SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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AROTECH CORPORATION
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[LOGO] AROTECH Arotech Corporation
250 West 57th Street, Suite 310
New York, New York 10107
Tel: (212) 258-3222 Fax: (212) 258-3281
Robert S. Ehrlich http://www.arotech.com
Chairman, President and Nasdaq National Market: ARTX
Chief Executive Officer Writer's e-mail: ehrlich@arotech.com
November 8, 2004
Dear Fellow Stockholder:
As you may recall, in July 2004 we obtained some of the funds needed
for our purchase of Armour of America, Incorporated by raising $6.6 million
through the sale of 4,258,065 shares of our common stock at a price of $1.55 per
share and by raising approximately $16.5 million through the exercise by certain
of our investors of previously outstanding warrants to purchase 8,814,235 shares
at an average exercise price of $1.87 per share. In connection with these
transactions, we issued to these investors new warrants to purchase 8,717,265
shares of our common stock at an exercise price of $1.38 per share.
As a Nasdaq-listed company, we are subject to the Marketplace Rules of
the National Association of Securities Dealers. NASD Marketplace Rule
4350(i)(1)(C)(ii) requires stockholder approval for the issuance of securities
representing more than 20% of a listed company's outstanding securities in
connection with an acquisition. Nasdaq contends that the issuance of the
8,717,265 new warrants should be combined with the contemporaneous sale of the
4,258,065 shares of our common stock and the issuance of the shares of our
common stock upon exercise of the 8,814,235 previously-outstanding warrants that
were issued by us in an unrelated financing in September 2003 and December 2003,
and that, as a result of this combination, the aggregate amount of securities
issued exceeded 20% of our outstanding common stock. As a result, Nasdaq has
informed us that it is requiring us to obtain stockholder approval for the
issuance of the new warrants to purchase 8,717,265 shares of our common stock
issued by us in July 2004.
Although we have disputed Nasdaq's position, particularly the theory
that shares issued upon the exercise of previously-outstanding warrants should
be aggregated with new securities issued in an unrelated financing, we have
nevertheless agreed to submit the issuance of the new warrants to our
stockholders for their approval.
Accordingly, the proposal ratifying the issuance of the new warrants to
purchase 8,717,265 shares of our common stock will be voted on at a Special
Meeting of Stockholders to be held on Tuesday, December 14, 2004 at 10:00 a.m.
local time at the Hilton Queen of Sheba Hotel, North Shore, Eilat, Israel, where
we are holding the Special Meeting in order to minimize expenses. The proposal
must be approved by a majority of the total votes cast in person or by proxy at
a meeting at which a quorum is present.
[LOGO] AROTECH
Our Board of Directors believes that approval of this proposal is in
the best interests of our stockholders. Under the terms of the warrants, if the
holders of these warrants are legally prevented from exercising them, we must
pay the holders of the warrants, in cash, the difference between their warrant
price of $1.38 and the market price of our stock at the time they demand
exercise of the warrants, since we would be unable to issue them the shares of
common stock to which they would be otherwise entitled under the terms of the
warrants. Accordingly, if this proposal were to be rejected and our stock price
were subsequently to rise, we could be subject to a substantial cash payment
that could seriously strain or exceed our financial resources.
Our Board of Directors has approved the issuance of the common stock
warrants, and recommends that you vote "FOR" the approval of this proposal.
The matters to be considered at the special meeting are of great
importance to our company and our stockholders Therefore, whether or not you
plan to attend and regardless of the number of shares you own, it is important
that your shares be represented at the meeting. You are accordingly urged to
carefully review the enclosed proxy materials and to mark, date, sign and return
the enclosed proxy card as promptly as possible in the postage-prepaid envelope
provided, or vote electronically through the Internet (at
http://www.voteproxy.com) or by telephone if you hold your shares in your own
name, to ensure your representation and the presence of a quorum at the special
meeting. If you submit your proxy and then decide to attend the special meeting
to vote your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
On behalf of our Board of Directors, I thank you for your support and
urge you to vote "FOR" approval of the proposal.
Sincerely,
/s/ Robert S. Ehrlich
Robert S. Ehrlich
Chairman of the Board of Directors
[LOGO] AROTECH
250 West 57th Street, Suite 310
New York, New York 10107
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NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON December 14, 2004
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To our Stockholders:
A Special Meeting of the Stockholders of Arotech Corporation will be
held at the Hilton Queen of Sheba Hotel, North Shore, Eilat, Israel, on Tuesday,
December 14, 2004 at 10:00 a.m. local time, and thereafter as it may be
postponed or adjourned from time to time, for the following purposes:
1. To consider and act upon a proposal to ratify, for purposes of
NASD Marketplace Rule 4350(i)(1)(C)(ii), the issuance in July 2004
of five-year warrants to purchase up to 8,717,265 shares of our
common stock at a price of $1.38 per share (beginning on page 3);
and
2. To act upon all other business that may properly come before the
meeting or any postponements or adjournments thereof.
Our Board of Directors has fixed the close of business on October 18,
2004 as the record date for determining which stockholders are entitled to
notice of the special meeting and to vote at the special meeting and any
postponements or adjournments thereof. If you are unable to be present at the
special meeting personally, please mark, date, sign and return the enclosed
proxy card as promptly as possible in the postage-prepaid envelope provided, or
vote electronically through the Internet (at http://www.voteproxy.com) or by
telephone if you hold your shares in your own name. Any stockholder who grants a
proxy may revoke it at any time prior to its exercise. Also, whether or not you
grant a proxy, you may vote in person if you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Yaakov Har-Oz
Yaakov Har-Oz
New York, New York Vice President, General Counsel and Secretary
November 8, 2004
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YOUR VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN
YOUR PROXY FORM IN THE ENCLOSED STAMPED, SELF-
ADDRESSED ENVELOPE AS SOON AS POSSIBLE.
================================================================================
QUESTIONS AND ANSWERS
Although we encourage you to read the proxy statement in its entirety,
we include these Questions and Answers to provide background information and
brief answers to several questions that you may have about the proposal.
Q. What proposals are stockholders being asked to consider at the upcoming
special meeting?
A. We are seeking the approval of one proposal. This proposal relates to the
issuance of warrants to purchase an aggregate of 8,717,265 shares of our
common stock at an exercise price of $1.38 per share.
Q. Why did Arotech issue these warrants?
A. In July 2004, our management and Board of Directors recognized our need to
raise additional funding to support our growth objectives, in particular
our potential acquisition of Armour of America, Incorporated. In view of
market conditions and our existing cash constraints, we determined that it
would not be feasible to raise additional capital through a public
offering. Instead, we focused our efforts on raising money through warrant
exercises and through a private placement to existing investors and other
investors of shares of our common stock.
After extensive negotiation with the holders of certain of our existing
warrants, it was agreed in connection with this capital raise that they
would exercise their 8,814,235 existing warrants at an average exercise
price of $1.87 per share, which was then above the market price of our
stock (the closing price of our stock on the date of exercise - July 14,
2004 - was $1.77). In return, we agreed to issue to these holders new
warrants to purchase 8,717,265 shares at an exercise price of $1.38 per
share. Essentially, we sold stock in a private placement at a price that
was 10(cent) above the market price of our common stock at the time of the
sale (whereas the norm in private placements is to sell stock at a discount
to market), and we lowered the exercise price of certain existing warrants
by 39(cent).
Without this capital, we would not have been able to complete the
acquisition of Armour of America, Incorporated. These terms were
unanimously approved by our Board of Directors.
Q. Why is Arotech seeking stockholder approval for this proposal?
A. As a Nasdaq-listed company, we are subject to the Marketplace Rules of the
National Association of Securities Dealers. NASD Marketplace Rule
4350(i)(1)(C)(ii) requires stockholder approval for the issuance of
securities representing more than 20% of a listed company's outstanding
securities in connection with an acquisition. Nasdaq contends that the
issuance of the 8,717,265 new warrants should be combined with the
contemporaneous sale of the 4,258,065 shares of our common stock and the
issuance of the shares of our common stock upon exercise of the 8,814,235
previously-outstanding warrants that were issued by us in an unrelated
financing in September 2003 and December 2003, and that, as a result of
this combination, the aggregate amount of securities issued exceeded 20%
of our outstanding common stock. As a result, Nasdaq has informed us that
it is requiring us to obtain stockholder approval for the issuance of the
new warrants to purchase 8,717,265 shares of our common stock issued by us
in July 2004.
Although we have disputed Nasdaq's position, particularly the theory that
shares issued upon the exercise of previously-outstanding warrants should
be aggregated with new securities issued in an unrelated financing, we have
nevertheless agreed to submit the issuance of the new warrants to our
stockholders for their approval.
Q. What does our Board recommend?
A. Our Board of Directors has determined that is in the best interests of the
Company and our stockholders to approve the proposal ratifying the issuance
of the warrants. Accordingly, our Board of Directors unanimously recommends
that you vote "FOR" the proposal.
Q. What vote is required to approve the proposal?
A. Holders of a majority of the outstanding shares entitled to vote must be
present, in person or by proxy, at the special meeting in order to have the
required quorum for the transaction of business. The affirmative vote of a
majority of the total votes cast on the proposal, in person or by proxy, is
required to approve the proposal. On all matters to be voted upon at the
special meeting, each holder of record of common stock will be entitled to
one vote for each common share held as of October 18, 2004. As of the
record date, October 18, 2004, there were 78,544,483 shares of our common
stock outstanding and entitled to vote.
Q. What happens if the proposal is approved?
A. If the proposal is approved by our stockholders at the special meeting, the
holders of the warrants will be entitled to exercise the warrants at any
time following the special meeting through July 2009, when the warrants
expire.
Q. What happens if the proposal is not approved?
A. If the proposal is not approved, we would, under the terms of our warrants,
be liable to pay the holders of the warrants, in cash, the difference
between their warrant price of $1.38 and the market price of our stock at
the time they demand exercise of the warrants, since we would be unable to
issue them the shares of common stock to which they would be otherwise
entitled under the terms of the warrants. Accordingly, if this proposal
were to be rejected and our stock price were subsequently to rise, we could
be subject to a substantial cash payment that could seriously strain or
exceed our financial resources.
You should consider the fact that our current capital resources are
limited. If we were required to pay the difference between the warrant
price of $1.38 and the market price of our stock at the time of payment
demand, then depending upon the price of our stock at such time we might
have insufficient cash to make this payment and we would accordingly be
required to obtain alternative sources of financing. Alternative sources of
financing may not be available to us on favorable terms, or at all.
Q&A-2
Q. What should I do now?
A. You should read this proxy statement carefully and promptly submit your
proxy card or vote by telephone as provided on the proxy card to ensure
that your vote is counted at the special meeting.
Q. How do I vote if I hold shares directly?
A. You may vote your shares by attending the special meeting in person and
completing a ballot or returning your validly executed proxy card at the
meeting. The special meeting will begin promptly at 10:00 a.m. local time
on Tuesday, December 14, 2004, at the Hilton Queen of Sheba Hotel, North
Shore, Eilat, Israel. Attendance at the special meeting will not, by
itself, result in the revocation of a previously submitted proxy. Even if
you are planning to attend the special meeting, we encourage you to submit
your proxy in advance to ensure the representation of your shares at the
special meeting.
If you do not want to attend the special meeting and you hold your shares
directly, you may vote by granting a proxy. To grant a proxy, mail your
signed proxy card in the enclosed return envelope or vote by telephone as
provided on the proxy card as soon as possible so that your shares may be
represented at the special meeting.
Q. How do I vote if I hold shares in street name?
A. If you do not want to attend the special meeting and hold your shares in a
stock brokerage account or if your shares are held by a bank or nominee
(i.e., in "street name"), you must provide your broker with directions on
how to vote your shares. Your broker will provide you with instructions
regarding how to direct your broker to vote your shares. It is important to
follow these instructions carefully to ensure your shares are represented
at the special meeting. If you do not provide directions to your broker,
your shares will not be voted at the special meeting.
Q&A-3
If you want to attend the special meeting and hold your shares in street
name, you must obtain a signed proxy card from your broker, bank or other
nominee acting as record holder that gives you the right to vote the
shares. Your broker will provide you with instructions regarding how to
obtain a signed proxy card from the bank or other nominee acting as record
holder in order to enable you to vote your shares in person at the special
meeting.
Q. What if I do not vote?
A. If you fail to respond, your shares will neither be voted nor count for
purposes of obtaining a quorum. If you respond and abstain from voting,
your shares will count for purposes of obtaining a quorum and will have the
same effect as a vote against the proposal. If you respond by returning a
properly executed proxy card without instructions, your shares will be
voted "FOR" adoption of the proposal.
Q. How can I change my vote after I have mailed my proxy card?
A. If you are a holder of record, you may generally change your vote by
delivering a later-dated proxy or written notice of revocation to our
Corporate Secretary before the special meeting, or by attending the special
meeting and voting in person. If your shares are held in "street name" by
your broker, you must follow the instructions received from your broker
regarding how to change your vote.
Q&A-4
[LOGO] AROTECH
250 West 57th Street, Suite 310
New York, New York 10107
SPECIAL MEETING OF THE STOCKHOLDERS OF
AROTECH CORPORATION TO BE HELD
ON DECEMBER 14, 2004
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PROXY STATEMENT
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The accompanying proxy is solicited by and on behalf of the Board of
Directors of Arotech Corporation, for use at our Special Meeting of Stockholders
and any postponements and adjournments thereof. The meeting is currently planned
to be held at the Hilton Queen of Sheba Hotel, North Shore, Eilat, Israel, on
Tuesday, December 14, 2004 at 10:00 a.m. local time, and thereafter as it may be
postponed or adjourned from time to time, for the purposes described in the
accompanying Notice of Special Meeting of Stockholders.
Stockholders of record at the close of business on October 18, 2004
will be entitled to vote at the special meeting. As of October 18, 2004, there
were 78,544,483 shares of our common stock outstanding held of record by 320
stockholders. Each holder of common stock is entitled to one vote per share on
each matter that comes before the special meeting.
This proxy statement and the enclosed form of proxy to stockholders
will be mailed commencing on or about November 8, 2004.
Voting Procedures and Vote Required
Proxies that are properly marked, dated, and signed, or submitted
electronically via the Internet or by telephone by following the instructions on
the proxy card, and not revoked will be voted at the special meeting in
accordance with any indicated directions. If no direction is indicated, proxies
will be voted FOR ratification of the issuance in July 2004 of five-year
warrants to purchase up to 8,717,265 shares of our common stock at an exercise
price of $1.38 per share, AND IN THE DISCRETION OF THE HOLDERS OF THE PROXIES
with respect to any other business that properly comes before the special
meeting and all matters relating to the conduct of the special meeting. If a
broker indicates on the enclosed proxy or its substitute that it does not have
discretionary authority as to certain shares to vote on a particular matter
("broker non-votes"), those shares will not be considered as voting with respect
to that matter. We believe that the tabulation procedures to be followed by the
Inspector of Elections are consistent with the general requirements of Delaware
law concerning voting of shares and determination of a quorum.
You may revoke your proxy at any time before it is voted by delivering
to the Secretary of our company a written revocation or a duly executed proxy
bearing a later date than the date of the proxy being revoked (including a proxy
voted over the Internet or by telephone). Any record stockholder attending the
special meeting in person may revoke his or her proxy and vote his or her shares
at the special meeting. Attendance at the special meeting will not, by itself,
result in the revocation of a previously submitted proxy. Even if you are
planning to attend the special meeting, we encourage you to submit your proxy in
advance to ensure the representation of your shares at the special meeting.
Votes cast by proxy or in person at the special meeting will be
tabulated by the Inspector of Elections, with the assistance of our transfer
agent. The Inspector of Elections will also determine whether or not a quorum is
present at the special meeting. The presence of a quorum is required to transact
the business proposed to be transacted at the special meeting. The presence in
person or by proxy of holders of a majority of the outstanding shares of our
common stock entitled to vote will constitute a quorum for the transaction of
business at the special meeting. Abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum.
The adoption of all proposals will require the affirmative vote of a
majority of the shares present, either in person or by proxy, and entitled to
vote with respect to such proposals. Abstentions and broker non-votes will each
be counted as present for purposes of determining the presence of a quorum;
abstentions will have the same practical effect as a negative vote on these
proposals, and broker non-votes will not have any effect on the outcome of these
proposals.
The solicitation of proxies will be conducted by mail and we will bear
all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the special meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the special meeting to beneficial owners of our
common stock. We may conduct further solicitation personally, telephonically or
by facsimile through our officers, directors and employees, none of whom will
receive additional compensation for assisting with the solicitation.
We are not aware of any matters other than those described in this
proxy statement that will be acted upon at the special meeting. In the event
that any other matters do come before the special meeting for a stockholder
vote, the persons named as proxies in the form of proxy being delivered to you
along with this proxy statement will vote in accordance with their best judgment
on those matters.
At least ten days before the special meeting, we will make a complete
list of the stockholders entitled to vote at the meeting open to the examination
of any stockholder for any purpose germane to the special meeting. The list will
be open for inspection during ordinary business hours at our offices at 250 West
57th Street, Suite 310, New York, New York 10107, and will also be made
available to stockholders present at the special meeting.
2
PROPOSAL NUMBER 1
RATIFICATION OF WARRANT ISSUANCE
Background
In July 2004, our management and Board of Directors recognized our need
to raise additional funding to support our growth objectives, in particular our
potential acquisition of Armour of America, Incorporated. In view of market
conditions and our existing cash constraints, we determined that it would not be
feasible to raise additional capital through a public offering. Instead, we
focused our efforts on raising money through warrant exercises and through a
private placement to existing investors and other investors of
previously-registered shares of our common stock.
We obtained some of the funds needed for our purchase of Armour of
America, Incorporated by raising $6.6 million through the sale of 4,258,065
shares of our common stock, and by raising $16.5 million through the exercise by
certain of our investors of previously-outstanding warrants to purchase
8,814,235 shares of our common stock. In addition, after extensive negotiation
with the holders of certain of our existing warrants, it was agreed in
connection with this capital raise that they would exercise their 8,814,235
existing warrants at an average exercise price of $1.87 per share, which was
then above the market price of our stock (the closing price of our stock on the
date of exercise - July 14, 2004 - was $1.77). In return, we agreed to issue to
these holders new warrants to purchase 8,717,265 shares at an exercise price of
$1.38 per share. Essentially, we sold stock in a private placement at a price
that was 10(cent) above the market price of our common stock at the time of the
sale (whereas the norm in private placements is to sell stock at a discount to
market), and we lowered the exercise price of certain existing warrants by
39(cent).
Without this capital, we would not have been able to complete the
acquisition of Armour of America, Incorporated. These terms were unanimously
approved by our Board of Directors.
Reasons for Seeking Stockholder Approval
As a Nasdaq-listed company, we are subject to the Marketplace Rules of
the National Association of Securities Dealers. NASD Marketplace Rule
4350(i)(1)(C)(ii) requires stockholder approval for the issuance of securities
representing more than 20% of a listed company's outstanding securities in
connection with an acquisition. Nasdaq contends that the issuance of the
8,717,265 new warrants should be combined with the contemporaneous sale of the
4,258,065 shares of our common stock and the issuance of the shares of our
common stock upon exercise of the 8,814,235 previously-outstanding warrants that
were issued by us in an unrelated financing in September 2003 and December 2003,
and that, as a result of this combination, the aggregate amount of securities
issued exceeded 20% of our outstanding common stock. As a result, Nasdaq has
informed us that it is requiring us to obtain stockholder approval for the
issuance of the new warrants to purchase 8,717,265 shares of our common stock
issued by us in July 2004.
3
Although we have disputed Nasdaq's position, particularly the theory
that shares issued upon the exercise of previously-outstanding warrants should
be aggregated with new securities issued in an unrelated financing, we have
nevertheless agreed to submit the issuance of the new warrants to our
stockholders for their approval.
Board Recommendation
Our Board of Directors has determined that is in the best interests of
the Company and our stockholders to approve the proposal ratifying the issuance
of the warrants. Accordingly, our Board of Directors unanimously recommends that
you vote "FOR" the proposal.
Description of the Warrants
The following description of the warrants is qualified in its entirety
by reference to the warrant itself, the form of which is attached as Appendix A
to this proxy statement and incorporated by reference herein.
Each warrant entitles the holder to purchase, at an exercise price of
$1.38, one share of our common stock. The warrant is exercisable by the holder
at any time and will expire on July 14, 2009.
The warrants are generally exercisable by the holder, in whole or in
part, by surrender to us of the warrant, together with a completed exercise
agreement, and payment by the holder of the aggregate exercise price in cash,
or, in limited circumstances with respect to certain of the warrants, by
effecting a cashless exercise. Upon any exercise of the warrant, we will forward
to the holder, as soon as practicable, but not exceeding three business days
after proper exercise, a certificate representing the number of shares of common
stock purchased upon such exercise. If less than all of the shares represented
by the warrant are purchased, we will also deliver to the holder a new warrant
representing the right to purchase the remaining shares. The shares of common
stock purchased by the holder upon exercise of the warrant will be deemed to
have been issued as of the close of business on the date the warrant is
surrendered to us as described above.
The terms of the warrants prohibit exercise of the warrants to the
extent that exercise of the warrants would result in the holder, together with
its affiliates, beneficially owning in excess of 4.999% of our outstanding
shares of common stock.
In addition to the above restrictions, the warrants each contain a
provision which precludes us from issuing, in connection with the transactions
described below, and at prices less than the greater of book or market value of
our common stock, a number of shares of our common stock which, in the aggregate
for such transactions, would exceed in excess of 19.99% of our common stock
outstanding as of the date we consummated such transactions. The foregoing
limitation will cease to apply in the event that we obtain, prior to any such
prohibited issuance, approval of our stockholders under applicable Nasdaq
Marketplace Rules to issue in connection with these transactions an aggregate
number of shares equal to or in excess of 20% of our outstanding shares of
common stock.
4
In the event that we are prohibited from issuing any warrant shares for
which an exercise notice has been received as a result of the operation of the
foregoing provision, we must pay the holder of the warrant, in cash, an amount
per warrant share equal to the difference between the closing sale price of our
common stock on the date of the attempted exercise and the exercise price of the
warrant ($1.38), since we would be unable to issue them the shares of common
stock to which they would be otherwise entitled under the terms of the warrants,
in exchange for cancellation of the warrant.
The exercise price payable and number of shares purchasable upon
exercise of a warrant will generally be adjusted to prevent the dilution of the
holder's beneficial interest in the common stock in the event we:
>> declare or pay a dividend in shares of common stock or make a
distribution of shares of common stock to holders of our outstanding
common stock;
>> subdivide or combine our common stock; or
>> issue shares of our capital stock in any reclassification of our
common stock.
Except as described above, a holder of a warrant will not have any of
the rights of a holder of common stock before the common stock is purchased upon
exercise of the warrant. Therefore, before a warrant is exercised, the holder of
the warrant will not be entitled to receive any dividend payments or exercise
any voting or other rights associated with the shares of common stock which may
be purchased when the warrant is exercised.
Vote Required
The affirmative vote of a majority of the votes cast at the meeting at
which a quorum representing a majority of all outstanding shares of our common
stock is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum; abstentions
will have the same practical effect as a negative vote on this proposal, and
broker non-votes will not have any effect on the outcome of this proposal.
Effect of a Stockholder Approval
If the proposal is approved, the holders of the warrants will be
entitled to exercise the warrants at any time following the special meeting
through July 2009, when the warrants expire.
Effect of a Failure to Obtain Stockholder Approval
If the proposal is not approved, we would, under the terms of our
warrants, be liable to pay the holders of the warrants, in cash, the difference
between their warrant price of $1.38 and the market price of our stock at the
time they demand exercise of the warrants, since we would be unable to issue
them the shares of common stock to which they would be otherwise entitled under
the terms of the warrants. Accordingly, if this proposal were to be rejected and
our stock price were subsequently to rise, we could be subject to a substantial
cash payment that could seriously strain or exceed our financial resources.
5
Additionally, our current capital resources are limited. If we were
required to pay the difference between the warrant price of $1.38 and the market
price of our stock at the time of payment demand, then depending upon the price
of our stock at such time we might have insufficient cash to make this payment
and we would accordingly be required to obtain alternative sources of financing.
Alternative sources of financing may not be available to us on favorable terms,
or at all.
FOR THE REASONS SET FORTH ABOVE,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR RATIFICATION OF THE ISSUANCE OF THE JULY 2004 WARRANTS.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information regarding the security
ownership, as of October 18, 2004, of each of our executive officers and
directors, and the shares of common stock held by all of our directors and
executive officers as a group.
Percentage of Total
Name and Address of Beneficial Owner(1) Shares Beneficially Owned(2)(3) Shares Outstanding(3)
--------------------------------------- ------------------------------- ---------------------
Robert S. Ehrlich....................................... 3,144,213(4)(12) 3.9%
Steven Esses............................................ 1,006,808(5) 1.3%
Avihai Shen............................................. 313,904(6) *
Dr. Jay M. Eastman...................................... 95,001(7) *
Jack E. Rosenfeld....................................... 97,001(8) *
Lawrence M. Miller...................................... 543,580(9) *
Bert W. Wasserman....................................... 20,001(10) *
Edward J. Borey......................................... 52,001(11) *
All of our directors and executive officers as a group
(10 persons**).......................................... 8,313,378(13) 10.1%
-------------------------------------
* Less than one percent.
** Includes 3,482,534 shares owned by Mr. Leon Gross that are subject to the
Voting Rights Agreement described in footnote 12, below. Also includes
310,165 shares held of record by Mr. Yehuda Harats that are subject to the
Voting Rights Agreement described in footnote 12, below.
(1) The address of each named beneficial owner is in care of Arotech
Corporation, 250 West 57th Street, Suite 310, New York, New York 10107.
(2) Unless otherwise indicated in these footnotes, each of the persons or
entities named in the table has sole voting and sole investment power with
respect to all shares shown as beneficially owned by that person, subject
to applicable community property laws.
(3) Based on 78,544,483 shares of common stock outstanding as of October 18,
2004. For purposes of determining beneficial ownership of our common
stock, owners of options exercisable within sixty days are considered to
be the beneficial owners of the shares of common stock for which such
securities are exercisable. The percentage ownership of the outstanding
common stock reported herein is based on the assumption (expressly
required by the applicable rules of the Securities and Exchange
Commission) that only the person whose ownership is being reported has
converted his options into shares of common stock.
6
(4) Includes 50,000 shares held by Mr. Ehrlich's wife (in which shares Mr.
Ehrlich disclaims beneficial ownership), 161,381 shares held in Mr.
Ehrlich's pension plan, 3,000 shares held by children sharing the same
household (in which shares Mr. Ehrlich disclaims beneficial ownership),
and 2,386,667 shares issuable upon exercise of options exercisable within
60 days. Also includes 365,000 restricted shares granted but not yet
formally issued; these shares have not been included in the total number
of our issued and outstanding shares noted in footnote 3, above.
(5) Consists of 841,808 shares issuable upon exercise of options exercisable
within 60 days. Also includes 165,000 restricted shares granted but not
yet formally issued; these shares have not been included in the total
number of our issued and outstanding shares noted in footnote 3, above.
(6) Includes 303,404 shares issuable upon exercise of options exercisable
within 60 days.
(7) Consists of 95,001 shares issuable upon exercise of options exercisable
within 60 days.
(8) Includes 95,001 shares issuable upon exercise of options exercisable
within 60 days.
(9) Includes 441,665 shares held by Leon S. Gross and Lawrence M. Miller as
co-trustees of the Rose Gross Charitable Foundation, and 90,001 shares
issuable upon exercise of options exercisable within 60 days.
(10) Consists of 20,001 shares issuable upon exercise of options exercisable
within 60 days.
(11) Includes 20,001 shares issuable upon exercise of options exercisable
within 60 days.
(12) Messrs. Ehrlich, Leon Gross and Yehuda Harats are parties to a Voting
Rights Agreement pursuant to which each of the parties agrees to vote the
shares of our common stock held by that person in favor of the election of
Messrs. Ehrlich, Harats and Miller until the earlier of December 28, 2004
or our fifth annual meeting of stockholders after December 28, 1999. Mr.
Harats resigned as a director in 2002; however, we believe that Mr. Harats
must continue to comply with the terms of this agreement. As of October
18, 2004, 4,550,245 shares of our common stock were subject to this Voting
Rights Agreement.
(13) Includes 3,851,884 shares issuable upon exercise of options exercisable
within 60 days.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You can read and
copy any materials we file with the Securities and Exchange Commission at its
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
its regional offices located at The Woolworth Building, 233 Broadway, New York,
New York 10279 and at 175 West Jackson Boulevard, Suite 900, Chicago, Illinois
60604. You can obtain information about the operations of the Securities and
Exchange Commission Public Reference Room by calling the Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission also
maintains a Website that contains information we file electronically with the
Securities and Exchange Commission, which you can access over the Internet at
http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is an important part of this proxy
statement, and later information that we file with the Securities and Exchange
Commission will automatically update and supersede some of this information. The
documents we incorporate by reference are:
o our Annual Report on Form 10-K for the year ended December 31, 2003
(filed with the Securities and Exchange Commission on March 30,
2004);
o our Quarterly Report on Form 10-Q for the quarter ended June 30,
2004 (filed with the Securities and Exchange Commission on August
16, 2004); and
o our Current Reports on Form 8-K or Form 8-K/A filed with the
Securities and Exchange Commission on January 9, 2004, February 4,
2004, March 9, 2004, March 26, 2004, May 12, 2004, July 15, 2004,
August 10, 2004 and August 23, 2004.
All reports and other documents that we file with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
proxy statement but before the date of the Special Meeting will also be
considered to be incorporated by reference into this proxy statement from the
date of the filing of these reports and documents, and will supersede the
information herein; provided, however, that all reports that we "furnish" to the
Commission will not be considered incorporated by reference into this proxy
statement. We undertake to provide without charge to each person who receives a
copy of this proxy statement, upon written or oral request, a copy of all of the
preceding documents that are incorporated by reference (other than exhibits,
unless the exhibits are specifically incorporated by reference into these
documents). You may request a copy of these materials, at no cost, by
telephoning us at the following address:
Arotech Corporation
250 West 57th Street, Suite 310
New York, New York 10107
Attention: General Counsel and Secretary
(212) 258-3222
STOCKHOLDER PROPOSALS
Pursuant to the rules of the Securities and Exchange Commission,
stockholder proposals made in accordance with Rule 14a-8 under the Exchange Act
intended to be included in our proxy material for the next annual meeting must
be received by us on or before February 16, 2005. Any proposals must be received
at our principal executive offices, 250 West 57th Street, Suite 310, New York,
New York 10107, Attention: Corporate Secretary by the applicable date.
Stockholder proposals submitted outside the processes of Rule 14a-8
must be received by our Corporate Secretary in a timely fashion. To be timely,
such notice and information regarding the proposal and the stockholder must be
delivered to or mailed and received by our Corporate Secretary at our principal
executive offices, 250 West 57th Street, Suite 310, New York, New York 10107,
not less than 45 days nor more than 60 days prior to the annual meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 7th day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure was made.
We have not been notified by any stockholder of its intention to
present a stockholder proposal at this Special Meeting.
OTHER MATTERS
We are not aware of any other matter that may come before the special
meeting of stockholders and we do not currently intend to present any such other
matter. However, if any such other matters properly come before the meeting or
any adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in accordance
with their own judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Yaakov Har-Oz
Yaakov Har-Oz
Vice President, General Counsel and Secretary
New York, New York
November 8, 2004
Appendix A
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES 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 THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
AROTECH CORPORATION
WARRANT
Warrant No.:
------------------
Number of Shares:
------------------
Date of Issuance: July 14, 2004 ("Issuance Date")
Arotech Corporation, a Delaware corporation (the "Company"), hereby certifies
that, for value received, the receipt and sufficiency of which are hereby
acknowledged, _______________________________________, the registered holder
hereof or its permitted assigns (the "Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, at any time or times on or after the date hereof,
but not after 11:59 p.m., New York Time, on the Expiration Date (as defined
below), __________________________________________________________ (_________)
fully paid nonassessable shares of Common Stock (as defined below) (the "Warrant
Shares"). Except as otherwise defined herein, capitalized terms in this warrant
(including all Warrants issued in exchange, transfer or replacement hereof, the
"Warrants") shall have the meanings set forth in Section 15.
The Company agrees that the Warrant Shares shall be treated as "Registrable
Securities" in accordance with, and shall be governed by, identical terms to the
Registration Rights Agreement, dated as of January 7, 2004, which provisions and
terms should be applicable hereto mutates mutandis (as such agreement may be
amended from time to time, the "Registration Rights Agreement"), by and among
the Company and the buyers named therein, as if the Company and the Holder had
executed such Registration Rights Agreement, and as if the Holder were party
thereto, as of the Issuance Date; provided, however, that:
A-1
"Effectiveness Date" shall mean with respect to the
Registration Statement required to be filed thereunder
relating to the Warrant Shares, the earlier of (1) (i) in the
event that the Registration Statement is not subject to a full
review by the SEC, 90 days after the Issuance Date or (ii) in
the event that the Registration Statement is subject to a full
review by the SEC, 90 days after the Issuance Date, and (2)
the fifth Business Day following the date on which the Company
is notified by the SEC that such Registration Statement will
not be reviewed or is no longer subject to further review and
comments.
"Filing Date" shall mean with respect to the Registration
Statement required to be filed thereunder relating to the
Warrant Shares, the 30th day following the Issuance Date.
For purposes of clarity, the issuance of this Warrant is unrelated to the
transaction pursuant to which the Registration Rights Agreement was entered
into.
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(g)), this Warrant may be exercised by the Holder on any day from and after the
date hereof, in whole or in part, by (i) delivery of a written notice, in the
form attached hereto as Exhibit A (the "Exercise Notice"), of such Holder's
election to exercise this Warrant, and (ii) (A) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds or (B)
by notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). The date the Exercise Notice and
the Aggregate Exercise Price (or notice of a Cashless Exercise) are delivered to
the Company (as determined in accordance with the notice provisions hereof) is
an "Exercise Date." The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original Warrant and issuance of a new
Warrant evidencing the right to purchase the remaining number of Warrant Shares.
On or before the first Business Day following the Exercise Date, the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Notice and the Aggregate Exercise Price to the Holder and the Company's
transfer agent (the "Transfer Agent"). On or before the third Business Day
following the Exercise Date, the Company shall direct the Transfer Agent to
credit through The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program such aggregate number of shares of Common Stock to which the
A-2
Holder is entitled pursuant to such exercise to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system.
On the Exercise Date, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. Upon surrender of this Warrant to
the Company following one or more partial exercises, the Company shall as soon
as practicable and in no event later than three Business Days after receipt of
the Warrant and at its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant Shares
upon exercise of this Warrant. In the event that the Company is unable to
electronically deliver the Warrant Shares because of applicable securities laws,
then the Company shall issue and deliver to the address as specified in the
Exercise Notice a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the holder of this
Warrant is entitled pursuant to such exercise.
(b) Exercise Price. For purposes of this Warrant, "Exercise
Price" means the arithmetic average of the Weighted Average Price of the Common
Stock over the period of July 15, 2004, July 16, 2004, and July 19, 2004
[$1.38], subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Shares. Subject to
Section 1(g), if the Company shall fail for any reason or for no reason within
three Business Days of the Exercise Date to credit the Holder's balance account
with DTC for such number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise of this Warrant, and if after such third
Business Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares that the Holder anticipated receiving from the Company (a
"Buy-In"), then the Company shall, within three Business Days after the Holder's
request and in the Holder's discretion, either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the "Buy-In
Price"), at which point the Company's obligation to issue such Common Stock
shall terminate, or (ii) promptly honor its obligation to credit to the Holder
such Common Stock and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) the Closing Sale Price on the date of the event giving
rise to the Company's obligation to deliver such certificate. Subject to Section
1(g), if the Company shall fail for any reason or for no reason within three
Business Days of the Exercise Date to credit the Holder's balance account with
DTC for such number of shares of Common Stock to which the Holder is entitled
upon the Holder's exercise of this Warrant, then the Holder will have the right
to rescind such exercise.
(d) Cashless Exercise. Notwithstanding anything contained
herein to the contrary, if at any time during the period commencing ten (10)
Business Days prior to the Holder's delivery of an Exercise Notice and ending on
the day of delivery of the Exercise Notice, the Registration Statement (as
defined in the Registration Rights Agreement) covering the Warrant Shares that
are the subject of the Exercise Notice (the "Unavailable Warrant Shares") is not
available for the issuance of such Unavailable Warrant Shares, the Holder may,
in its sole discretion, exercise this Warrant in whole or in part and, in lieu
of making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless Exercise"):
A-3
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Common Stock on the
date immediately preceding the date of the Exercise
Notice.
C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
(e) Absolute and Unconditional Obligation. The Company's
obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person. Nothing herein shall limit
the Holder's right to pursue any other remedies available to it hereunder, at
law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's failure to
timely deliver certificates representing Warrant Shares upon exercise of the
Warrant as required pursuant to the terms hereof.
(f) Disputes. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 12.
(g) Limitations on Exercises. The Company shall not effect the
exercise of this Warrant, and no Person who is a holder of this Warrant shall
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 4.99% of the shares of the Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
A-4
and its affiliates (including, without limitation, any convertible notes,
convertible debentures, convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock a
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q, Form 10-K or other public filing
with the Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or its Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within two Business Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company by the
Holder and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
The Company shall not be obligated to issue any shares of Common Stock upon
exercise of this Warrant if the issuance of such shares of Common Stock would
exceed that number of shares of Common Stock which the Company may issue upon
exercise of this Warrant without breaching the Company's obligations under the
rules or regulations of the Principal Market (the "Exchange Cap"), except that
such limitation shall not apply in the event that the Company obtains, only if
required, the approval of its stockholders as required by the applicable rules
of the Principal Market for issuances of shares of Common Stock in excess of
such amount. Until such approval is obtained, the Holder shall not be issued,
upon exercise of any Warrants, shares of Common Stock in an amount greater than
the product of the Exchange Cap multiplied by a fraction, the numerator of which
is the total number of shares of Common Stock underlying the Warrants issued to
the Holder on the Issuance Date and the denominator of which is the aggregate
number of shares of Common Stock underlying all the substantially identical
warrants (the "Exchange Warrants") issued by the Company on the Issuance Date
(with respect to the Holder, the "Exchange Cap Allocation"). In the event that
the Holder shall sell or otherwise transfer any of such Holder's Warrants, the
transferee shall be allocated a pro rata portion of the Holder's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of applicable warrants shall
exercise all of such holder's applicable warrants into a number of shares of
Common Stock which, in the aggregate, is less than such holder's Exchange Cap
Allocation, then the difference between such holder's Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the remaining holders of
applicable warrants on a pro rata basis in proportion to the shares of Common
Stock underlying the warrants then held by each such holder. In the event that
the Company is prohibited from issuing any Warrant Shares for which an Exercise
Notice has been received as a result of the operation of this paragraph, the
Company shall pay cash in exchange for cancellation of such Warrant Shares, at a
price per Warrant Share equal to the difference between the Closing Sale Price
and the Exercise Price as of the date of the attempted exercise.
A-5
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES UPON
SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time after the
date of issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the Company at
any time after the date of issuance of this Warrant combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in each
such case:
(a) any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
Common Stock entitled to receive the Distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the Common Stock on the trading day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator shall be the Closing Bid Price of the
Common Stock on the trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a
number of shares equal to the number of shares of Common Stock obtainable
immediately prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
common stock ("Other Common Stock") of a company whose common stock is traded on
a national securities exchange or a national automated quotation system, then
the Holder may elect to receive a warrant to purchase Other Common Stock in lieu
A-6
of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Common Stock that would have been
payable to the Holder pursuant to the Distribution had the Holder exercised this
Warrant immediately prior to such record date and with an aggregate exercise
price equal to the product of the amount by which the exercise price of this
Warrant was decreased with respect to the Distribution pursuant to the terms of
the immediately preceding paragraph (a) and the number of Warrant Shares
calculated in accordance with the first part of this paragraph (b).
4. PURCHASE RIGHTS; ORGANIC CHANGE.
(a) Purchase Rights. In addition to any adjustments pursuant
to Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held
the number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(b) Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets to another Person or other transaction, in each case which is
effected in such a way that holders of Common Stock are entitled to receive
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Prior to the consummation of any (i) sale of
all or substantially all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity (for
purposes hereof a "surviving entity" means that this Warrant will continue to be
exercisable for the publicly traded shares of a publicly traded entity), the
Company will secure from the Person purchasing such assets or the Person issuing
the securities or providing the assets in such Organic Change (in each case, the
"Acquiring Entity") a written agreement (in form and substance reasonably
satisfactory to the holders of warrants representing at least a majority of the
shares of Common Stock obtainable upon exercise of the Exchange Warrants then
outstanding) to deliver to the Holder in exchange for this Warrant, a security
of the Acquiring Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant and reasonably satisfactory to the Holder
(including, an adjusted exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of this Warrant (without regard to any limitations on the exercise
of this Warrant), if the value so reflected is less than the Exercise Price in
effect immediately prior to such consolidation, merger or sale). In the event
that an Acquiring Entity is directly or indirectly controlled by a company or
entity whose common stock or similar equity interest is listed, designated or
quoted on a securities exchange or trading market, the Holder may elect to treat
such Person as the Acquiring Entity for purposes of this Section 4(b). Prior to
the consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of
Exchange Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the Exchange Warrants then outstanding) to insure
that the Holder thereafter will have the right to acquire and receive in lieu of
or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant), such shares of
stock, securities or assets that would have been issued or payable in such
Organic Change with respect to or in exchange for the number of shares of Common
Stock which would have been acquirable and receivable upon the exercise of this
Warrant as of the date of such Organic Change (without regard to any limitations
on the exercise of this Warrant).
A-7
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (ii) will take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (iii) will, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
exercise of the Warrants, 100% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of the Warrants then
outstanding (without regard to any limitations on exercise).
6. HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically
provided herein, no Holder, solely in such Person's capacity as a holder of this
Warrant, shall be entitled to vote or receive dividends or be deemed the holder
of shares of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as a Holder, any of the rights of a shareholder of the Company or any right to
vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on such Holder to purchase any
securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 6, the Company will
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder of this Warrant representing the right to
purchase the number of Warrant Shares not being transferred.
A-8
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.
(c) Warrant Exchangeable for Multiple Warrants. This Warrant
is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated
on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant 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:
A-9
If to the Company:
Arotech Corporation
250 West 57th Street
Suite 310
New York, New York 10107
Facsimile No.: (212) 258-3281
Telephone No.: (212) 258-3222
Attn.: 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
Facsimile No.: 011-972-2-990-6688
Telephone No.: 011-972-2-990-6623
Attn.: General Counsel
If to the Holder, to its address and facsimile number set forth on the Schedule
of Buyers to the Securities Purchase Agreement, dated as of January 7, 2004,
among the Company and the investors referred to therein (the "January SPA"), or
in the event that the Holder was not party to the January SPA, then as set forth
on Exhibit B hereto, with copies to such Holder's representatives as set forth
on such Schedule of Buyers,
With a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 593-5955
Telephone No.: (212) 756-2000
Attn.: Eleazer Klein, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
A-10
The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of
such action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) promptly after the
date on which the Company establishes a record date (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any grants,
issues or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of Common Stock or (C)
for determining rights to vote with respect to any Organic Change, dissolution
or liquidation, provided in each case that such information shall be made known
to the public prior to or in conjunction with such notice being provided to the
Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of
Exchange Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the Exchange Warrants then outstanding; provided
that no such action may increase the exercise price of any Exchange Warrants or
decrease the number of shares or class of stock obtainable upon exercise of any
Exchange Warrants without the written consent of the Holder. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the Exchange Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant 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.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
12. DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic
calculations via facsimile within two Business Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within two Business Days submit via
facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to
the Company's independent, outside accountant. The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
A-11
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the Registration Rights
Agreement, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and nothing herein shall limit the right of the
Holder to pursue actual damages for any failure by the Company to comply with
the terms of this Warrant. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. TRANSFER. This Warrant may be offered for sale, sold, transferred
or assigned without the consent of the Company.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:
"Bloomberg" means Bloomberg Financial Markets.
"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.
"Closing Bid Price" and "Closing Sale Price" means, for any security as
of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
A-12
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 12. All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
"Common Stock" means (i) the Company's common stock, par value $.01 per
share, and (ii) any capital stock into which such Common Stock shall have been
changed or any capital stock resulting from a reclassification of such Common
Stock.
"Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for Common Stock.
"Expiration Date" means July 14, 2009.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
"Principal Market" means the Nasdaq National Market.
"Weighted Average Price" means, for any security as of any date, the
dollar volume-weighted average price for such security on the Principal Market
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as the Principal Market publicly announces is the official open of trading), and
ending at 4:00:00 p.m., New York Time (or such other time as the Principal
Market publicly announces is the official close of trading) as reported by
Bloomberg through its "Volume at Price" functions, or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the Weighted Average Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Weighted Average Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 12. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
A-13
16. January SPA Provisions. The Company and the Holder hereby make to
each other the representations and warranties as to the Warrants and the Warrant
Shares as set forth in the January SPA as if such representations and warranties
were set forth herein, mutates mutandis. The Company hereby agrees to issue
transfer agent instructions substantially identical to, and subject to the same
terms and conditions, as the Transfer Agent Instructions referenced in the
January SPA and that the Warrants and Warrant Shares shall be governed by the
provisions of Section 4(b) of the January SPA as if such provisions were set
forth in full herein.
[Signature Page Follows]
A-14
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.
AROTECH CORPORATION
By:
-----------------------------------
Name: Robert S. Ehrlich
Title: Chief Executive Officer
A-15
Exhibit A
---------
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
AROTECH CORPORATION
To: Arotech Corporation
The undersigned is the Holder of Warrant No. _____ (the "Warrant") issued
by Arotech Corporation, a Delaware corporation (the "Company"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. The Warrant is currently exercisable to purchase a total of ________
Warrant Shares.
2. The undersigned holder hereby exercises its right to purchase ________
Warrant Shares pursuant to the Warrant.
3. The Holder intends that payment of the Exercise Price shall be made as:
______ a "Cash Exercise" with respect to ________ Warrant Shares; and/or
______ a "Cashless Exercise" with respect to ________ Warrant Shares.
4. Pursuant to this exercise, the Company shall deliver to the holder
________ Warrant Shares in accordance with the terms of the Warrant.
5. Following this exercise, the Warrant shall be exercisable to purchase a
total of ________ Warrant Shares.
Please issue the Warrant Shares in the following name and to the following
address:
Issue to:_________________________________________________________________
_________________________________________________________________
Account Number:___________________________________________________________
DTC Participant Number:___________________________________________________
Date: _______________ __, ______
__________________________
Name of Registered Holder
By:
----------------------------
Name:
Title:
A-16
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Co. to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
July 14, 2004, from the Company and acknowledged and agreed to by American Stock
Transfer & Trust Co.
AROTECH CORPORATION
By:
----------------------------
Name:
Title:
A-17
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Arotech Corporation to which the
within Warrant relates and appoints ________________ attorney to transfer said
right on the books of Arotech Corporation with full power of substitution in the
premises.
Dated: ,
---------------------
--------------------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Warrant)
---------------------------------------------------
Address of Transferee
---------------------------------------------------
---------------------------------------------------
In the presence of:
----------------------------
A-18
Exhibit B
---------
Address for Notices
A-19
SPECIAL MEETING OF STOCKHOLDERS OF
AROTECH CORPORATION
December 14, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible
Please detach along perforated line and mail in the envelope provided.
v v
------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
-------------------------------------------------------------------------------------------------------------------------
1. To ratify the issuance in July 2004 of FOR AGAINST ABSTAIN
five-year warrants to purchase up to 8,717,265 |_| |_| |_|
shares of our common stock at a price
of $1.38 per share
PLEASE SIGN, DATE AND RETURN THIS PROXY FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
---------------------------------------------------
Mark here if you plan to attend the meeting. |_|
---------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please note |_|
that changes to the registered name(s) on the
account may not be submitted via this method.
---------------------------------------------------
------------------------------- -------------- -------------------------------- --------------
Signature of Date: Signature of Date:
Stockholder Stockholder
------------------------------- -------------- -------------------------------- --------------
Note: Please sign exactly as name appears on this Proxy. When shares are held by joint tenants, both should sign. If signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If you are signing for a corporation,
please sign in the full corporate name by President or other authorized officer. If you are signing for a partnership, please
sign in the partnership name by authorized person.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AROTECH CORPORATION
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 14, 2004
The undersigned, having received the Notice of the Special Meeting of
Stockholders and the Proxy Statement on behalf of the Board of Directors of
Arotech Corporation (the "Company"), hereby appoint(s) Robert S. Ehrlich and
Steven Esses, and each of them, proxies of the undersigned (with full power of
substitution) to attend the Special Meeting of the Company to be held on
Tuesday, December 14, 2004 at 10:00 a.m. local time at the Hilton Queen of Sheba
Hotel, North Shore, Eilat, Israel, and all postponements and adjournments
thereof (the "Meeting"), and there to vote all shares of common stock of the
Company that the undersigned would be entitled to vote, if personally present,
in regard to all matters that may come before the Meeting, and without limiting
the general authorization hereby given, the undersigned directs that his or her
vote be cast as specified in this Proxy.
This Proxy, when properly executed, will be voted in the manner specified
herein. If no specification is made, the proxies intend to vote FOR the nominees
and FOR the other proposals set forth herein and described in the Board of
Directors' Proxy Statement. If any of the nominees is not available to serve,
this Proxy may be voted for a substitute. This Proxy delegates discretionary
authority with respect to matters not known or determined at the time of
solicitation of this Proxy. The undersigned hereby revokes any other proxy
previously granted to vote the same shares of stock for said Meeting.
SEE REVERSE SIDE. If you wish to vote in accordance with the recommendations of
the Board of Directors, just sign on the reverse side. You need not mark any
boxes.
(Continued and to be signed on the reverse side)
SPECIAL MEETING OF STOCKHOLDERS OF
AROTECH CORPORATION
December 14, 2004
--------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
--------------------------------------------------------------------------------
MAIL - Date, sign and mail your
proxy card in the envelope
provided as soon as possible.
- OR -
TELEPHONE - Call toll-free
1-800-PROXIES (1-800-776-9437)from -----------------------
any touch-tone telephone and COMPANY NUMBER
follow the instructions. Have your -----------------------
proxy card available when you ACCOUNT NUMBER
call. -----------------------
- OR - -----------------------
INTERNET - Access
"www.voteproxy.com" instructions.
Have your proxy card and follow
the on-screen instructions. Have
your proxy card available when you
access
Please detach along perforated line and mail in the envelope provided.
v v
------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
-------------------------------------------------------------------------------------------------------------------------
1. To ratify the issuance in July 2004 of FOR AGAINST ABSTAIN
five-year warrants to purchase up to 8,717,265 |_| |_| |_|
shares of our common stock at a price
of $1.38 per share
PLEASE SIGN, DATE AND RETURN THIS PROXY FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
---------------------------------------------------
Mark here if you plan to attend the meeting. |_|
---------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please note |_|
that changes to the registered name(s) on the
account may not be submitted via this method.
---------------------------------------------------
------------------------------- -------------- -------------------------------- --------------
Signature of Date: Signature of Date:
Stockholder Stockholder
------------------------------- -------------- -------------------------------- --------------
Note: Please sign exactly as name appears on this Proxy. When shares are held by joint tenants, both should sign. If signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If you are signing for a corporation,
please sign in the full corporate name by President or other authorized officer. If you are signing for a partnership, please
sign in the partnership name by authorized person.