Exhibit
10.2
EMPLOYMENT
AGREEMENT
EMPLOYMENT
AGREEMENT dated as
of the 30 th day of December, 2005, by and between
Arotech Corporation , a Delaware corporation with
offices at 354 Industry Drive, Auburn, Alabama 36830 (the
“Company”), and Thomas J. Paup , an
individual residing at 4716 Lohr Road, Ann Arbor, Michigan 46108
(the “Employee”).
W I T N E S S E T H
:
WHEREAS
, the Company desires to employ the
Employee, and the Employee desires to enter into such employment,
on and subject to the terms and conditions set forth
below:
NOW
, THEREFORE , the
parties hereto do hereby agree as follows:
(a) Beginning December 31, 2005, the Employee will
serve as Vice President - Finance of the Company, except that the
Company may, from time to time, change the title and/or duties of
the Employee in such manner as shall not unduly prejudice the
rights of the Employee hereunder. The Employee will assume the
function of principal financial officer of the Company immediately
upon request by the Chief Operating Officer of the Company, and in
any event by February 28, 2006, whereupon the Employee’s
title shall become Vice President - Finance and Chief Financial
Officer. The Employee will report to the President and Chief
Operating Officer of the Company or to such other person as shall
be designated, from time to time, by the Board of Directors of the
Company.
(b) The Employee shall not during the term hereof
undertake or accept any other employment or occupation, whether
paid or unpaid provided , however , that the
Employee may continue to work up to eight (8) evenings per month
as a Finance
Instructor at Eastern Michigan University . The Employee acknowledges and agrees that,
although ordinary working hours are expected to be Monday through
Friday, 8 a.m. to 5 p.m., under certain circumstances the
performance of his duties hereunder may require additional time
and/or domestic and international travel. The Employee acknowledges
that this is a managerial position, and that accordingly overtime
hours will be worked as needed, without additional
compensation.
(c) The Employee’s place of work will be in
Ann Arbor, Michigan, or at such other place as the Company may from
time to time specify, provided that the employment of the Employee
on a permanent basis at a place which is located more that fifty
(50) miles from Ann Arbor, Michigan shall be done only with the
Employee’s prior consent.
2.
Compensation and
Benefits.
(a) The Company shall pay the Employee, as
compensation for all of the employment services provided by him
hereunder during the term of this Agreement, an annualized gross
salary of one hundred thirty-five thousand dollars ($135,000) (the
“Gross Salary”). The Gross Salary will be paid
semi-monthly in arrears on the fifteenth and final day of each
month. The Gross Salary may be increased from time to time,
effective March 31 of each year beginning March 31, 2006, in
accordance with the Company’s procedures, and in the
Company’s sole discretion, based on the Employee’s
performance during the prior year.
(b) The Company agrees to pay or cause to be paid
to the Employee on each March 31 following the first anniversary of
this Agreement, or as soon thereafter as may be possible in order
to determine the relevant results of the Company, an annual bonus,
as follows:
(i) 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
Employee’s bonus shall be equal to 20% of Employee’s
gross annual Base Salary as then in effect for the year preceding
such anniversary;
(ii) If, as of such anniversary, the Company shall
have attained 120% of the Company’s Budgeted Number (as
defined below) for the year preceding such anniversary, then
Employee’s bonus shall be equal to 50% of Employee’s
gross annual Base Salary as then in effect for the year preceding
such anniversary;
(iii) If, as of such anniversary, the Company shall
have attained more than 90% but less than 120% of the
Company’s Budgeted Number (as defined below), then
Employee’s bonus shall be calculated as follows:
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(S x 20%) +
(N-90)/30 x (S x 30%)
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The amount of
Employee’s annual bonus; and
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The percentage
of the Budgeted Number (as defined below) that was attained by the
Company in the immediately preceding fiscal year; provided
, however , that N is more than 90 and less than
120;
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Employee’s gross annual Base
Salary.
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For the
purposes of this Section 2(b), the Budgeted Number shall be the
budgeted results of the Company as agreed by the Board prior to the
end of each fiscal year for the fiscal year designated in such
budget, and may include targets for any or all of the following
factors: (i) revenues; (ii) cash flow, and (iii) EBITDA. In the
event that some but not all targets are reached, the Compensation
Committee shall made a determination as to what percentage of the
Budgeted Number was attained.
(c) The Employee will receive 50,000 stock options
for shares of the common stock of the Company at an exercise price
equal to the closing price of the Company’s stock on the
Nasdaq Stock Market on the date hereof, vesting immediately, and
having a term of five years. Such options shall be issued pursuant
to the Company’s employee stock option plan, on such other
terms and conditions as specified in such plan.
(d) The Employee shall be entitled to a
paid annual vacation of ten (10) business days with respect to, and
during, each twelve (12) month period of his employment hereunder,
provided that the unused portion of any such vacation, in respect
to any year, may be carried forward only to the next two-year
period. Upon termination Employee shall be paid for all accrued but
unused vacation. Any vacation days taken by Employee in advance of
their actual accrual shall be considered an advance on wages and
deducted from any wages owing at termination. Timing of vacations
will be cleared in advance with the Company.
(e) The Employee shall be entitled to paid sick
leave of five (5) days with respect to, and during, each twelve
(12) month period of his employment hereunder.
(f) The Company shall provide the Employee and his
family with medical insurance and related insurance benefits in
accordance with its policies from time to time for all employees
generally.
(g) The Company shall reimburse the
Employee’s work-related expenses, against proper receipts,
subject to and in accordance with policies adopted, from time to
time, by the Company.
3.
Confidential Information;
Return of Materials; Inventions;
on-Solicitation.
(a) In the course of his employment by the Company
hereunder, the Employee will have access to, and become familiar
with, “Confidential Information” (as hereinafter
defined) of the Company. The Employee shall at all times
hereinafter maintain in the strictest confide
