FOURTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit
10.38
FOURTH
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS
AGREEMENT
(“Agreement”) is entered into on the 15th
day of
April, 2007 by and among Arotech Corporation, a Delaware corporation
(“Arotech”), and Electric Fuel (E.F.L.) Limited, an Israeli company (“EFL” and
together with Arotech, the “Companies”), and Xx. Xxxxxx X. Xxxxxxx, Israel I.D.
Number 303673487 (the “Executive”).
WHEREAS,
the
Companies and the Executive entered into an Amended and Restated Employment
Agreement dated as of October 1, 1996, a Second Amended and Restated Employment
Agreement dated as of January 1, 2000, as extended, and a Third Amended and
Restated Employment Agreement effective as of January 1, 2005 (together, the
“Original Agreement”) formalizing the terms of the Executive’s employment with
the Companies;
WHEREAS,
the
Executive is within one year of the minimum age set forth in his existing
employment agreement for retirement;
WHEREAS,
the
Companies and the Executive now wish to extend the Executive’s employment and to
amend and restate the Original Agreement in its entirety in accordance with
the
terms of this Agreement;
NOW,
THEREFORE,
in
consideration of the respective agreements of the parties contained herein,
the
parties agree as follows:
1. Term.
The
term
of the Executive’s employment under this Agreement shall be for the period
commencing on the date hereof, and ending on December 31, 2009 (the “Term”). The
provisions of this Agreement shall apply to the relationship between the parties
hereto retroactively as if this Agreement were signed on the commencement of
the
Term.
2. Employment.
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(a)
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The
Executive shall be employed as the Chairman of the Board and Chief
Executive Officer of Arotech. The Executive shall perform the duties,
undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by persons situated in a similar
executive capacity in publicly-held United States corporations and
their
Israeli subsidiaries. The Executive shall exercise his authority
in a
reasonable manner and shall report to the Board of Directors of each
Company (each a “Board”).
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(b)
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Excluding
periods of vacation and sick leave to which the Executive shall be
entitled, the Executive agrees to devote the attention and time to
the
businesses and affairs of the Companies required to discharge the
responsibilities assigned to the Executive hereunder. The Executive’s
duties shall be in the nature of management duties that demand a
special
level of loyalty and accordingly the Israeli Law of Work Hours and
Rest,
5711 - 1951 shall not apply to this
Agreement.
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(c)
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While
the Executive is employed by the Companies hereunder, Arotech shall
use
its best efforts to cause the Executive to be elected to, and if
so
elected the Executive shall serve on, the Board of Arotech as a member
of
such Board, and shall cause the Executive to be elected to, and the
Executive shall serve on, the Board of EFL as a member of such Board.
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(d)
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Each
Company will use its reasonable best efforts to obtain, and to keep
in
place at all times that the Executive is a director or officer of
either
Company, a directors and officers liability policy covering the Executive
in an amount and otherwise containing terms and conditions consistent
with
past practices.
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(e)
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The
Executive agrees to serve on the board of directors of such subsidiaries
of the Companies as the Board may reasonably
request.
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3. Base
Salary, Bonus and Financial Planning Allowance.
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(a)
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The
Companies agree to pay or cause to be paid to the Executive a monthly
base
salary at the rate of US $33,333 per month, payable in U.S. Dollars
or in
the currency of Israel (as determined by the Representative Rate
of the
U.S. Dollar published by the Bank of Israel immediately prior to
the date
of payment of each installment thereof), or such larger amount as
the
Board may in its sole discretion determine following a review which
shall
be conducted by the Board by not later than March 31 of each year,
such
larger amount to take effect retroactively to the January 1 immediately
preceding such review (hereinafter referred to as the “Base Salary”).
Notwithstanding such review, on each anniversary of the effective
date of
this Agreement, the Base Salary shall be adjusted upward in an amount
equal to the official anticipated net Israeli inflation rate as published
by the Israeli Central Bureau of Statistics in the month of December
immediately preceding such anniversary, in each case for the year
immediately following such anniversary, as adjusted for any changes
in the
value of the New Israeli Shekel against the U.S. Dollar.
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| (b) |
The
Company will grant to the Executive a retention bonus of 200,000
shares of
restricted stock, vesting 66,667 on December 31, 2007, 66,667 on
December
31, 2008, and 66,666 on December 31, 2009, with each such vesting
being
contingent on the Executive being employed by the Company on the
scheduled
vesting date. Additionally, the Companies agree to pay or cause to
be paid
to the Executive on each anniversary of this Agreement or as soon
thereafter as may be possible in order to determine the relevant
results
of the Companies, an annual bonus, as
follows:
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(i)
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If,
as of such anniversary, the Company shall have attained 90% of the
Company’s Budgeted Number (as defined below) for the year preceding such
anniversary, then Executive’s bonus shall be equal to 35% of Executive’s
gross annual Base Salary as then in effect for the year preceding
such
anniversary;
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(ii)
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If,
as of such anniversary, the Companies shall have attained 120% of
the
Companies’ Budgeted Number (as defined below) for the year preceding such
anniversary, then Executive’s bonus shall be equal to 75% of Executive’s
annual Base Salary as then in effect for the year preceding such
anniversary;
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(iii)
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If,
as of such anniversary, the Companies shall have attained more than
90%
but less than 120% of the Companies’ Budgeted Number (as defined below),
then Executive’s bonus shall be calculated as
follows:
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B
=
(S
x 35%)
+ (N-75)/30 x (S x 40%)
Where:
B
=
The
amount of Executive’s annual bonus, as a percentage of Executive’s Base Salary;
and
N
= The
percentage of the Budgeted Number (as defined below) that was attained by the
Companies in the immediately preceding fiscal year; provided,
however,
that N
is more than 90 and less than 120;
S
= Executive’s
Base Salary.
For
the
purposes of this Section 3(b), the Budgeted Number shall be the budgeted results
of the Companies as mutually agreed by the Boards and Executive prior to the
end
of each fiscal year for the fiscal year designated in such budget.
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(c)
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In
addition, the Companies shall pay Executive an amount of $10,000
on each
anniversary of this Agreement to cover Executive’s tax and financial
planning expenses. The Companies acknowledge that the Executive is
owed an
amount of $20,197 in connection with tax and financial planning expenses
from previous years.
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(d)
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To
the maximum extent permitted by law, all payments to the Executive
hereunder shall be paid in U.S. Dollars. Subject to the immediately
preceding sentence, and subject to the approval of the Executive,
which
shall not be unreasonably withheld, the Companies, in order to reflect
the
different duties of the Executive with respect to each of them, may
allocate between themselves their obligations to make the payments
and
provide the benefits specified in this Agreement. The amount paid
to the
Executive hereunder by EFL shall be referred to hereinafter as the
“EFL
Base Salary”; provided,
that in no event shall the EFL Base Salary in any year be greater
than the
Base Salary for that year.
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4. Employee
Benefits.
The
Executive shall be entitled to the following benefits:
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(a)
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Manager’s
Insurance.
The Companies will pay to an insurance company of the Executive’s choice,
as premiums for manager’s insurance for the Executive, an amount equal to
13.33% of each monthly payment of the Base Salary together with 2.5%
of
the Base Salary for disability, and will deduct from each monthly
payment
of the Base Salary and pay to such insurance company an amount equal
to 5%
of each monthly payment of the Base Salary, which shall constitute
the
Executive’s contribution to such premiums. Upon the termination of the
Executive’s employment with the Companies for whatever reason, including
without limitation termination for Cause or the resignation by the
Executive, the right to receive the manager’s insurance benefits shall be
automatically assigned to the Executive.
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(b)
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Education
Fund (Keren Hishtalmut).
The Companies will contribute to an education fund of the Executive’s
choice an amount equal to 7.5% of each monthly payment of the Base
Salary,
and will deduct from each monthly payment of the Base Salary and
contribute to such education fund an additional amount equal to 2.5%
of
each such monthly payment of the Base Salary. Upon the termination
of the
Executive’s employment with the Companies for whatever reason, including
without limitation termination for Cause or the resignation by the
Executive, the right to receive any amounts in such fund shall be
automatically assigned to the Executive. All education fund contributions
or imputed income made under this Section in excess of the statutory
exemption shall be tax-effected such that the amount of contribution
net
of any taxes and withholding (including such amounts in respect of
payments pursuant to this sentence) equals the percentages specified
herein.
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(c)
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Vacation.
The Executive shall be entitled to an annual vacation at full pay
equal to
24 work days.
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Vacation
days may be accumulated and may, at the Executive’s option or automatically upon
termination, be converted into cash payments in an amount equal to the
proportionate part of the Base Salary for such days; provided,
however,
that if
the Executive accumulates more than two (2) times his then current annual
entitlement of vacation days, such excess shall be automatically converted
into
the right to receive such a cash payment in respect of such excess. Payments
to
which the Executive is entitled pursuant to this Section 4(c) shall be made
promptly after the Executive’s request therefor.
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(d)
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Sick
Leave.
The Executive shall be entitled to up to 30 days of fully paid sick
leave
annually; provided,
however,
that the Executive shall not be entitled to sick leave payment to
the
extent he is already covered by manager’s insurance. Sick leave may be
accumulated and at the conclusion of this Agreement for all reasons
other
than Cause, up to 30 days of accumulated but unused sick leave shall
be
converted into a cash payment to the Executive in an amount equal
to the
proportionate part of the Base Salary for such
days.
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(e)
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Automobile.
The Companies shall make an automobile available to the Executive
during
the term of this Agreement. Such automobile shall be of a high quality
comparable to, but not less than, that of a Volvo S-80, and shall
be
subject to the approval of the Executive, which shall not be unreasonably
withheld. The Executive shall be entitled to use the automobile for
his
personal and business needs, so long as he does not allow anyone
who would
not be covered by the Companies’ insurance to drive it. The Companies
shall pay all expenses of maintaining and operating the automobile.
All
expense reimbursements or imputed income made under this Section
shall be
tax-effected such that the amount of reimbursement received by the
Executive net of any taxes and withholdings (including such amounts
in
respect of payments pursuant to this sentence) equals the expense
incurred.
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(f)
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Recuperation
Payments (D’mai Havra-ah).
The Executive shall be entitled to Recuperation Payments in accordance
with the Companies’ policies for all of its management employees, but no
less than required by law.
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(g)
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Benefit
Plans.
The Executive shall be entitled to participate in all incentive,
bonus,
benefit or other similar plans offered by either of the Companies,
including without limitation Arotech’s 2004 Stock Option and Restricted
Stock Purchase Plan, in accordance with the terms thereof and as
determined by the Boards from time to
time.
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5. Expenses.
The
Executive shall be entitled to receive prompt reimbursement of all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder. Without limiting the generality of the foregoing, the Companies
shall
pay all of the Executive’s expenses in the use of telephones for the Companies’
businesses. The Executive shall be entitled to receive room, board and travel
reimbursement in connection with the performance of his duties other than at
the
principal executive office of either Company, as is customary for senior
executives in publicly-held United States and Israeli companies. All expense
reimbursements made under this Section shall be tax-effected such that the
amount of reimbursement received by the Executive net of any taxes and
withholdings (including such amounts in respect of payments pursuant to this
sentence) equals the expense incurred.
6. Termination.
The
Executive’s employment hereunder shall and/or may be terminated under the
following circumstances:
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(a)
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Death.
This Agreement shall terminate upon the death of the
Executive.
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(b)
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Disability.
The Companies may terminate the Executive’s employment after having
established the Executive’s Disability. For purposes of this Agreement,
“Disability” means a physical or mental infirmity which impairs the
Executive’s ability to substantially perform his duties under this
Agreement which continues for a period of at least one hundred and
eighty
(180) consecutive days.
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(c)
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Cause.
The Companies may terminate the Executive’s employment for Cause. For
purposes of this Agreement, termination for “Cause” shall mean and
include: (i) conviction for fraud, crimes of moral turpitude or other
conduct which reflects on the Companies in a material and adverse
manner;
(ii) a willful failure to carry out a material directive of either
of the
Boards, provided
that such directive concerned matters within the scope of the Executive’s
duties, was in conformity with Sections 2(a) and 2(b) hereof, would
not
give the Executive Good Reason to terminate this Agreement and was
capable
of being reasonably and lawfully performed; (iii) conviction in a
court of
competent jurisdiction for embezzlement of funds of the Companies;
and
(iv) reckless or willful misconduct that is materially harmful to
either
of the Companies; provided,
however,
that the Companies may not terminate the Executive for Cause unless
they
have given the Executive (i) written notice of the basis for the
proposed
termination given not more than thirty (30) days after the Companies
have
obtained knowledge of such basis (“Companies’ Notice of Termination”) and
(ii) a period of at least thirty (30) days after the Executive’s receipt
of such notice in which to cure such
basis.
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(d)
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Good
Reason.
The Executive may terminate his employment under this Agreement for
Good
Reason. For purposes of this Agreement, “Good Reason” shall mean the
occurrence of any of the events or conditions described in subsections
(i)
through (viii) hereof:
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(i)
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a
change in the Executive’s status, title, position or responsibilities
which, in the Executive’s reasonable judgment, represents a reduction or
demotion in the Executive’s status, title, position or responsibilities as
in effect immediately prior
thereto;
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(ii)
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a
reduction in the Executive’s Base
Salary;
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(iii)
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the
failure by the Companies to continue in effect any material compensation
or benefit plan in which the Executive is
participating;
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(iv)
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the
insolvency or the filing (by any party, including the Companies)
of a
petition for the winding-up of either of the
Companies;
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(v)
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any
material breach by the Companies of any provision of this
Agreement;
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(vi)
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any
purported termination of the Executive’s employment for Cause by the
Companies which does not comply with the terms of Section 6(c) of
this
Agreement;
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(vii)
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any
movement of either Company’s principal executive offices from the
Jerusalem/Tel Aviv area of Israel;
and
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(viii)
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any
movement of the location where the Executive is generally to render
his
services to the Companies hereunder from the Jerusalem/Tel Aviv area
of
Israel;
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provided,
however,
that
the Executive may not terminate his employment under this Agreement for Good
Reason unless he has given the Companies (i) written notice of the basis for
the
proposed termination given not more than thirty (30) days after the Executive
has obtained knowledge of such basis (“Executive’s Notice of Termination”) and
(ii) a period of at least thirty (30) days after the Companies’ receipt of such
notice in which to cure such basis.
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(e)
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Change
in Control.
The Executive may terminate this Agreement if there is a “Change in
Control.” For purposes of this Agreement, a “Change in Control” shall mean
any of the following events:
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(i)
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the
acquisition from Arotech in any public or offering or private placement
of
equity or equivalent securities by any person or entity of beneficial
ownership of fifty (50%) or more of the combined voting power of
Arotech’s
then outstanding voting securities;
or
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(ii)
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the
acquisition other than from Arotech in any public or offering or
private
placement of equity or equivalent securities by any person or entity
of
beneficial ownership of twenty percent (20%) or more of the combined
voting power of Arotech’s then outstanding voting securities;
or
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(iii)
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individuals
who, as of January 1, 2007, were members of the Board of Arotech
(the
“Original Arotech Board”), together with individuals approved by a vote of
at least two-thirds (2/3) of the individuals who were members of
the
Original Arotech Board and are then still members of the Board of
Arotech,
cease for any reason to constitute at least one-third (1/3) of the
Board
of Arotech; or
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(iv)
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approval
by the shareholders of either of the Companies of a complete winding-up
of
such Company or an agreement for the sale or other disposition of
all or
substantially all of the assets of either of the
Companies.
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The
Executive shall give to the Companies an Executive’s Notice of Termination if
the Executive desires to terminate his employment because there has been a
Change in Control, such notice to specify the date of such termination which
shall be not less than thirty (30) days after such notice is received by the
Companies. Any such notice, to be effective with respect to any Change in
Control, must be sent no later than twenty-four (24) months after such Change
in
Control.
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(f)
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Termination
Date, Etc. “Termination
Date” shall mean in the case of the Executive’s death, his date of death,
or in all other cases, the date specified in the Notice of Termination
subject to the following:
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(i)
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if
the Executive’s employment is terminated by the Companies for Cause or due
to Disability, the date specified in the Companies’ Notice of Termination
shall be at least thirty (30) days from the date the Notice of Termination
is given to the Executive, provided
that in the case of Disability the Executive shall not have returned
to
the full-time performance of his duties during such period of at
least
thirty (30) days;
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(ii)
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if
the Executive’s employment is terminated for Good Reason, or because there
has been a Change in Control, the Termination Date specified in the
Executive’s Notice of Termination shall not be more than sixty (60) days
from the date the Notice of Termination is given to the
Companies.
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(g)
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Termination
at Will.
Subject to the other provisions of this Section 6, the Executive
may
terminate his employment with the Companies for any reason other
than the
other reasons specified in this Section 6 (“Termination at Will”), by
giving to the Companies written Notice of Termination specifying
the
Termination Date, which Termination Date shall be at least one hundred
and
twenty (120) days from the date of such Notice of
Termination.
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7. Compensation
upon Termination.
Upon
termination of the Executive’s employment hereunder, the Executive shall be
entitled to the following benefits:
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(a)
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If
the Executive’s employment is terminated by the Companies for Cause or if
the Executive’s employment is terminated by the Executive other than with
either Good Reason, because there has been a Change in Control, due
to
Termination at Will, or by this Agreement coming to the end of the
Term,
then the Companies shall pay the Executive all amounts of Base Salary
and
the employee benefits specified in clauses (a), (b) and (c) of Section
4
of this Agreement earned or accrued hereunder through the Termination
Date
but not paid as of the Termination Date (collectively, “Accrued
Compensation”).
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(b)
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If
the Executive’s employment by the Companies shall be terminated (1) due to
Disability, (2) by the Executive for Good Reason, (3) by the Executive
because there has been a Change in Control, (4) by the Executive’s death,
(5) due to Termination at Will, or (6) by this Agreement coming to
the end
of the Term, then the Executive shall be entitled to the benefits
provided
below (in addition to and not instead of whatever other benefits
he may be
entitled to by reason of operation of
law):
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(i)
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The
Companies shall pay the Executive (a) all Accrued Compensation, (b)
a
bonus at the rate that would otherwise be payable pursuant to the
provisions of Section 3(b) above for the year in which the Termination
Date occurs, of Executive’s annual Base Salary as of the Termination Date,
pro
rated
based on the number of days in such year which occurred prior to
the
Termination Date, and (c) the amounts referred to in Sections 4(d)
and (e)
above, to the extent earned or accrued hereunder through the Termination
Date but unpaid as of the Termination
Date.
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(ii)
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the
Companies shall pay into the Account (as defined in Section 7(b)(v)
below), as a retirement payment (the “Retirement Payment”) and in lieu of
any further salary for periods subsequent to the Termination Date
(except
as provided in Section 7(b)(i) above), a total of $1,625,400 (the
parties
acknowledge that $617,240 of this amount has previously been paid
into the
Account (the “Pre-Payment”)). Subject to the proviso contained in Section
7(b)(v) below, the Retirement Payment will vest and be funded into
the
Account in installments as provided in Section 7(b)(iii) below, and
will
be released from the Account to the Employee as
follows:
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| (a) |
In
the event of termination due to Good Reason, Disability, Change of
Control, death or any other termination without Cause by the Companies,
all unvested and/or unfunded installments of the Retirement Payment
will,
notwithstanding the provisions of Section 7(b)(iii) below, vest
immediately and become due and payable on the Termination
Date.
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| (b) |
In
the event of termination due to Non Renewal or Termination at Will,
the
Employee will be entitled only to that portion of the Retirement
Payment
that shall have vested or shall vest prior to the Termination Date,
which
amount will become due and payable on the Termination
Date.
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(iii)
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The
installments of the Retirement Payment in excess of the Pre-Payment
will
vest and (subject to the proviso contained in Section 7(b)(v) below)
be
funded as follows:
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| (a) |
First
installment (vests on June 30, 2007): $504,080 in cash;
and
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| (b) |
Final
installment (vests on December 31, 2007): $504,080 in cash.
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(iv)
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For
thirty-six (36) months after the Executive ceases to be an officer
of
either of the Companies, the Companies shall at their expense continue
to
provide the Executive with his then-current automobile (the operating
expenses and tax on such automobile to be borne by the Executive),
a
cellular telephone, an e-mail account, and an office if the Company
or any
of its subsidiaries otherwise maintains office space in Beit Shemesh,
Israel, or if not then a home office allowance of $1,000 per month.
The
Executive will also be authorized in his discretion to hire a secretary
at
a salary of no more than $2,000 per month. The Executive will be
solely
responsible for any taxes levied on the above
benefits.
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(v)
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The
Companies have previously established certain accounts owned by the
Company but maintained for the benefit of the Executive (the “Account”).
The Companies will fund vested amounts of the Retirement Payment
into the
Account as they vest; provided,
howver,
that a vested amount will not be funded upon vesting if the CFO,
the Audit
Committee and the Compensation Committee of Arotech inform the Executive
in writing and in good faith that they believe that such funding
would
jeopardize the Companies’ cash position; any such deferred amount will be
funded as soon as the cash position of the Companies permits such
funding,
and in any event upon the Termination Date. Even after a payment
is funded
into the Account the risk of gain or loss with respect to such payment
remains with the Company.
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(c)
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The
Companies may procure life insurance on the Executive in order to
secure
the payment of its obligations arising in the event of termination
under
Section 6(a) hereof. Such insurance shall be payable to the Company,
which
shall remain primarily liable for the payment of all such obligations
to
the Executive.
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(d)
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All
stock options that are unvested shall vest on termination (except
for
Termination for Cause) and shall be extended for the longer of their
term
or the term by which Arotech director options are generally extended
upon
a director of Arotech leaving Arotech’s Board of Directors. In the event
of a termination due to Change of Control, all of the Executive’s stock
options, whether or not they have yet vested, shall immediately vest
and
shall be extended for a period of the later of (x) the expiration
date
thereof, and (y) the second anniversary of such Change of Control.
In the
event of termination due to any other reason except for Termination
for
Cause, the Executive’s stock options shall be extended for a period of the
earlier of (x) the expiration date thereof, and (y) two years after
such
termination.
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(e)
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As
of the date of this Agreement, the Executive holds a total of 440,000
shares of restricted stock (including the 200,000 shares referred
to in
Section 3(b) above) (“Restricted Shares”), which number does not include
106,071 shares of restricted stock (26,071 granted in August 2004
and
80,000 granted in December 2006) the restrictions on which have already
elapsed as of the date of this Agreement. Pursuant to the terms of
grant,
the restrictions on 106,667 of these Restricted Shares elapse on
December
31, 2007, the restrictions on 66,667 of these Restricted Shares elapse
on
December 31, 2008, and the restrictions on 66,666 of these Restricted
Shares elapse on December 31, 2009 (these 240,000 Restricted Shares
are
hereinafter referred to as the “Non-Performance Restricted Shares”). The
removal of the restrictions on the remaining 200,000 Restricted Shares
is
or may be subject to performance criteria (these 200,000 Restricted
Shares
are hereinafter referred to as the “Performance Restricted Shares”). On
termination (except Termination for
Cause):
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(i)
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All
of the Executive’s 200,000 Performance Restricted Shares shall immediately
become unrestricted and freely tradable (subject to applicable
securities
laws).
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(ii)
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Any
Non-Performance Restricted Shares the restrictions on which shall
have
lapsed as of the date of termination (meaning the last day of the
Executive’s employment under this Agreement) shall continue to be
unrestricted and freely tradable (subject to applicable securities
laws).
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(iii)
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Non-Performance
Restricted Shares the restrictions on which shall not have lapsed
as of
the date of termination (meaning the last day of the Executive’s
employment under this Agreement), as well as all Restricted Shares
the
restrictions on which shall not have lapsed as of the date of Termination
for Cause, shall be returned to the Company for
cancellation.
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As
a
condition to receiving the payments described in this Section 7, the Executive
shall execute and deliver to the Companies a release in the form attached hereto
as Exhibit A.
8. Confidentiality;
Proprietary Rights; Competitive Activity.
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(a)
|
Confidentiality.
Executive recognizes and acknowledges that the technology, developments,
designs, inventions, improvements, data, methods, trade secrets and
works
of authorship which the Companies own, plan or develop, including
without
limitation the specifications, documentation and other information
relating to the Companies’ zinc-air battery systems, and businesses and
equipment related thereto (in each case whether for their own use
or for
use by their clients) are confidential and are the property of the
Companies. Executive also recognizes that the Companies’ technology,
customer lists, supplier lists, proposals and procedures are confidential
and are the property of the Companies. Executive further recognizes
and
acknowledges that in order to enable the Companies to perform services
for
their clients, those clients may furnish to the Companies confidential
information concerning their business affairs, property, methods
of
operation or other data. All of these materials and information will
be
referred to below as “Proprietary Information”; provided,
however,
that such information shall not include any information known generally
to
the public (other than as a result of unauthorized disclosure by
the
Executive).
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(b)
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Non-Disclosure.
Executive agrees that, except as directed by the Companies, and in
the
ordinary course of the Companies’ businesses, Executive will not during
Executive’s employment with the Companies and thereafter, disclose to any
person or entity or use, directly or indirectly for Executive’s own
benefit or the benefit of others, any Proprietary Information, or
permit
any person to examine or make copies of any documents which may contain
or
be derived from Proprietary Information; provided,
however,
that the Executive’s duties under this Section 8(b) shall not extend to
(i) any disclosure that may be required by law in connection with
any
judicial or administrative proceeding or inquiry or (ii) any disclosure
which may be reasonably required in connection with any actions or
proceedings to enforce the Executive’s rights under this Agreement.
Executive agrees that the provisions of this paragraph shall survive
the
termination of this Agreement and Executive’s employment by the
Companies.
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-10-
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(c)
|
Competitive
Activity.
The Executive undertakes not, directly or indirectly (whether as
owner,
partner, consultant, employee or otherwise) at any time, during and
for
sixty (60) months following termination of his employment with the
Companies, to engage in or contribute his knowledge to any work or
activity that involves a product, process, service or development
which is
then directly (in any material manner) competitive with the Companies’
businesses as then constituted. Notwithstanding the foregoing, the
Executive shall be permitted to engage in the aforementioned proposed
work
or activity if the Companies furnishes him with written consent to
that
effect signed by an authorized officer of each
Company.
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(d)
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No
Solicitation.
During the period specified in 8(c) hereof, Executive will not solicit
or
encourage any customer or supplier of either Company or of any group,
division or subsidiary of either Company, to terminate its relationship
with either Company or any such group, division or subsidiary, and
Executive will not, directly or indirectly, recruit or otherwise
seek to
induce any employee of either Company or any such group, division
or
subsidiary to terminate his or her employment or violate any agreement
with or duty to either Company or any such group, division or
subsidiary.
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(e)
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Equitable
Relief.
The Executive agrees that violations of the material covenants in
this
Section 8 will cause the Companies irreparable injuries and agrees
that
the Companies may enforce said covenants by seeking injunctive or
other
equitable relief (in addition to any other remedies the Companies
may have
at law for damages or otherwise) from a court of competent jurisdiction.
In the event such court declares these covenants to be too broad
to be
specifically enforced, the covenants shall be enforced to the largest
extent as may be allowed by such court for the Companies’ protection.
Executive further agrees that no breach by the Companies of, or other
failure by the Companies under this Agreement shall relieve the Executive
of any obligations under Sections 8(a) and 8(b)
hereof.
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9. Successors
and Assigns.
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(a)
|
This
Agreement shall be binding upon and shall inure to the benefit of
each
Company, its successors and assigns and the Companies shall require
any
successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Companies
would be required to perform it if no such succession or assignment
had
taken place. The term the “Companies” as used herein shall include such
successors and assigns. The term “successors and assigns” as used herein
shall mean a corporation or other entity acquiring all or substantially
all the assets and business of either Company (including this Agreement)
whether by operations of law or
otherwise.
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(b)
|
Subject
to Section 16 hereof, neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except by will or by the
laws of
descent and distribution. This Agreement shall inure to the benefit
of and
be enforceable by the Executive’s legal personal
representative.
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10. Notice.
For
the
purposes of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by registered mail, postage prepaid, addressed
to the respective addresses set forth below or last given by each party to
the
other. All notices and communications shall be deemed to have been received on
the date of delivery thereof or on the eighth business day after the mailing
thereof, except that notice of change of address shall be effective only upon
receipt.
The
initial addresses of the parties for purposes of this Agreement shall be as
follows:
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The
Companies:
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Arotech
Corporation
|
0000
Xxx
Xxxxxx Xxxxx
Xxx
Xxxxx, Xxxxxxxx 00000
Attention:
Xxxxxx Xxxxx, President
|
and
|
Electric
Fuel Limited
|
Western
Industrial Park
X.X.
Xxx
000
Xxxx
Xxxxxxx 00000
Xxxxxx
|
The
Executive:
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Xxxxxx
X. Xxxxxxx
|
00
Xxxxx
Xxxxx
Ramat
Beit Shemesh
Israel
11. Miscellaneous.
No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by the
Executive and the Companies. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any
prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by
either party which are not expressly set forth in this Agreement.
12. Governing
Law; Venue.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of Israel without application of any conflicts of laws principles which
would cause the application of the domestic substantive laws of any other
jurisdiction. Each of the Executive and the Companies hereby irrevocably waives
any objection it may now or hereafter have to the laying of venue in the courts
of the State of Israel for any legal suit or action instituted by any party
to
the Agreement against any other with respect to the subject matter
hereof.
-12-
13. Severability.
The
provisions of this Agreement shall be deemed severable, and the invalidity
or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
14. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof
including, without limitation the Original Agreement.
15. Joint
and Several Obligations.
The
obligations and liabilities of each Company hereunder shall be joint and several
with the obligations and liabilities of the other Company
hereunder.
16. Registration
Rights.
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(a)
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If
Arotech at any time proposes to register any of its securities under
the
Securities Act of 1933, as from time to time in effect (together
with the
rules and regulations thereunder, all as from time to time in effect,
the
“Securities Act”), for its own account or for the account of any holder of
its securities, on a form which would permit registration of Common
Stock
of Arotech at the time held or obtainable upon the exercise of options,
warrants or rights, or the conversion of convertible securities,
at the
time held by the Executive (“Registrable Securities”), for sale to the
public under the Securities Act, Arotech will each such time give
notice
to the Executive of its intention to do so. Such notice shall describe
such securities and specify the form, manner and other relevant aspects
of
such proposed registration. The Executive may, by written response
delivered to Arotech within 15 days after the giving of any such
notice,
request that all or a specified part of the Registrable Securities
be
included in such registration. Arotech will thereupon use its best
efforts
as part of its filing of such form to effect the registration under
the
Securities Act of all Registrable Securities which Arotech has been
so
requested to register by the Executive, to the extent required to
permit
the disposition (in accordance with the intended methods thereof
as
aforesaid) of the Registrable Securities to be so
registered.
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| (b) |
The
Executive may, by notice to Arotech specifying the intended method
or
methods of disposition, given at any time and from time to time after
Arotech has registered any shares of its Common Stock under the Securities
Act, request that Arotech effect the registration under the Securities
Act
of all or a specified part of the Registrable Securities; provided,
however,
that Arotech shall not be required to effect a registration pursuant
to
this Section 16(b) unless such registration may be effected on a
Form S-3
(or any successor or similar Form); and provided,
further,
that each registration pursuant to this Section 16(b) shall cover
a number
of Registrable Shares equal to not less than 2% of the aggregate
number of
shares of Arotech Common Stock then outstanding. Arotech will then
use its
best efforts to effect the registration as promptly as practicable
under
the Securities Act of the Registrable Securities which Arotech has
been
requested to register by the Executive pursuant to the Section
16(b).
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| (c) |
Notwithstanding
the provisions of Section 16(b), in the event that Executive has
requested
pursuant to Section 16(b) that Arotech effect a registration of
securities, and (i) the Board of Arotech determines that it would
be
seriously detrimental to Arotech to effect a registration pursuant
to
Section 16(b), or (ii) the Board of Arotech determines in good faith
that
(A) Arotech is in possession of material, non-public information
concerning an acquisition, merger, recapitalization, consolidation,
reorganization or other material transaction by or of Arotech or
concerning pending or threatened litigation and (B) disclosure of
such
information would jeopardize any such transaction or litigation or
otherwise materially harm Arotech, then Arotech shall promptly notify
Executive of the occurrence of any of the events described in the
foregoing clauses (i) or (ii). Upon the occurrence of any of the
events
described in clauses (i) or (ii) hereof, Arotech shall be allowed
to defer
a registration of securities pursuant to Section 16(b) above, and
if a
registration statement had already been filed at such time, Executive
shall not dispose of his Registrable Securities under such registration
statement until it is so advised in writing by Arotech that the
registration of securities under 16(b) may be effected or resumed.
Notwithstanding the foregoing, any such deferment or prohibition
on
disposition shall not be in effect for more than 90 days in any 12
months
period.
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(d)
|
Arotech
shall not be obligated to effect any registration of Registrable
Securities under Section 16(a) hereof incidental to the registration
of
any of its securities in connection with mergers, acquisitions, exchange
offers, dividend reinvestment plans or stock option or other employee
benefit plans.
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|
(e)
|
Arotech
hereby agrees to pay, or cause to be paid, all legal, accounting,
printing
and other expenses (other than the fees and expenses of the Executive’s
own counsel and other than underwriting discounts and commissions
attributable to the Registrable Securities) in connection with each
registration of Registrable Securities pursuant to this Section
16.
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(f)
|
In
connection with each registration of Registrable Securities pursuant
to
this Section 16, Arotech and the Executive will enter into such
agreements, containing such terms and conditions, as are customary
in
connection with public offerings, such agreements to contain, without
limitation, customary indemnification provisions, representations
and
warranties and opinions and other documents to be delivered in connection
therewith, and to be, if requested, with
underwriters.
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(g)
|
The
provisions of this Section 16 shall be subject to any agreement entered
into by Arotech, in good faith, with any underwriter of Arotech’s
securities or any person or entity providing financing to Arotech,
in each
case containing reasonable limitations on the Executive’s rights and
Arotech’s obligations hereunder.
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(h)
|
The
provisions of this Section 16 shall survive the termination of the
other
provisions of this Agreement. The rights of the Executive under this
Section 16 are assignable, in whole or in part, by the Executive
to any
person or other entity acquiring securities of Arotech from the
Executive.
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|
(i)
|
Notwithstanding
anything in the foregoing to the contrary, the Executive shall not
demand
a registration during the 180 days following an underwritten public
offering of the Common Stock of the
Company.
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(j)
|
Without
the prior written consent of the underwriters managing any public
offering, for a period beginning ten days immediately preceding the
effective date of any registration statement filed by the Company
under
the Securities Act of 1933, as amended, and ending on the earlier
of (i)
180 days after the effective date of such registration statement
and (ii)
the end of the shortest period generally applicable to any “affiliate” (as
defined in the Securities Act of 1933, as amended) of Arotech who
is a
selling shareholder pursuant to such registration statement or who
is
otherwise subject to a lockup provision, the Executive (whether or
not a
selling shareholder pursuant to such registration statement) shall
not
sell or otherwise transfer any securities of Arotech except pursuant
to
such registration statement.
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17.
|
Taxes.
|
All
sums
referred to herein are gross, not net.
IN
WITNESS WHEREOF,
the
Companies have caused this Agreement to be executed by its duly authorized
officer and the Executive has executed this Agreement as of the day and year
first above written.
AROTECH
CORPORATION
| By: | ||||
| Its: |
President and COO |
ELECTRIC
FUEL (E.F.L.) LIMITED
| By: | ||||
| Its: |
President and CEO |
Executive |
-15-
Exhibit
A
FORM
OF MUTUAL RELEASE
This
mutual release is executed and delivered by and between the undersigned employee
of Arotech Corporation, a Delaware corporation (“Arotech”) and Electric Fuel
(E.F.L.) Limited (“EFL”) and the undersigned’s successors, assigns, executors,
estates and personal representatives (collectively, the “Executive”), on the one
hand, and Arotech and EFL and each of their respective affiliates, agents,
successors and assigns (collectively, the “Companies”), on the other hand. For
and in consideration of the Executive receiving the compensation referred to
in
Section 7 of the Fourth Amended and Restated Employment Agreement dated April
15, 2007 and other good and valuable consideration, the adequacy and receipt
of
which are hereby acknowledged by the Executive and the Companies, the Executive
hereby remises, releases and forever discharges the Companies, and the Companies
hereby remise, release and forever discharge the Executive, of and from any
and
all manner of action and actions, cause and causes of actions, suits, debts,
dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts,
controversies, executions, claims and demands of any kind and nature whatsoever
in law or in equity, known or unknown, against the other party which ever
existed prior to the date hereof, or may ever have on and after the date hereof
with respect to matters arising, and dealings with the other party occurring,
prior to the date hereof; provided,
however,
that
nothing contained herein shall be construed to release the Executive from any
obligations to the Companies pursuant to the Employment Agreement nor to release
the Companies from any of their obligations to the Executive pursuant to the
Employment Agreement.
IN
WITNESS WHEREOF, the Executive and the Companies have each caused this Release
to be executed as of __________________.
| EXECUTIVE | ||
|
Name: Xxxxxx X. Xxxxxxx |
||
| AROTECH CORPORATION | ||
| |
|
|
| By: | ||
|
Title: |
||
| ELECTRIC FUEL (E.F.L.) LTD. | ||
| |
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| By: | ||
|
Title: |
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