Exhibit ▇▇.▇
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April 10, ▇▇▇▇
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and CEO
Re: Stock Purchase/Sale Agreement
Gentlemen:
Reference is made to the Stock Purchase and Sale Agreement dated January
7, 2004 (the "Agreement") by and among ourselves (the "Shareholders"), Arotech
Corporation, a Delaware corporation ("Arotech"), and FAAC Incorporated, a
Michigan corporation ("FAAC"). All capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to such terms in the Agreement.
This letter supersedes the letter between us dated February 15, 2005.
This will confirm our agreement to your request that we modify the terms
of the Agreement to provide that, notwithstanding anything to the contrary in
the Agreement or in the Restated Security Agreement dated February 19, 2004 (the
"Security Agreement") between and among Arotech, FAAC, and the Shareholders,
payment of the 2004 Earnout Consideration shall be made by Arotech as follows:
1. On or prior to ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇ will transfer to the
Shareholders all right and title to the Debt Instruments, as
defined in and serving as security under the Security
Agreement and being held pursuant to the terms of an Escrow
Agreement dated February 19, 2004 between and among Arotech,
the Shareholders and HSBC Bank USA or, at Arotech's option,
Arotech will deliver to the Shareholders a cashier's check or
wire transfer of immediately available funds in an amount
equal to the principal plus accrued interest then outstanding
under those Debt Instruments.
2. As soon as Arotech has filed its Form 10-K for 2004, but in no
event later than April 30, 2005 (the "Issuance Date"), Arotech
will issue in the name of the Shareholders and deliver to CIBC
Israel, a subsidiary of CIBC World Markets (the "Broker"),
that number of registered shares of Arotech Common Stock (the
"Shares") having a value, based upon the lowest of the bid
price in the previous 20 days immediately preceding the
Issuance Date, of $10,000,000 (which is approximately 125% of
the amount that Arotech and the Shareholders estimate will be
the remaining balance of the 2004 Earnout Consideration after
application of the amount specified in Paragraph 1(but in no
event will Arotech be obligated to issue additional shares
which, when combined with the Shares and the Closing Stock
Consideration, will constitute more than 20% of Arotech's
issued and outstanding common stock on the date the Shares
were issued)) for sale or distribution in accordance with the
procedures hereafter described.
3. Immediately following the Issuance Date, the Buyer will cause
the Broker to initiate and thereafter implement as rapidly as
possible the sale, in one or more transactions, of that number
of the Shares as will be required to generate net proceeds to
the Shareholders (after all fees to the Broker and all other
transactional expenses) of the remaining balance of the 2004
Earnout Consideration after application of the amount
Arotech Corporation
April 10, 2005
Page 2
specified in Paragraph 1, plus (as provided in the Agreement)
interest on that remaining t 12 12 balance from April 1, 2005
until paid at the rate of 12% per annum (collectively, the
"Earnout Balance") and, within three (3) business days
following each such sale, to disburse such net proceeds to the
Shareholders by wire transfer to an account or accounts
designated by the Shareholders. In implementing those sales,
the Broker shall operate with the primary objective to
generate net proceeds equal to the Earnout Balance for
distribution to the Shareholders on or before September 30,
2005 and, to the extent (but only to the extent) consistent
with that primary objective, to maximize the average price per
share at which the Shares are sold. Unless at the written
directive of the Shareholders, no sales of Shares will be
completed at a price that is less than 80% of the price per
share that was the valuation basis for the issuance of the
Shares.
4. If as of September 30, 2005, the Shareholders have not
received full payment of the Earnout Balance from
distributions of cumulative net proceeds of the sales of the
Shares, then the following shall apply:
(a) If, based upon the lowest of the bid price in the
20 days immediately preceding September 30, 2005, the market
value of the Shares then held by the Broker for sale is less
than 125% of the Earnout Balance not yet paid as of that date,
then Arotech, on October 3, 2005, shall issue in the name of
the Shareholders and deliver to the Broker that number of
additional registered shares of Arotech Common Stock as will
be required to achieve that percentage (but in no event will
Arotech be obligated to issue additional shares which, when
combined with the Shares and the Closing Stock Consideration,
will constitute more than 20% of Arotech's issued and
outstanding common stock on the date the Shares were issued);
and
(b) The Shareholders shall have the right, as of or
at any time after October 3, 2005, (i) to direct the Broker to
sell the Shares at whatever prices are offered in the market
and the Shareholders approve and (ii) if the Shareholders so
elect, by written notice (the "Notice") delivered to the
Broker and Arotech, to require that the Broker release and
deliver to the Shareholders on or before the fifth (5th)
business day following the date of delivery of the Notice any
remaining net proceeds from the prior sales of the Shares and
any remaining Shares that had not yet been sold as of the date
the Notice was delivered so that the Shareholders can directly
implement the sale of the Shares.
5. If, at any time prior to March 31, 2006, the Shareholders
receive full payment of the Earnout Balance from distributions
of cumulative net proceeds of the sales of the Shares, then
(a) any net proceeds of such sales in excess of the Earnout
Balance shall be delivered to the Buyer and (b) any Shares
remaining unsold after such full payment shall be delivered to
the Buyer.
6. If as of March 31, 2006, the Shareholders have not received
full payment of the Earnout Balance from distributions of
cumulative net proceeds of the sales of the Shares, then the
Shareholders shall have the right, as of or at any time after
that date, by written demand delivered to the Buyer (the
"Demand"), to require that the Buyer, on or before the tenth
(10th) business day following the date of delivery of that
Demand, pay to the Shareholders by a cashier's check or wire
transfer of immediately available funds an amount equal to
Earnout Balance and, following receipt of such payment, the
Shareholders will waive all rights to any remaining net
proceeds from the prior sales of the Shares and to any
remaining Shares, if any, that had not yet been sold as of the
date such payment and any remaining net proceeds and Shares,
if any, shall be delivered to the Buyer.
Arotech Corporation
April 10, 2005
Page 3
7. Until paid, the 2004 Earnout Consideration will continue to
bear interest at the rate specified in Section 2.4.1 of the
Agreement.
8. Unless and until the 2004 Earnout Consideration is paid in
full, the provisions for security for that payment in the
Security Agreement will remain in full force and effect.
Except as expressly stated above, all provisions of the Agreement,
as originally signed and previously amended, remain in full force and effect.
If the foregoing is acceptable to you, kindly sign in the place
provided for your signature below, whereupon this letter will become a binding
amendment to the Agreement, the Security Agreement and the Escrow Agreement.
Sincerely,
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ACCEPTED AND AGREED:
AROTECH CORPORATION
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and CEO
ACCEPTED AND AGREED:
FAAC INCORPORATED
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and CEO
