Exhibit 4.2A
ADDENDUM NO. 1
TO MANAGEMENT CONTRACT MADE AND SIGNED ON APRIL 1, 2003
MADE AND SIGNED ON FEBRUARY 8, 2006
BETWEEN
XXXXXX ELECTRONIC ENGINEERING LTD.
Public Co. 00-000000-0, a company duly registered in Israel
("XXXXXX")
OF THE ONE PART:
AND
XXXXX XXXXXX MANAGEMENT SERVICES LTD.
Private Co. 00-000000-0, a company duly registered in Israel
(the "MANAGEMENT COMPANY")
OF THE OTHER PART:
WHEREAS a management agreement was made and signed on April 1, 2003 between
the parties (hereinafter: the "MAIN CONTRACT"), by virtue of which,
inter alia, Xx. Xxxxxx Xxxxx serves as Chairman of the Board of
Directors of Xxxxxx; and
WHEREAS the First Contract Period is due to end on February 8, 2006; and
WHEREAS the parties wish: (a) to extend the First Contract Period, with
certain changes as specified in this Addendum No. 1, and (b) to
establish a new option plan upon the conditions specified in this
Addendum No. 1;
THEREFORE, THE PARTIES HEREBY AGREE, DECLARE AND STIPULATE AS FOLLOWS:
1. The preamble to this Addendum No. 1 forms an integral part hereof.
2. All the terms in this Addendum No. 1 shall be given the meaning assigned to
them in the Main Contract.
3. This Addendum No. 1 shall be deemed an integral part of the Main Contract.
4. All the provisions of the Main Contract, including the provisions of clause
10 thereof, shall remain in full force, save as explicitly modified by the
provisions of this Addendum No. 1.
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5. PERIOD OF THE CONTRACT
5.1 The First Contract Period is hereby extended for a further period of
36 (thirty six) months, to be counted from February 8, 2006 (the
"EXTENDED CONTRACT PERIOD").
5.2 Either party shall be entitled to terminate the contract during the
Extended Contract Period, without any explanation or reason, by prior
notice of ninety (90) days to be given in writing by the one party to
the other (the "TERMINATION NOTICE").
6. MANAGEMENT FEE
6.1 During the Extended Contract Period, Xxxxxx shall pay the Management
Company a monthly sum of 42 (forty two) thousand shekels (the "MONTHLY
MANAGEMENT FEE").
6.2 Statutory VAT shall be added to the Monthly Management Fee, to be paid
by Xxxxxx to the Management Company against receipt of a lawful tax
invoice.
6.3 The Monthly Management Fee (plus VAT) shall be paid every month, by
the fifth day of the month, for the management services that were
provided by the Management Company during the previous month.
6.4 The Monthly Management Fee shall be linked to the increase (but not
decrease) in the consumer price index - the general index (the
"INDEX"), according to the "last known index" method, the base index
being the Index published on May 15, 2003 (in respect of April 2003),
and the new index being the last Index known on the actual payment
date. The linked Monthly Management Fee shall be adjusted once per
quarter throughout the Extended Contract Period.
7. OPTION PLAN
7.1 In addition to the Monthly Management Fee and subject to receipt of
all the approvals required in accordance with any statutory provision,
the Management Company shall be allotted, following the signing of
this Addendum No. 1, 100,000 (one hundred thousand) options, each
convertible into one ordinary share of NIS 1 nominal value, of Xxxxxx
(the "WARRANTS").
7.2 The Warrants shall be deposited with a trustee whose identity shall be
determined by agreement between Xxxxxx and the Management Company (the
"TRUSTEE").
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7.3 The options shall be exercisable, subject to the conditions detailed
in this clause 7, in three lots, according to the breakdown and at the
times specified below:
7.3.1 Starting from February 8, 2007 - 33,333 (thirty three thousand
three hundred and thirty three) options (the "FIRST LOT");
7.3.2 Starting from February 8, 2008 - 33, 333 (thirty three thousand
three hundred and thirty three) options (the "SECOND LOT");
7.3.3 Starting from February 8, 2009 - 33,334 (thirty three thousand
three hundred and thirty four) options (the "THIRD LOT");
7.3.4 For the avoidance of doubt: In the circumstances specified in
paragraph 7.9.2, the Management Company shall be entitled to
exercise the options wholly or partly at different times than
those specified in this paragraph 7.3.
7.4 The options are cumulative, in the sense that the Management Company
shall be entitled to exercise each lot (or any part thereof) starting
from when the right of exercise first vests in relation to that lot
and up to the end of one year from when the right to exercise the
Third Lot vests, i.e. up to February 8, 2010 (the "EXERCISE PERIOD").
At the end of the Exercise Period the options shall lapse and shall
not vest the Management Company with any right.
7.5 The exercise price of each option shall be the closing price on the
Tel Aviv Stock Exchange (the "EXCHANGE") of an ordinary share of NIS 1
nominal value on the date when the allotment of the Warrants is
approved by Xxxxxx'x shareholders' meeting (the "EXERCISE PRICE"). The
options, as well as the Exercise Price, shall be subject to the
Adjustment Rules detailed in APPENDIX B to the Main Contract.
7.6 The options or any part thereof shall be exercised in a written notice
of the Management Company to be delivered to Xxxxxx (the "EXERCISE
NOTICE"), to which shall be attached the full consideration for the
exercise, which (subject to any adjustment to be made in accordance
with APPENDIX B to the Main Contract), shall be the consideration
obtained by multiplying the Exercise Price by the number of options in
respect of which the Exercise Notice was given.
7.7 Within fourteen (14) days from when the Management Company delivered
to Xxxxxx the Exercise Notice together with the consideration for the
exercise, Xxxxxx shall allot to the Management Company the shares the
subject of the options that were exercised (the "EXERCISED SHARES")
and
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shall deliver to the Management Company share certificates in respect
thereof.
7.8 Xxxxxx shall cause the Exercised Shares to be registered for trade on
the Exchange and shall bear any expense or cost entailed therein. For
the avoidance of doubt: The registration of the Exercised Shares on
NASDAQ shall be done solely as part of a prospectus, if and to the
extent that one is published by Xxxxxx.
7.9 In the event that the Main Contract lapses or is canceled (hereinafter
jointly: "TERMINATION OF THE SERVICES"), the following provisions
shall apply:
7.9.1 If the Termination Notice is delivered to Xxxxxx by the
Management Company, the Management Company in such case shall be
entitled only to those options for which the date of exercise
had passed prior to the date of delivery of the Termination
Notice.
7.9.2 If the Termination Notice is delivered to the Management Company
by Xxxxxx for a cause other than any cause which enables the
withholding of severance pay from an employee, then the
following provisions shall apply:
7.9.2.1 If the Termination Notice is delivered during the period
up to February 8, 2007 - all the options included in the
First Lot shall belong to the Management Company, and the
entitlement with respect to all the rest of the options
shall automatically lapse.
7.9.2.2 If the Termination Notice is delivered after February 8,
2007 - the Management Company shall be entitled to
exercise: (a) all the options included in the First Lot
(if they were not exercised until then); and (b) all the
options included in the Second Lot, pro rata to the
number of months elapsed from February 8, 2007 to the end
of ninety (90) days from the date of delivery of the
Termination Notice, and the entitlement with respect to
all the rest of the options shall automatically lapse.
7.9.2.3 If the Termination Notice is delivered after February 8,
2008 - the Management Company shall be entitled to
exercise: (a) all the options included in the First Lot
(if they were not exercised until then); and (b) all the
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options included in the Second Lot (if they were not
exercised until then); and (c) all the options included
in the Third Lot, pro rata to the number of months
elapsed from February 8, 2008 to the end of ninety (90)
days from the date of delivery of the Termination Notice,
and the entitlement with respect to all the rest of the
options shall automatically lapse.
7.9.3 Should the Management Company wish to exercise the options to
which it is entitled by the provisions of paragraphs 7.9.1,
7.9.2 and 7.9.3, it shall be obligated to deliver the Exercise
Notice within ninety (90) days from the date of delivery of the
Termination Notice. If the Termination Notice is not delivered -
the options shall lapse.
7.9.4 Notwithstanding that stated in this clause 7, in the event that
the Management Company stops providing Xxxxxx with management
services in accordance with the provisions of the Main Contract,
by reason of Perry's inability to fill the position due to
incapacity for work or death, God forbid, the right shall
continue to vest in the Management Company to exercise all the
options in accordance with the provisions of this clause 7, at
the same times and upon the same conditions to which it would
have been entitled if not for the Termination of the Services.
7.9.5 Xxxxxx shall make best efforts to obtain all the approvals
required in accordance with any statutory provision for the
allotment of the options.
7.10 The Management Company confirms that it is aware of the restrictions
on the sale of securities under Section 15C of the Securities Law,
5728-1968, and under NASDAQ Rule 144.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HAND HERETO
AT THE PLACE AND ON THE DATE SPECIFIED ABOVE:
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XXXXX XXXXXX MANAGEMENT XXXXXX ELECTRONIC
SERVICES LTD. ENGINEERING LTD.
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