries International Inc.
Attn: Xx. Xxxxx Xxxxxxxxxx
0 Xxxxxxxx Xx. Xxxxxx, Xxxxxx
Copy to: Efrati, Galili & Co.
Attn: Xxxxx Xxxxxxx, Adv.
0 Xxxxxxxxx Xx., Xxx Xxxx, Xxxxxx
If to the Transfer Agent: Xxxxxxxxx Xxxxxxxx
OTC Transfer Agent
000 Xxxx 0000 Xxxxx Xxxxx 0
Xxxx Xxxx Xxxx, XX 00000
If to Buyers: As specified in Exhibit A.
Copy to: Xxxxx Xxxxx & Co.
Attn: Xxxxxx Xxxxxxxx, Adv.
0 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxx
21
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyers. The Buyers may assign some or
all of their rights hereunder without the consent of the Company, in which event
such assignee shall be deemed to be the Buyers hereunder with respect to such
assigned rights, but only if the assignee has assumed all obligations (as well
as all rights) of the Buyers. However, such assignee shall not be entitled to
nominate an observer (as mentioned in section 4(m) above and to receive the
financial information mentioned in section 4(e) above.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) SURVIVAL. The representations and warranties of the Company and the
Buyers contained in Sections 2 and 3 and the agreements and covenants set forth
in Sections 4, 5 and 8 that, by their terms are intended to continue in effect
following the Execution Date, shall survive the consummation of the transactions
contemplated hereunder.
(j) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) INDEMNIFICATION. In consideration of the Buyers' execution and delivery
of the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Buyers and each other holder of the Securities and all of their shareholders,
partners, members, officers, directors and employees (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby.
A. The Company shall not be required to indemnify the Indemnitees with
respect to any losses, liabilities, obligations and damages unless and only to
the extent that the aggregate amount of all such losses, liabilities,
obligations and damages incurred by all Indemnitees exceeds $60,000.
B. The Company shall not, under any circumstances, be liable to the
Indemnitees (as a whole) for losses, liabilities, obligations and damages
pursuant to this Section to the extent that such losses, liabilities,
obligations and damages exceed the aggregate Purchase Price paid by the Buyers
together with interest of 15% per annum, compounded annually, plus any
reasonable expenses (including reasonable legal expenses) incurred by the
Buyers.
PROVIDED, HOWEVER, that the limitations specified in subsections A and B
above should not apply in all events for fraud, gross negligence and willful
misconduct.
22
(l) NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(m) REMEDIES. The Buyers shall have all rights and remedies set forth in
the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, each party recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the other party. Therefore the parties agree that the other
party shall be entitled to seek temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages and without posting a
bond or other security.
[SIGNATURE PAGES FOLLOW]
23
IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
DEFENSE INDUSTRIES INTERNATIONAL, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
BUYERS:
_______________________________
Gov Financial Holdings Ltd.
By: /s/ Avshalom Hershcovich
----------------------------
By: /s/ Xxxxxx Xxxxxxx
----------------------------
_______________________________
Multi Concept (Consultants), Ltd.
By: /s/ Xxxxxx Even
-------------------
_______________________________
Xxxx Creative Business Ltd
By: /s/ Xxxx Xxx Rush
---------------------
/s/ Avshalom Hershcovich
------------------------
Avshalom Hershcovich
24
EXHIBIT A
THE BUYERS
NAME OF BUYER ADDRESS NUMBER OF SHARES NUMBER OF WARRANTS PURCHASE PRICE
(IN US$)
GOV FINANCIAL HOLDINGS 27 Yoav St. Tel-Aviv, 1,697,386 Warrants A - 1,018,431
LTD., Company No. 513663310 69081, ISRAEL 337,934
Warrants B -
168,967
Avshalom Hershcovich 00 Xxxxx Xx., Xxx Xxxx, Xxxxxxxx X -
Xxxxxx 100,000 19,909 60,000
Warrants B -
9,955
Multi Concept 56 Xxxx St. Oranit 35,948 Warrants A - 21,569
(Consultants), Ltd. 00000, Xxxxxx. 7,157
Company No. Warrants B -
512835000 3,578
WARRANTS A -365,000
TOTAL 1,833,334 WARRANTS B - 1,100,000
182,500
25
EXHIBIT B
Filed as Exhibit 10.2
26
EXHIBIT C
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE UNITED STATES
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL (SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK
Of
DEFENSE INDUSTRIES INTERNATIONAL, INC.
This is to certify that, for value received, ________________. (the
"HOLDER") is entitled to purchase, subject to the provisions of this Warrant
(the "WARRANT"), from Defense Industries International, Inc. (the "COMPANY"), an
aggregate of _______ (____________) fully paid and non-assessable shares of
Common Stock, $0.0001 par value (the "WARRANT SHARES"), of the Company at an
exercise price of US $0.94 (ninety four cents) per share, subject to adjustments
pursuant to the terms hereof.
1. EXERCISE OF WARRANT.
(a) MECHANICS OF EXERCISE. Subject to the provisions hereof, this Warrant
may be exercised in whole or in part at any time from the date of issuance of
the Warrant until June 30, 2007 (the "TERMINATION DATE"). The exercise price for
each Warrant Share purchasable hereunder is US $0.94 (ninety four cents) per
share (the "EXERCISE PRICE"). This Warrant shall be exercised by presentation
and surrender hereof to the Company at the registered office of the Company,
accompanied by both (i) a written notice of exercise (the "NOTICE") in the form
attached hereto and (ii) payment to the Company, for the account of the Company,
of the Exercise Price multiplied by the number of Warrant Shares specified in
the Notice, payable in accordance with Section 2. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder. All
such Warrants shall be dated the date of this Warrant. The number of Warrant
Shares and the Exercise Price may be adjusted from time to time as hereinafter
set forth.
2. PAYMENT. The Exercise Price for the number of Warrant Shares specified
in the Notice shall be paid to the Company by wire transfer of immediately
available U.S. funds.
3. RESERVATION OF SHARES: PRESERVATION OF RIGHTS OF HOLDER. The Company
hereby agrees that at all times it will maintain and reserve, free from
pre-emptive rights, such number of authorized but unissued shares of Common
Stock so that this Warrant may be exercised without additional authorization of
Common Stock by the Company after giving effect to all other options, warrants,
convertible securities and other rights to acquire shares of Common Stock of the
Company.
4. The Holder hereby represents and warrants to the Company that it is an
experienced investor with requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of an
investment in the Company and is an accredited investor as defined under
Regulation D as promulgated by the United States Securities and Exchange
Commission. The Holder has reviewed and inspected all of the data and
information provided to it by the Company in connection with this Warrant and
hereby confirms that it has not been provided with nor seen an offering
memorandum or advertisement in connection with this Warrant and the transactions
contemplated hereby. The Holder represents and agrees that the Warrant is
purchased only for investment, for its own account, and without any present
intention to sell or distribute the Warrant Shares within the meaning of Section
2(11) of the Securities Act. Holder understands that, except as set forth in the
Stockholders Agreement dated June 15, 2005, between, inter alia, the Holder and
the Company (the "STOCKHOLDERS AGREEMENT"), none of the Warrant Shares are
required to be, registered under the Act or the laws of any jurisdiction,
provided that the Warrant Shares shall be listed for trading on the Over the
Counter Bulletin Board (the "OTCBB") prior to or upon issuance, subject to any
resale restrictions under applicable law. Holder further agrees that the Warrant
Shares may not be sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except in compliance with the Securities Act and the terms
of this Warrant and the Stockholders Agreement, between, inter alia, the Holder
and the Company. Holder also acknowledges that the Warrant Shares upon issuance,
will bear a legend substantially similar to following form:
27
THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE OR OTHER JURISDICTION'S
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE UNITED STATES IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT OR
AN OPINION OF COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
5. ADJUSTMENT FOR STOCK DIVIDENDS, COMBINATIONS, ETC. The following
adjustments shall be implemented in the event that, during the term of this
Warrant, the Company shall take any of the corporate actions described in this
Section below:
(a) In the event that the Company effects a subdivision of its
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by reclassification, stock split or otherwise than by payment
of a dividend in shares of Common Stock) then, following the record date
for the determination of holders of shares of Common Stock to be affected
by such subdivision or split-up, the Exercise Price shall be appropriately
decreased by multiplying the Exercise Price by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately prior
to such increase and the denominator of which is the number of shares of
Common Stock outstanding immediately after such increase in outstanding
shares or in the event that the Company effects a combination of its
outstanding shares of Common Stock into a lesser number of shares (by
reclassification, reverse split or otherwise), then, following the record
date to determine the holders affected by such combination or reverse stock
split, the Exercise Price shall be appropriately increased by multiplying
the Exercise Price by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such decrease and
the denominator of which is the number of shares of Common Stock
outstanding immediately after such decrease in outstanding shares. Upon any
adjustment of the Exercise Price as provided in this Section 5 the Holder
of the Warrant shall thereafter be entitled to purchase upon the exercise
thereof, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable on the
exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(b) In the event that the Company declares a dividend payable in
shares of Common Stock of the Company or other distribution on its shares
of Common Stock payable in shares of the Company, the number of Warrant
Shares that may be purchased under this Warrant will be increased by the
number of shares of Common Stock that the Holder would have received if the
Holder had exercised the Warrant on the record date fixed for the
distribution.
(c) In the event that the Company offers shares of Common Stock or any
securities convertible into shares of Common Stock to its shareholders by a
rights issue, then the number of Warrant Shares which may be purchased
under this Warrant shall be adjusted to take into account the element of
economic benefit of such rights issue, as such element is calculated by the
OTCBB in accordance with its rules.
28
(d) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par
value or from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split up or combination
of shares), or any consolidation or merger of the Company with or into
another person (where the Company is not the surviving person or where
there is a change in or distribution with respect to the shares of Common
Stock), each Warrant shall after such reorganization, reclassification,
consolidation, or merger be exercisable for the kind and number of shares
of stock or other securities or property of the Company or of the successor
person resulting from such consolidation or surviving such merger, if any,
to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon exercise of such Warrant would have been
entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers. The Company
shall not effect any such reorganization, reclassification, consolidation
or merger unless, prior to the consummation thereof, the successor person
(if other than the Company) resulting from such reorganization,
reclassification, consolidation or merger, shall assume, by written
instrument, the obligation to deliver to the Holder of the Warrant such
shares of stock, securities or assets, which, in accordance with the
foregoing provisions, the Holder shall be entitled to receive upon such
conversion.
(e) The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, free and clear of all liens, and
shall use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
The above adjustments shall be made successively whenever any of the
aforementioned events shall occur during the term of this Warrant.
6. FULLY PAID SHARES; STAMP TAXES. The Company agrees that the shares of
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant in accordance with the terms hereof
shall, at the time of such delivery, be validly issued, fully paid and
non-assessable, free and clear of all liens, pledges, options, claims or other
encumbrances. The Company further covenants and agrees that it will pay, if and
when due and payable, any US stamp duty, which may be payable in respect of the
issue of any Warrant Shares or certificates therefor.
7. TERMINATION. This Warrant and the rights conferred hereby shall
terminate on the Termination Date. Any Warrants outstanding at such time shall
be void and shall no longer be exercisable.
8. NO RIGHT OF STOCKHOLDER. This Warrant does not grant the Holder any
rights as a stockholder of the Company with regard to the Warrant Shares prior
to the actual exercise resulting in the purchase of any Warrant Shares.
29
9. SUCCESSORS AND ASSIGNS; CERTAIN TRANSFERABILITY RIGHTS. The terms and
conditions of this Warrant shall inure to the benefit of and be binding upon the
respective successors of the parties hereto; provided, however, that this
Warrant may not be assigned by any party without the prior written consent of
the other party hereto except as provided under that certain Stockholders
Agreement entered into between the Holder and the Company dated as of the date
hereof. Notwithstanding the previous sentence, in the event that after the
issuance hereof, warrants of the Company with equal rights as provided in this
Warrant shall be listed for trade on a principal national securities exchange or
on the OTCBB, then, subject to any restrictions imposed by applicable law, the
Company shall make its best efforts to cause this Warrant to be tradable on such
principal national securities exchange or on the OTCBB, as the case may be.
10. GOVERNING LAW; JURISDICTION. THIS WARRANT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE
ARISING UNDER OR IN RELATION TO THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY IN
THE COMPETENT COURTS OF THE STATE OF NEW YORK, AND EACH OF THE PARTIES HEREBY
SUBMITS IRREVOCABLY TO THE JURISDICTION OF SUCH COURT.
11. NOTICES. All notices and other communications required or permitted
hereunder to be given to a party to this Agreement shall be in writing and shall
be faxed or mailed by registered or certified mail, postage prepaid, or
otherwise delivered by hand or by messenger, addressed to such party's address
as set forth below or at such other address as the party shall have furnished to
each other party in writing in accordance with this provision:
if to the Holder: ----------------
if to the Company: Defense Industries International, Inc.
0 Xxxxxxxx Xx.
Xxxxxx, Xxxxxx
Attn: Xx. Xxxxx Xxxxxxxxxx
with a copy to
(which shall not constitute notice):
Efrati, Galili & Co.
0 Xxxxxxxxx Xx.
Xxx Xxxx, Xxxxxx, 00000
Fax : 00-0000000
Attn : Xxxxx Xxxxxxx, Adv
or such other address with respect to a party as such party shall notify
each other party in writing as above provided. Any notice sent in accordance
with this Section 11 shall be effective (i) if mailed, five (5) business days
after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
facsimile, one (1) business day following transmission and electronic
confirmation of receipt.
Dated: June 15, 2005
DEFENSE INDUSTRIES ----------------
INTERNATIONAL, INC.
By: ________________________
Name: ______________________
Title: _____________________
30
NOTICE OF EXERCISE
1. THE UNDERSIGNED HEREBY ELECTS TO PURCHASE [INSERT NUMBER OF WARRANT
SHARES] SHARES OF COMMON STOCK OF DEFENSE INDUSTRIES INTERNATIONAL, INC.
PURSUANT TO THE TERMS OF THE ATTACHED WARRANT.
2. PAYMENT OF EXERCISE PRICE. THE HOLDER SHALL PAY THE AGGREGATE EXERCISE
PRICE IN THE SUM OF $___________________ TO THE COMPANY IN ACCORDANCE WITH THE
TERMS OF THE WARRANT.
3. IN EXERCISING THIS WARRANT, THE UNDERSIGNED HEREBY CONFIRMS AND
ACKNOWLEDGES THAT THE SHARES OF COMMON STOCK ARE BEING ACQUIRED SOLELY FOR THE
ACCOUNT OF THE UNDERSIGNED AND NOT AS A NOMINEE FOR ANY OTHER PARTY, OR FOR
INVESTMENT, AND THAT THE UNDERSIGNED WILL NOT OFFER, SELL OR OTHERWISE DISPOSE
OF ANY SUCH SHARES OF COMMON STOCK EXCEPT UNDER CIRCUMSTANCES THAT WILL NOT
RESULT IN A VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS.
4. PLEASE ISSUE A CERTIFICATE REPRESENTING SAID SHARES IN THE NAME OF THE
UNDERSIGNED.
5. PLEASE ISSUE A NEW WARRANT FOR THE BALANCE OF THE WARRANT SHARES
PURCHASABLE UNDER THE ATTACHED WARRANT IN THE NAME OF THE UNDERSIGNED.
__________________________ ____________________________
(Date) (Print Name)
____________________________
(Signature)
31
EXHIBIT D
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE UNITED STATES
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL (SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
WARRANT TO PURCHASE __________ SHARES OF COMMON STOCK
Of
DEFENSE INDUSTRIES INTERNATIONAL, INC.
This is to certify that, for value received, ____________ "WARRANT"), from
Defense Industries International, Inc. (the "COMPANY"), an aggregate of _______
(eight thousand one hundred and seventy five) fully paid and non-assessable
shares of Common Stock, $0.0001 par value (the "WARRANT SHARES"), of the Company
at an exercise price of US $2.4 (two US dollars and forty cents) per share,
subject to adjustments pursuant to the terms hereof.
1. EXERCISE OF WARRANT.
MECHANICS OF EXERCISE. Subject to the provisions hereof, this Warrant may be
exercised in whole or in part at any time from the date of issuance of the
Warrant until June 30, 2010 (the "TERMINATION DATE"). The exercise price for
each Warrant Share purchasable hereunder is US $2.4 (two US dollars and forty
cents) per share (the "EXERCISE PRICE"). This Warrant shall be exercised by
presentation and surrender hereof to the Company at the registered office of the
Company, accompanied by both (i) a written notice of exercise (the "NOTICE") in
the form attached hereto and (ii) payment to the Company, for the account of the
Company, of the Exercise Price multiplied by the number of Warrant Shares
specified in the Notice, payable in accordance with Section 2. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder to purchase the balance of the Warrant Shares purchasable
hereunder. All such Warrants shall be dated the date of this Warrant. The number
of Warrant Shares and the Exercise Price may be adjusted from time to time as
hereinafter set forth.
2. PAYMENT. The Exercise Price for the number of Warrant Shares specified
in the Notice shall be paid to the Company by wire transfer of immediately
available U.S. funds.
3. RESERVATION OF SHARES: PRESERVATION OF RIGHTS OF HOLDER. The Company
hereby agrees that at all times it will maintain and reserve, free from
pre-emptive rights, such number of authorized but unissued shares of Common
Stock so that this Warrant may be exercised without additional authorization of
Common Stock by the Company after giving effect to all other options, warrants,
convertible securities and other rights to acquire shares of Common Stock of the
Company.
4. The Holder hereby represents and warrants to the Company that it is an
experienced investor with requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of an
investment in the Company and is an accredited investor as defined under
Regulation D as promulgated by the United States Securities and Exchange
Commission. The Holder has reviewed and inspected all of the data and
information provided to it by the Company in connection with this Warrant and
hereby confirms that it has not been provided with nor seen an offering
memorandum or advertisement in connection with this Warrant and the transactions
contemplated hereby. The Holder represents and agrees that the Warrant is
purchased only for investment, for its own account, and without any present
intention to sell or distribute the Warrant Shares within the meaning of Section
2(11) of the Securities Act. Holder understands that, except as set forth in the
Stockholders Agreement dated June 15, 2005, between, inter alia, the Holder and
the Company (the "STOCKHOLDERS AGREEMENT"), none of the Warrant Shares are
required to be, registered under the Act or the laws of any jurisdiction,
provided that the Warrant Shares shall be listed for trading on the Over the
Counter Bulletin Board (the "OTCBB") prior to or upon issuance, subject to any
resale restrictions under applicable law. Holder further agrees that the Warrant
Shares may not be sold, offered for sale, transferred, pledged, hypothecated or
otherwise disposed of except in compliance with the Securities Act and the terms
of this Warrant. Holder also acknowledges that the Warrant Shares upon issuance,
will bear a legend substantially similar to following form:
32
THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE OR OTHER JURISDICTION'S
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE OR PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE UNITED STATES IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT OR
AN OPINION OF COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
5. ADJUSTMENT FOR STOCK DIVIDENDS, COMBINATIONS, ETC. The following
adjustments shall be implemented in the event that, during the term of this
Warrant, the Company shall take any of the corporate actions described in this
Section below:
(a) In the event that the Company effects a subdivision of its
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by reclassification, stock split or otherwise than by payment
of a dividend in shares of Common Stock) then, following the record date
for the determination of holders of shares of Common Stock to be affected
by such subdivision or split-up, the Exercise Price shall be appropriately
decreased by multiplying the Exercise Price by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately prior
to such increase and the denominator of which is the number of shares of
Common Stock outstanding immediately after such increase in outstanding
shares or in the event that the Company effects a combination of its
outstanding shares of Common Stock into a lesser number of shares (by
reclassification, reverse split or otherwise), then, following the record
date to determine the holders affected by such combination or reverse stock
split, the Exercise Price shall be appropriately increased by multiplying
the Exercise Price by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such decrease and
the denominator of which is the number of shares of Common Stock
outstanding immediately after such decrease in outstanding shares. Upon any
adjustment of the Exercise Price as provided in this Section 5 the Holder
of the Warrant shall thereafter be entitled to purchase upon the exercise
thereof, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable on the
exercise hereof immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(b) In the event that the Company declares a dividend payable in
shares of Common Stock of the Company or other distribution on its shares
of Common Stock payable in shares of the Company, the number of Warrant
Shares that may be purchased under this Warrant will be increased by the
number of shares of Common Stock that the Holder would have received if the
Holder had exercised the Warrant on the record date fixed for the
distribution.
(c) In the event that the Company offers shares of Common Stock or any
securities convertible into shares of Common Stock to its shareholders by a
rights issue, then the number of Warrant Shares which may be purchased
under this Warrant shall be adjusted to take into account the element of
economic benefit of such rights issue, as such element is calculated by the
OTCBB in accordance with its rules.
33
(d) In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par
value or from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split up or combination
of shares), or any consolidation or merger of the Company with or into
another person (where the Company is not the surviving person or where
there is a change in or distribution with respect to the shares of Common
Stock), each Warrant shall after such reorganization, reclassification,
consolidation, or merger be exercisable for the kind and number of shares
of stock or other securities or property of the Company or of the successor
person resulting from such consolidation or surviving such merger, if any,
to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon exercise of such Warrant would have been
entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers. The Company
shall not effect any such reorganization, reclassification, consolidation
or merger unless, prior to the consummation thereof, the successor person
(if other than the Company) resulting from such reorganization,
reclassification, consolidation or merger, shall assume, by written
instrument, the obligation to deliver to the Holder of the Warrant such
shares of stock, securities or assets, which, in accordance with the
foregoing provisions, the Holder shall be entitled to receive upon such
conversion.
(e) The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, free and clear of all liens, and
shall use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
The above adjustments shall be made successively whenever any of the
aforementioned events shall occur during the term of this Warrant.
6. FULLY PAID SHARES; STAMP TAXES. The Company agrees that the shares of
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant in accordance with the terms hereof
shall, at the time of such delivery, be validly issued, fully paid and
non-assessable, free and clear of all liens, pledges, options, claims or other
encumbrances. The Company further covenants and agrees that it will pay, if and
when due and payable, any US stamp duty, which may be payable in respect of the
issue of any Warrant Shares or certificates therefor.
7. TERMINATION. This Warrant and the rights conferred hereby shall
terminate on the Termination Date. Any Warrants outstanding at such time shall
be void and shall no longer be exercisable.
8. NO RIGHT OF STOCKHOLDER. This Warrant does not grant the Holder any
rights as a stockholder of the Company with regard to the Warrant Shares prior
to the actual exercise resulting in the purchase of any Warrant Shares.
9. SUCCESSORS AND ASSIGNS; CERTAIN TRANSFERABILITY RIGHTS. The terms and
conditions of this Warrant shall inure to the benefit of and be binding upon the
respective successors of the parties hereto; provided, however, that this
Warrant may not be assigned by any party without the prior written consent of
the other party hereto except as provided under that certain Stockholders
Agreement entered into between the Holder and the Company dated as of the date
hereof. Notwithstanding the previous sentence, in the event that after the
issuance hereof, warrants of the Company with equal rights as provided in this
Warrant shall be listed for trade on a principal national securities exchange or
on the OTCBB, then, subject to any restrictions imposed by applicable law, the
Company shall make its best efforts to cause this Warrant to be tradable on such
principal national securities exchange or on the OTCBB, as the case may be.
34
10. GOVERNING LAW; JURISDICTION. THIS WARRANT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE
ARISING UNDER OR IN RELATION TO THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY IN
THE COMPETENT COURTS OF THE STATE OF NEW YORK, AND EACH OF THE PARTIES HEREBY
SUBMITS IRREVOCABLY TO THE JURISDICTION OF SUCH COURT.
11. NOTICES. All notices and other communications required or permitted
hereunder to be given to a party to this Agreement shall be in writing and shall
be faxed or mailed by registered or certified mail, postage prepaid, or
otherwise delivered by hand or by messenger, addressed to such party's address
as set forth below or at such other address as the party shall have furnished to
each other party in writing in accordance with this provision:
if to the Holder: ----------------
if to the Company: Defense Industries International, Inc.
0 Xxxxxxxx Xx.
Xxxxxx, Xxxxxx
Attn: Xx. Xxxxx Xxxxxxxxxx
with a copy to
(which shall not constitute notice): Efrati, Galili & Co.
0 Xxxxxxxxx Xx.
Xxx Xxxx, Xxxxxx, 00000
Fax : 00-0000000
Attn : Xxxxx Xxxxxxx, Adv
or such other address with respect to a party as such party shall notify
each other party in writing as above provided. Any notice sent in accordance
with this Section 11 shall be effective (i) if mailed, five (5) business days
after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
facsimile, one (1) business day following transmission and electronic
confirmation of receipt.
Dated: June 15, 2005
DEFENSE INDUSTRIES ----------------
INTERNATIONAL, INC.
By: ________________________
Name: ______________________
Title: _____________________
35
NOTICE OF EXERCISE
1. THE UNDERSIGNED HEREBY ELECTS TO PURCHASE [INSERT NUMBER OF WARRANT
SHARES] SHARES OF COMMON STOCK OF DEFENSE INDUSTRIES INTERNATIONAL, INC.
PURSUANT TO THE TERMS OF THE ATTACHED WARRANT.
2. PAYMENT OF EXERCISE PRICE. THE HOLDER SHALL PAY THE AGGREGATE EXERCISE
PRICE IN THE SUM OF $___________________ TO THE COMPANY IN ACCORDANCE WITH THE
TERMS OF THE WARRANT.
3. IN EXERCISING THIS WARRANT, THE UNDERSIGNED HEREBY CONFIRMS AND
ACKNOWLEDGES THAT THE SHARES OF COMMON STOCK ARE BEING ACQUIRED SOLELY FOR THE
ACCOUNT OF THE UNDERSIGNED AND NOT AS A NOMINEE FOR ANY OTHER PARTY, OR FOR
INVESTMENT, AND THAT THE UNDERSIGNED WILL NOT OFFER, SELL OR OTHERWISE DISPOSE
OF ANY SUCH SHARES OF COMMON STOCK EXCEPT UNDER CIRCUMSTANCES THAT WILL NOT
RESULT IN A VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS.
4. PLEASE ISSUE A CERTIFICATE REPRESENTING SAID SHARES IN THE NAME OF THE
UNDERSIGNED.
5. PLEASE ISSUE A NEW WARRANT FOR THE BALANCE OF THE WARRANT SHARES
PURCHASABLE UNDER THE ATTACHED WARRANT IN THE NAME OF THE UNDERSIGNED.
__________________________ ____________________________
(Date) (Print Name)
____________________________
(Signature)
36
EXHIBIT E
NAME OF BUYER ADDRESS NUMBER OF SHARES NUMBER OF WARRANTS
------------- ------- ---------------- ------------------
Multi Concept 56 Xxxx St. Oranit 29,333 Warrants A - 26,350
(Consultants), Ltd. 00000, Xxxxxx Warrants B - 8,175
Company No.
512835000
Xxxx Creative Business Ltd Nachalat Xxxxx 23 /2 52,800 Warrants A - 33,650
Company No. Xxx Xxxx 00000 Warrants B - 11,825
513667477 Israel
TOTAL 82,133 WARRANTS A - 60,000
WARRANTS B - 20,000
37
EXHIBIT F
Filed as Exhibit 10.3
38
