Re: Option to Purchase Shares
Exhibit
1
December
31, 2009
Xx. Xxx
Xxxxxxx
11
Ha’Tavor St.
Rishon
LeZion
Israel
Dear Xx.
Xxxxxxx,
The
undersigned (each a “Seller”,
and jointly, the “Sellers”),
each being a holder of (or, with respect to the Inherited Shares (as defined
below), having a right to own) such amount of shares of common stock, par value
$0.0001 per share (each, a Share),
of Defense Industries International Inc. (the “Company”)
as set forth opposite his or her name in the column titled “Option
Shares” in Exhibit
A hereto, hereby grant you an option to purchase all (and in no event
less than all, other than as set forth in the second sentence of Section 2) of
the Shares owned by the Sellers together with any other right they have or may
have in the Company and any affiliate thereof (collectively, the “Option
Shares”), on the terms and subject to the conditions set forth in this
letter (the “Option”).
1. Term
of Option. The Option may be exercised by you, in whole but not in part,
at any time until June 30, 2011 (the “Exercise
Period”) in the manner provided in Section 2 below. In the event that
prior to the end of the Exercise Period you will be able to demonstrate that
that a minimum of $3.5 million is deposited with the Trustee (as defined herein)
then the Exercise Period shall be automatically extended by an additional 12
month period, until June 30, 2012. Notwithstanding the foregoing, Sellers may,
in their sole and absolute discretion, at any time, shorten the Exercise Period
by providing you with written notice to this effect (the “Acceleration
Notice”). If Sellers provide you with such Acceleration Notice, the
Exercise Period will terminate on the 180th day
following delivery of such Acceleration Notice to you. Notwithstanding any of
the above, the Exercise Period shall not expire so long as the Inherited Shares
(as defined below) shall not have been registered in the name of Xxx. Xxxxx
Xxxxxxxxxx.
2. Exercise
of the Option. The
Option is not transferable and may only be exercised by you providing us, during
the Exercise Period, with a written notice of exercise in the form attached
hereto as Exhibit B (the “Exercise
Notice”). In addition and notwithstanding the above, in the event that
the Exercise Period is extended until June
30, 2012, Sellers shall have the right, subject to the applicable law, to
require you to partially exercise the Option against the amounts deposited with
the Trustee.
3. Exercise
Price. The aggregate consideration to be paid by you for all the Option
Shares is US$7,000,000, in cash, before Taxes (as defined below) and Expenses
(as defined below) (i.e. on gross basis) (the “Consideration”).
Any
amounts paid to Sellers, directly or indirectly (including, without limitation,
to any of their family members), by the Company or any affiliate thereof, during
the Exercise Period including any extension thereof, shall be deemed as a
payment on account of the Consideration, unless otherwise agreed in writing
between you and Xxx. Xxxxx Xxxxxxxxx (or anyone on her behalf) (the “Deducted
Amounts”). Every 180 days from the date hereof, the parties shall agree
in writing as to which amounts shall be excluded from the Deducted
Amounts.
“Taxes”
shall mean the aggregate amount of applicable taxes payable by any of the
Sellers in connection with the sale of the Option Shares to you, including,
without limitation, income tax and capital gains tax.
“Expenses”
shall mean the aggregate expenses payable by Sellers in connection with the sale
of the Option Shares to you, including, without limitation, any finder’s or
broker’s fees, any fees or expenses associated with the transfer of the Option
Shares, legal fees, accounting fees, payments to advisors, etc.
4. Trustee
(a) As
soon as practicable each Seller shall deposit in trust with Tadmor & Co.
Trust Company Ltd. and BGA Middle East Trust Company Ltd. (collectively, the
“Trustee”)
(i) with respect to the Option Shares registered in the name of each Seller
(other than the Inherited Shares, as defined below), a deed of transfer with
respect to the transfer to you of such Option Shares owned by such Seller, as
set forth opposite such Seller’s name in the column titled “Option
Shares” in Exhibit A (the
“Deeds
of Transfer”); and (ii) with respect to the Option Shares listed opposite
the row titled “Xxxxx
Xxxxxxxxxx (inherited from Xxxxxx Xxxxxxxxxx)” in Exhibit A (the “Inherited
Shares”), an irrevocable power of attorney in the form attached hereto as
Schedule 4(a) (the “Power
of Attorney”); provided, however, that as soon as the Inherited Shares
are registered in the name of Xxx. Xxxxx Xxxxxxxxxx, she shall execute a Deed of
Transfer with respect to such shares and deposit it in trust with the Trustee,
and the Trustee shall return the Power of attorney to Xxx. Xxxxx
Xxxxxxxxxx.
(b) The
Trustee is hereby irrevocably instructed to hold in trust the Deeds of Transfer
and the Power of Attorney until either (i) the expiration of the Exercise
Period, including any extension thereof, without any exercise of the Option, in
which case Trustee shall return the Deeds of Transfer and the Power of Attorney
to the Sellers and simultaneously return all funds accumulated on account of the
Consideration to their owner, or (ii) the Closing, in which case, and subject to
the Sellers being relieved by you of all the Guarantees (as defined below) and
being paid the portion of the Consideration not held by the Trustee and after
deducting any Deducted Amounts, the Trustee shall provide you with the Deeds of
Transfer and the Power of Attorney (if applicable) and provide the Sellers the
portion in the Consideration held by the Trustee (divided among Sellers pro rata
to the number of Option Shares of each Seller).
(c) During
the Exercise Period you may deposit, or cause to be deposited, with the Trustee,
amounts on account of the Consideration. Such amounts shall be held in trust and
be invested as you shall instruct the Trustee in writing. Any amount earned or
interest accrued on the amount deposited with the Trustee shall be on account of
the Consideration. Sellers shall have the right to receive reports from the
Trustee of the sum held in trust.
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(d) The
parties shall execute an Escrow Agreement with the Trustee in customary form,
which shall incorporate the provisions of this Section 4.
5.
Closing.
(a) Within
30 days from the date the Exercise Notice is provided to Sellers, the parties
and the Trustee shall meet at the offices of Tadmor & Co., Attorney at Law,
at 0 Xxxxxxx Xxxxxx, Xxxxxx Xxxxx, 00xx
xxxxx, Xxx Xxxx 00000, in order to close the Option transaction (the “Closing”).
(b) At the Closing, the following shall occur and shall
be deemed to take place simultaneously, so that no transaction shall be deemed
to have been completed nor any document delivered until all such transactions
relevant to the Closing have been completed and all required documents
delivered:
i. each
Seller (or the Trustee) shall transfer to you a duly executed Deed of Transfer
with respect to the Option Shares owned by such Seller as set forth opposite
such Seller’s name in the column titles “Option
Shares” in Exhibit A,
and+ Xxx. Xxxxx Xxxxxxxxxx (or the Trustee) shall transfer to you the Power of
Attorney, if applicable. Each Seller shall provide you with a statement that the
representations and warranties in Section 6 herein are true and
correct.
ii. you
shall pay each Seller the cash amount set forth opposite such Seller’s name in
the column titled “Consideration”
in Exhibit A less (a) any
amounts already deposited with the Trustee on account of the Consideration
(divided among Sellers pro rata to the number of Option Shares of each Seller)
and (b) any Deducted Amounts (divided among Sellers pro rata to the number of
Option Shares of each Seller). Trustee shall provide each Seller with his/her
pro rata share of the Consideration held by Trustee in accordance with the
number of Option Shares of each Seller. Payment of such amounts shall be
executed by wire transfer of immediately available funds to bank accounts to be
provided by the Sellers at least 48 hours prior to Closing. In addition, by or
at the Closing, you shall dismiss the Sellers from any and all guarantees they
may have towards third parties with respect to the Company (the “Guarantees”).
iii. Xxx.
Xxxxx Xxxxxxxxxx and Xx. Xxx Xxxxxxxxxx shall submit their resignation from the
Board of Directors of the Company.
6. Sellers’
Representations. Each Seller hereby represents, warrants and undertakes
to you, with respect to all of the Option Shares, as follows:
(a) Such
Seller has, and during of the Exercise Period including any extension thereof
will continue to have, a good and valid right, title and interest in and to the
Option Shares and at the Closing, such Seller shall transfer, and you shall
acquire, good and marketable title to all right, title and interest in and to
the Option Shares, free and clear of any liens, security interests, pledges,
claims liabilities, rights and restrictions of any nature whatsoever.
Notwithstanding the above, the Inherited Shares are registered in the name of
the late Xxxxxx Xxxxxxxxxx and Mrs. Xxxxxxxxxx shall take all necessary measure
in her power to register such Inherited Shares in her name, being the sole heir
of the late Xx. Xxxxxx Xxxxxxxxxx; provided, however, that if such registration
is not completed by the Closing, you shall be entitled to use the Power of
Attorney to effect registration of the Inherited Shares in your
name.
3
(b) Such
Seller does not own and does not have any right to purchase any securities of
the Company other than the Option Shares.
(c) The
execution and delivery by each Seller of this letter and his or her grant of the
Option and the performance by him or her of their obligations hereunder and the
consummation of the transactions contemplated hereby will not (a) violate any
provision of law applicable to it, or (b) require the consent, waiver, approval,
license or authorization of or any filing (other than filings pursuant to
applicable securities laws) by it with any third party or governmental entity,
or (c) violate, result (with or without notice or the passage of time, or both)
in a breach of or give rise to the right to terminate or cancel any contract,
order or judgment to which it is subject or by which it is bound.
(d) Xxx.
Xxxxx Xxxxxxxxxx and Xx. Xxx Xxxxxxxxxx shall not resign from the Board of
Directors of the Company prior to the Closing.
7. Nissani’s
Representations. By exercising the Option, you shall be making the
following representations and warranties:
(a) Your
exercise of the Option and purchase of the Option Shares and the performance by
you of your obligations hereunder and the consummation by you of the
transactions contemplated hereby at such time as the Option is exercised will
not (a) violate any provision of law applicable to you, or (b) require the
consent, waiver, approval, license or authorization of or any filing (other than
filings pursuant to applicable securities laws) by it with any third party or
governmental entity, or (c) violate, result (with or without notice or the
passage of time, or both) in a breach of or give rise to the right to terminate
or cancel any contract, order or judgment to which it is subject or by which you
are bound.
(b) Your
exercise of the Option and purchase of the Option Shares shall not be in
reliance on any representations and warranties given by any Seller (other than
the representations and warranties specifically contained in Section 6 hereof)
including any representation with respect to the affairs, businesses and
financial condition of the Company or its assets. You are entering into this
transaction and your purchase of the Option Shares upon exercise of the Option,
is and shall be on an “As Is” basis and not in reliance on any representations
and warranties given by Sellers, or any of their respective affiliates,
relatives, officers, employees, agents or representatives (other than the
representations and warranties contained in Section 6 above) including with
respect to the affairs, businesses and financial condition of the Company or its
assets or liabilities. You hereby irrevocably waive and release any of the
Sellers from any liability (based on tort, contract, equity or otherwise)
relating to or in connection with Company, other than liability that is based on
any misrepresentation.
8. Costs.
Each party is responsible for its own Expenses and Taxes in connection with the
transactions contemplated hereunder.
4
9. Confidentiality.
Except for public disclosures required by law and regulation, the parties and
any other person acting on their behalf shall keep the provisions of this letter
in confidence. The parties shall not issue any public statement or press release
concerning this letter without all parties’ prior approval of the substance and
form of any such statement or release. Such approval shall not to be
unreasonably withheld or delayed.
10. Governing
Law. This letter agreement, the Option and the transactions contemplated
herein, and all disputes and claims arising out of or in connection with them
(including any disagreement with respect to the validity of this letter
agreement), shall be governed by, and construed in accordance with, the laws of
the State of Israel (without giving effect to the choice of law provisions
thereof that require the application of any other laws) and the courts of
Tel-Aviv shall have exclusive jurisdiction in connection with any such
dispute.
11. Notices.
Any notice or other communication to be given by one party to another under, or
in connection with, this letter or the transaction contemplated hereunder shall
be in writing and signed by or on behalf of the party giving such notice.
Notices shall be sent to the Sellers c/x Xxx Xxxxxxxxxx at: 00 XxXxxxxx Xx.,
Xxxxxxxx, Xxxxxx, email: xxxxxxx@xxxxx.xxx, with a copy to Xxxx Xxxxxx, at:
xxxx@xxxxxx.xxx; and to you at
the address first mentioned above, email: xxxxxx@xxxxxxxx.xxx, with a copy to:
Xxxx Xxxxx: xxxxxx@xxxxxx.xx.xx.
Sincerely,
|
Xxxxx
Xxxxxxxxxx
|
Xxxxxx
Xxxxxxxxxx
|
Xxxxxx
Xxxxxx
|
5
Exhibit
A
|
Option
|
Fully
|
||
|
Seller
|
Shares
|
Diluted
|
Consideration
(US$)
|
|
Xxxxx
Xxxxxxxxxx
|
|||
|
(inherited
from Xxxxxx Xxxxxxxxxx)
|
19,440,212
|
68.5648%
|
6,996,403
|
|
Xxxxx
Xxxxxxxxxx
|
9,788
|
0.0345%
|
|
|
Xxxxxx
Xxxxxxxxxx
|
5,000
|
0.0176%
|
1,798.5
|
|
Xxxxxx
Xxxxxx
|
5,000
|
0.0176%
|
1,798.5
|
|
Total
|
19,460,000
|
100%
|
7,000,000
|
6
Schedule
2 – Exercise Notice
[DATE]
Xxx.
Xxxxx Xxxxxxxxxx
Xx.
Xxxxxx Xxxxxxxxxx
Xxx.
Xxxxxx Xxxxxx
Dear Xxx
and Madams,
Re: Exercise
Notice
I
hereby present you with this Exercise Notice (as this term is defined in your
letter dated __________; the “Option
Letter”) for the purchase of 19,460,000 shares of Defense Industries
International Inc.
By
presenting you with this notice I undertake to fully fulfill and abide by any
undertaking, obligation or commitment by which I am bound under the Option
Letter. I further represent and warrant that any representations and warranties
contained in Section 7 of the Option Letter are true and correct, and shall be
true and correct at the date of Closing (as this term is defined in the Option
Letter).
Sincerely,
Uri
Nissani
7
Schedule
4(a) – Power of Attorney
Date:
_________
The
undersigned, Xxx. Xxxxx Xxxxxxxxxx, Israeli ID no. 03915527, hereby irrevocably
empowers any of Adv. Xxxx Xxxxxx, Adv. Xxxxx Xxxxxxxxx (or any other attorney at
Tadmor & Co.), Adv. Xxxx Xxxxx, Adv. Avi Xxxx and Adv. Xxx Xxxxxx (or any
other attorney at Balter, Guth, Aloni & Co.) (each, an “Attorney”), to take any action required to
effect a transfer to Xx. Xxx Xxxxxxx, Israeli ID no. 52013224 any and all shares
of commons stock of Defense Industries International Inc. that are or were
registered in the name of the Late Xx. Xxxxxx Xxxxxxxxxx (the “Inherited Shares”).
Each
Attorney may:
|
(i)
|
represent
me and appear in my name and on my behalf before any official, government
officer or competent authority, government office, ministry, or any
municipality, of any country or local council or any other administrative
officers in any country, or before any other authority of any country in
all matters affecting or connected with the transfer and registration of
the Inherited Shares, as aforementioned, and to sign and execute all
manner of certificates, documents and contracts before such authorities or
offices and to perform all actions and matters which may be required by
those authorities, or offices;
|
|
|
(ii)
|
to
assign this Power of Attorney to other attorneys with further right of
assignment and to sign powers of attorney to third parties including
irrevocable powers of attorney.
|
The
undersigned represents and warrants that she is the sole heiress of the Late Xx.
Xxxxxx Xxxxxxxxxx, and has the full right to have the Inherited Shares
registered in her name, according to the order of probate granted by the
Ashkelon Rabbinical Court on October 27, 2009.
Whereas
this Power of Attorney is given in favor of a third party whose rights depend on
this Power of Attorney, this Power of Attorney shall be irrevocable and I shall
not be entitled to revoke or change it, and it shall remain in force after my
death and be binding upon my heirs, custodians and the executors of my
estate.
I hereby
release each Attorney from any liability
Xxxxx
Xxxxxxxxxx
I hereby
attest to the fact that Xxx. Xxxxx Xxxxxxxxxx signed this power of attorney
before me, after identifying herself by means of Israeli ID no.
03915527.
| By: |
8
Schedule
5(b)iii – Letters of Resignation
[DATE]
Defense
Industries International Inc.
Dear Sir
/ Madam,
Re: Resignation
from the Board of Directors
I,
the undersigned, being a duly nominated member of the Board of Directors of
Defense Industries International Inc. (the “Company”), hereby resign, effective as of the
date hereof, from my position as a director of the Company.
Sincerely,
[NAME OF
RESIGNING DIRECTOR]
9
