Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of January 7,
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 at least
$30,000,000 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. The Company and each Buyer are executing and delivering this Agreement
in connection with the Warrants (as defined below) and the Warrant Shares (as
defined below) in reliance upon the exemption from securities registration
afforded by Section 4(2) of the 1933 Act and Rule 506 of Regulation D
("Regulation D") as promulgated by the SEC under the 1933 Act.
C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) 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 9,840,426 shares
of Common Stock and shall collectively be referred to herein as the "Purchased
Shares"), and (ii) a warrant representing the right to acquire up to that number
of additional shares of Common Stock set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers (which aggregate amount for all Buyers
together shall be 9,840,426 shares of Common Stock and shall collectively be
referred to herein as the (the "Warrants"), in substantially the form attached
hereto as Exhibit A (as exercised, collectively, the "Warrant Shares").
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights with respect to the Warrant Shares under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
E. The Purchased Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS.
(a) Purchase of Purchased Shares and Warrants.
Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 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) (i) the number of Purchased Shares as is
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers and
(ii) Warrants to acquire up to that number of Warrant Shares as is set forth
opposite such Buyer's name in column (4) 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 and
related Warrant to be purchased by each Buyer at the Closing shall be $1.88 (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 second 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 6 and 7 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 and Warrants 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 (A) 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 and (B) deliver to each Buyer a Warrant
pursuant to which such Buyer shall have the right to acquire such number of
Warrant Shares as is set forth opposite such Buyer's name in column (4) of the
Schedule of Buyers, duly executed on behalf of the Company and registered in the
name of such Buyer.
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 the applicable Transaction
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Documents (as defined below) and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by such Buyer
of the transactions contemplated by this Agreement and the other applicable
Transaction Documents 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 and therewith. This Agreement and the
Registration Rights Agreement have been duly executed by such Buyer, and when
delivered by such Buyer in accordance with the terms hereof and thereof, each
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) Investment Intent. Such Buyer is acquiring the Warrants and the
Warrant Shares as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Warrants or Warrant
Shares or any part thereof, without prejudice, however, to such Buyer's right at
all times to sell or otherwise dispose of all or any part of such Warrants or
Warrant Shares in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such
Buyer to hold the Warrants or the Warrant Shares for any period of time. Such
Buyer is acquiring the Warrants and the Warrant Shares hereunder in the ordinary
course of its business. Such Buyer does not have any agreement or understanding,
directly or indirectly, 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") to distribute any of the Warrants or the Warrant Shares.
(c) Buyer Status. At the time such Buyer was offered the Warrants
and the Warrant Shares, it was, and at the date hereof it is, and on each date
on which it exercises the Warrants it will be, an "accredited investor" as
defined in Rule 501(a) under the 1933 Act. Such Buyer is not a registered
broker-dealer under Section 15 of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
(d) Experience of such Buyer. Such Buyer, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Warrants and the Warrant Shares, and
has so evaluated the merits and risks of such investment. Such Buyer is able to
bear the economic risk of an investment in the Warrants and the Warrant Shares
and, at the present time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Buyer is not purchasing the Warrants
or the Warrant Shares as a result of any advertisement, article, notice or other
communication regarding the Warrant or the Warrant Shares published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
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(f) Access to Information. Such Buyer acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Warrants and the Warrant Shares and
the merits and risks of investing in the Warrants and the Warrant Shares; (ii)
access to information about the Company and the Subsidiaries (as defined below)
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Buyer or its representatives or counsel shall modify, amend or
affect such Buyer's right to rely on the truth, accuracy and completeness of the
Company's representations and warranties contained in the Transaction Documents
in accordance with the terms of such representations and warranties.
(g) No Conflicts. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
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.
(h) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
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.
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(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, the Warrants, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined below) 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
Securities 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 and the
Warrants and the reservation for issuance of the Warrant Shares issuable upon
exercise of the Warrants, 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,
except to the extent that the rules of the Principal Market (as hereinafter
defined) may require stockholder approval in order for the Buyers to be able to
exercise the Warrants in full. 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 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 and the Warrants and reservation for issuance
of the Warrant Shares) do not and will not
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(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 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 filing with the SEC of one or more
registration statements in accordance with the requirements of the Registration
Rights Agreement, (iii) the application(s) to the Principal Market for the
listing of the Purchased Shares and the Warrant Shares for trading thereon in
the time and manner required thereby, (iv) all filings required pursuant to
Section 4(g) hereof, and (v) those Consents set forth in Schedule 3.1(e), which
Consents have been obtained prior to the date hereof.
(f) Issuance of the Securities. The Purchased Shares and Warrants
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 Warrant Shares have
been duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all taxes, Liens and charges with respect to
the issue thereof. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to the
Warrants in order to issue the full number of Warrant Shares as are or may
become issuable in accordance with the terms of the Warrants. 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
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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. Assuming the accuracy of each of the representations
and warranties set forth in Section 3.2 hereof, the issuance by the Company of
the Warrant and the Warrant Shares is exempt from registration under the 1933
Act.
(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 Securities 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 Securities 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 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
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statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. 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 Company stock option plans, (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 Securities 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 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
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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 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
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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
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
10
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) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Warrants or the Warrant Shares. 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 require registration of any of
the Warrants or Warrant Shares under the 1933 Act or cause this offering of the
Warrants and Warrant Shares to be integrated with prior offerings by the Company
for purposes of the 1933 Act or cause this offering of the Securities 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 require
registration of any of the Warrants or Warrant Shares under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings.
11
(x) Certain Registration Matters. Assuming the accuracy of the
Buyers' representations and warranties set forth in Section 2(b)-(f), no
registration under the 1933 Act is required for the offer and sale of the
Warrants and Warrant Shares by the Company to the Buyers as contemplated by the
Transaction Documents. The Company is eligible to register the resale of its
Common Stock for resale by the Buyers 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 Securities
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, including by reason of the issuance of shares of
Common Stock upon the issuance of the Warrant Shares upon exercise in full of
the Warrants.
(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 Securities and the Buyers' ownership of
the Securities.
(bb) Disclosure. 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. All disclosure provided to the Buyers regarding the
Company, its business 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.
12
(cc) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and that 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 Securities. 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, 6 and 7 of this Agreement.
(b) Transfer Restrictions. (i) Securities may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of the Warrants or the Warrant Shares other than pursuant to an
effective registration statement, to the Company, to an Affiliate of a Buyer or
in connection with a pledge as contemplated below, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Warrants or Warrant Shares under the 1933 Act.
(ii) Certificates evidencing the Warrants and Warrant Shares
will contain the following legend, so long as is required by this Section 4(b):
[NEITHER] THESE SECURITIES [NOR THE SECURITIES ISSUABLE UPON
[EXERCISE] OF THESE SECURITIES] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
1933 ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF
13
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Buyer may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Warrants and Warrant Shares and,
if required under the terms of such arrangement, such Buyer may transfer
pledged or secured Warrants and Warrant Shares to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or
consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the
appropriate Buyer's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Warrants and
Warrant Shares may reasonably request in connection with a pledge or
transfer of the Warrants and Warrant Shares including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the
1933 Act or other applicable provision of the 1933 Act to appropriately
amend the list of Selling Stockholders thereunder.
(iii) Certificates evidencing the Warrant Shares shall not
contain any legend (including the legend set forth in Section 4(b)(ii)): (i)
while a registration statement covering the resale of such Warrant Shares is
effective under the 1933 Act, or (ii) following any sale of such Warrant Shares
pursuant to Rule 144 promulgated under the 1933 Act, as amended (or a successor
rule thereto) ("Rule 144"), or (iii) if such Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the 1933 Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its
counsel to issue the legal opinion included in the Irrevocable Transfer Agent
Instructions to the Company's transfer agent on the Effective Date (as defined
in the Registration Rights Agreement). Following the Effective Date or at such
earlier time as a legend is no longer required for the Warrant Shares under this
Section 4(b), the Company will, no later than three trading days following the
delivery by a Buyer to the Company or the Company's transfer agent of a
certificate representing Warrant Shares containing a restrictive legend, deliver
or cause to be delivered to such Buyer a certificate representing such Warrant
Shares that is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section.
(c) Prospectus Supplement, Form D 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. The Company agrees to file a
Form D with respect to the Warrants and Warrant Shares as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. 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 Securities for sale to the Buyers at the
Closing pursuant to this Agreement under
14
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
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
(d) Reporting Status. Until the date on which the Buyers shall have
sold all the Purchased Shares and Warrant Shares and none of the Warrants is
outstanding (the "Reporting Period"), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
(e) Listing. The Company shall promptly secure the listing of all of
the Purchased Shares and Warrant 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(e).
(f) Fees. At the Closing, the Company shall pay an expense allowance
of $35,000 to the lead 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 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 Securities to the Buyers.
(g) Disclosure of Transactions and Other Material Information.
Except as may be otherwise agreed in writing by the Company and a majority in
interest of the Holders, the Company shall, on or before 8:30 a.m., New York
City Time, on the first Business Day following the execution and delivery of
this Agreement, 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 proposed acquisition of FAAC Incorporated (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 in the form required by the 1934 Act, and attaching
the material Transaction Documents (including, without limitation, this
Agreement, the Registration Rights Agreement and the form of the Warrants) as
15
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.
(h) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, from and after the Closing Date, the number of shares of Common Stock
issuable upon exercise of the Warrants being issued at the Closing.
(i) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for general corporate purposes and as set forth in the
Prospectus Supplement.
(j) Additional Registration Statements. Until the Effective Date (as
defined in the Registration Rights Agreement), the Company will not file a
registration statement under the 1933 Act relating to securities that are not
the Registrable Securities thereunder, other than the registration statement
required to be filed in connection with the issuance of the Additional
Debentures and related warrants pursuant to the Registration Rights Agreement
dated September 30, 2003, as amended.
(k) Furnishing of Information. As long as any Buyer owns any
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the 1934
Act. Upon the request of any such Person, the Company shall deliver to such
Person a written certification of a duly authorized officer as to whether it has
complied with the preceding sentence. As long as any Buyer owns Warrants or
Warrant Shares, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Buyers and make publicly available in
accordance with Rule 144(c) such information as is required for the Buyers to
sell the Warrants and the Warrant Shares under Rule 144. The Company further
covenants that it will take such further action as any holder of Warrants or
Warrant Shares may reasonably request, all to the extent required from time to
time to enable such Person to sell such
16
Warrants and Warrant Shares without registration under the 1933 Act within the
limitation of the exemptions provided by Rule 144.
(l) Proxy Statement. The Company shall provide each stockholder
entitled to vote at a meeting of stockholders of the Company, which meeting
shall be called and held not later than June 19, 2004 (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the Buyers
and a single legal counsel of their choice, soliciting each such stockholder's
affirmative vote at such stockholder meeting for approval of the Company's
issuance of all of the Securities as described in the Transaction Documents in
accordance with applicable law and the rules and regulations of the Trading
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal. The Company shall be obligated to obtain the Stockholder Approval
by the Stockholder Meeting Deadline.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to the Transfer
Agent, and any subsequent transfer agent, to issue certificates or credit shares
to the applicable balance accounts at DTC, registered in the name of each Buyer
or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon exercise of the
Warrants in the form of Exhibit C attached hereto (the "Irrevocable Transfer
Agent Instructions"). The Company represents and warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5 will be given by the Company to the Transfer Agent, and any subsequent
transfer agent with respect to the Securities, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction Documents.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to a Buyer. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that a Buyer shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Purchased Shares and the related Warrants 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 the
Registration Rights Agreement and delivered the same to the Company.
17
(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Purchased Shares and the related Warrants being purchased
by such Buyer at the Closing 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.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Purchased
Shares and the related Warrants 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, (ii) electronically delivered the
Purchased Shares being purchased by such Buyer at the Closing pursuant to this
Agreement and (iii) executed and delivered the related Warrants (in such amounts
as such Buyer shall request) being purchased by such Buyer at the Closing
pursuant to this Agreement.
(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 Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(iv) 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.
(v) 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 D.
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(vi) 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 E.
(vii) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Purchased Shares, the Warrants and the Warrant Shares.
(viii) 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 the Prospectus
Supplement as required thereunder.
(ix) 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.
8. 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 6 and 7 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 8, the Company shall remain
obligated to reimburse the Buyers for the expenses described in Section 4(f)
above.
9. 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
19
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
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, holders of Purchased Shares, holders of the Warrants
or holders of Warrant 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.
20
(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.: ▇▇▇-▇▇▇-▇-▇▇▇-▇▇▇▇
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 to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ 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
21
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 or the Warrants. 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 to any
entity able accurately to make the representations and warranties contained in
Section 2 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 8,
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, 5 and 9
shall survive the Closing and the delivery and exercise of Securities, as
applicable. 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 Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and 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
22
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 Securities, or (iii) the status of such Buyer or holder of the Securities
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 9(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 9(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
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 9(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 9(k) shall
be made by
23
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 Securities 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.
(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
24
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]
25
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:________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
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.
BUYERS:
[Name of Buyer]
By:_________________________________
Name:
Title:
EXHIBITS
Exhibit A Form of Warrants
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Irrevocable Transfer Agent Instructions
Exhibit D Form of Secretary's Certificate
Exhibit E Form of Officer's Certificate
