EXHIBIT 4.1
AMENDMENT AND EXERCISE AGREEMENT
AMENDMENT AND EXERCISE AGREEMENT (the "Agreement"), dated as of December
10, 2003, by and between Arotech Corporation, a Delaware corporation (the
"Company"), and [Smithfield Fiduciary LLC] [Portside Growth and Opportunity
Fund] [Mainfield Enterprises Inc.] [Cranshire Capital L.P.] [Omicron Master
Trust] [Cleveland Overseas Ltd.] (the "Investor").
WHEREAS:
A. The Company, the Investor and certain other investors (the "Other
Investors"; and collectively with the Investor, the "Investors"), have entered
into that certain Securities Purchase Agreement, dated as of September 30, 2003
(the "Securities Purchase Agreement"), pursuant to which, among other things,
the Investors purchased from the Company (i) an aggregate of $5,000,000
principal amount of convertible debentures of the Company (the "Initial
Debentures"), convertible into shares of the Company's Common Stock, par value
$0.01 per share (the "Common Stock"), in accordance with the terms of the
Initial Debentures, and (ii) warrants (the "Initial Warrants") to acquire
additional shares of Common Stock;
B. Subject to the terms and conditions set forth in the Securities
Purchase Agreement, the Investors have the right to purchase, and the Company
has the obligation to sell (the "Additional Investment Right") (i) up to an
aggregate of $6,000,000 principal amount of Additional Debentures (as defined in
the Securities Purchase Agreement) and (ii) Additional Warrants (as defined in
the Securities Purchase Agreement);
C. In connection with the transactions set forth in the Securities
Purchase Agreement, the Company entered into a Security Agreement and an
Intellectual Property Security Agreement, each dated as of September 30, 2003
(together, the "Security Agreements"), pursuant to which the Company pledged to
the Investors certain assets to secure during their respective terms, its
obligations under the Debentures and the transactions contemplated by the
Securities Purchase Agreement;
D. Contemporaneously with the execution and delivery of the Securities
Purchase Agreement, the Company and the Investors entered into a Registration
Rights Agreement, dated as of September 30, 2003 (the "Registration Rights
Agreement"), pursuant to which the Company agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "1933 Act"), and the rules and regulations promulgated thereunder, and
applicable state securities laws;
E. The Company and the Investor desire to enter into this Agreement,
pursuant to which, among other things, (i) the Investor will exercise in full
its Additional Investment Right for such Investor's Additional Investment Amount
(as defined in the Securities Purchase Agreement), (ii) the Company will issue
to the Investor the Additional Warrants (as defined in the Securities Purchase
Agreement) in accordance with the terms of the Securities Purchase Agreement and
(iii) as further incentive for agreeing currently to exercise the
Additional Investment Right, the Company will issue to the Investor additional
warrants in the form attached hereto as Exhibit A (the "Incentive Warrants", and
together with the Additional Warrants, the "Warrants") to purchase 173 shares of
the Common Stock ("Incentive Warrant Shares") for each $1,000 of principal
amount of Additional Debentures purchased upon exercise of the Additional
Investment Right;
F. The parties hereto desire to amend certain provisions of the Securities
Purchase Agreement, the Registration Rights Agreement and the Security
Agreements;
G. The issuance of the Additional Debentures, Additional Warrants and the
Incentive Warrants is being made in reliance upon the exemption from
registration provided by Section 4(2) of the 1933 Act and Rule 506 of Regulation
D, as promulgated by the SEC under the 1933 Act; and
H. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings ascribed to them in the Securities Purchase
Agreement.
NOW, THEREFORE, the Company and the Investors hereby agree as follows:
1. PURCHASE OF ADDITIONAL DEBENTURES AND WARRANTS.
(a) Purchase of Additional Debentures and Warrants. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 5(a) and 6(a)
below, the Company shall issue and sell to the Investor, and the Investor agrees
to purchase from the Company on the Closing Date (as defined below), a principal
amount of Additional Debentures equal to its Additional Investment Amount (as
set forth on the Schedule of Buyers to the Securities Purchase Agreement), along
with Additional Warrants to acquire up to 250 Additional Warrant Shares for each
$1,000 principal amount of Additional Debentures purchased and Incentive
Warrants to acquire up to 173 Incentive Warrant Shares for each such $1,000
principal amount of Additional Debentures purchased.
(b) Closing Date. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York Time, on the date ten business days after
the date hereof, subject to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 5(a) and 6(a) below (or such
other date as is mutually agreed to by the Company and the Investor). The
Closing shall occur on the Closing Date at the offices of Schulte Roth & Zabel
LLP, 919 Third Avenue, New York, New York 10022. The Closing Date shall
constitute the "Additional Closing Date" under the Registration Rights
Agreement.
(c) Form of Payment. On the Closing Date, (i) the Investor shall pay
its Additional Investment Amount to the Company for the Additional Debentures
and Warrants to be issued and sold to such Investor at the Closing, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to the Investor the
Additional Debentures (in the principal amounts as such Investor shall request)
which such Investor is then purchasing along with Additional Warrants and
Incentive Warrants (in the amounts as such Investor shall request) corresponding
to such Investor's Additional Investment Amount, duly executed on behalf of the
Company and registered in the name of such Investor or its designee.
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2. AMENDMENTS TO TRANSACTION DOCUMENTS.
(a) Securities Purchase Agreement. The Security Purchase Agreement
is hereby amended as follows:
(i) The defined term "Warrants" is hereby amended to include
the Incentive Warrants; and
(ii) The defined term "Warrant Shares" is hereby amended to
include the Incentive Warrant Shares.
(b) Registration Rights Agreement. The Registration Rights Agreement
is hereby amended as follows: The defined term "Warrants" is replaced in its
entirety by the following:
"Warrants" means (i) the Warrants issued or issuable under the
Purchase Agreement, (ii) any New Warrants issuable under the
Warrants and (iii) the Incentive Warrants.
(c) Security Agreement. The Security Agreement is hereby amended as
follows:
(i) The defined term "Debentures" is hereby amended to include
the Additional Debentures.
(ii) The defined term "Obligations" is hereby amended to
include all of Debtors' obligations under this Agreement and the
Incentive Warrants.
(d) Intellectual Property Security Agreement. The Intellectual
Property Security Agreement is hereby amended as follows:
(i) The defined term "Debentures" is hereby amended to include
the Additional Debentures.
(ii) The defined term "Obligations" is hereby amended to
include all of Debtors' obligations under this Agreement and the
Incentive Warrants.
3. REPRESENTATIONS AND WARRANTIES
(a) Company Bring Down. The Company represents and warrants to the
Investor as set forth in Section 3.1 of the Securities Purchase Agreement as if
such representations and warranties were made as of the date hereof and set
forth in their entirety in this Agreement, including without limitation the
schedules referenced therein.
(b) Investor Bring Down. The Investor hereby represents and
warrants, as to itself only, as set forth in Section 3.2 of the Securities
Purchase Agreement as if such representations and warranties were made as of the
date hereof and set forth in their entirety in this Agreement.
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4. CERTAIN COVENANTS
(a) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the second Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8-K describing the terms
of the transactions contemplated by this Agreement and by any documents relating
to the issuance of Additional Debentures, Additional Warrants and Incentive
Warrants on the Closing Date to any Other Investor (the "Other Investor
Documents") in the form required by the 1934 Act, and attaching the material
transaction documents (including, without limitation, this Agreement, the form
of the Incentive Warrants and any Other Investor Documents) as exhibits to such
filing (including all attachments, the "8-K Filing", and the description and
attachments, the "8-K Materials"). From and after the filing of the 8-K Filing
with the SEC, the Investors shall not 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 the 8-K Filing. 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 the Investor with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the SEC without the express written consent of such
Investor. Subject to the foregoing, neither the Company nor the Investor 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, with the prior approval of the Investor, 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 Trading Market (provided that in the case of clause (i) the
Investor shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release).
5. investors' closing deliveries.
At the Closing, each Investor shall deliver or cause to be delivered
to the Company such Investor's Additional Investment Amount in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose.
6. company's closing deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to the Investor the following:
(i) An Additional Debenture, registered in the name of such
Investor, evidencing the principal amount of Additional Debentures
purchased by such Investor, which amount is such Investor's
Additional Investment Amount;
(ii) An Additional Warrant, registered in the name of such
Investor, pursuant to which such Investor shall have the right to
acquire 250 shares of
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Common Stock for each $1,000 of such Investor's Additional
Investment Amount, at an exercise price equal to $1.8125;
(iii) An Incentive Warrant, registered in the name of such
Investor pursuant to which such Investor shall have the right to
acquire 173 Incentive Warrant Shares for each $1,000 of such
Investor's Additional Investment Amount, at an exercise price equal
to $2.20, and an expiration date that is 66 months from the Closing
Date and otherwise on terms identical to the Additional Warrants;
(iv) The legal opinion of Company Counsel, in agreed form,
addressed to the Investors;
(v) A perfection certificate, duly completed and executed by
the Company and each of its Subsidiaries, in form and substance
satisfactory to the Investors or confirmation that the perfection
certificate delivered in connection with the Initial Closing is
still accurate;
(vi) A certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the effect that the
representations and warranties of the Company shall be true and
correct 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
material respects with the covenants, agreements and conditions
required by the Transaction Documents and this Agreement to be
performed, satisfied or complied with by the Company at or prior to
an Additional Closing Date. The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if
any, necessary for the issuance of the Additional Debentures,
Additional Warrants and Incentive Warrants; and
(vii) Such other documents relating to the transactions
contemplated by this Agreement as the Investor or its counsel may
reasonably request.
7. 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 non-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
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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 one 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; Effect on Prior Agreements; Amendments. Except
for the Transaction Documents (to the extent any such Transaction Document is
not amended by this Agreement), this Agreement and the documents referenced
herein supersede all other prior oral or written agreements between the
Investors, 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 Investor 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 Investors owning at least a majority of
the aggregate principal amount of the Debentures then outstanding. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. 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 Debentures or
holders of the Warrants, as the case may be. The Company has not, directly or
indirectly, made any agreements with any of the Investors relating to the terms
or conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt,
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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
632 Broadway
Suite 1200
New York, New York 10012
Telephone: (646) 654-2107
Facsimile: (646) 654-2187
Attention: Chief Executive Officer
with a copy to:
Electric Fuel (E.F.L.) Ltd.
One HaSolela Street, POB 641
Western Industrial Park
Beit Shemesh 99000, Israel
Telephone: 011-972-2-990-6623
Facsimile: 011-972-2-990-6688
Attention: General Counsel
If to an Investor:
To the address set forth under such Investor's name on
the signature pages hereof;
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Debentures 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 Debentures representing at least
two-thirds of the aggregate principal amount of the Debentures then outstanding,
including by merger or consolidation. The Investors may assign some or all of
their respective rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be an Investor hereunder with respect to
such assigned rights.
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(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(i) Survival. The representations and warranties of the Company and
the Investors contained herein, and the agreements and covenants set forth
herein, shall survive the Closing.
(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
the 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) 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.
(l) Remedies. The Investors 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 this Agreement, any remedy at law
may prove to be inadequate relief to the Investor. The Company therefore agrees
that the Investor 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
and Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
AROTECH CORPORATION
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE OF INVESTOR FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
and Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
SMITHFIELD FIDUCIARY LLC
By:_____________________________________
Name:
Title:
Additional Investment Amount: $2,100,000
Address for Notice:
c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, New York 10019
Attention: Ari J. Storch / Adam J. Chill
Facsimile No.: (212) 751-0755
Telephone No.: (212) 287-4720
With a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 593-5955
Telephone No.: (212) 756-2376
Attention: Eleazer Klein, Esq.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
OMICRON MASTER TRUST
By:_____________________________________
Name:
Title:
Additional Investment Amount: $600,000
Address for Notice:
c/o Omicron Capital L.P.
810 Seventh Avenue
39th Floor
New York, New York 10019
Attention: Olivier Morali
Facsimile: (212) 803-5269
Telephone: (212) 803-5262
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PORTSIDE GROWTH AND OPPORTUNITY FUND
By:_____________________________________
Name:
Title:
Additional Investment Amount: $900,000
Address for Notice:
c/o Ramius Capital Group, L.L.C.
666 Third Avenue, 26th Floor
New York, New York 10006
Facsimile No.: (212) 845-7999
Telephone No.: (212) 845-7917
Attention: Jeffrey Solomon
Jeffrey Smith
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
MAINFIELD ENTERPRISES INC.
By:_____________________________________
Name:
Title:
Additional Investment Amount: $900,000
Address for Notice:
c/o Sage Growth Capital, Inc.
660 Madison Avenue, 18th Floor
New York, New York 10021
Attention: Mor Sagi
Facsimile: (212) 651-9010
Telephone: (212) 651-9005
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CRANSHIRE CAPITAL L.P.
By:_____________________________________
Name:
Title:
Additional Investment Amount: $900,000
Address for Notice:
c/o Downsview Capital, Inc.
The General Partner
666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attention: Mitchell D. Kopin
Facsimile: (847) 562-9031
Telephone: (847) 562-9030
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Exercise Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CLEVELAND OVERSEAS LTD.
By:_____________________________________
Name:
Title:
Investment Amount: $600,000
Address for Notice:
________________________________________
________________________________________
________________________________________
Facsimile No.: (___) ___-____
Telephone No.: (___) ___-____
Attention: ______________
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EXHIBITS
Exhibit A -- Form of Incentive Warrant