SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 15,
2004, by and among Arotech Corporation, a Delaware corporation, with
headquarters located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer desire to enter into this transaction to
purchase the Purchased Shares (as defined below) set forth herein pursuant to a
currently effective shelf registration statement on Form S-3, which has
$7,800,000 in unallocated securities registered thereunder (Registration Number
333-110729) (the "REGISTRATION STATEMENT"), which Registration Statement has
been declared effective in accordance with the Securities Act of 1933, as
amended (the "1933 ACT"), by the United States Securities and Exchange
Commission (the "SEC").
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, that aggregate number of
shares of common stock, par value $.01 per share, of the Company (the "COMMON
STOCK"), set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be 4,258,065 shares
of Common Stock and shall collectively be referred to herein as the "PURCHASED
SHARES").
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES.
(a) Purchase of Purchased Shares. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 5 and 6 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below) the
number of Purchased Shares as is set forth opposite such Buyer's name in column
(3) on the Schedule of Buyers (the "CLOSING"). The Closing shall occur on the
Closing Date at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(b) Purchase Price. The purchase price for each Purchased
Share to be purchased by each Buyer at the Closing shall be $1.55 (the "PURCHASE
PRICE").
(c) Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m., New York City Time, on the Business Day
after execution and delivery of this Agreement, after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
5 and 6 below (or such later date as is mutually agreed to by the Company and
each Buyer). As used herein, "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(d) Form of Payment. On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Purchased Shares to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and (ii) the
Company shall cause American Stock Transfer and Trust Company, the Company's
transfer agent (the "TRANSFER AGENT"), through the Depository Trust Company
("DTC") Fast Automated Securities Transfer Program, to credit such aggregate
number of Purchased Shares that such Buyer is purchasing as is set forth
opposite such Buyer's name in column (3) of the Schedule of Buyers to such
Buyer's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system.
2. REPRESENTATIONS AND WARRANTIES OF EACH BUYER.
Each Buyer represents and warrants with respect to only itself
that:
(a) Organization; Authority. Such Buyer is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder. The execution, delivery and
performance by such Buyer of the transactions contemplated by this Agreement
have been duly authorized by all necessary action on the part of such Buyer and
no further action is required by such Buyer or any of its composite entities
(such as a board of directors, management committee, partners or stockholders)
in connection herewith. This Agreement has been duly executed by such Buyer, and
when delivered by such Buyer in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Buyer, enforceable
against it in accordance with its terms, except (a) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification and
contribution provisions may be limited under the federal and state securities
laws and public policy, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) No Conflicts. The execution, delivery and performance by
such Buyer of this Agreement and the consummation by such Buyer of the
transactions contemplated hereby do not and will not (i) conflict with or
violate the organizational documents of such Buyer 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 such Buyer is a party, or (iii) 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 clauses (ii)
and (iii) 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.
(c) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
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The Company acknowledges and agrees that each Buyer does not
make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to each Buyer:
(a) Subsidiaries. There is no entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest other than those listed in Schedule 3.1(a) ("SUBSIDIARIES"). Except as
disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of
the capital stock of each Subsidiary free and clear of any and all liens,
charges, encumbrances, security interests, rights of first refusal or other
restrictions of any kind ("LIENS"), and all the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Except as set forth on
Schedule 3(b) hereto, (1) each of the Company and each Subsidiary is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted, (2) neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents, and (3) each of the Company and each Subsidiary is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, have or reasonably be expected to
result in (i) an adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material and adverse effect on the results of
operations, assets, business or financial condition of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company's
ability to perform on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of this Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder
(collectively, the "TRANSACTION DOCUMENTS") and otherwise to carry out its
obligations hereunder and thereunder and to issue the Purchased Shares in
accordance with the terms hereof and thereof. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Purchased Shares, have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its Board of Directors or its stockholders in connection herewith and
therewith. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (a) as such
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enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of any
indemnification and contribution provisions may be limited under the federal and
state securities laws and public policy, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(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) do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations of
whichever of the New York Stock Exchange, Inc., the American Stock Exchange, the
Nasdaq National Market (the "PRINCIPAL MARKET") or The Nasdaq SmallCap Market
that the Common Stock is listed or quoted for trading on the date in question
(any of the foregoing, a "TRADING MARKET"), or by which any property or asset of
the Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration (collectively,
"CONSENTS") with, any court or other federal, state, local or other governmental
authority or any regulatory or self-regulatory agency or other individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind (a "PERSON") in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing with the SEC of the prospectus
supplement required by the Registration Statement pursuant to Rule 424(b) under
the 1933 Act (the "PROSPECTUS SUPPLEMENT") supplementing the base prospectus
forming part of the Registration Statement (the "PROSPECTUS"), (ii) the
application(s) to the Principal Market for the listing of the Purchased Shares
for trading thereon in the time and manner required thereby, (iii) all filings
required pursuant to Section 4(f) hereof, and (iv) those Consents set forth in
Schedule 3.1(e), which Consents have been obtained prior to the date hereof.
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(f) Issuance of the Purchased Shares. The Purchased Shares are
duly authorized and, upon issuance in accordance with the terms hereof, will be
duly and validly issued, fully paid and nonassessable, free from all taxes,
Liens and charges with respect to the issue thereof. The issuance by the Company
of the Purchased Shares has been registered under the 1933 Act and all of the
Purchased Shares are freely transferable and tradable by the Buyers without
restriction. The Purchased Shares are being issued pursuant to the Registration
Statement and the issuance of the Purchased Shares has been registered by the
Company under the 1933 Act. The Registration Statement is effective and
available for the issuance of the Purchased Shares thereunder and the Company
has not received any notice that the SEC has issued or intends to issue a
stop-order with respect to the Registration Statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of the Registration Statement,
either temporarily or permanently, or intends or has threatened in writing to do
so. The "Plan of Distribution" section under the Registration Statement permits
the issuance and sale of the Purchased Shares hereunder. Upon receipt of the
Purchased Shares and making payment for them in accordance with the terms
hereof, the Buyers will have good and marketable title to such Purchased Shares
and the Purchased Shares will be freely tradable on the Principal Market.
(g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g). Except as set forth in Schedule 3.1(g), no securities of the
Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Purchased Shares
and except as disclosed in Schedule 3.1(g), there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth in Schedule
3.1(g), the issue and sale of the Purchased Shares will not, immediately or with
the passage of time, obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Buyers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such reports) (the
foregoing materials being collectively referred to herein as the "SEC REPORTS"
and, together with the Schedules to this Agreement, the "DISCLOSURE MATERIALS")
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension.
The Company has delivered to the Buyers a copy of all SEC Reports not available
on the ▇▇▇▇▇ system. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the 1933 Act and the 1934 Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
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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. The Registration Statement and any
prospectus included therein, including the Prospectus and the Prospectus
Supplement, complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder, and none of such Registration Statement or any such prospectus,
including the Prospectus and the Prospectus Supplement, contain or 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 case of any prospectus in the light of the circumstances under which they
were made, not misleading. The Company is in compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002, and the rules and regulations promulgated thereunder by all
government and regulatory authorities and agencies. The financial statements of
the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
SEC, (iii) the Company has not altered its method of accounting or the identity
of its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, (v) the Company has not issued any equity securities to any officer,
director or any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 promulgated under
the 1933 Act, as amended (or a successor rule thereto) ("RULE 144") (an
"AFFILIATE"), except pursuant to existing stock option plans of the Company,
(vi) the Company has not sold any assets, individually or in the aggregate, in
excess of $250,000 outside of the ordinary course of business or (vii) the
Company has not had capital expenditures, individually or in the aggregate, in
excess of $250,000. The Company does not have pending before the SEC any request
for confidential treatment of information.
(j) Litigation. Except as set forth in Schedule 3.1(j), there
is no Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Purchased Shares or
(ii) could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
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Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any claim, action or proceeding involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company. The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the 1934 Act or the 1933 Act, including the Registration
Statement.
(k) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(l) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator, governmental body, or
regulatory or self-regulatory authority or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except as set forth in Schedule 3.1(n)
and except for Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance in all material respects.
(o) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
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other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY Rights"). 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.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it or its Subsidiaries will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost, other than anticipated increases in the market
price of officers' and directors' liability insurance generally.
(q) Foreign Corrupt Practices. Neither the Company nor any
direct director, officer or employee 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.
(r) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all 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 material 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
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be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(t) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls which the audit
committee of the board of directors reasonably believes is sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(u) Solvency. Based on the financial condition of the Company
as of the date hereof and as of the Closing Date, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(v) Placement Agent's Fees. The Company shall be responsible
for the payment of any placement agent's fees, financial advisory or consultancy
fees, brokers' commissions or finder's fee (other than for persons engaged by
any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby, which fees are set forth on Schedule 3.1(v).
The Company shall pay, and hold each Buyer 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.
(w) 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 cause
this offering of the Purchased Shares to be integrated with prior offerings by
the Company for purposes of any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. 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 cause the offering of the Purchased Shares
to be integrated with other offerings.
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(x) Certain Registration Matters. The Company is eligible to
register the sale of its Common Stock under Form S-3 promulgated under the 1933
Act. Except as described in Schedule 3.1(x), the Company has not granted or
agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the SEC or any
other governmental authority that have not been satisfied.
(y) Listing and Maintenance Requirements. Except as set forth
in the SEC Reports or as set forth in Schedule 3.1(y), the Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. Except for the maintenance of the $10
million minimum in stockholders' equity (pursuant to the rules and regulations
of the Principal Market), the Company is currently in compliance with all such
listing and maintenance requirements. The issuance and sale of the Purchased
Shares hereunder does not contravene the rules and regulations of the Principal
Market and no approval of the stockholders of the Company is required for the
Company to issue and deliver to the Buyers the maximum number of shares of
Common Stock contemplated by this Agreement.
(z) Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(aa) Application of Takeover Protections. The Company has
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to the
Buyers solely as a result of the Buyers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Purchased Shares and
the Buyers' ownership of the Purchased Shares.
(bb) Disclosure. Other than in connection with the acquisition
of Armour of America, Incorporated (the "AOA ACQUISITION"), the Company confirms
that neither it nor any Person acting on its behalf has provided any of the
Buyers or their agents or counsel with any information that the Company believes
constitutes material, non-public information. The Company understands and
confirms that the Buyers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. The Company
has provided each Buyer with a true, correct and complete copy of all of the
executed documentation in connection with the AoA Acquisition. All disclosure
provided to the Buyers regarding the Company, its business, the AoA Acquisition
and the transactions contemplated hereby, furnished by or on behalf of the
Company (including the Company's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(cc) Acknowledgment Regarding Buyer's Purchase of Purchased
Shares. The Company acknowledges and agrees that each Buyer is acting solely in
10
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby, and that no Buyer is an
officer or director of the Company. The Company further acknowledges that no
Buyer is 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 a 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 Purchased Shares. The Company further represents to each
Buyer 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.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the covenants and the conditions to be satisfied by it as
provided in Sections 5 and 6 of this Agreement.
(b) Prospectus Supplement and Blue Sky. On or before the
execution of this Agreement, the Company shall have delivered, and as soon as
practicable after the Closing the Company shall file, the Prospectus Supplement
with respect to the Purchased Shares as required under and in conformity with
the 1933 Act, including Rule 424(b) thereunder. If required, the Company, on or
before the Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Purchased Shares for sale to the Buyers at the Closing 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 prior to the
Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Purchased Shares required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
(c) Listing. The Company shall promptly secure the listing of
all of the Purchased Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable under the terms of the Transaction Documents. The Company
shall maintain the Common Stock's authorization for listing on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(c).
(d) Fees. At the Closing, the Company shall pay an expense
allowance of $25,000 to Smithfield Fiduciary LLC (a Buyer) or its designee(s),
which amount shall be withheld by such Buyer from its aggregate Purchase Price
at the Closing. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or broker's commissions (other
than for Persons engaged by any Buyer) relating to or arising out of the
11
transactions contemplated hereby. The Company shall pay, and hold each 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
this Agreement or in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Purchased Shares
to the Buyers.
(e) Disclosure of Transactions and Other Material Information.
The Company shall, on or before 8:30 a.m., New York City Time, on July 15, 2004,
issue a press release reasonably acceptable to the Buyers disclosing all
material terms of the transactions contemplated hereby as well as the material
terms of the AoA Acquisition (the "PRESS RELEASE"). On or before 8:30 a.m., New
York Time, on the second Business Day following the execution and delivery of
this Agreement, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction Documents and the
AoA Acquisition in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement) as
exhibits to such filing (including all attachments, the "8-K FILING"). From and
after the filing of the Press Release, no Buyer shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in such Press Release. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Buyer with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the press release referred to in the first sentence of this
Section without the express written consent of such Buyer. Subject to the
foregoing, neither the Company nor any Buyer 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 any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its release). Without the prior written consent of any applicable
Buyer, the Company shall not disclose the name of any Buyer in any filing,
announcement, release or otherwise.
(f) Use of Proceeds. The Company shall use the proceeds from
the sale of the Purchased Shares for the AOA Acquisition and as set forth in the
Prospectus Supplement.
(g) Subsequent Registrations and Subsequent Placements.
(i) Prior to June 30, 2005, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of Common Stock or Common Stock Equivalents or any of
its Subsidiaries' equity or Common Stock Equivalents, including without
limitation, pursuant to a private placement, an equity line of credit or a shelf
registration statement in accordance with Rule 415 under the Securities Act,
(such offer, sale, grant, disposition or announcement being referred to as a
12
"SUBSEQUENT PLACEMENT"), unless: (i) the Company delivers to each Purchaser a
written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect
such Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement is proposed to be effected, and attached to which shall be a term
sheet or similar document relating thereto and (ii) such Purchaser shall not
have notified the Company by 6:30 p.m. (New York City time) on the seventh
Trading Day after (but not including) its receipt of the Subsequent Placement
Notice of its willingness to provide (or to cause its designee to provide),
subject to completion of mutually acceptable documentation, all or part of such
financing to the Company on the same terms set forth in the Subsequent Placement
Notice. If the Purchasers shall fail to so notify the Company of their
willingness to participate in full in the Subsequent Placement, the Company may
effect the remaining portion of such Subsequent Placement on the terms and to
the Persons set forth in the Subsequent Placement Notice. The Company shall
provide the Purchasers with a second Subsequent Placement Notice and the
Purchasers will again have the right of first refusal set forth in this Section
4.4(b), if the Subsequent Placement subject to the initial Subsequent Placement
Notice is not consummated for any reason on the terms set forth in such
Subsequent Notice within 45 Trading Days after the date of the initial
Subsequent Placement Notice with the Person identified in the Subsequent
Placement Notice. If the Purchasers indicate a willingness to provide financing
in excess of the amount set forth in the Subsequent Placement Notice, then each
Purchaser will be entitled to provide financing pursuant to such Subsequent
Placement Notice up to an amount equal to such Purchaser Percentage of the
financing, but the Company shall not be required to accept financing from the
Purchasers in an amount in excess of the amount set forth in the Subsequent
Placement Notice. For purposes hereof, (x) "COMMON STOCK EQUIVALENTS" means any
securities of the Company or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.; (y) "TRADING DAY" means (i) a
day on which the Common Stock is traded on a Trading Market, or (ii) if the
Common Stock is not listed on a Trading Market, a day on which the Common Stock
is traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
Pink Sheets LLC (formerly the National Quotation Bureau Incorporated) (or any
similar organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) above, then Trading Day shall mean a Business Day;
and (z) "PURCHASER PERCENTAGE" means, with respect to each Buyer, the percentage
equal to the product of (x) a fraction, the numerator of which shall be the
number of Purchased Shares acquired by such Buyer on the Closing Date and the
denominator of which shall be the aggregate number of Purchased Shares issued
hereunder on the Closing Date. times (y) 100.
(ii) The provisions contained in Sections 4(g)(i) shall
not apply to (x) a bona fide firm commitment underwritten public offering with a
nationally recognized underwriter which generates gross proceeds to the Company
in excess of $30,000,000 (other than an "at-the-market offering" as defined in
13
Rule 415(a)(4) under the 1933 Act and "equity lines"); (y) the issuance of
securities upon the exercise or conversion of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement; , provided that the
terms of such Common Stock Equivalents are not amended, modified or changed on
or after the date hereof, or (z) the grant of options or warrants, or the
issuance of additional securities, under any duly authorized Company stock
option, restricted stock plan or stock purchase plan in existence on the Closing
Date (but not as to any amendments or other modifications to the number of
shares of Common Stock issuable thereunder, the terms set forth therein, or the
exercise price set forth therein).
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Purchased Shares to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i) Such Buyer shall have executed this Agreement and
delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Purchased Shares being purchased by such Buyer at the
Closing (less, in the case of Smithfield Fiduciary LLC, the amounts withheld
pursuant to Section 4(d)) by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Purchased Shares at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The Company shall have (i) executed and delivered to
such Buyer each of the Transaction Documents, and (ii) caused the Transfer Agent
to have electronically delivered the Purchased Shares being purchased by such
Buyer at the Closing pursuant to this Agreement.
14
(ii) Such Buyer shall have received the opinion of the
Company's counsel, dated as of the Closing Date, in a form reasonably acceptable
to the Buyers.
(iii) The Common Stock (I) shall be listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum listing maintenance requirements of the
Principal Market.
(iv) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with this transaction as
adopted by the Company's Board of Directors in a form reasonably acceptable to
such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws of the
Company, each as in effect at the Closing, in the form attached hereto as
Exhibit A.
(v) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit B.
(vi) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Purchased Shares.
(vii) The Registration Statement shall be effective and
available for the issuance and sale of the Purchased Shares hereunder and the
Company shall have delivered to such Buyer the Prospectus and Prospectus
Supplement as required thereunder.
(viii) The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
7. TERMINATION. In the event that the Closing shall not have occurred
with respect to a Buyer on the Closing Date due to the Company's or such Buyer's
failure to satisfy the conditions set forth in Sections 5 and 6 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 7, the Company shall remain
obligated to reimburse the Buyers for the expenses described in Section 4(d)
above.
15
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 New York 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, Borough of Manhattan
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.
(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
16
Company and the holders of Purchased Shares representing at least a majority of
the amount of the Purchased Shares, or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least a
majority of the amount of the Purchased Shares. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Purchased Shares then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents or holders of Purchased Shares, as the case may be.
The Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents.
(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:
Arotech Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: Chief Executive Officer
With a copy to:
Electric Fuel (E.F.L.) Ltd.
One HaSolela Street, POB ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Facsimile No.: 011-972-2-990-6688
Telephone No.: ▇▇▇-▇▇▇-▇-▇▇▇-▇▇▇▇
Attn.: General Counsel
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
With a copy (for informational purposes only) to:
17
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Purchased Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of Purchased Shares representing at least a
majority of the number of the Purchased Shares, including by merger or
consolidation. A Buyer may assign some or all of its rights hereunder without
the consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.
(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. Unless this Agreement is terminated under
Section 7, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 8 shall survive the Closing. Each Buyer shall be responsible only
for its own representations, warranties, agreements and covenants 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. (i) In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Purchased
Shares 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 each Buyer and each other holder of the Purchased Shares and
all of their shareholders, partners, members, officers, directors, employees and
18
direct or indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (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 the 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 or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Purchased Shares, or (iii)
the status of such Buyer or holder of the Purchased Shares as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(ii) Promptly after receipt by an Indemnitee under this
Section 8(k) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving an Indemnified
Liability, such Indemnitee shall, if a claim for indemnification in respect
thereof is to be made against any indemnifying party under this Section 8(k),
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnitee; provided,
however, that an Indemnitee shall have the right to retain its own counsel with
the fees and expenses of not more than one counsel for such Indemnitee to be
paid by the indemnifying party, if, in the reasonable opinion of the Indemnitee,
the representation by such counsel of the Indemnitee and the indemnifying party
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceeding. Legal counsel referred to in the immediately preceding sentence
shall be selected by the Investors holding at least a majority of the Purchased
Shares. The Indemnitee shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Indemnified
Liabilities by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnitee that relates to
such action or Indemnified Liabilities. The indemnifying party shall keep the
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
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shall, without the prior written consent of the Indemnitee, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnitee of a release from all liability in respect to such
Indemnified Liabilities or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnitee with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnitee under this Section 8(k), except to the extent that
the indemnifying party is prejudiced in its ability to defend such action.
(iii) The indemnification required by this Section 8(k)
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Liabilities are incurred.
(iv) The indemnity agreements contained herein shall be
in addition to (i) any cause of action or similar right of the Indemnitee
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
(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. Each Buyer and each holder of the Purchased
Shares 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, the Company 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 Buyers.
The Company therefore agrees that the Buyers 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.
(n) Rescission and Withdrawal Right. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever any Buyer exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Buyer may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
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(o) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
(p) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to the Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
AROTECH CORPORATION
By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer