SETTLEMENT AGREEMENT
AND
RELEASE
MADE AND ENTERED INTO BY AND BETWEEN:
DEFENSE INSUSTRIES INTERNATIONAL, INC.
(hereinafter: "the COMPANY")
AND
GLOBAL GUARANTEE CORPORATION
(hereinafter: "GLOBAL")
Whereas the Parties hereto entered into a consulting agreement dated
November 29, 2001 attached here as Appendix A (hereinafter: the "Consulting
Agreement"), whereby Global agreed to provide the Company with certain
business consulting services including but not limited to assisting the
Company in raising a minimum of US$5 million from external resources and,
pursuant to Global's efforts the Company entered into an exclusive
financial consulting relationship with KPMG Consulting, all in
consideration for certain compensation, as provided in the Consultancy
Agreement, and
WHEREAS pursuant to the Consultancy Agreement, letters and undertakings
between the Parties during the term of the Consultancy Agreement,
each of the Parties have claims, demands and allegations against
the other Party in respect to the compensation, performance and
other issues; and
WHEREAS the Parties desire fully and finally to settle and compromise any
and all claims and disputes between them, which have arisen prior
to this Agreement, including any claims which have arisen under,
pursuant to or in connection with the Consulting Agreement.
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NOW, THEREFORE, in consideration for the mutual promises and understandings and
after consideration specified herein, the parties hereby agree as follows:
1. Concurrently with the signature of this Agreement, the Company shall
deliver to Efrati, Galili & Co. (the "LAW FIRM"), in trust, the following
documents: (a) a letter to the transfer agent of the Company (Attached
hereto as APPENDIX B) requesting its transfer agent to cause the issuance
to Global one Company stock certificate evidencing 50,000 shares of Company
stock, all of which are deemed fully earned, fully paid for and
nonassessable as of April 30, 2002; one Company stock certificate
evidencing 20,000 shares of Company stock, all of which are deemed fully
earned, fully paid for and nonassessable as of June 30, 2002; and one
Company stock certificate evidencing 30,000 shares of Company stock, all of
which are deemed fully earned, fully paid for nonassessable as of September
30, 2002 (collectively, the "ISSUED SHARES") and (b) a copy of the
resolution of the Board of Directors of the Company with respect to the
issuance of the Issued Shares (attached hereto as APPENDIX C). The Company
further agrees that immediately following the issuance of the Issued
Shares, it will immediately cause its legal counsel to provide Global with
an appropriate opinion letter(s), subject to the provisions of the
applicable law, which enables Global to have the Rule 144 restrictive
legend removed from the above-referenced stock certificates as of April 30,
2003, June 30, 2003, and September 30, 2003 respectively, and that such
stock certificates can be transferred free and clear of any restrictive
legend pursuant to Rule 144 of the Securities Act of 1933, as amended.
2. Global shall not act in any way or cause or encourage any third party to
take any action which shall have the effect to depress the stock price of
the Company's shares and if at any time any of the Issued Shares are to be
sold by Global, Global shall not place a sell order below the last sale
price.
<PAGE>
3. Global agrees to hold the Company harmless and waives any rights it may
have to collect from the Company 100,000 shares of Company stock (the
"Redwood Shares") that remains due and owing from Redwood Consultants LLC
to Global. Global further agrees to not attempt, in any manner, to collect
the Redwood Shares from Redwood Consultants LLC., A letter to such effect
addressed to Redwood Consultants LLC., is attached hereto as APPENDIX D.
4. The Company undertakes to pay to Global US$32,000 (the "BASIC AMOUNT"), if
and when the Company shall raise a minimum of US$5 million in an equity
transaction with respect to the sale of its shares.
5. Following review by the Company of the details of the expenses incurred by
Global in relation to its performance of services under the Consultancy
Agreement beginning as of the date of the execution of the Consultancy
Agreement and until December 31, 2002 (the "CONSULTANCY TERM"), it is
agreed that Global shall be entitled to be paid US$ 49,000 (the "EXPENSE
AMOUNT") as full and final payment for all expenses incurred by Global
during the Consultancy Term. Concurrently with the signature of this
Agreement, the Company shall deliver to the Law Firm, in trust, irrevocable
instructions by the Company addressed to the Company's bank (details of
which are attached hereto as Appendix Q) (the "Bank"), instructing the Bank
to transfer US$10,000 of the Expense Amount to the account of Global
(attached hereto as APPENDIX E. As for the remaining US$39,000 of the
Expense Amount, The Company agrees to pay said amount in installments
pursuant to the mutual agreement of the Parties from time to time and as
the business of the Company shall permit.
6. Concurrently with the signature of this Agreement, each of the Parties will
provide the Law Firm with its signed Settlement Agreement and Release (the
"SETTLEMENT AGREEMENT") in respect to the Liviakis issue, a copy of which
is attached hereto as APPENDIX F.
7. Concurrently with the signature of this Agreement the Company shall deliver
to the Law Firm, in trust, irrevocable instructions to the Bank (details of
which are attached hereto as APPENDIX G) to transfer to Pace Communications
Network the amount of US$ 23,526.39.
<PAGE>
8. Following the signature of this Agreement by the Parties, the Company shall
enter into a consulting agreement (in the form attached hereto as Appendix
H) with a company managed by Mr. Michael Markow (a majority shareholder in
such Company) and which is approved by the Company.
9. Global irrevocably waives any of its rights to receive from the Company any
warrants of any kind whatsoever, arising or which may arise in respect to
the Consultancy Agreement.
10. This Agreement will be effective on the date (the "EFFECTIVE DATE") that
all of the following actions (the "Effectiveness Actions") have occurred:
(a) The Law Firm has delivered to the transfer agent the letters attached
as APPENDICES B - D;
(b) The Law Firm has delivered to the Bank the letter attached as APPENDIX
E.
(c) The Company has provided evidence to the Law Firm, that the Settlement
Agreement was executed in full.
(d) The Law Firm has delivered to the Bank the letter attached hereto as
APPENDIX G
11. It is agreed between the parties that time is of the essence and the
Parties will make a good faith effort to complete the Effectiveness Actions
within fourteen (14) days after this Agreement has been signed by all
parties.
12. It is agreed between the Parties that any expenses of Global during the
period beginning January 1, 2003 until the Execution date of this
Agreement, shall be reviewed by Mr. David Efrati, and he shall have the
sole discretion to determine the amount, if any, owed by the Company to
Global in respect to any expenses during such period. The determination of
Mr. David Efrati as provided above shall be final and binding upon the
parties and the Parties hereby waive any right of appeal in respect to the
above determination.
<PAGE>
13. The Company and Global, each waive any and all rights which it or it had
under the provisions of section 1542 of Civil Code of the State of
California, which section reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
14. Each of the Company and Global acknowledge that the facts in respect to
which this release is given may hereafter turn out to be different from the
facts now known to them or believed by them to be true. Each of the Company
and Global therefore assumes such risk of the facts turning out to be
different and agrees that this release shall be in all respects effective
and final and not subject to rescission by reason of said different facts.
15. Except to claims under or arising out of this Agreement, Global on its
behalf and on behalf of all its successors and assigns (the "Global
Releasors") forever and irrevocably waives, releases and discharges the
Company and its respective past, present and future officers, employees,
directors, shareholders, representatives, affiliates and agents (the
"Company Releasees"), from any and all claims, demands, causes of actions,
fees, liabilities and expenses (inclusive of attorneys' fees) of any kind
whatsoever, whether known or unknown, which the Global Releasors, ever had
or now have or may in the future have against any of the Company Releasees
by reason of any actual or alleged act, omission, transaction, practice,
conduct, occurrence, or other matter up to and including the date hereof,
including but not limited to, any claims under any applicable law,
regulation, or ordinance or relating thereto or resulting therefrom,
including without limitation, with respect to the Consultancy Agreement.
Notwithstanding anything to the contrary in this agreement, it is expressly
agreed that this waiver and release shall not include any act and/or
omission of the Company and/or Company Releasees caused or arising from (i)
any grossly negligent act or omission of the Company and/or Company
Releasees, or (ii) any claim by any third party against Global regarding
the accuracy, completeness and/or truthfulness of the information regarding
the Company provided by the Company or anyone on its behalf. Global's
(including Global Releasors) release of the Company Releasees, as set forth
above herein, shall be binding upon Global and Global Releasors immediately
upon signature of this Agreement by both parties and the effectiveness
thereof shall not be subject to the execution of the Effectiveness Actions.
<PAGE>
Global and Global Releasors collectively warrant that, they are not
currently aware of any claim by a third party against Global regarding the
accuracy, completeness and/or truthfulness of the information regarding the
Company provided by the Company or anyone on its behalf, as referenced in
Section 15(ii) herein.
16. Except to claims under or arising out of this Agreement and subject to the
second sentence of this Section 16, the Company on its behalf and on behalf
of all its successors and assigns (the "Company Releasors") forever and
irrevocably waives, releases and discharges Global and its respective past,
present and future officers, employees, directors, shareholders,
representatives, affiliates and agents (the "Global Releasees"), from any
and all claims, demands, causes of actions, fees, liabilities and expenses
(inclusive of attorneys' fees) of any kind whatsoever, whether known or
unknown, which the Company Releasors, ever had or now have or may in the
future have against any of the Global Releasees by reason of any actual or
alleged act, omission, transaction, practice, conduct, occurrence, or other
matter up to and including the date hereof, including but not limited to,
any claims under any applicable law, regulation, or ordinance or relating
thereto or resulting therefrom, including without limitation, with respect
to the Consultancy Agreement. Notwithstanding anything to the contrary in
this agreement, it is expressly agreed that this waiver and release shall
not include any act and/or omissions of Global and/or Global Releasees
caused or arising from (i) any claim of a third party that Global
misrepresented its authority, or made any commitment or representation on
behalf of or relating to the Company not expressly authorized in writing by
the Company, or (ii) any grossly negligent or illegal act or omission in
providing any services to the Company by Global and/or Global Releasees.
The Company's (including the Company Releasors) release of the Global
Releasees, as set forth above herein, shall be binding upon the Company and
the Company Releasors immediately upon the signature of this Agreement by
both Parties and the effectiveness thereof shall not be subject to the
execution of the Effectiveness Actions.
<PAGE>
Company and Company Releasors collectively warrant that they are not
currently aware of ay claim of a third party that Global misrepresented its
authority, or made any commitment or representation on behalf of or
relating ot the Company not expressly authorized in writing by the Company,
as referenced in Section 16 (i) herein.
17. Notwithstanding the aforesaid, nothing in this Agreement will constitute a
waiver or release by Global in respect to any press releases or other
public releases released by Global in respect of the Company following
written instructions by the Company as of November 29, 2001 until signature
of this Agreement (the "Press Releases"). The Company undertakes to hold
Global harmless and indemnify Global (and it employees, officers,
directors, successors and assigns), including reasonable attorney's fees,
in respect to any of the Press Releases. The Company's duty to hold Global
harmless and indemnify Global shall be binding upon the Company immediately
upon the signature of this Agreement by both parties and the effectiveness
thereof shall not be subject to the execution of the Effectiveness Actions.
18. This Agreement shall be binding on and shall inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and legal
representatives.
19. Each of the parties hereto shall bear his, her or its own attorney's fees
and costs for the preparation and review of this Agreement.
<PAGE>
20. Each of the recitals to this Agreement is incorporated herein by this
reference and shall become part of the Agreement.
21. No modification of this Agreement or of any part hereof shall be valid or
binding upon the parties hereto unless made in writing and signed by the
parties hereto and their respective attorneys. This document constitutes
the entire agreement between the parties and supersedes all prior
agreements, discussions, representations or negotiations. Each party
acknowledges that he, she or it has not relied upon any representation
whatsoever made by another party or said party's counsel in entering into
this Agreement, except only as expressly set forth herein.
22. Each of the parties acknowledges and agrees that he, she or it has
cooperated in the preparation of this Agreement and have had opportunity to
review the agreement and consult with attorneys .
23. No party shall be deemed to be the "drafter" of this Agreement, such that
an ambiguity in the Agreement would be interpreted against that party.
24. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
25. This Agreement shall be governed by and construed in accordance with the
laws of the State of California and each of the Company and Global consent
to the exclusive jurisdiction of the courts of the State of California, in
the County of Los Angeles, in connection with the enforcement and or
construction of this Agreement.
26. This Agreement may be executed in one or more counterparts, each of which
shall be considered an original, but all of which together shall constitute
one and the same instrument.
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27. Each of the Company and Global undertakes to keep in strict confidence, and
not to use for any purpose whatsoever except for internal purposes, any and
all information relating, in any way, to the other party which had been
provided to such Party by the other Party or was otherwise obtained by the
such Party including the terms and conditions of this Agreement and all
transactions contemplated herein, including their existence, except for
information: (i) which is or shall be in the public domain not due to any
act of any of the Parties in breach of law or agreement; and/or, (ii) which
such Party is required to disclose under any applicable law after providing
the other Party with a detailed written notice of that fact so that the
other Party may seek a protective order, confidential treatment or any
other remedy, in that event such Party shall furnish only that portion of
information which is legally required and shall exercise reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded
that information to the extent reasonably requested by such Party.
28. All notices or other communications hereunder shall be in writing and shall
be given in person, by registered mail (registered international air mail
if mailed internationally), by an overnight courier service which obtains a
receipt to evidence delivery, or by facsimile transmission (provided that
written confirmation of receipt is provided), addressed as set forth below:
If to the Company:
Defense Industries International, Inc.
Attention: President
Industrial Zone Erez, PO Box 779
Ashkelon, Israel 78101
Tel: 972-8-789-1611
Fax: 972-8-689-9287 and
Fax: 972-3-927-1572
With a copy to:
Efrati, Galili & Co.
6 Wissotsky st.
Tel Aviv 62330 Israel
Fax: 972-3-604 0111
Attn: Adv. David Efrati
If to Global:
Global Guarantee Corporation
Attention: President
15760 Ventura Boulevard, Suite 1020
Encino, California 91436
Tel: 818-783-0054
Fax: 818-783-1120
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 1st day of May 2003.
DEFENSE INDUSTRIES, INCORPORATED
By: Dated: May 1, 2003
-----------------------------
Joseph Fostbinder, Its Chief
Executive Officer
GLOBAL GUARANTEE CORPORATION,
By: Dated: May 1, 2003
-----------------------------
Michael M. Markow, Its President |
