AMERICAN DEFENSE SYSTEMS, INC. NON-QUALIFIED STOCK OPTION AGREEMENT FOR Agreement
AMERICAN
DEFENSE SYSTEMS, INC.
FOR
___________________________________________
Agreement
1. Grant
of Option. AMERICAN DEFENSE SYSTEMS, INC., a Delaware
corporation (the “Company”) hereby grants, as of
(“Date of Grant”),
to (the “Optionee”) an option
(the “Option”) to purchase up to shares of the Company’s common stock, $.001 par
value per share (the “Shares”), at an exercise price per share equal to $2.00
(the “Exercise Price”). The Option shall be subject to the terms and
conditions set forth herein. The Option was issued pursuant to the
Company’s 2007 Incentive Compensation Plan (the “Plan”), which is incorporated
herein for all purposes. The Option is a Non-Qualified Stock Option,
and not an Incentive Stock Option. The Optionee hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all of the terms and
conditions hereof and thereof and all applicable laws and
regulations.
2. Definitions. Unless
otherwise provided herein, terms used herein that are defined in the Plan and
not defined herein shall have the meanings attributed thereto in the
Plan.
3. Exercise
Schedule. Except as otherwise provided in Sections 6 or 10 of
this Agreement, or in the Plan, the Option is exercisable in installments as
provided below, which shall be cumulative. To the extent that the Option has
become exercisable with respect to a percentage of Shares as provided below, the
Option may thereafter be exercised by the Optionee, in whole or in part, at any
time or from time to time prior to the expiration of the Option as provided
herein. The following table indicates each date (the “Vesting Date”) upon which
the Optionee shall be entitled to exercise the Option with respect to the
percentage of Shares granted as indicated beside the date, provided that the
Continuous Service of the Optionee continues through and on the applicable
Vesting Date:
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Percentage of
Shares
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Vesting
Date
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20%
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First
anniversary of the Date of Grant
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40%
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Second
anniversary of the Date of Grant
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60%
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Third
anniversary of the Date of Grant
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80%
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Fourth
anniversary of the Date of Grant
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100%
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Fifth
anniversary of the Date of Grant
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Except as
otherwise specifically provided herein, there shall be no proportionate or
partial vesting in the periods prior to each Vesting Date, and all vesting shall
occur only on the appropriate Vesting Date. Upon the termination of the
Optionee’s Continuous Service, any unvested portion of the Option shall
terminate and be null and void.
4. Method
of Exercise. The vested portion of this Option shall be
exercisable in whole or in part in accordance with the exercise schedule set
forth in Section 3 hereof by written notice which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder’s investment intent with respect to such Shares as may be required by the
Company pursuant to the provisions of the Plan. Such written notice
shall be signed by the Optionee and shall be delivered in person or by certified
mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised after both (a) receipt by the Company of such written
notice accompanied by the Exercise Price and (b) arrangements that are
satisfactory to the Committee in its sole discretion have been made for
Optionee’s payment to the Company of the amount, if any, that is necessary to be
withheld in accordance with applicable Federal or state withholding
requirements. No Shares shall be issued pursuant to the Option unless
and until such issuance and such exercise shall comply with all relevant
provisions of applicable law, including the requirements of any stock exchange
upon which the Shares then may be traded.
5. Method
of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the
Optionee: (a) cash; (b) check; (c) to the extent permitted by the
Committee, with Shares owned by the Optionee, or the withholding of Shares that
otherwise would be delivered to the Optionee as a result of the exercise of the
Option, or (d) if approved by the Committee, pursuant to a “cashless exercise”
procedure by delivery by the Optionee of a properly executed exercise notice
together with such other documentation, and subject to such guidelines, as the
Committee shall require to effect an exercise of the Option and delivery to the
Company by a licensed broker acceptable to the Company of proceeds from the sale
of Shares or a margin loan sufficient to pay the Exercise Price and any
applicable income or employment taxes, or (e) such other consideration or in
such other manner as may be determined by the Committee in its absolute
discretion.
6. Termination of
Option.
(a) General. Any
unexercised portion of the Option shall automatically and without notice
terminate and become null and void at the time of the earliest to occur of the
following:
(i)
unless the Committee otherwise determines in writing in its sole discretion,
three months after the date on which the Optionee’s Continuous Service is
terminated other than by reason of (A) by the Company or a Related Entity for
Cause, (B) a Disability of the Optionee as determined by a medical doctor
satisfactory to the Committee, or (C) the death of the Optionee;
(ii)
immediately upon the termination of the Optionee’s Continuous Service by the
Company or a Related Entity for Cause;
(iii)
twelve months after the date on which the Optionee’s Continuous Service is
terminated by reason of a Disability as determined by a medical doctor
satisfactory to the Committee;
(iv) (A)
twelve months after the date of termination of the Optionee’s Continuous Service
by reason of the death of the Optionee, or, if later, (B) three months after the
date on which the Optionee shall die if such death shall occur during the one
year period specified in Section 6(a)(iii) hereof; or
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(v) the
seventh anniversary of the date as of which the Option is granted.
(b) Cancellation. To
the extent not previously exercised, (i) the Option shall terminate immediately
in the event of (A) the liquidation or dissolution of the Company, or (B) any
reorganization, merger, consolidation or other form of corporate transaction in
which the Company does not survive or the Shares are exchanged for or converted
into securities issued by another entity, or an affiliate of such successor or
acquiring entity, unless the successor or acquiring entity, or an affiliate
thereof, assumes the Option or substitutes an equivalent option or right
pursuant to Section 10(c) of the Plan, and (ii) the Committee in its sole
discretion may by written notice (“cancellation notice”) cancel, effective upon
the consummation of any transaction that constitutes a Change in Control, the
Option (or portion thereof) that remains unexercised on such
date. The Committee shall give written notice of any proposed
transaction referred to in this Section 6(b) a reasonable period of time prior
to the closing date for such transaction (which notice may be given either
before or after approval of such transaction), in order that the Optionee may
have a reasonable period of time prior to the closing date of such transaction
within which to exercise the Option if and to the extent that it then is
exercisable (including any portion of the Option that may become exercisable
upon the closing date of such transaction). The Optionee may
condition his exercise of the Option upon the consummation of a transaction
referred to in this Section 6(b).
7. Restrictions
While Stock is Not Registered.
(a) Restricted
Shares. Any Shares acquired upon exercise of the Option
specified in Section 1 and (i) all shares of the Company’s capital stock
received as a dividend or other distribution upon such shares, and (ii) all
shares of capital stock or other securities of the Company into which such
shares may be changed or for which such shares shall be exchanged, whether
through reorganization, recapitalization, stock split-ups or the like, shall be
subject to the provisions of this Section 7 at all times, and only at those
times, that Shares are not registered under the Securities Exchange Act of 1934,
as amended (such times during which the Stock is not so registered sometimes
hereinafter being referred to as the “Restricted Period”) and are during the
Restricted Period hereinafter referred to as “Restricted
Securities.”
(b) No Sale or Pledge
of Restricted Securities. Except as otherwise provided herein,
the Optionee agrees and covenants that during the Restricted Period he or she
shall not sell, pledge, encumber or otherwise transfer or dispose of, and shall
not permit to be sold, encumbered, attached or otherwise disposed of or
transferred in any manner, either voluntarily or by operation of law (all
hereinafter collectively referred to as “transfers”), all or any portion of the
Restricted Securities or any interest therein except in accordance with and
subject to the terms of this Section 7.
3
(c) Voluntary
Transfer Repurchase Option. If the Optionee desires to effect
a voluntary transfer of any of the Restricted Securities during the Restricted
Period, the Optionee shall first give written notice to the Company of such
intent to transfer (the “Offer Notice”) specifying (i) the number of the
Restricted Securities (the “Offered Shares”) and the date of the proposed
transfer (which shall not be less than fifty (50) days after the giving of the
Offer Notice), (ii) the name, address, and principal business of the proposed
transferee (the “Transferee”), and (iii) the price and other terms and
conditions of the proposed transfer of the Offered Shares to the
Transferee. The Offer Notice by the Optionee shall constitute an
offer to sell all, but not less than all, of the Offered Shares, at the price
and on the terms specified in such Offer Notice, to the Company and/or its
designated purchaser. If the Company desires to accept the Optionee’s
offer to sell, either for itself or on behalf of its designated purchaser, the
Company shall signify such acceptance by written notice to Optionee within fifty
(50) days following the giving of the Option Notice. Failing such
acceptance, the Optionee’s offer shall lapse on the fifty-first day following
the giving of the Option Notice. With such written acceptance, the
Company shall designate a day not later than ten days following the date of
giving its notice of acceptance on which the Company or its designated purchaser
shall deliver the purchase price of the Offered Shares (in the same form as
provided in the Offer Notice) and the Optionee shall deliver to the Company or
its designated Purchaser, as applicable, all certificates evidencing the Offered
Shares endorsed in blank for transfer or with separate stock powers endorsed in
blank for transfer. The Company may in its sole and absolute
discretion, notify the Optionee within fifty-one days following the giving of
the Option Notice that it does not permit the transfer of the Offered Shares to
the Transferee pursuant to the terms and conditions set forth in the Option
Notice in which event any such transfer or attempted transfer by the Optionee to
the Transferee shall be null and void. Upon the lapse without acceptance by the
Company of the Optionee’s offer to sell the Offered Shares, and unless the
Company shall provide written notice to the Optionee within fifty-one days
following the giving of the Option Notice that it will not permit the transfer
of the Offered Shares to the Transferee pursuant to the terms and conditions set
forth in the Option Notice, the Optionee shall be free to transfer the Offered
Shares not purchased by the Company or the designated purchaser to the
Transferee (and no one else), for a price and on terms and conditions which are
no more favorable to the Transferee than those set forth in the Offer Notice,
for a period of thirty days thereafter, but after such period the restrictions
of this Section 7 shall again apply to the Restricted Securities. The
Offered Shares so transferred by the Optionee to the Transferee shall continue
to be subject to all of the terms and conditions of this Section 7 (including
without limitation Section 7(f)) and the Company shall have the right to
require, as a condition of such transfer, that the Transferee execute an
agreement substantially in the form and content of the provisions of this
Section 7, as well as any voting agreement and/or shareholders agreement
required by the Company.
(d) Involuntary
Transfer Repurchase Option. Whenever, during
the Restricted Period, the Optionee has any notice or knowledge of any
attempted, pending, or consummated involuntary transfer or lien or charge upon
any of the Restricted Securities, whether by operation of law or otherwise, the
Optionee shall give immediate written notice thereof to the
Company. Whenever the Company has any other notice or knowledge of
any such attempted, impending, or consummated involuntary transfer, lien, or
charge, it shall give written notice thereof to the Optionee. In
either case, the Optionee agrees to disclose forthwith to the Company all
pertinent information in his possession relating thereto. If during
the Restricted Period any of the Restricted Securities are subjected to any such
involuntary transfer, lien, or charge, the Company and its designated purchaser
shall at all times have the immediate and continuing option to purchase such of
the Restricted Securities upon notice by the Company to the Optionee or other
record holder at a price and on terms determined according to Section 7(g)
below, and any of the Restricted Securities so purchased by the Company or its
designated purchaser shall in every case be free and clear of such transfer,
lien, or charge.
4
(e) Excepted
Transfers. The provisions of Sections 7(a) and (b) shall not
apply to transfers by the Optionee, either during his or her lifetime or upon
his or her death, to his or her spouse and/or lineal descendants, to the trustee
of any trusts for the sole benefit of the Optionee and/or the Optionee’s spouse
and/or the Optionee’s lineal descendants; provided, however, that during the
Restricted Period the Optionee shall continue to be subject to all of the terms
and provisions of this Section 7 with respect to any remaining present or future
interest whatsoever he or she may have in the transferred Restricted Securities,
and, further provided that during the Restricted Period any shares transferred
pursuant to this subsection (e) shall continue to be treated as Restricted
Securities and the transferee of any such Restricted Securities shall likewise
be subject to all such terms and conditions of this Section 7 as though such
transferee were a party hereto.
(f) Repurchase Option
After Termination of Continuous Service. Anything set forth in
this Agreement to the contrary notwithstanding, the Company shall have the right
(but not the obligation) to purchase or designate a purchaser of all, but not
less than all, of the Restricted Securities (including, without limitation, any
Restricted Securities transferred pursuant to Section 7(e)) during the
Restricted Period and after termination of the Optionee’s Continuous Service for
any reason, for the purchase price and on terms specified in Section 7(g)
hereof. The Company may exercise its right to purchase or designate a
purchaser of the Restricted Securities at any time (without any time limitation)
after the Optionee’s termination of Continuous Service and during the Restricted
Period. If the Company chooses to exercise its right to purchase the
Restricted Securities hereunder, the Company shall give its notice of its
exercise of this right to the Optionee or his or her legal representative
specifying in such notice a date not later than ten (10) days following the date
of giving such notice on which the Company or its designated purchaser shall
deliver, or be prepared to deliver, the check or promissory note for the
purchase price and the Optionee or his or her legal representative shall deliver
all stock certificates evidencing such Restricted Securities duly endorsed in
blank for transfer or with separate stock powers endorsed in blank for
transfer.
(g) Repurchase
Price. For purposes of Sections 7(d) and (f) hereof, the per
share purchase price of Restricted Securities shall be an amount equal to the
Fair Market Value of such Share, determined by the Committee as of any date
determined by the Committee that is not more than one year prior to the date of
the event giving rise to the Company’s right to purchase such Restricted
Securities. Notwithstanding the foregoing, if the event that gives
rise to the Company’s right to repurchase the Restricted Securities is the
termination of Optionee’s Continuous Service by the Company or a Related Entity
for Cause, the per share purchase price of the Restricted Securities shall be an
amount equal to the lesser of (i) the Fair Market Value of such Share (as
determined in accordance with the previous sentence), and (ii) the original
purchase price per share the Optionee paid for such Restricted
Securities. Any determination of Fair Market Value made by the
Committee shall be binding and conclusive on all parties. The
purchase price shall, at the option of the Company, be payable in cash or in the
form of the Company’s promissory note payable in up to three equal annual
installments commencing 12 months after the acquisition by the Company (the
“Restricted Share Acquisition Date”) of the Restricted Securities, together with
interest on the unpaid balance thereof at the rate equal to the prime rate of
interest as quoted in the Wall Street Journal on the Restricted Share
Acquisition Date.
5
(h) Legends. The certificate
or certificates representing any Restricted Securities acquired pursuant to the
exercise of this Option prior to the last day of the Restricted Period shall
bear the following legends (as well as any legends required by applicable state
and federal corporate and securities laws):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AND RIGHT OF FIRST REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER OR
ITS ASSIGNEE(S) AS SET FORTH IN A NONQUALIFIED STOCK OPTION AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHTS ARE BINDING ON
TRANSFEREES OF THESE SHARES.
8. Transferability. Unless
otherwise determined by the Committee, the Option granted hereby is not
transferable otherwise than by will or under the applicable laws of descent and
distribution, and during the lifetime of the Optionee the Option shall be
exercisable only by the Optionee, or the Optionee’s guardian or legal
representative. In addition, the Option shall not be assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or otherwise),
and the Option shall not be subject to execution, attachment or similar process.
Upon any attempt to transfer, assign, negotiate, pledge or hypothecate the
Option, or in the event of any levy upon the Option by reason of any execution,
attachment or similar process contrary to the provisions hereof, the Option
shall immediately become null and void. The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
9. No
Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any Shares
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date on which the Shares are issued.
6
10. Acceleration of
Exercisability of Option.
(a) Acceleration Upon
Certain Terminations or Cancellations of Option. This Option
shall become immediately fully exercisable in the event that, prior to the
termination of the Option pursuant to Section 6 hereof, (i) the Option is
terminated pursuant to Section 6(b)(i) hereof, or (ii) the Company exercises its
discretion to provide a cancellation notice with respect to the Option pursuant
to Section 6(b)(ii) hereof.
(b) Acceleration Upon
Change in Control. This Option shall become immediately fully
exercisable in the event that, prior to the termination of the Option pursuant
to Section 6 hereof, and during the Optionee's Continuous Service, there is a
“Change in Control”, as defined in Section 9(b) of the Plan.
(c) Exception to
Acceleration Upon Change in Control. Notwithstanding the
foregoing, if in the event of a Change in Control the successor company assumes
or substitutes for the Option, the vesting of the Option shall not be
accelerated as described in Section 10(b). For the purposes of this
paragraph, the Option shall be considered assumed or substituted for if
following the Change in Control the Option or substituted option confers the
right to purchase, for each Share subject to the Option immediately prior to the
Change in Control, the consideration (whether stock, cash or other securities or
property) received in the transaction constituting a Change in Control by
holders of Shares for each Share held on the effective date of such transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the transaction
constituting a Change in Control is not solely common stock of the successor
company or its parent or subsidiary, the Committee may, with the consent of the
successor company, or its parent or subsidiary, provide that the consideration
to be received upon the exercise or vesting of the Option will be solely common
stock of the successor company or its parent or subsidiary substantially equal
in Fair Market Value to the per share consideration received by holders of
Shares in the transaction constituting a Change in Control. The
determination of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its determination shall be
conclusive and binding.
11. No
Right to Continued Employment. Neither the Option nor this
Agreement shall confer upon the Optionee any right to continued employment or
service with the Company.
12. Law
Governing. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of Delaware.
13. Interpretation
/ Provisions of Plan Control. This
Agreement is subject to all the terms, conditions and provisions of the Plan,
including, without limitation, the amendment provisions thereof, and to such
rules, regulations and interpretations relating to the Plan adopted by the
Committee as may be in effect from time to time. If and to the extent that this
Agreement conflicts or is inconsistent with the terms, conditions and provisions
of the Plan, the Plan shall control, and this Agreement shall be deemed to be
modified accordingly. The Optionee accepts the Option subject to all of the
terms and provisions of the Plan and this Agreement. The undersigned
Optionee hereby accepts as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Plan and
this Agreement, unless shown to have been made in an arbitrary and capricious
manner.
7
14. Notices. Any
notice under this Agreement shall be in writing and shall be deemed to have been
duly given when delivered personally or when deposited in the United States
mail, registered, postage prepaid, and addressed, in the case of the Company, to
the Company’s Secretary at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or if the Company should move
its principal office, to such principal office, and, in the case of the
Optionee, to the Optionee’s last permanent address as shown on the Company’s
records, subject to the right of either party to designate some other address at
any time hereafter in a notice satisfying the requirements of this
Section.
15. Market
Stand-Off Agreement. In the event of an initial public
offering of the Company’s securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company’s securities, the
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) acquired pursuant to the exercise of the Option, without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters.
16. Optionee’s
Representations. In the event that the Company’s issuance of
the Shares purchasable pursuant to the exercise of this Option has not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached to this Agreement
as Exhibit A or in such other form as the Company may request.
IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the _____ day of
___________________, 2007.
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COMPANY:
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AMERICAN
DEFENSE SYSTEMS, INC.
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By:
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The
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she has reviewed the provisions of the Plan and this Option Agreement in their
entirety, is familiar with and understands their terms and provisions, and
hereby accepts this Option subject to all of the terms and provisions of the
Plan and the Option Agreement. The Optionee further represents that
he or she has had an opportunity to obtain the advice of counsel prior to
executing this Option Agreement.
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Dated:
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OPTIONEE:
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By:
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9
EXHIBIT
A
INVESTMENT
REPRESENTATION STATEMENT
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PURCHASER
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:
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COMPANY
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:
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AMERICAN
DEFENSE SYSTEMS, INC.
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SECURITY
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:
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AMOUNT
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:
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DATE
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:
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In
connection with the purchase of the above-listed Securities, I, the Purchaser,
represent to the Company the following:
(a) I am
aware of the Company’s business affairs and financial condition, and have
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I
understand that the Company’s issuance of the Securities has not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I
further understand that the Securities must be held indefinitely unless the
transfer is subsequently registered under the Securities Act or unless an
exemption from registration is otherwise available. Moreover, I understand that
the Company is under no obligation to register any transfer of the Securities.
In addition, I understand that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am
familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the Securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (e) hereof.
10
In the
event that the Company does not qualify under Rule 701 at the time of issuance
of the Securities, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the availability of certain public information about the Company,
(2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if
applicable.
(e) I
further understand that in the event all of the applicable requirements of Rule
144 or Rule 701 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and Rule 701 are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
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Signature
of Purchaser:
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Date:
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11