Exhibit 10.1
 
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of the 8th day of January, 2018, is entered into by
and between Arotech Corporation, a Delaware corporation with offices at 1229 Oak
Valley Drive, Ann Arbor, Michigan 48108 (the “Company”), and Kelli L. Kellar, an
individual residing at 1939 Cedar Hill Drive, Bloomfield Hills, Michigan 48301
(the “Executive”).
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive, and the Executive 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:
1. Title and Duties.
(a) The Executive will serve as Vice President – Finance of the Company, and,
beginning April 1, 2018, Vice President – Finance and Chief Financial Officer of
the Company, except that the Company may, from time to time, change the title
and/or duties of the Executive in such manner as shall not unduly prejudice the
rights of the Executive hereunder. The Executive will report to the chief
executive 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 Executive shall not during the term hereof undertake or accept any other
employment or occupation, whether paid or unpaid. The Executive 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 her
duties hereunder may require additional time and/or domestic and international
travel. The Executive acknowledges that this is a managerial position, and that
accordingly overtime hours will be worked as needed, without additional
compensation.
(c) The Executive’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 Executive on a permanent basis at a place which is located
more than fifty (50) miles from Ann Arbor, Michigan shall be done only with the
Executive’s prior consent.
2. Compensation and Benefits.
(a) The Company shall pay the Executive, as compensation for all of the
employment services provided by her hereunder during the term of this Agreement,
an annualized base salary of two hundred twenty-five thousand dollars ($225,000)
(the “Base Salary”). The Base Salary will be paid semi-monthly in arrears on the
fifteenth and final day of each month. Should the parties agree to extend this
Agreement beyond its initial Term, the Base Salary will, effective March 31 of
each year beginning March 31, 2019, be adjusted annually, retroactive to January
1 of that year, in accordance with the change in the Consumer Price Index for
Urban Wage Earners and Clerical Workers in Detroit-Ann Arbor-Flint, Michigan
(All Items), as reported by the Bureau of Labor Statistics of the United States
Department of Labor, during the previous year (the “CPI Adjustment”).
Additionally, should the parties agree to extend this Agreement beyond its
initial Term, the Base Salary may be increased from time to time, effective
January 1 of each year beginning January 1, 2019, in accordance with the
Company’s procedures, and in
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the Company’s sole discretion, based on the Executive’s performance during the
prior year. The Company shall also pay the Executive a start bonus (the “Start
Bonus”) of sixty thousand dollars ($60,000), payable in a lump sum at the time
of payment of the Executive’s first semi-monthly salary payment; provided that
in the event that the Executive resigns for any reason at any time prior to
December 31, 2018, the Executive will be required to repay to the Company a pro
rata portion of the Start Bonus, based upon the portion of the year worked by
the Executive prior to such resignation, and the Executive specifically
authorizes the Company to withhold payment to the Executive of amounts due to
the Executive, including without limitation for salary, unused vacation, and
reimbursement of expenses, and to apply such amounts to the repayment of the
Start Bonus.
(b) The Company agrees to pay or cause to be paid to the Executive, in a single
lump-sum payment in cash 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 (but in no event later than May 31 of each
year), and irrespective of whether the Executive is then employed by the Company
(unless the Executive’s employment was terminated pursuant to Section 5(b)
below), an annual bonus (if and to the extent earned according to the criteria
below), as follows:
(i) If, as of such anniversary, the Company shall have attained 100% of the
Company’s Budgeted Number (as defined below) for the year preceding such
anniversary, then Executive’s bonus shall be equal to 20% of Executive’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 110% of the
Company’s Budgeted Number (as defined below) for the year preceding such
anniversary, then Executive’s bonus shall be equal to 40% of Executive’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 100%
but less than 110% of the Company’s Budgeted Number (as defined below), then
Executive’s bonus shall be calculated as follows:
B = (S x 20%) + (N-100)/10 x (S x 20%)
Where:

B  =
The amount of Executive’s annual bonus; and

N  =
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 100 and less than 110;

S  =
Executive’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. It is hereby clarified that no bonus shall be due unless
the Company shall have attained at least 100% of the Company’s Budgeted Number.
(c) The Company hereby grants to the Executive a starting stock bonus of 36,000
shares of restricted stock, vesting on December 31, 2018, the vesting of
one-third of such shares being contingent on the Executive being employed by the
Company on the scheduled vesting date and the vesting of two-thirds of such
shares to be contingent on performance criteria established by the Compensation
Committee of the Board of Directors of the Company.
(d) The Executive shall be entitled to a paid annual vacation of twenty (20)
business days with respect to, and during, each twelve (12) month period of her
employment hereunder, provided that up to five days of the unused portion of any
such vacation, in respect to any year, may be carried forward only to the next
year, with the remainder being redeemed by the Company for cash. Upon
termination Executive shall be paid for all accrued but unused vacation. Any
vacation days taken by Executive 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 Executive shall be entitled to paid sick leave of five (5) days with
respect to, and during, each twelve (12) month period of her employment
hereunder.
(f) The Company shall provide the Executive and her 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 Executive’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; Non-Competition and
Non-Solicitation.
(a) In the course of her employment by the Company hereunder, the Executive will
have access to, and become familiar with, “Confidential Information” (as
hereinafter defined) of the Company. The Executive shall at all times
hereinafter maintain in the strictest confidence all such Confidential
Information and shall not divulge any Confidential Information to any person,
firm or corporation without the prior written consent of the Company. For
purposes hereof, “Confidential Information” shall mean all information in any
and all media which is confidential by its nature including, without limitation,
data, technology, know-how, inventions, discoveries, designs, processes,
formulations, models, customer lists and contact people, prices and any other
trade and business secrets relating to any line of business in which the
Company’s marketing and business plans relating to current, planned or nascent
products.
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(b) The Executive shall not use Confidential Information for, or in connection
with, the development, manufacture or use of any product or for any other
purpose whatsoever except as and to the extent necessary for her to perform her
obligations under this Agreement.
(c) Notwithstanding the foregoing, Confidential Information shall not include
information which the Executive can demonstrate to the Company by appropriate
documentation is in, or enters, the public domain otherwise than by reason of
breach hereof by the Executive.
(d) All Confidential Information made available to, or received by, the
Executive shall remain the property of the Company, and no license or other
rights in or to the Confidential Information is granted hereby.
(e) All files, records, documents, drawings, specifications, equipment, and
similar items relating to the business of the Company, whether prepared by the
Executive or otherwise coming into her possession, and whether classified as
Confidential Information or not, shall remain the exclusive property of the
Company. Upon termination or expiration of this Agreement, or upon request by
the Company at any time, the Executive shall promptly turn over to the Company
all such files, records, reports, analyses, documents, and other material of any
kind and in any medium concerning the Company which the Executive obtained,
received or prepared pursuant to this Agreement without retaining any copies
thereof in any medium.
(f) Commencing January 8, 2018 and ending one (1) year after the termination of
this Agreement (irrespective of the reason for such termination), the Executive
shall not, directly or indirectly, except on behalf and at the request of the
Company, control, manage, be employed or engaged by, provide services to, be
employed by, or otherwise be connected with – whether as an individual
proprietor, partner, officer, director, employee, consultant, 3% or greater
shareholder, broker, finder, joint venturer or otherwise – any company or other
entity that competes or intends to compete with the business then being
conducted by the Company. This restrictive covenant is of the essence of the
Agreement, and the Executive understands that she would not be offered
employment by the Company were she not willing to make this commitment.
(g) Commencing January 8, 2018 and ending two (2) years after the termination of
this Agreement (irrespective of the reason for such termination), the Executive
shall not solicit nor in any manner encourage other employees of the Company to
leave its employ. The Executive further agrees that during that two (2) year
period she will not offer, or cause to be offered, employment to any person who
was employed by the Company at any time during the three months prior to the
termination of this Agreement.
(h) The Executive acknowledges that the provisions set forth in Section 3 of
this Agreement are fair and reasonable. The Executive further acknowledges that
the Company will be irreparably harmed if the Executive’s obligations under this
Section 3 are not specifically enforced and that the Company would not have an
adequate remedy at law in the event of an actual or threatened violation by the
Executive of the Executive’s obligations. Therefore, and in addition to any and
all other remedies to which it may be entitled, the Company shall be entitled to
an injunction or any appropriate decree of specific performance for any actual
or threatened violations or breach by the Executive without the necessity of the
Company showing actual damages or that monetary damages would not afford an
adequate remedy, and without posting a bond.
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(i) The provisions of this Section 3 shall survive the expiration or termination
of this Agreement regardless of the reasons therefor. Furthermore, the period of
time during which the restrictions set forth in subsections (f) and (g) above
shall be in effect shall be extended by the length of time during which the
Executive is in breach of any of the terms of such subsection.
4. Prohibition on Trading While in Possession of Material Non-Public
Information.
(a) The Executive acknowledges that the Company is a publicly-listed company,
and that the Executive is a “person having a duty of trust or confidence” as
defined in Rule 10b5-2 promulgated under the United States Securities Exchange
Act of 1934, as amended, and that the Executive is accordingly prohibited from
trading in shares of the Company on the basis of material non-public
information. The Executive covenants and agrees that the Executive will not
trade in, or, without the express consent of the Company, exercise any option to
purchase securities of the Company (the “Arotech Shares”) (1) until at least one
Trading Day (a “Trading Day” being a day on which the U.S. Financial markets are
open for trading) have passed since such material information was released to
the public, and (2) during the period beginning on the eleventh calendar day of
the third month of each fiscal quarter and ending at the close of the first
Trading Day following the release of quarterly or annual financial results. The
Executive understands and acknowledges that the most appropriate time to trade
in Arotech Shares is the period beginning on the second Trading Day and ending
on the twelfth Trading Day following the release of quarterly or financial
information, provided that during such period the Executive possesses no other
material non-public information which is not disclosed in such release.
(b) If at any time the Executive is working on securities matters regarding the
Company, or is aware that the Company is offering or selling its own securities
or is involved in a tender offer situation, the Executive shall consult with the
General Counsel of the Company before trading in Arotech Shares.
(c) The provisions of this Section 4 shall survive the expiration or termination
of this Agreement regardless of the reasons therefor.
5. Term and Termination. This Agreement shall be for a period from January 8,
2018 until December 31, 2018 (the “Term”). This Agreement may be terminated at
any time, as follows:
(a) This Agreement shall terminate upon the death or incapacitation of the
Executive. For purposes hereof, the Executive shall be deemed to be
incapacitated if she is unable to perform her duties hereunder, as evidenced by
a certificate(s) to that effect, signed by a doctor reasonably satisfactory to
the Company, for a continuous period of one hundred fifty (150) days or for
shorter periods aggregating more than two hundred (200) days in any period of
twelve (12) consecutive months.
(b) The Company shall have the right to terminate this Agreement and the
employment relationship hereunder for cause, at any time, by informing the
Executive that such termination is for and cause and by further informing the
Executive of the acts or omissions constituting cause. In such event, this
Agreement and the employment relationship between the Company and the Executive
shall be terminated as of the time Executive is informed that such
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termination is for cause. For purposes hereof, “cause” shall mean: (1) a breach
of trust by the Executive, including, for example, but without limitation,
commission of an act of moral turpitude, theft, embezzlement, self-dealing or
insider trading; (2) the unauthorized disclosure by the Executive of
confidential information of or relating to the Company; (3) a material breach by
the Executive of this Agreement; or (4) any act of, or omission by, the
Executive which, in the reasonable judgment of the Company, amounts to a serious
failure by the Executive to perform her responsibilities or functions or in the
exercise of her authority, which failure, in the reasonable judgment of the
Company, rises to a level of gross nonfeasance, misfeasance or malfeasance.
(c) Upon termination of this Agreement other than for the reasons set forth in
subsection (b) above, including without limitation a Change of Control (as
hereinafter defined) and a Non-Renewal (as hereinafter defined), the Company
shall pay the Executive as severance pay an amount equal to three (3) times the
monthly Base Salary at the highest rate in effect at any time within the ninety
(90) day period ending on the Termination Date. As used herein, a “Change of
Control” means any of the following: (i) the acquisition (other than from
Arotech in any public offering or private placement of equity securities) by any
person or entity of beneficial ownership of fifty-one percent (51%) or more of
the combined voting power of Arotech’s then-outstanding voting securities; or
(ii) approval by the shareholders of Arotech of a complete winding-up of Arotech
or an agreement for the sale or other disposition of all or substantially all of
the assets of Arotech. As used herein, a “Non-Renewal” means this Agreement
coming to the end of the Term and not being extended or immediately succeeded by
a new substantially similar employment agreement.
(d) Upon termination of this Agreement for any reason, including without
limitation Non-Renewal, the Executive will return to the Company (and will not
keep in her possession or deliver to anyone else) any and all devices that are
Company property, including without limitation mobile telephone, laptop
computer, records, data, notes, and correspondence, whether in written, magnetic
or other form, developed or received by the Executive pursuant to her employment
with the Company or otherwise belonging to the Company.
(e) The parties agree that irrespective of the reasons for the termination of
this Agreement, including in the event that this Agreement shall have been
terminated for the reasons set forth in subsection (b) above, they will not at
any time make any disparaging or derogatory statements concerning the other or,
in the case of the Executive, the Company’s business, products or services.
Nothing in the foregoing shall require the Company to provide the Executive with
a particular type of reference beyond confirming dates of employment.
6. Miscellaneous.
(a) All notices and other communications required or permitted under this
Agreement shall be in writing and shall be sent by email to the other party at
the email address set forth below, with a copy sent by first class mail or
express courier to said party at the address set forth below, or to such other
email address and/or physical address as a party may hereinafter designate by
notice to the other. All notices and communications shall be deemed to have been
received on the date of delivery thereof or on the fifth business day after the
mailing thereof, except that notice of change of address shall be effective only
upon receipt. Notices sent by email shall be effective on the date they are sent
by email if the email transmission confirms delivery. The initial addresses of
the parties for purposes of this Agreement shall be as follows:
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The Company:
Arotech Corporation
1229 Oak Valley Drive
Ann Arbor, Michigan 48108
Attention: Dean Krutty, Acting CEO
Email: krutty@arotechusa.com

with a copy to:
Yaakov Har-Oz, Senior Vice President and General Counsel
Email:  yaakovh@arotech.com

The Executive:
Kelli L. Kellar
[Redacted]
[Redacted]
Email:  kstile@yahoo.com

 
 
(b) This Agreement shall be subject to, governed by and construed in accordance
with, the laws of the State of Michigan without regard to conflicts of law
provisions and principles of that State, and the courts located in Washtenaw
County, Michigan shall have exclusive jurisdiction and venue of any dispute
hereunder.
(c) This Agreement contains the entire agreement between the Executive and the
Company with respect to all matters relating to the Executive’s employment with
the Company and will supersede and replace all prior agreements and
understandings, written or oral, between the parties relating to the subject
matter hereof. This Agreement may be amended, modified, or supplemented only by
a written instrument signed by both of the parties hereto. No waiver or failure
to act by either party with respect to any breach or default hereunder, whether
or not the other party has notice thereof, shall be deemed to be a waiver with
respect to any subsequent breach or default, whether of similar or different
nature.
(d) If any provision of this Agreement, under all the then relevant
circumstances, is held to be invalid, illegal or unenforceable, the other
provisions shall remain in full force and effect, and the relevant provision
shall automatically be modified by substituting for the unenforceable provision
an enforceable provision which most closely approximates the intent and economic
effect of the invalid provision.
(e) This Agreement shall inure to the benefit of the Company and its successors
and assigns.
(f) The headings contained in this Agreement are intended solely for ease of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the effective date set forth above:

  /s/ Kelli L.
Kellar                                                                  
                           Kelli L. Kellar
Arotech Corporation

By:     /s/ Dean M.
Krutty                                                       
Name:  Dean M. Krutty
Title:    Acting CEO

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