pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
MELLANOX TECHNOLOGIES, LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.: |
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NOTICE
OF
2009 ANNUAL GENERAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 18, 2009
To our Shareholders:
You are cordially invited to attend our 2009 annual general
meeting of shareholders, which will be held at the offices of
Mellanox Technologies, Ltd., located at Binyan Hermon,
Industrial Area, Yokneam, Israel 20692, on Monday, May 18,
2009. Shareholders may also participate in the meeting via a
live webcast on the investor relations section of the Mellanox
web site at www.mellanox.com. Please access the web site
15 minutes prior to the start of the meeting to download and
install any necessary audio software.
We are holding the annual general meeting for the following
purposes:
1. To elect directors to hold office until our 2010 annual
general meeting of shareholders, or until their respective
successors have been elected and have qualified, or until their
earlier resignation or removal;
2. To approve the cash bonus paid on March 1, 2009 to
Mr. Eyal Waldman in the amount of $162,500 for services
rendered for the fiscal year ended December 31, 2008;
3. To approve an amendment to the indemnification
undertaking by and among the Company and its directors and
officers;
4. To approve an amendment and restatement of the Mellanox
Technologies, Ltd. Global Incentive Plan (2006);
5. To appoint PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2009 and to further authorize our audit
committee to determine our accounting firms remuneration
in accordance with the volume and nature of their
services; and
6. To receive managements report on our business for
the year ended December 31, 2008 and to transact any other
business as may properly come before the meeting, including any
motion to adjourn to a later date to permit further solicitation
of proxies, if necessary, or any adjournment or postponement of
the meeting.
These items of business to be transacted at the meeting are more
fully described in the proxy statement, which is part of this
notice.
The meeting will begin promptly at 6:00 p.m. local Israeli
time (11:00 a.m. Eastern Daylight Time) and check-in
will begin at 5:00 p.m. local Israeli time. Only holders of
record of ordinary shares at the close of business on
April 8, 2009, the record date, are entitled to notice of,
to attend and to vote at the meeting and any adjournments or
postponements of the meeting.
All shareholders are cordially invited to attend the meeting in
person. Even if you plan to attend the meeting, please complete,
sign and date the enclosed proxy card and return it promptly in
the postage-paid return envelope in order to ensure that your
vote will be counted if you later decide not to, or are unable
to, attend the meeting. Even if you have given your proxy, you
may still attend and vote in person at the meeting after
revoking your proxy prior to the meeting.
By order of the board of directors,
Alan C. Mendelson
Secretary
Sunnyvale, California
April , 2009
TABLE
OF CONTENTS
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A-1
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PROXY
STATEMENT FOR
2009 ANNUAL GENERAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 18, 2009
This proxy statement is furnished to our shareholders as of the
close of business on April 8, 2009, the record date, in
connection with the solicitation of proxies by our board of
directors for use at our annual general meeting of shareholders,
to be held at the offices of Mellanox Technologies, Ltd.,
located at Binyan Hermon, Industrial Area, Yokneam, Israel, on
Monday, May 18, 2009 at 6:00 p.m. local Israeli time
(11:00 a.m. Eastern Daylight Time) and at any
adjournments or postponements of the meeting. This proxy
statement and the proxy card, together with a copy of our Annual
Report on
Form 10-K
for the year ended December 31, 2008, is first being mailed
to our shareholders on or about April 9, 2009.
QUESTIONS
AND ANSWERS REGARDING THIS SOLICITATION AND VOTING
AT THE MEETING
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Why am I receiving this proxy statement? |
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You are receiving this proxy statement from us because you were
a shareholder of record at the close of business on the record
date of April 8, 2009. As a shareholder of record, you are
invited to attend our annual general meeting of shareholders and
are entitled to vote on the items of business described in this
proxy statement. This proxy statement contains important
information about the meeting and the items of business to be
transacted at the meeting. You are strongly encouraged to read
this proxy statement, which includes information that you may
find useful in determining how to vote. |
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As of February 28, 2009, there were 31,902,998 ordinary
shares outstanding. Our ordinary shares are our only class of
voting stock. |
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Who is entitled to attend and vote at the meeting? |
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Only holders of record of shares of our ordinary shares at the
close of business on April 8, 2009 are entitled to notice
of, to attend and to vote at the meeting and any adjournments or
postponements of the meeting. |
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How many shares must be present or represented to
conduct business at the meeting (that is,
what constitutes a quorum)? |
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The presence at the meeting, in person or represented by proxy,
of the holders of at least
331/3%
of our ordinary shares issued and outstanding on the record date
and entitled to vote at the meeting will constitute a quorum for
the transaction of business. If, however, a quorum is not
present, in person or represented by proxy, then either the
chairman of the meeting or the shareholders entitled to vote at
the meeting may adjourn the meeting until a later time. |
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What items of business will be voted on at the
meeting? |
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The items of business to be voted on at the meeting are as
follows: |
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1. To elect directors to hold office until our 2010 annual
general meeting of shareholders, or until their respective
successors have been elected and have qualified, or until their
earlier resignation or removal; |
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2. To approve the cash bonus paid on March 1, 2009 to
Mr. Eyal Waldman in the amount of $162,500 for services
rendered for the fiscal year ended December 31, 2008; |
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3. To approve an amendment to the form of indemnification
undertaking by and among the Company and its directors and
officers; |
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4. To approve an amendment and restatement of the Mellanox
Technologies, Ltd. Global Share Incentive Plan (2006); and |
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5. To appoint PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2009 and to further authorize our audit
committee to determine our accounting firms remuneration
in accordance with the volume and nature of their services. |
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What happens if additional matters are
presented at the meeting? |
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The only items of business that our board of directors intends
to present at the meeting are set forth in this proxy statement.
As of the date of this proxy statement, no shareholder has
advised us of the intent to present any other matter, and we are
not aware of any other matters to be presented at the meeting.
If any other matter or matters are properly brought before the
meeting, the person(s) named as your proxyholder(s) will have
the discretion to vote your shares on the matters in accordance
with their best judgment and as they deem advisable. |
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How does the board of directors recommend that
I vote? |
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Our board of directors recommends that you vote your shares
FOR the election of each of the director
nominees, FOR the cash bonus previously paid
to Mr. Waldman, FOR the amendment to the
indemnification undertaking, FOR the
amendment and restatement of the Mellanox Technologies, Ltd.
Global Share Incentive Plan (2006) and FOR
the appointment of PricewaterhouseCoopers LLP and the
authorization of audit committee determination of their
remuneration. |
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What shares can I vote at the meeting? |
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You may vote all of the shares you owned as of April 8,
2009, the record date, including shares held directly in your
name as the shareholder of record and all shares held for
you as the beneficial owner through a broker, trustee or
other nominee such as a bank. |
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What is the difference between holding shares as
a shareholder of record and as a
beneficial owner? |
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Most of our shareholders hold their shares through a broker or
other nominee rather than directly in their own name. As
summarized below, there are some distinctions between shares
held of record and those owned beneficially. |
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Shareholders of Record. If your shares are
registered directly in your name with our transfer agent,
American Stock Transfer and Trust Company, you are
considered, with respect to those shares, the shareholder of
record, and these proxy materials are being sent directly to
you by us. As the shareholder of record, you have the
right to vote in person at the meeting or direct the proxyholder
how to vote your shares on your behalf at the meeting by fully
completing, signing and dating the enclosed proxy card and
returning it to us in the enclosed postage-paid return envelope. |
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Beneficial Owner. If your shares are held in a
brokerage account or by another nominee, you are considered the
beneficial owner of shares |
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held in street name, and these proxy materials are being
forwarded to you together with a voting instruction card. As the
beneficial owner, you have the right to direct your broker,
trustee or nominee to vote your shares as you instruct in the
voting instruction card. The broker, trustee or other nominee
may either vote in person at the meeting or grant a proxy and
direct the proxyholder to vote your shares at the meeting as you
instruct in the voting instruction card. You may also vote in
person at the meeting, but only after you obtain a legal
proxy from the broker, trustee or nominee that holds your
shares, giving you the right to vote your shares at the meeting.
Your broker, trustee or nominee has enclosed or provided a
voting instruction card for you to use in directing the broker,
trustee or nominee how to vote your shares. |
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How can I vote my shares without attending the
meeting? |
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Whether you hold shares directly as the shareholder of record or
as a beneficial owner, you may direct how your shares are voted
without attending the meeting by completing and returning the
enclosed proxy card or voting instruction card. If you provide
specific instructions with regard to items of business to be
voted on at the meeting, your shares will be voted as you
instruct on those items. Proxies properly signed, dated and
submitted to us that do not contain voting instructions and are
not revoked prior to the meeting will be voted
FOR the election of each of the director
nominees, FOR the cash bonus previously paid
to Mr. Waldman, FOR the amendment to the
indemnification undertaking, FOR the approval
of the amendment and restatement of the Mellanox Technologies,
Ltd. Global Share Incentive Plan (2006) and
FOR the appointment of PricewaterhouseCoopers
LLP and the authorization of audit committee determination of
their remuneration. |
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How can I vote my shares in person at the meeting? |
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Shares held in your name as the shareholder of record may be
voted in person at the meeting. Shares held beneficially in
street name may be voted in person only if you obtain a legal
proxy from the broker, trustee or nominee that holds your shares
giving you the right to vote the shares at the meeting. You
should be prepared to present photo identification for
admittance. Please also note that if you are not a shareholder
of record but hold shares through a broker, trustee or nominee,
you will need to provide proof of beneficial ownership as of the
record date, such as your most recent brokerage account
statement, a copy of the voting instruction card provided by
your broker, trustee or nominee or other similar evidence of
ownership. The meeting will begin promptly at 6:00 p.m.
local Israeli time (11:00 a.m. Eastern Daylight Time).
Check-in will begin at 5:00 p.m. local Israeli time.
Even if you plan to attend the meeting, we recommend that
you also complete, sign and date the enclosed proxy card or
voting instruction card and return it promptly in the
accompanying postage-paid return envelope in order to ensure
that your vote will be counted if you later decide not to, or
are unable to, attend the meeting. |
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Can I change my vote or revoke my proxy? |
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You may change your vote or revoke your proxy at any time prior
to the vote at the meeting. If you are the shareholder of
record, you may change your vote by granting a new proxy bearing
a later date, which automatically revokes the earlier proxy, by
providing a written notice of revocation to our corporate
secretary prior to your shares being voted, or by attending the
meeting and voting in person. Attendance at |
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the meeting will not cause your previously granted proxy to be
revoked unless you specifically so request. If you are a
beneficial owner, you may change your vote by submitting a new
voting instruction card to your broker, trustee or nominee, or,
if you have obtained a legal proxy from your broker, trustee or
nominee giving you the right to vote your shares, by attending
the meeting and voting in person. |
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Is my vote confidential? |
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Proxy cards, voting instructions, ballots and voting tabulations
that identify individual shareholders are handled in a manner
that protects your voting privacy. Your vote will not be
disclosed, except as required by law to American Stock Transfer
and Trust Company, our transfer agent, to allow for the
tabulation of votes and certification of the vote and to
facilitate a successful proxy solicitation. |
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How are votes counted and what vote is required to
approve each item? |
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Each outstanding ordinary share entitles the holder thereof to
one vote on each matter considered at the meeting. Shareholders
are not entitled to cumulate their votes in the election of
directors or with respect to any other matter submitted to a
vote of the shareholders. |
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Each election of Eyal Waldman, Irwin Federman and Thomas
Weatherford as directors requires a majority of the votes cast.
You may vote either FOR or
AGAINST the election of each nominee, or you
may abstain. A properly executed proxy marked
ABSTAIN with respect to the election of any
nominee will not be voted, although it will be counted for
purposes of determining both whether there is a quorum and the
total number of votes cast with respect to such nominees
election. |
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The approval of the cash bonus paid on March 1, 2009 to
Mr. Waldman in the amount of $162,500 for services rendered
for the fiscal year ended December 31, 2008 requires a
majority of the votes cast. You may vote either
FOR or AGAINST this
proposal, or you may abstain. A properly executed proxy marked
ABSTAIN with respect to this proposal will
not be voted with respect to such proposal, although it will be
counted for purposes of determining both whether there is a
quorum and the total number of votes cast with respect to the
proposal. |
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The approval of the amendment to the indemnification undertaking
requires a majority of the votes cast. You may vote either
FOR or AGAINST this
proposal, or you may abstain. A properly executed proxy marked
ABSTAIN with respect to this proposal will
not be voted with respect to such proposal, although it will be
counted for purposes of determining both whether there is a
quorum and the total number of votes cast with respect to the
proposal. |
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The approval of the amendment and restatement of the Mellanox
Technologies, Ltd. Global Incentive Plan (2006) requires a
majority of the votes cast. You may vote either
FOR or AGAINST the
approval of the amendment and restatement of the Mellanox
Technologies, Ltd. Global Incentive Plan (2006) or you may
abstain. A properly executed proxy marked ABSTAIN
with respect to this proposal will not be voted with respect
to such proposal, although it will be counted for purposes of
determining both whether there is a quorum and the total number
of votes cast with respect to the proposal. |
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The appointment of PricewaterhouseCoopers LLP and authorization
of audit committee determination of their remuneration requires
a majority of the votes cast. You may vote either
FOR or AGAINST the
appointment and the audit committees authority to
determine PricewaterhouseCoopers LLPs remuneration, or you
may abstain. A properly executed proxy marked
ABSTAIN with respect to this proposal will
not be voted with respect to such proposal, although it will be
counted for purposes of determining both whether there is a
quorum and the total number of votes cast with respect to the
proposal. |
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What is a controlling shareholder
under Israeli law? |
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A controlling shareholder is a shareholder who has
the power to direct the companys operations, other than by
virtue of being a director or other office holder of the
company, and includes a shareholder who holds 50% or more of our
voting rights or, if we have no shareholder that owns more than
50% of the voting rights, then a controlling
shareholder also includes any shareholder who holds 25% or
more of the voting rights. |
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What is a broker non-vote? |
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Under the rules that govern brokers and banks that have record
ownership of our ordinary shares that are held in street name
for their clients such as you, who are the beneficial owners of
the shares, brokers and banks have the discretion to vote such
shares on routine matters. The election of directors and the
appointment of the independent auditors are considered routine
matters. Therefore, if you do not otherwise instruct your broker
or bank, the broker or bank may vote your shares on these
matters. A broker non-vote occurs when a
broker or bank expressly instructs on a proxy card that it is
not voting on a matter, whether routine or non-routine. |
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How are broker non-votes counted? |
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Broker non-votes will be counted as present for the purpose of
determining the presence or absence of a quorum for the
transaction of business, but they will not be counted in
tabulating the voting result for any particular proposal. |
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How are abstentions counted? |
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If you return a proxy card that indicates an abstention from
voting on all matters, the shares represented by your proxy will
be counted as present for the purpose of determining both the
presence of a quorum and the total number of votes cast with
respect to a proposal, but they will not be counted in
tabulating the voting results for any particular proposal. |
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What happens if the meeting is adjourned? |
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Assuming the presence of a quorum, if our annual general meeting
is adjourned to another time and place, no additional notice
will be given of the adjourned meeting if the time and place of
the adjourned meeting is announced at the annual general
meeting, unless the adjournment is for more than 21 days,
in which case a notice of the adjourned meeting will be given to
each shareholder of record as of April 8, 2009 entitled to
vote at the adjourned meeting. At the adjourned meeting, we may
transact any items of business that might have been transacted
at the annual general meeting. |
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What happens if a quorum is not present? |
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If within half an hour from the time appointed for the meeting a
quorum is not present, the meeting shall stand adjourned for one
week, to May 25, 2009 at the same hour and place, without
any notification to shareholders. If a quorum is not present at
the adjourned date of the |
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meeting within half an hour of the time fixed for the
commencement thereof, subject to the terms of applicable law,
the persons present shall constitute a quorum. |
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Who will serve as inspector of elections? |
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A representative of American Stock Transfer and
Trust Company, our transfer agent, will tabulate the votes
and act as inspector of elections at the meeting. |
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What should I do in the event that I receive more
than one set of proxy materials? |
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You may receive more than one set of these proxy solicitation
materials, including multiple copies of this proxy statement and
multiple proxy cards or voting instruction cards. For example,
if you hold your shares in more than one brokerage account, you
may receive a separate voting instruction card for each
brokerage account in which you hold shares. In addition, if you
are a shareholder of record and your shares are registered in
more than one name, you may receive more than one proxy card.
Please complete, sign, date and return each proxy card and
voting instruction card that you receive to ensure that all your
shares are voted. |
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Who is soliciting my vote and who will bear the
costs of this solicitation? |
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The enclosed proxy is being solicited on behalf of our board of
directors. We will bear the entire cost of solicitation of
proxies, including preparation, assembly, printing and mailing
of this proxy statement. In addition to solicitation by mail,
our directors, officers, employees and agents may also solicit
proxies in person, by telephone, by electronic mail or by other
means of communication. We will not pay any additional
compensation to our directors, officers or other employees for
soliciting proxies. We may pay compensation to a proxy
soliciting agent, if we retain one. Copies of the proxy
materials will be furnished to brokerage firms, banks, trustees,
custodians and other nominees holding beneficially owned shares
of our ordinary shares, who will forward the proxy materials to
the beneficial owners. We may reimburse brokerage firms, banks,
trustees, custodians and other agents for the costs of
forwarding the proxy materials. Our costs for forwarding proxy
materials are not expected to be significant. |
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Where can I find the voting results of the
meeting? |
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We intend to announce preliminary voting results at the meeting
and publish the final voting results in our quarterly report on
Form 10-Q
for the second quarter of fiscal 2009. |
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What is the deadline for submitting proposals for
consideration at next years annual
general meeting of shareholders or
to nominate individuals to serve as
directors? |
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As a shareholder, you may be entitled to present proposals for
action at a future meeting of shareholders, including director
nominations.
Shareholder Proposals: For a shareholder
proposal to be considered for inclusion in our proxy statement
for the annual general meeting to be held in 2010, the proposal
must be in writing and received by the secretary of the company
at the offices of Mellanox Technologies, Ltd., 350 Oakmead
Parkway, Suite 100, Sunnyvale, California 94085 no later than
December 3, 2009, or such proposal will be considered
untimely under
Rule 14a-4(c)
of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. If the date of our 2010 annual general meeting is
more than 30 days before or 30 days after the
anniversary date of our 2009 annual general meeting, the
deadline for inclusion of proposals in our proxy statement will
instead be a reasonable time before we begin to print and mail
our proxy materials. |
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Shareholder proposals must comply with the requirements of
Rule 14a-8
of the Exchange Act and any other applicable rules established
by the Securities and Exchange Commission, or SEC. Shareholders
are also advised to review our amended and restated articles of
association, which contain additional requirements with respect
to advance notice of shareholder proposals. |
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Nomination of Director Candidates: Any
proposals for director candidates must be in writing, include
the name and address of the shareholder who is making the
nomination and of the nominee and should be directed to the
secretary of the company at the offices of Mellanox
Technologies, Ltd, 350 Oakmead Parkway, Suite 100, Sunnyvale,
California 94085, or such proposal will be considered untimely
under
Rule 14a-4(c)
of the Exchange Act. Our amended and restated articles of
association also require that any proposal for nomination of
directors include the consent of each nominee to serve as a
member of our board of directors, if so elected. Shareholders
are also advised to review our amended and restated articles of
association, which contain additional requirements with respect
to shareholder nominees for our board of directors. In addition,
the shareholder must give timely notice to the secretary of the
company in accordance with the provisions of our amended and
restated articles of association, which require that the notice
be received by the secretary of the company no later than
February 17, 2010. |
PROPOSAL ONE
ELECTION OF DIRECTORS
Members
of the Board of Directors
Three directors (who are not outside directors) are to be
elected at the meeting to serve until the next annual general
meeting of shareholders, or until their respective successors
have been elected and have qualified, or until their earlier
resignation or removal. In accordance with the Israel Companies
Law, 1999, or the Companies Law, outside directors are elected
for three-year terms.
The names of each member of our board of directors, including
each outside director, their ages as of April 1, 2009 and
principal occupations are as follows:
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Term
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Name
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Expires
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Age
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Principal Occupation
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Eyal Waldman
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2010
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Chief Executive Officer, President and Chairman of the Board of
Directors, Mellanox Technologies, Ltd.
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Rob S. Chandra
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General Partner, Bessemer Venture Partners
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Irwin Federman
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2010
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General Partner, Bessemer Venture Partners
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Thomas Weatherford
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2010
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Former Executive Vice President and Chief Financial Officer,
Business Objects SAGeneral Partner, U.S. Venture Partners
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Outside
Directors
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Amal M. Johnson
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2010
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Chief Executive Officer, MarketTools, Inc.
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Thomas J. Riordan
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2010
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Chief Executive Officer of Exclara, Inc.
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Rob S. Chandra is not standing for reelection. See Form 8-K
previously filed with the SEC on February 13, 2009. |
7
Director
Nominees
Our board of directors has nominated Eyal Waldman, Irwin
Federman and Thomas Weatherford for reelection. Each nominee for
director has consented to being named in this proxy statement
and has indicated a willingness to serve if elected. Although we
do not anticipate that any nominee will be unavailable for
election, if a nominee is unavailable for election, the persons
named as proxyholders will use their discretion to vote for any
substitute nominee in accordance with their best judgment as
they deem advisable. If elected, Messrs. Waldman, Federman
and Weatherford will hold office until our annual general
meeting of shareholders to be held in 2010, or until their
respective successors have been elected and have qualified or
until their earlier resignation or removal.
Eyal Waldman is a co-founder of Mellanox, and has served
as our chief executive officer, president and chairman of our
board of directors since March 1999. From March 1993 to February
1999, Mr. Waldman served as vice president of engineering
and was a co-founder of Galileo Technology, Ltd., or Galileo, a
semiconductor company, which was acquired by Marvell Technology
Group, Ltd. in January 2001. From August 1989 to March 1993,
Mr. Waldman held a number of design and architecture
related positions at Intel Corporation, a semiconductor chip
maker. Mr. Waldman serves on the board of directors of a
number of private companies. Mr. Waldman holds a Bachelor
of Science in Electrical Engineering and a Master of Science in
Electrical Engineering from the Technion Israel
Institute of Technology. Mr. Waldman is located in Israel.
Irwin Federman has served as a member of our board of
directors since June 1999. Mr. Federman has been a general
partner of U.S. Venture Partners, a venture capital firm,
since April 1990. From 1988 to 1990, he was a managing director
of Dillon Read & Co., an investment banking firm, and
a general partner in its venture capital affiliate, Concord
Partners. From 1978 to 1987, Mr. Federman was president and
chief executive officer of Monolithic Memories, Inc., a
semiconductor company which was acquired in 1987 by Advanced
Micro Devices, Inc., an integrated circuit manufacturer.
Mr. Federman serves on the boards of directors of SanDisk
Corporation, a data storage company, Check Point Software
Technologies, Ltd., an Internet security software company, and a
number of private companies. Mr. Federman was two-term
chairman of the Semiconductor Industry Association, has served
on the board of directors of the National Venture Capital
Association and served two terms on the Deans Advisory
Board of Santa Clara University. Mr. Federman holds a
Bachelor of Science in Economics from Brooklyn College.
Mr. Federman is located in the United States.
Thomas Weatherford has served as a member of our board of
directors since November 2005. From August 1997 until his
retirement in December 2002, Mr. Weatherford served as
executive vice president and chief financial officer of Business
Objects SA, a provider of business intelligence software.
Mr. Weatherford also serves on the boards of directors of
Advanced Analogic Technologies, Inc., a maker of analog and
power semiconductors, SMART Modular Technologies, Inc., a
manufacturer of memory products, Tesco Corporation, a global
provider of technology-based solutions to the upstream energy
industry, InfoUSA, Inc., a provider of sales leads, mailing
lists, direct marketing, database marketing,
e-mail
marketing and market research solutions, and several privately
held companies. Mr. Weatherford holds a Bachelor of
Business Administration from the University of Houston.
Mr. Weatherford is located in the United States.
Outside
Directors
Under Israeli law, we are required to appoint at least two
directors who satisfy the criteria for outside directors as
defined in the Companies Law. These criteria differ from the
criteria for independence under the applicable rules and
regulations of the SEC and The Nasdaq Stock Market. At the
Annual Meeting in 2007, our shareholders elected Amal Johnson
and Thomas Riordan as our outside directors. Each of
Ms. Johnson and Mr. Riordan will hold office for a
three-year term until our annual general meeting in 2010, or
until her or his successor shall be duly elected or appointed,
or until her or his earlier resignation or removal, subject to
and in accordance with the provisions of the Companies Law. As a
result, you are not being asked to vote for either
Ms. Johnson or Mr. Riordan at this meeting.
Amal M. Johnson has served as a member of our board of
directors since October 2006. Ms. Johnson is currently the
chief executive officer of MarketTools, Inc., a market research
company, which she joined in March 2005. Prior to joining
MarketTools, Inc., Ms. Johnson was a venture partner of
ComVentures, L.P. from April 2004 to March 2005, and Lightspeed
Venture Partners, focusing on enterprise software and
infrastructure, from March
8
1999 to March 2004. Previously, Ms. Johnson was president
of Baan Supply Chain Solutions, an enterprise resource planning,
or ERP, software company, from January 1998 to December 1998,
president of Baan Affiliates, an ERP software company, from
January 1997 to December 1997, and president of Baan Americas,
an ERP software company, from October 1994 to December 1996.
Prior to that, Ms. Johnson served as president of ASK
Manufacturing Systems, a material requirements planning software
company, from August 1993 to July 1994 and held executive
positions at IBM from 1977 to June 1993. Ms. Johnson also
serves on the board of directors of Opsource Inc., a private
company, and MarketTools, Inc. Ms. Johnson holds a Bachelor
of Arts in Mathematics and Physics from Montclair College.
Ms. Johnson is located in the United States.
Thomas J. Riordan has served as a member of our board of
directors since November 2005. Mr. Riordan previously
served as a member of our board of directors from February 2003
to February 2005. Mr. Riordan is currently the chief
executive officer of Exclara, Inc., a fabless semiconductor
company, which he joined in August 2006. From August 2000 to
December 2004, Mr. Riordan was vice president of the
microprocessor division of PMC-Sierra, Inc., a semiconductor
company. From August 1991 to August 2000, Mr. Riordan was
chief executive officer, president and a member of the board of
directors of Quantum Effect Devices, Inc., a semiconductor
design company. From February 1985 to June 1991,
Mr. Riordan served in various design and managerial roles,
most recently as director of research and development at MIPS
Computer Systems, Inc., a semiconductor design company. From
March 1983 to January 1985, Mr. Riordan served as a design
engineer at Weitek Corporation, a semiconductor company. From
October 1979 to February 1983, Mr. Riordan was a design
engineer at Intel Corporation. Mr. Riordan holds Bachelor
of Science and Master of Science degrees in Electrical
Engineering as well as a Bachelor of Arts degree in Government
from the University of Central Florida and has done
post-graduate work in Electrical Engineering at Stanford
University. Mr. Riordan also serves on the boards of
directors of PLX Technology, Inc., a semiconductor company,
and several private companies. Mr. Riordan is located in
the United States.
Board of
Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
EACH OF THE THREE NOMINEES FOR DIRECTOR LISTED ABOVE.
PROPOSAL TWO
APPROVAL OF BONUS PAID TO EYAL WALDMAN
Under Israeli law, the terms of service of the members of the
board of directors of a public company require the approval of
its audit committee, board of directors and shareholders, in
that order. In recognition of Mr. Waldmans
significant contribution to the company as its chief executive
officer, president and chairman of the board of directors, each
of our audit committee, compensation committee and our board of
directors has approved a cash bonus to Mr. Waldman in the
amount of $162,500 which we paid Mr. Waldman on
March 1, 2009, for services rendered for the fiscal year
ended December 31, 2008, pursuant to the Companys
annual discretionary cash bonus compensation program.
Board of
Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE BONUS WE PAID MR. WALDMAN FOR THE YEAR ENDED DECEMBER
31, 2008 AS DESCRIBED IN THIS PROPOSAL TWO.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO INDEMNIFICATION UNDERTAKING
The Companies Law and our articles of association authorize us,
subject to the receipt of requisite corporate approvals, to
indemnify our directors and officers, subject to certain
conditions and limitations. We believe that it is in the
companys best interest to provide indemnification to our
officers and directors, to enable us to attract and retain
highly qualified individuals. For more details relating to
indemnification of our directors and officers, please
9
see our Registration Statement on
Form S-1,
Compensation Discussion and Analysis Exculpation,
Insurance and Indemnification of Directors and Officers.
Pursuant to the companys indemnification undertaking
agreement with each of its directors and officers, as approved
by shareholders at the companys extraordinary general
meeting held on December 5, 2006, and filed with the SEC on
September 28, 2006 as Exhibit 10.4 to the
companys Registration Statement on Form
S-1, the
company is obligated to indemnify its directors and officers who
are, or who may become, parties to such agreement to the fullest
extent permitted by law. The proposed amendment to the
indemnification undertaking agreement would limit the total
amount of the companys indemnification obligation pursuant
to these agreements to 50% of the companys net assets,
measured by the balance sheet of the company last published
prior to the time that notice is provided to the company, as set
forth below.
Pursuant to the proposed amendment to the indemnification
undertaking agreement, Section 6 thereof will be amended
and restated in its entirety to read as follows:
6. The total amount of indemnification that the
Company undertakes towards all of the Company office holders
whom the Company has resolved to indemnify, jointly and in the
aggregate, shall not exceed, during the course of the
Companys existence, 50% (fifty percent) of the
Companys net assets, measured by the balance sheet of the
Company last published prior to the time that notice is provided
to the Company.
No other amendments are proposed to the current version of
indemnification undertaking except the amendment set forth in
this proposal. The proposed amendment was approved by our audit
committee and board of directors on March 10, 2009. Under
the Companies Law, the adoption of the proposed resolutions
require the approvals of the audit committee, board of directors
and shareholders, in that order.
Board of
Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE AMENDMENT TO THE CURRENT FORM OF INDEMNIFICATION
UNDERTAKING AS DESCRIBED IN THIS PROPOSAL THREE.
PROPOSAL FOUR
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE
MELLANOX TECHNOLOGIES, LTD. GLOBAL SHARE INCENTIVE PLAN
(2006)
We are asking you to approve the amendment and restatement of
the Mellanox Technologies, Ltd. Global Share Incentive Plan
(2006) (the 2006 Plan), to increase the number by
which the ordinary shares reserved for issuance under the 2006
Plan automatically increases on the first day of each fiscal
year to the least of (i) 3.75% of the ordinary shares
outstanding on a fully diluted basis on the date of the
increase, (ii) 1,400,000, or (iii) a lesser amount
determined by our board of directors, or Board, on
or before the date of increase. Prior to this proposed amendment
and restatement of the 2006 Plan, the number of ordinary shares
reserved for issuance under the 2006 Plan increases
automatically on the first day of each fiscal year by that
number of ordinary shares equal to the least of (i) two
percent (2%) of the total number of ordinary shares outstanding
on the date of the increase, (ii) 685,714 or (iii) a
lesser amount determined by our Board. As of February 28,
2009, the number of shares reserved for issuance under the 2006
Plan was 5,212,710.
The amendment and restatement of the 2006 Plan will only become
effective if it is approved by the affirmative vote of a
majority of the votes cast with respect to this proposal by the
shares present in person or represented by proxy and entitled to
vote thereon at the annual general meeting.
A summary of the principal provisions of the 2006 Plan is set
forth below. The summary is qualified by reference to the full
text of the amendment and restatement of the 2006 Plan, which is
attached as Appendix A to this proxy statement.
10
General
Our Board adopted the amendment and restatement of the 2006
Plan, subject to stockholder approval, to provide us the
continued ability to grant a variety of equity awards as a
valuable tool to help attract and retain members of our Board
and employees and consultants of our company and its
subsidiaries. The 2006 Plan, as amended and restated, will
increase the number by which the ordinary shares reserved for
issuance under the 2006 Plan automatically increases on the
first day of each fiscal year to the least of (i) 3.75% of
the ordinary shares outstanding on a fully diluted basis on the
date of the increase, (ii) 1,400,000, or (iii) a
lesser amount determined by the Board on or before the date of
increase.
Our prudent use of the 2006 Plan allows us to grant equity-based
awards to motivate our employees to achieve our business goals
and create long-term shareholder value while balancing corporate
governance and dilution concerns. The existing 2006 Plan was
first adopted by our Board in October 2006, approved by our
shareholders in December 2006 and became effective on
February 6, 2007. The 2006 Plan has not previously been
amended and restated. As of February 28, 2009, awards
covering an aggregate of 3,843,120 of our ordinary shares were
outstanding under the 2006 Plan, and 1,369,590 shares
remained available for future grants. The closing share price
for our ordinary shares on the NASDAQ Stock Market on
March 17, 2009 was $8.91 per share.
Description
of Proposed Amendment
The 2006 Plan, prior to this proposed amendment and restatement,
provided that the number of ordinary shares reserved for
issuance under the 2006 Plan increases automatically on the
first day of each fiscal year by a number of ordinary shares
equal to the least of: (i) 2% of ordinary shares
outstanding on a fully diluted basis on such date,
(ii) 685,714 ordinary shares, or (iii) a lesser amount
determined by our Board. Subject to shareholder approval of this
proxy proposal, the 2006 Plan, as amended and restated, will
provide that the number of ordinary shares reserved for issuance
under the 2006 Plan will increase automatically on the first day
of each fiscal year by a number of ordinary shares equal to the
least of: (i) 3.75% of the ordinary shares outstanding on a
fully diluted basis on the date of increase, (ii) 1,400,000
or (iii) a lesser amount determined by the Board on or
before the date of increase.
The 2006 Plan is not being amended in any material respect
pursuant to this proposal other than to reflect the changes
described above.
Purposes
The purposes of the 2006 Plan are to attract and retain the best
available personnel for positions of substantial responsibility,
to provide additional incentive to employees of, consultants to
and non-employee directors of the company and its affiliates, if
any, and to promote the companys business by providing
such individuals with opportunities to receive awards pursuant
to the 2006 Plan and to strengthen the sense of common interest
between such individuals and the companys shareholders.
Shares
Subject to the 2006 Plan
As of February 28, 2009, an aggregate of 5,212,710 of our
ordinary shares have been reserved for issuance under the 2006
Plan. Under the 2006 Plan, prior to its amendment and
restatement, the number of ordinary shares reserved for issuance
under the 2006 Plan increases automatically on the first day of
each fiscal year by a number of ordinary shares equal to the
least of: (i) 2% of ordinary shares outstanding on a fully
diluted basis on such date, (ii) 685,714 ordinary shares,
or (iii) a lesser amount determined by our Board. Subject
to shareholders approving this proposal, the 2006 Plan, as
amended and restated, provides that the number of our ordinary
shares reserved for issuance under the 2006 Plan will increase
automatically on the first day of each fiscal year by a number
of ordinary shares equal to the least of: (i) 3.75% of the
ordinary shares outstanding on a fully diluted basis on the date
of increase, (ii) 1,400,000, or (iii) a lesser amount
determined by the Board on or before the date of increase.
The 2006 Plan also provides that the number of our ordinary
shares reserved for issuance under the 2006 Plan will
automatically increase by the number of ordinary shares subject
to any award that was granted under any of our
11
share incentive plans, other than the 2006 Plan, that for any
reason terminates, expires or otherwise lapses. In addition, any
awards that were granted under the 2006 Plan that for any reason
terminate, expire or otherwise lapse shall again be available
for grant as awards under the 2006 Plan. Additionally, any
ordinary shares tendered or withheld to satisfy the grant or
exercise price or tax withholding obligation pursuant to any
award granted under the 2006 Plan shall again be available for
the grant of an award pursuant to the 2006 Plan.
The maximum aggregate number of our ordinary shares that may be
issued or transferred pursuant to awards granted under the 2006
Plan is 15,474,018.
Each of the foregoing increases and limitations may be adjusted
proportionately in connection with any change in our capital
structure, as described herein.
Administration
Our Board may administer the 2006 Plan or it may delegate
authority to administer the plan to a committee of board members
(the Committee), subject to the relevant provisions
of the Companies Law. The 2006 Plan is administered jointly by
our Board and a Committee consisting of two or more members of
the Board, each of whom is an outside director,
within the meaning of Section 162(m) of the
U.S. Internal Revenue Code, and a non-employee
director as defined in
Rule 16b-3(b)(3)
of the Exchange Act with respect to awards granted to officers
who are subject to Section 162(m) of the U.S. Internal
Revenue Code. Subject to the relevant provisions of the
Companies Law, the plan administrator shall have full authority
to determine eligible participants in the 2006 Plan, the number
of options or ordinary shares to be awarded, as well as the time
of grant, vesting schedule and form of the awards. Our Board
conducts general administration of the 2006 Plan with respect to
awards granted to a member of our Board who is not an employee.
Eligibility
Currently, the employees, officers, consultants and non-employee
directors of our company or any of our affiliates are eligible
to receive awards under the 2006 Plan. As of February 28,
2009, we had approximately 307 employees, 7 consultants and
5 non-employee directors who were eligible to receive awards
under the 2006 Plan. The Committee determines which of our
employees, office holders, consultants and other persons will be
granted awards. Our Board will determine which of our
non-employee directors will be granted awards. No person is
entitled to participate in the 2006 Plan as a matter of right
nor does any such participation constitute assurance of
continued employment or service on our Board. Only those who are
selected to receive grants by the Committee or Board, as
applicable, may participate in the 2006 Plan.
Awards
under the 2006 Plan
The 2006 Plan provides that the Committee may grant or issue
incentive stock options (ISOs) and non-qualified
stock options (NSOs), restricted stock, restricted
stock units, stock bonus awards or performance-based awards.
Each type of award may be awarded to participants in such
amounts and subject to such terms and conditions as determined
by the Committee. Each award will be set forth in a separate
agreement with the person receiving the award and will indicate
the type, terms and conditions of the award.
General Option Provisions. The term of options
granted under the 2006 Plan may not exceed ten years. In the
case of ISOs that are granted to persons who own more than 10%
of the total combined voting power of our company, our
subsidiaries or our parent at the time of grant, the term of the
ISOs cannot exceed five years.
Unless the terms of the participants option agreement
provide otherwise, if a participants service relationship
with us or with any of our affiliates terminates for any reason
other than for cause, death or disability, the participant may
exercise any options vested as of the termination date up to
three months from the termination date. Unless the terms of the
participants option agreement provide otherwise, if a
participants service relationship with us ceases in the
event of death or disability, the participant or
participants estate may exercise any options vested as of
the termination date for 12 months from the termination
date. Unless the terms of the participants option
agreement provide otherwise, if a participants service
relationship with us or with any of our affiliates terminates
for cause, all
12
unvested options granted to such participant will immediately
expire as of the termination date. In no event may an option be
exercised after its expiration date.
The purchase price of ordinary shares acquired pursuant to the
exercise of an option must generally be paid by cash or check,
but other forms of legal consideration may be approved by the
plan administrator.
The exercise price of an option is determined by the plan
administrator at the time of grant. The per share exercise price
of an ISO may not be less than 100% of the fair market value per
share of the underlying ordinary shares at the time of grant of
the ISO. ISOs granted to persons who own more than 10% of the
total combined voting power of our company, our subsidiaries or
our parent on the grant date must have a per share exercise
price of no less than 110% of the fair market value per share of
the underlying ordinary shares at the time of grant of the ISO.
General Restricted Stock Award
Provisions. Participants who are granted
restricted stock awards generally have all of the rights of a
shareholder with respect to such shares, but such rights may be
limited at the discretion of our Board. Restricted stock awards
may be subject to vesting over time or upon achievement of
milestones. Any unvested ordinary shares subject to restricted
stock awards are generally forfeited upon termination of
employment, unless our Board provides otherwise.
General Restricted Stock Unit Awards. Awards
of restricted stock units are denominated in unit equivalent of
ordinary shares. They are typically awarded to participants
without payment of consideration, and are subject to vesting
conditions based upon a vesting schedule or performance criteria
established by the plan administrator. Unlike restricted stock,
the ordinary shares underlying restricted stock unit awards will
not be issued until the restricted stock units have vested, and
recipients of restricted stock units generally will have no
voting or dividend rights prior to the time the vesting
conditions are satisfied. On the maturity date, the participant
will receive one unrestricted, fully transferable ordinary share
for each restricted stock unit not previously forfeited.
Section 102 Options and Shares Holding
Period. Section 102 Options, any ordinary
shares issued upon the exercise of Section 102 Options and
any other ordinary shares that are received subsequently with
respect to these options or ordinary shares, including bonus
shares, must be issued to a trustee that is nominated by the
plan administrator to serve as a trustee in accordance with
Section 102 of the Israeli Tax Ordinance. These
Section 102 Options and ordinary shares must be held by the
trustee for the benefit of the participants for at least two
years from the date of grant of the Section 102 Options,
and the participant may not sell or otherwise transfer any of
the ordinary shares held by the trustee until the holding period
has lapsed without triggering adverse tax consequences.
Stock Bonus Awards. Stock bonus awards may be
awarded to participants in such amounts and subject to such
terms and conditions as determined by the Committee. The
Committee may establish the exercise or purchase price, if any,
of any stock bonus award but such price will not be less than
the par value of an ordinary share on the date of grant. The
Committee may determine that the participants may be awarded
stock bonus awards in consideration for past services actually
rendered to us for our benefit. A stock bonus award will only be
exercisable or payable while the participant is an employee or
consultant of us, but the Committee in its sole and absolute
discretion may provide that a stock bonus award may be exercised
or paid subsequent to a termination of employment or service or
following a change of control of us or because of the
participants retirement, death or disability or otherwise.
All stock bonus awards shall be subject to the additional terms
and conditions as determined by the Committee and as evidenced
by an award agreement.
Performance-Based Awards. Performance-based
awards include awards other than options which comply with
U.S. Internal Revenue Service requirements under
Section 162(m) of the U.S. Internal Revenue Code for
performance-based compensation. They may provide for payments
based upon net earnings (either before or after interest, taxes,
depreciation and amortization), economic value-added, sales or
revenue, net income (either before or after taxes), operating
earnings, cash flow (including, but not limited to, operating
cash flow and free cash flow), cash flow return on capital,
return on net assets, return on stockholders equity,
return on assets, return on capital, stockholder returns, return
on sales, gross or net profit margin, productivity, expense,
margins, operating efficiency, customer satisfaction, working
capital, earnings per share, price per share, and market share,
any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results
of a peer group, in each case over a period or periods
determined by the plan administrator.
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Term of
2006 Plan
The 2006 Plan currently has a ten-year term extending through
October 2016, subject to earlier termination by our Board of
Directors. No awards shall be made under the 2006 Plan after
expiration of the 2006 Plan, but the terms all individual awards
made on or before expiration of the 2006 plan in October 2016
may extend beyond such expiration in accordance with the terms
of the underlying award agreement.
Limitations
and Conditions of Awards
Each award is evidenced by an award agreement between us and the
participant, and is subject to the following additional terms
and conditions:
No Rights until Issuance of Share
Certificates. Participants shall not be, and
shall not have any of the rights or privileges of, our
shareholders in respect of any ordinary shares purchasable or
otherwise acquired relating to any award unless and until
certificates representing such shares have been issued by us to
the participants.
Individual Award Limit. No participant shall
be granted, in any calendar year (measured from the date of any
grant), awards to purchase more than 2,285,714 ordinary shares.
This limitation may be adjusted proportionately in connection
with any change in our capital structure, as described herein.
Incentive Stock Option Limitations. The
aggregate fair market value, determined at the time of grant, of
our ordinary shares subject to ISOs that are exercisable for the
first time by a participant during any calendar year under all
of our share plans may not exceed $100,000. An option or portion
of an option that exceeds this limit is treated as an NSO.
Performance-Based Award
Limitations. Notwithstanding any other provision
of the 2006 Plan, any award granted to a covered employee
intended to constitute Qualified Performance-Based Compensation
shall be subject to any additional limitations set forth in
Section 162(m) of the U.S. Internal Revenue Code (including
any amendment to Section 162(m) of the U.S. Internal
Revenue Code) or any regulations or rulings issued thereunder
that are requirements for qualification as qualified
performance-based compensation as described in
Section 162(m)(4)(C) of the U.S. Internal Revenue Code, and
the 2006 Plan shall be deemed amended to the extent necessary to
conform to such requirements.
Limits on
Transfer of Awards
Except as may be permitted under an applicable appendix to the
2006 Plan, no option or other award may be transferred other
than by will or by the laws of descent and distribution, and
during the participants lifetime an option may be
exercised only by such participant. Furthermore, except as may
be permitted under an applicable appendix to the 2006 Plan,
shares for which full payment has not been made cannot be
assigned, transferred, pledged or mortgaged, other than by will
or laws of descent and distribution.
Adjustments
upon Changes in Capital Structure
In the event of an equity restructuring of our company, such as
a stock dividend, stock split, spin-off, rights offering or
certain recapitalizations, that affects our ordinary shares or
the share price of our ordinary shares and causes a change in
the per share value of the ordinary shares underlying
outstanding awards, the number and type of securities subject to
each outstanding award and the exercise or grant price of the
award will be proportionately adjusted, and the plan
administrator will make such proportionate adjustments as the
plan administrator deems appropriate to reflect the equity
restructuring with respect to the aggregate number and type of
securities that may be issued under the 2006 Plan.
In the event of any dividend, distribution, reorganization,
repurchase, exchange of ordinary shares, or other change in the
corporate structure of our company affecting the ordinary shares
(other than an equity restructuring of our company), the plan
administrator may appropriately adjust the aggregate number and
kind of shares that may be issued under the 2006 Plan and the
terms and conditions of any outstanding awards in order to
prevent dilution or enlargement of benefits intended to be made
available under the 2006 Plan.
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Amendment
and Termination of the 2006 Plan
The plan administrator has the authority to amend or terminate
the 2006 Plan, subject to shareholder approval as required under
the 2006 Plan, including as required by applicable law, stock
exchange or other regulatory rules. However, no amendment or
termination of the 2006 Plan may reduce the rights under awards
already granted to a participant prior to such amendment or
termination unless consented to by the affected participant.
U.S.
Federal Income Tax Consequences Associated with the 2006
Plan
The following is a general summary under current law of the
material U.S. federal income tax consequences to participants in
the 2006 Plan. This summary deals with the general tax
principles that apply and is provided only for general
information. Some kinds of taxes, such as foreign, state and
local income taxes, are not discussed. Tax laws are complex and
subject to change and may vary depending on individual
circumstances and from locality to locality. The summary does
not discuss all aspects of income taxation that may be relevant
in light of a participants personal investment
circumstances. This summarized tax information is not tax advice.
Incentive Stock Options. A participant to whom
ISOs are granted will not recognize taxable income upon grant.
Additionally, if applicable holding period requirements are met,
the participant will not recognize taxable income at the time of
exercise. However, the excess of the fair market value of the
ordinary shares received over the option price is an item of tax
preference income potentially subject to the alternative minimum
tax. If ordinary shares acquired upon exercise of an ISO are
held for a minimum of two years from the date of grant and one
year from the date of exercise, the gain or loss (in an amount
equal to the difference between the fair market value on the
date of sale and the exercise price) upon disposition of the
ordinary shares will be treated as a long-term capital gain or
loss, and we will not be entitled to any deduction. If the
holding period requirements are not met, the ISO will be treated
as one that does not meet the requirements of the U.S. Internal
Revenue Code for ISOs and the tax consequences described for
NSOs will apply.
Non-Qualified Stock Options. For U.S. federal
income tax purposes, if a participant is granted NSOs under the
2006 Plan, the participant will not have taxable income on the
grant of the option, nor will we be entitled to any deduction.
Generally, on exercise of NSOs, the participant will recognize
ordinary income, and we will be entitled to a deduction, in an
amount equal to the difference between the option exercise price
and the fair market value of an ordinary share on the date each
such option is exercised. The participants basis for the
ordinary shares for purposes of determining gain or loss on
subsequent disposition of such shares generally will be the fair
market value of the ordinary shares on the date the participant
exercises such option. Any subsequent gain or loss will be
generally taxable as capital gains or losses.
Restricted Stock and Restricted Stock Units. A
participant to whom restricted stock or restricted stock units
are issued generally will not recognize taxable income upon such
issuance and we generally will not then be entitled to a
deduction unless, with respect to restricted stock, an election
is made by the participant under Section 83(b) of the U.S.
Internal Revenue Code. However, when restrictions on shares of
restricted stock lapse, such that the shares are no longer
subject to a substantial risk of forfeiture, the employee
generally will recognize ordinary income and we generally will
be entitled to a deduction for an amount equal to the excess of
the fair market value of the shares at the date such
restrictions lapse over the purchase price. If a timely election
is made under Section 83(b) with respect to restricted
stock, the participant generally will recognize ordinary income
on the date of the issuance equal to the excess, if any, of the
fair market value of the shares at that date over the purchase
price, and we will be entitled to a deduction for the same
amount. Similarly, when restricted stock units vest and the
underlying ordinary shares are issued to the participant, the
participant generally will recognize ordinary income and we
generally will be entitled to a deduction for the amount equal
to the fair market value of the shares at the date of issuance.
A Section 83(b) election is not permitted with regard to
the grant of restricted stock units.
Stock Bonus Awards. A participant to whom
stock bonus awards are issued generally will recognize ordinary
income in the amount of the fair market value of the ordinary
shares awarded and we generally will be entitled to a deduction
for the same amount. If, however, such shares are subject to a
substantial risk of forfeiture, then the tax rules described
above with respect to restricted stock awards would be
applicable.
15
Section 162(m). In general, under
Section 162(m) of the U.S. Internal Revenue Code, income
tax deductions of publicly-held corporations may be limited to
the extent total compensation (including base salary, annual
bonus, stock option exercises and non-qualified benefits paid)
for specified executive officers exceeds $1,000,000 (less the
amount of any excess parachute payments as defined
in Section 280G of the U.S. Internal Revenue Code) in any
one year. However, under Section 162(m), the deduction
limit does not apply to certain performance-based
compensation as provided for by the U.S. Internal Revenue
Code and established by an independent compensation committee
which is adequately disclosed to, and approved by, shareholders.
In particular, stock options will satisfy the
performance-based compensation exception if the
options are made by a qualifying compensation committee, the
underlying plan sets the maximum number of shares that can be
granted to any person within a specified period and the
compensation is based solely on an increase in the share price
after the grant date (i.e., the option exercise price is equal
to or greater than the fair market value of the ordinary shares
subject to the award on the grant date). Performance-based
awards granted under the 2006 Plan may qualify as
qualified performance-based compensation for
purposes of Section 162(m) if such awards are granted or
vest upon the pre-established objective performance goals
described above.
We have attempted to structure the 2006 Plan in such a manner
that the Committee can determine the terms and conditions of
stock options and performance-based awards granted thereunder
such that remuneration attributable to such awards will not be
subject to the $1,000,000 limitation. We have not, however,
requested a ruling from the Internal Revenue Service or an
opinion of counsel regarding this issue. This discussion will
neither bind the Internal Revenue Service nor preclude the
Internal Revenue Service from adopting a contrary position.
Section 409A. Section 409A of the
U.S. Internal Revenue Code, which was added by the American Jobs
Creation Act of 2004, provides certain requirements on
non-qualified deferred compensation arrangements. These include
requirements on an individuals election to defer
compensation and the individuals selection of the timing
and form of distribution of the deferred compensation. Also,
Section 409A generally provides that distributions must be
made on or following the occurrence of certain events (i.e., the
individuals separation from service, a predetermined date
or the individuals death). Section 409A imposes
restrictions on an individuals ability to change his or
her distribution timing or form after the compensation has been
deferred. For certain individuals who are officers,
Section 409A requires that such individuals
distribution commence no earlier than six months after such
officers separation from service.
If a 2006 Plan award is subject to and fails to satisfy the
requirements of Section 409A, the recipient of that award
may recognize ordinary income on the amounts deferred under the
award, to the extent vested, which may be prior to when the
compensation is actually or constructively received. Also, if an
award that is subject to Section 409A fails to comply,
Section 409A imposes an additional 20% federal income tax
on compensation recognized as ordinary income, as well as
interest on such deferred compensation.
Under the 2006 Plan, in the event that the Committee determines
that any award made under the 2006 Plan may be subject to
Section 409A and related Department of Treasury guidance
(including such Department of Treasury guidance as may be issued
in the future), the Committee may adopt such amendments to the
2006 Plan and the applicable award agreement or adopt other
policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions,
that the Committee determines are necessary or appropriate to
(a) exempt the award from Section 409A
and/or
preserve the intended tax treatment of the benefits provided
with respect to the award, or (b) comply with the
requirements of Section 409A and related Department of
Treasury guidance.
New Plan
Benefits
Each of our non-employer directors is entitled to receive
options to purchase 11,428 of our ordinary shares following each
annual meeting of our shareholders. Otherwise, all future grants
under the 2006 Plan are within the discretion of our
compensation committee of the Board or another committee of the
Board designated by the Board to administer the 2006 Plan and
the benefits of such grants are, therefore, not determinable.
Under the 2006 Plan, our named executive officers (as defined
below in the Section Compensation Discussion and
Analysis) have been granted the following awards: Eyal
Waldman, our chief executive officer, has received options to
purchase an aggregate of 139,578 of our ordinary shares; Michael
Gray, our chief financial officer, has received options to
purchase an aggregate of 56,808 of our ordinary shares; Michael
Kagan, our chief technology
16
officer and vice president architecture, has received options to
purchase an aggregate of 52,588 of our ordinary shares; Marc
Sultzbaugh, our vice president worldwide sales, has received
options to purchase an aggregate of 159,800 of our ordinary
shares; and Shai Cohen, vice president operations and
engineering, has received options to purchase an aggregate of
56,113 of our ordinary shares. Our executive officers as a group
have received options to purchase an aggregate of 514,000 of our
ordinary shares. Our non-employee directors as a group have
received options to purchase an aggregate of 102,852 shares
under the 2006 Plan. Our non-executive officer employees as a
group have received options to purchase an aggregate of
3,528,827 shares under the 2006 Plan.
Recommendation
of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
MELLANOX TECHNOLOGIES, LTD. GLOBAL SHARE INCENTIVE PLAN
(2006) AS DESCRIBED IN THIS PROPOSAL FOUR.
PROPOSAL FIVE
APPROVAL OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND
AUTHORIZATION
OF AUDIT COMMITTEE DETERMINATION OF REMUNERATION
The audit committee of our board of directors has selected
PricewaterhouseCoopers LLP as our independent registered public
accounting firm to perform the audit of our consolidated
financial statements for the fiscal year ending
December 31, 2009. PricewaterhouseCoopers LLP, an
independent registered public accounting firm, audited our
consolidated financial statements for the fiscal years ending
December 31, 2008, 2007 and 2006.
Shareholder approval of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm for the fiscal year ending December 31,
2009 is required under the Companies Law. The audit committee of
our board of directors believes that such appointment is
appropriate and in the best interests of the company and its
shareholders. Subject to the approval of this proposal, the
audit committee will fix the remuneration of
PricewaterhouseCoopers LLP in accordance with the volume and
nature of their services to the company.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the annual general meeting of shareholders. They will
have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate
questions from our shareholders.
Board of
Directors Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS
LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2009 AND THE AUTHORIZATION OF
OUR AUDIT COMMITTEE TO DETERMINE THEIR REMUNERATION IN
ACCORDANCE WITH THE VOLUME AND NATURE OF THEIR SERVICES AS
DESCRIBED IN THIS PROPOSAL FIVE.
Audit and
Non-Audit Services
Subject to shareholder approval of the audit committees
authority to determine remuneration for their services, the
audit committee is directly responsible for the appointment,
compensation and oversight of our independent auditors. In
addition to retaining PricewaterhouseCoopers LLP to audit our
consolidated financial statements for the fiscal year ending
2008, the audit committee retained PricewaterhouseCoopers LLP to
provide other non-audit and advisory services in 2008. The audit
committee has reviewed all non-audit services provided by
PricewaterhouseCoopers LLP in 2008, and has concluded that the
provision of such non-audit services was compatible with
maintaining PricewaterhouseCoopers LLPs independence and
that such independence has not been impaired.
17
The aggregate fees billed by PricewaterhouseCoopers LLP for
audit and non-audit services in 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
December 31,
|
|
Service Category
|
|
2008
|
|
|
2007
|
|
|
Audit Fees
|
|
$
|
799,761
|
|
|
$
|
517,800
|
|
Audit-Related Fees
|
|
|
3,000
|
|
|
|
6,361
|
|
Tax Fees
|
|
|
169,503
|
|
|
|
276,390
|
|
All Other Fees
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
982,264
|
|
|
$
|
800,551
|
|
|
|
|
|
|
|
|
|
|
In the above table, in accordance with the SECs
definitions and rules, audit fees are fees for
professional services for the audit and review of our annual
consolidated financial statements, as well as fees for issuance
of consents and for services that are normally provided by the
accountant in connection with statutory and regulatory filings
or engagements except those not required by statute or
regulation; audit-related fees are fees for
assurance and related services that were reasonably related to
the performance of the audit or review of our financial
statements, including attestation services that are not required
by statute or regulation, due diligence and any services related
to acquisitions; tax fees are fees for tax
compliance, tax advice and tax planning; and all other
fees are fees for any services not included in the first
three categories.
18
REPORT OF
THE AUDIT
COMMITTEE1
The audit committee, which currently consists of
Messrs. Federman, Riordan and Weatherford and
Ms. Johnson, evaluates audit performance, manages relations
with our independent registered public accounting firm and
evaluates policies and procedures relating to internal
accounting functions and controls. The board of directors
adopted a written charter for the audit committee in December
2000 and most recently amended it in April 2008, which charter
details the responsibilities of the audit committee. This report
relates to the activities undertaken by the audit committee in
fulfilling such responsibilities.
The audit committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or
to certify the activities of management and the independent
registered public accounting firm. The audit committee oversees
the companys financial reporting process on behalf of the
board of directors. Management has the primary responsibility
for the financial statements and reporting process, including
the companys systems of internal controls over financial
reporting. In fulfilling its oversight responsibilities, the
audit committee reviewed and discussed with management the
audited financial statements included in the Annual Report on
Form 10-K
for the year ended December 31, 2008. This review included
a discussion of the quality and the acceptability of the
companys financial reporting and controls, including the
clarity of disclosures in the financial statements.
The audit committee also reviewed with the companys
independent registered public accounting firm, who is
responsible for expressing an opinion on the conformity of the
companys audited financial statements with generally
accepted accounting principles, its judgments as to the quality
and the acceptability of the companys financial reporting
and such other matters required to be discussed with the audit
committee under generally accepted auditing standards in the
United States including Statement on Auditing Standards
No. 61, as amended.
The audit committee has received the written disclosures and the
letter from the companys independent registered public
accounting firm required by applicable requirements of the
Public Company Accounting Oversight Board regarding the
independent registered public accounting firms
communications with the audit committee concerning independence,
and has discussed with the independent registered public
accounting firm its independence.
The audit committee further discussed with the companys
independent registered public accounting firm the overall scope
and plans for its audits. The audit committee meets periodically
with the independent registered public accounting firm, with and
without management present, to discuss the results of the
independent registered public accounting firms
examinations and evaluations of the companys internal
controls, and the overall quality of the companys
financial reporting.
The Sarbanes-Oxley Act of 2002 and the auditor independence
rules of the SEC require all issuers to obtain pre-approval from
their respective audit committees in order for their independent
registered public accounting firms to provide professional
services without impairing independence. As such, the audit
committee has a policy and has established procedures by which
it pre-approves all audit and other permitted professional
services to be provided by the companys independent
registered public accounting firm. From time to time, the
company may desire additional permitted professional services
for which specific pre-approval is obtained from the audit
committee before provision of such services commences. The audit
committee has considered and determined that the provision of
the services other than audit services referenced above is
compatible with maintenance of the auditors independence.
1 This
section is not soliciting material, is not deemed
filed with the SEC and is not to be incorporated by
reference in any filing of the company under the Securities Act
of 1933, as amended (the Securities Act), or the
Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
19
In reliance on the reviews and discussions referred to above,
the audit committee recommended to the board of directors that
the audited financial statements and disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations be included in the
Annual Report on
Form 10-K
for the year ended December 31, 2008 and be filed with the
SEC.
The foregoing report is provided by the undersigned members of
the audit committee.
Thomas Weatherford, Chairperson
Irwin Federman
Amal M. Johnson
Thomas J. Riordan
20
Our compensation committee reviews and recommends our Policies
and Practices relating to the compensation and benefits of our
officers and employees. Our compensation committee, in
consultation with our chief executive officer, or our CEO, and
our board of directors and our audit committee with respect to
our CEOs compensation, decides how much cash compensation
should be part of each of our officers total compensation
by benchmarking to a peer group of companies, which we refer to
as our Peer Group Companies, and considering the relative
importance of short-term incentives. In addition, our
compensation committee, in consultation with our CEO, makes
recommendations to our board of directors regarding equity-based
compensation to align the interests of our management with
shareholders, considering each named executive officers
equity holdings. Our compensation committee also manages the
granting of options to purchase our ordinary shares and other
awards under our Global Share Incentive Plan (2006). Our
compensation committee will review and evaluate, at least
annually, our incentive compensation plans. All members of our
compensation committee are independent under the applicable
rules and regulations of the SEC, the NASDAQ Stock Market and
the U.S. Internal Revenue Service.
Our compensation committee has reviewed and discussed the
Compensation Discussion and Analysis, or CD&A, for the year
ended December 31, 2008 with management. In reliance on the
reviews and discussion referred to above, our compensation
committee recommended to our board of directors, and our board
of directors has approved, that the CD&A be included in the
proxy statement for the year ended December 31, 2008 for
filing with the SEC.
The foregoing report is provided by the undersigned members of
our compensation committee.
Rob S. Chandra, Chairperson
Irwin Federman
Amal Johnson
2 This
section is not soliciting material, is not deemed
filed with the SEC and is not to be incorporated by
reference in any filing of the company under the Securities Act
of 1933, as amended (the Securities Act), or the
Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
21
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Objectives
We invest our resources to grow our business in a manner that
will increase shareholder value. To further this objective, our
compensation committee oversees our compensation program to
support and reward the achievement of our financial goals and to
promote the attainment of other key business objectives. In
order to conduct our business effectively, we must attract,
motivate and retain highly qualified executive officers. Our
compensation program is designed to reward high performance and
innovation, to promote accountability and to ensure that
executive interests are aligned with the interests of our
shareholders.
Our named executive officers for 2008 were Eyal Waldman,
chairman of our board of directors, CEO and president; Michael
Gray, chief financial officer; Marc Sultzbaugh, vice president
worldwide sales; Michael Kagan, vice president architecture; and
Shai Cohen, vice president operations and engineering.
Mr. Kagan was promoted to chief technology officer and vice
president architecture in January 2009.
Our executive compensation program has three primary components:
(i) base compensation or salary, (ii) annual cash
bonuses and (iii) stock option awards. Our program is
designed to provide incentives and rewards for both our
short-term and long-term performance, and is structured to
motivate the companys named executive officers to meet our
strategic objectives, thereby maximizing total return to
shareholders. In addition, we provide our named executive
officers with benefits that we also generally make available to
all salaried employees in the geographic location where they are
based.
Our executive compensation program is administered by our
compensation committee, which is comprised of three independent
members of, and reports to, our board of directors. Operating
under its charter, our compensation committee reviews, in
consultation with management and the board of directors, and
evaluates the compensation plans, policies and programs of the
company. In addition, our compensation committee reviews and
recommends to our audit committee and board of directors the
approval of our CEOs compensation (including base salary,
cash bonuses and stock option grants). Our compensation
committee also annually evaluates and approves certain elements
of our other named executive officers compensation. These
annual evaluations include: (i) consideration of the
current levels and components of compensation paid to our named
executive officers, (ii) consideration of the mix of cash
incentives and long-term equity awards and (iii) a review
of compensation paid by our Peer Group Companies conducted by
our compensation committee (and our board of directors and audit
committee, with respect to our CEOs compensation), as
described below, to executives in positions comparable to those
held by our named executive officers. In 2008, our board of
directors approved the amount and terms of stock option grants
to our named executive officers based on the recommendation of
our compensation committee and CEO.
In making compensation decisions, our compensation committee and
board of directors reference third-party surveys that provide
compensation data. Compensation surveys allow our compensation
committee and board of directors to be better informed in
determining the key elements of our compensation program. Base
salary increases for our named executive officers that were
implemented in 2008 were determined by our compensation
committee in late 2007 after reviewing salary surveys prepared
by Radford Surveys + Consulting, an Aon Consulting Company, or
Radford, for named executive officers in the United States and
Tali Atzmon for named executive officers in Israel. To determine
competitive bonus and equity compensation levels in 2008, our
compensation committee and board of directors utilized data from
the Radford Executive Survey U.S., an independent
third-party national compensation survey covering more than
1,100 high-tech companies in the United States, and the Radford
International Survey Israel, an independent
third-party survey of compensation practices by high-tech
companies in Israel, which, together, we refer to as the Radford
Surveys. The industry data from the Radford Surveys consists of
salaries and other compensation paid by companies to executives
in positions comparable to those held by our named executive
officers. Specifically, we reviewed data on named executive
officer positions in the United States from the Radford
Executive Survey U.S. and for positions in
Israel from the Radford International Survey Israel.
In reviewing the data from the Radford Surveys, we focused on
compensation data for the 25th, 50th and
75th percentiles of our Peer Group Companies, which
participate in the Radford Surveys and are similar to us with
respect to industry sector, revenue, market capitalization and
headcount or operate in industry sectors in which we
22
typically compete for senior management talent. For 2008, our
Peer Group Companies in the Radford Executive Survey
U.S. consisted of the following:
|
|
|
3PAR, Inc.
|
|
Microtune, Inc.
|
Actel Corp.
|
|
Mindspeed Technologies, Inc.
|
BigBand Networks, Inc.
|
|
Monolithic Power Systems, Inc.
|
California Micro Devices Corp.
|
|
NetLogic Microsystems, Inc.
|
Cirrus Logic, Inc.
|
|
NetScout Systems, Inc.
|
Cray, Inc.
|
|
Occam Networks, Inc.
|
Digi International, Inc.
|
|
Pericom Semiconductor Corp.
|
EMCORE Corp.
|
|
PLX Technology, Inc.
|
Endwave Corp.
|
|
Rambus, Inc.
|
Entropic Communications, Inc.
|
|
ShoreTel, Inc.
|
Exar Corp.
|
|
Tessera Technologies, Inc.
|
Ikanos Communications, Inc.
|
|
ZiLOG, Inc.
|
Ixia
|
|
|
Our Peer Group Companies within the Radford International
Survey Israel consisted of the following:
|
|
|
Applied Materials, Inc.
|
|
Marvell Technology Group Ltd.
|
BMC Software, Inc.
|
|
Polycom, Inc.
|
Broadcom Corporation
|
|
Qualcomm Incorporated
|
Cadence Design Systems, Inc.
|
|
Sandisk Corporatoin
|
Conexant Systems, Inc.
|
|
Tessera Technologies, Inc.
|
Dune Networks
|
|
Websense, Inc.
|
KLA-Tencor Corporation
|
|
Wintegra
|
Kulicke And Soffa Industries, Inc.
|
|
Zoran Corporation
|
In addition, our compensation committee and board of directors
reference applicable guidelines from RiskMetrics Group, an
influential proxy voting service, with respect to stock option
grants. RiskMetrics Group guidelines provide that the gross
number of equity awards granted in a given year, when divided by
the shares of a company outstanding at the end of the fiscal
year, should not exceed a certain percentage, which the
RiskMetrics Group refers to as the burn rate. Our
compensation committee reviewed burn rate data from the
RiskMetrics Group U.S. Corporate Governance Policy 2009
Updates to compare the companys historical annual equity
burn rate to the RiskMetrics Group guidelines for
Semiconductor and Semiconductor Equipment companies.
The RiskMetrics Group guidelines establish a maximum annual
burn rate percentage of 7.79% for non-Russell 3000
Index companies in the Semiconductor and Semiconductor
Equipment industry. Our compensation committee believed it
was appropriate to retain the flexibility to make option grants
in the future by setting our annual equity burn rate
target at 4% to 5%, which is below the maximum established by
the RiskMetrics Group guidelines.
During 2008, our compensation committee engaged Radford as an
independent compensation consultant. Radford reports directly to
our compensation committee. Radford also provided services to
management at the direction of our compensation committee during
2008 and in providing these services met with management
personnel. Our compensation committee decided to engage a
compensation consultant to ensure that our compensation
practices were competitive and allowed us to continue to attract
and retain talented executives. During 2008, the compensation
consultant advised our compensation committee regarding our
compensation philosophy
23
and strategy, the identification of market data sources and peer
group companies, compensation assessment, equity compensation
and compensation plan structure.
Throughout the fiscal year, our CEO provides our compensation
committee with his assessment of the performance levels of the
company and our named executive officers (other than himself)
and his recommendations with respect to compensation of our
named executive officers (other than himself). Our compensation
committee believes it is important to consider and evaluate our
CEOs input on matters concerning compensation of other
named executive officers. The compensation committee believes
that our CEOs input regarding our other named executive
officers individual performances, as well as the expected
contributions and future potential of each of them, is useful
because each other named executive officer reports directly to
our CEO, and our CEO interacts with our other named executive
officers on an ongoing basis throughout the year.
While our compensation committee considers our CEOs
recommendations, our compensation committee is responsible for
setting the base salary and annual cash bonus for our executive
officers, other than our CEO, and for recommending to the Board
of Directors for final approval the annual stock option awards
made to our executive officers. Our compensation committee also
makes all final recommendations on base salary, cash bonus
awards and stock option compensation matters concerning our CEO
to our audit committee and to our board of directors, which
finally approves the compensation of our CEO. In addition, under
Israeli law, our CEOs compensation is subject to approval
by the companys shareholders at each annual general
meeting.
Compensation
Philosophy and Objectives
Our compensation philosophy includes compensating our executives
at levels that are competitive with the our Peer Group Companies
in order to attract and retain talented executives and to
provide equity incentives that align the interests of our
executives with the interests of our shareholders.
Since our initial public offering, we have paid base salaries to
our named executive officers that were less than base salaries
paid to executive officers of our Peer Group Companies because
we believed that the lower base salaries we paid were partially
offset by the potential value of stock option grants awarded to
our named executive officers and, to a lesser extent, by annual
cash bonus awards earned by our named executive officers.
As we have grown and matured as a public company, our
compensation objectives continue to evolve. In 2008, we provided
cash compensation to our named executive officers at levels that
were lower than the cash compensation paid by our Peer Group
Companies and equity compensation for our named executive
officers at levels that were higher than our Peer Group
Companies. Base salaries for our named executive officers were
increased in 2008 so that they would approximate the
50th percentile for named executive officers in the United
States and between the 50th and 75th percentile for
named executive officers in Israel, in each case, as compared to
the companies participating in the salary surveys for each
region reviewed by our compensation committee in November 2007.
Bonus awards for 2008 were set in reference to the
25th percentile of our Peer Group Companies. In addition to
base salary and cash bonuses, we continue to believe that the
opportunity to share in the creation of shareholder value
through equity compensation is critical for retaining our
executive officer talent and for providing appropriate
incentives to drive our companys performance and to ensure
that we maximize long-term shareholder value. As such, our
equity compensation was set to approximate the
75th percentile of our Peer Group Companies.
Historically, we have sought to align the interests of our
executives and other employees with the interests of our
shareholders by granting our executives and other employees
stock options, which will not have any value unless our share
price increases. Our compensation committee has considered from
time to time using other equity incentive awards, such as
restricted stock units, that have value regardless of whether
our share price increases or decreases from the date we make any
such awards. Our compensation committee believes that restricted
stock units can provide value certainty in a turbulent economic
environment while continuing to align the interests of our
executives and other employees with the interests of our
shareholders. Our compensation committee expects to continue to
consider awarding restricted stock units when it determines such
awards may be necessary as an incentive to motivate and retain
our executives and other employees
and/or may
provide a better alignment of the interests of our executives
and other employees with those of our shareholders.
24
In order to provide our named executive officers security so
that they can remain focused on our business in the event of a
potential change in control, we have entered into executive
severance benefits agreements with each of our named executive
officers that provide for certain payments and other severance
benefits in the event their service is terminated following a
change in control of our company. We believe that these
executive severance benefits agreements help attract and retain
talented executives by ensuring their efforts remain focused on
our shareholders long term interests rather than the
individual executives short term employment-related
interests.
We believe that the cash compensation (including base salary and
annual cash bonus awards) and stock option grants we provide,
along with the security provided by executive severance benefits
agreements, create a competitive total compensation package for
our named executive officers in light of the compensation
packages provided by our Peer Group Companies.
Base
Salary
We design base salaries to fall within a competitive range of
the companies against which we compete for executive talent. Our
compensation committee established the 2008 base salary
increases for our named executive officers in November 2007
after reviewing salary surveys prepared by Radford for named
executive officers in the United States and Tali Atzmon for
named executive officers in Israel. In 2008, the base salaries
of our named executive officers fell near the
50th percentile of the companies that participated in these
surveys. The final decision regarding base salary for an
individual named executive officer reflects many inputs,
including our CEOs assessment of the named executive
officers performance, the level of responsibility of the
named executive officer, and competitive pay levels based on
salaries paid to employees with similar roles and
responsibilities at our Peer Group Companies.
Our CEOs base salary is the highest base salary at the
company because he has the central management role, which is
consistent with our review of CEO salaries in the salary surveys
referenced above. Our Chief Financial Officers base salary
is higher than that of other named executive officers because of
the importance of retaining consistency and quality financial
expertise as a public company, which is also consistent with our
review of chief financial officer salaries in the salary surveys
referenced above. The base salaries of other named executive
officers are determined based on their overall duties and
responsibilities within the company, their experience and
qualifications and the base salaries paid by the companies
participating in the salary surveys for similar roles.
In late 2007, our CEO completed his focal review of each of our
named executive officers and recommended base salary increases
for each for 2008 to our compensation committee. Our
compensation committee then approved the base salaries for 2008
based on our CEOs recommendations for each of the named
executive officers other than himself. Our compensation
committees determination was based largely on the average
salaries in the 50th percentile in the United States and
between the 50th and 75th percentiles in Israel, in
each case, as compared to the companies that participate in the
salary surveys referenced above for positions similar to the
positions held by each of our named executive officers. Based on
the salary surveys, our compensation committee provided an
average salary increase of 7% for employees located in the
United States and 10% for employees located in Israel. With
input from our CEO (except with respect to himself), our
compensation committee determined the base salary increase
amount for each individual named executive officers base
salary following the process described above.
Mr. Grays base salary was increased 7.9% to $230,000;
Mr. Kagans base salary was increased 8.5% to
$161,030; Mr. Sultzbaughs base salary was increased
10% to $220,000; and Mr. Cohens base salary was
increased 12.3% to $171,699. The base salaries reported for
Messrs. Kagan and Cohen are converted from New Israeli
Shekels to U.S. dollars using the 2008 average exchange
rate of 3.54 Shekels to 1 U.S. dollar.
In late 2007, our compensation committee also considered the
base salary of our CEO and, after determining that his base
salary was considerably lower than the base salaries of other
CEOs at the companies that participated in the salary
surveys reviewed by our compensation committee, increased our
CEOs base salary 30% to $325,000.
We began paying our named executive officers their 2008 adjusted
base salary on April 1, 2008.
25
Annual
Discretionary Cash Bonus Program
We structure our annual discretionary cash bonus award program
to reward named executive officers and employees for our
companys successful performance and for each
individuals contribution to that performance. We initiated
our annual discretionary cash bonus program in 2005 and since
then, annual cash bonuses have not constituted a significant
portion of our named executive officers and
employees total compensation because we primarily rely on
stock options to provide incentives to our named executive
officers and employees.
Under our annual discretionary cash bonus award program, our
employees in good performance standing, including our named
executive officers, are eligible to receive an award from a
bonus pool in an amount that is determined annually. The annual
bonus pool amount is determined by our compensation committee
based on its assessment of our achievement of our operating plan
and company profitability. For 2008, the aggregate discretionary
cash bonus pool was set at 10% of our fiscal year 2008 operating
income, as measured on a GAAP basis. After consultation with our
CEO, the compensation committee approved the amount of each
named executive officers bonus award from this pool. The
amount of the bonus award to each named executive officer is not
tied to individual performance objectives. No specific
performance targets for our named executive officers were
established in connection with the determination of the
aggregate amount of the bonus pool for the year ended
December 31, 2008, or the allocation of a portion of the
pool to our named executive officers.
Our compensation committee then determined the allocation of the
bonus pool based, in part, on information gathered from the
Radford Executive Survey U.S. (no data was
available from the Radford International Survey
Israel) which indicated that the 25th percentile of our
Peer Group provide target annual bonus opportunities ranging
from 30% to 45% of base salaries for the named executive officer
positions. Consistent with our approach of placing a greater
emphasis on equity compensation, our compensation committee
awarded bonuses under the companys annual discretionary
cash bonus compensation program in February 2009 for services
performed in the year ended December 31, 2008 that ranged
from 20% to 23% of each named executive officers base
salary. Specifically, Mr. Gray was awarded $47,000, which
represents 20% of his base salary; Mr. Kagan was awarded
$37,000, which represents 23% of his base salary;
Mr. Sultzbaugh was awarded $47,000, which represents 21% of
his base salary; and Mr. Cohen was awarded $37,000, which
represents 22% of his base salary. We paid our U.S. and Israeli
executive officers their bonuses on February 27, 2009 and
March 1, 2009, respectively. Payments under the annual
discretionary cash bonus program are contingent upon continued
employment through the actual date of payment.
Also, subject to shareholder approval at our 2009 annual general
meeting of shareholders, upon the recommendation of our
Compensation Committee and the approval of our audit committee,
on January 26, 2009, our Board of Directors approved a cash
bonus to our CEO, Eyal Waldman, in the amount of $162,500, which
represents 50% of his base salary, for services performed in the
year ended December 31, 2008 pursuant to the Companys
annual discretionary cash bonus compensation program. Since no
annual bonus data was available from the Radford International
Survey Israel, this amount was determined by our
compensation committee, audit committee and board of directors
largely based on data from the Radford Executive
Survey U.S., which indicates that the
25th percentile of our Peer Group Companies provide a
target bonus opportunity of 75% of base salary for chief
executive officers.
Stock
Option Awards; Policies with Respect to Equity Compensation
Awards
As described above, stock options are the only type of equity
award we currently grant to our named executive officers from
our equity incentive plan. Although we have not done so to date,
we have the ability under our equity incentive plan to grant
other types of equity incentive awards, including restricted
stock units, to our named executive officers and other plan
participants. These other types of awards may have some value
regardless of whether our share price increases or decreases
from the date we make any such awards.
During 2008, we granted stock options to our named executive
officers in order to align their interests with our goal of
maximizing shareholder value through increases in the price per
share of our ordinary shares. We also believe that our 2008
stock option grants to our named executive officers provide them
with long-term incentives that will aid in retaining executive
talent by providing opportunities to be compensated through the
companys performance and rewarding executives for creating
shareholder value over the long-term. Our compensation
26
committee believes that granting stock options
and/or other
equity awards on an annual basis to existing named executive
officers and employees provides an important incentive to retain
executives and employees and rewards them for short-term company
performance while also creating long-term incentives to sustain
that performance. We may also make grants of stock options at
the discretion of our board of directors and the compensation
committee in connection with the hiring or promotion of new
named executive officers.
We grant stock options with exercise prices equal to the closing
price of our ordinary shares on the date of the grant;
therefore, the options only have value if our share price
increases. Stock option grants to newly hired employees,
including our named executive officers, generally vest over four
years, with 25% of the shares subject to the grant vesting on
the one-year anniversary of employment, and 1/48th of the
shares vesting during each subsequent month of employment.
Annual stock option grants made to existing employees, including
named executive officers, generally vest over four years, with
25% of the shares subject to the grant vesting on the one-year
anniversary of the grant date, and 1/48th of the shares
vesting during each subsequent month of employment. We set these
vesting schedules in order to provide an incentive to our
employees, including our named executive officers, to continue
their employment with us over the long term.
During 2008, we determined the size of each option grant to a
named executive officer after reviewing long-term incentive
compensation data from the Radford Surveys and after considering
the role of each named executive officer within our company, the
criticality of their function within the organization, the named
executive officers current equity position from previous
stock option grants and the overall burn rate goal for our
equity incentive program of 4% to 5%, as described previously.
Since long-term incentive compensation levels fluctuate from
year to year (depending on each companys granting
patterns, valuation assumptions, and stock price) and given the
relatively low trading price of our ordinary shares during 2008,
we reviewed the Radford Survey long-term incentive information
from our Peer Group Companies under both a value approach, which
is based on the fair value of long-term incentive awards, and a
percentage of common shares outstanding approach, which compares
the number of shares subject to each long-term incentive award
to the number of shares outstanding for each company.
In 2008, the initial determinations with respect to option
grants were made by our compensation committee in consultation
with our CEO (except for his own grant). Our compensation
committee and our CEO (except with respect to his own grant)
then recommended the size of each option grant to our board of
directors, which approved each grant on December 18, 2008
with an effective date of grant of December 26, 2008. The
board of directors instituted a delay between the date of
approval and the date of grant to allow time for a tax ruling
requested for Israeli employees to become effective prior to the
grant being complete.
Using the methodology described above, our board of directors
granted our CEO an option to purchase 90,000 of our ordinary
shares. The CEOs option grant consists of a higher number
of our ordinary shares as compared to our other named executive
officers because of its retentive effect on our CEO, and because
we believe that our CEO has the most direct impact on creating
shareholder value. Our board of directors granted
Mr. Sultzbaugh an option to purchase 27,800 of our ordinary
shares based on similar grants made at our Peer Group Companies,
the low number of ordinary shares subject to in-the-money
options held by Mr. Sultzbaugh relative to our other named
executive officers and our burn rate goal. Our board of
directors granted Messrs. Gray, Kagan and Cohen options to
purchase 19,808, 22,588 and 19,113 of our ordinary shares based
on similar grants made at our Peer Group Companies, the number
of ordinary shares subject to in-the-money options held by each
named executive officer and our burn rate goal.
The company does not have any equity ownership guidelines that
require any of our directors or executive officers to hold a
stated number or fixed percentage of our ordinary shares.
Change of
Control Severance Arrangements
In November 2006, we entered into executive severance benefits
agreements with each of our named executive officers, some of
which were amended in 2008 to ensure compliance with, or
exemption from, Section 409A of the U.S. Internal Revenue
Code.
Each of the executive severance benefit agreements to which we
are a party provide that if the executives employment with
our company is terminated without cause or if the executive is
constructively terminated (as these
27
terms are defined in the agreements), in each case during the
12-month
period following a change of control (as defined in the
agreements) of our company, then the executive is entitled to
receive the following payments and benefits:
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Continuation of the named executive officers salary for
six months at a per annum rate of 120% of the executives
annual base salary in effect on the termination date.
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In the case of a named executive officer who resides in the
United States, if the named executive officer elects COBRA
coverage under our group health plan, payment for the cost to
continue COBRA coverage for the named executive officer and his
eligible dependents for up to 12 months following the
termination date.
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Accelerated vesting and immediate exercisability of the named
executive officers outstanding and unvested stock awards
as to 50% of the total number of unvested shares subject to such
outstanding and unvested stock option awards.
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We determined this amount prior to our initial public offering
by reference to the general practices of public companies in our
industry at that time.
The benefits payable under the severance agreements are in
addition to payments or other benefits, if any, that any named
executive officer who resides in Israel may be entitled to under
applicable Israeli law. Israeli law generally requires severance
pay equal to one months salary for each year of employment
upon the retirement, death or termination without cause (as
defined in the Israeli Severance Pay Law) of an employee. To
satisfy this requirement, we make contributions on behalf of
most of our Israeli-based employees to a fund known as
Managers Insurance. This fund provides a combination of
pension plan, insurance and severance pay benefits to the
employee, giving the employee or his or her estate payments upon
retirement or death and securing the severance pay, if legally
entitled, upon termination of employment. Each full-time Israeli
employee, including each of our Israeli-based named executive
officers, is entitled to participate in the plan, and each
employee who participates contributes an amount equal to 5% of
his or her salary to the pension plan and we contribute between
13.33% and 15.83% of his or her salary (consisting of 5% to the
pension plan, 8.33% for severance payments and up to 2.5% for
insurance).
Within the context of our compensation philosophy, the
compensation committee believes the terms of our executive
severance agreements with our named executive officers will
encourage their continued attention and dedication to their
assigned duties through and following any change of control of
our company. We believe that the terms of these agreements will
further ensure that each of our named executive officers will
continue to remain focused on the long-term objective of
delivering shareholder value during and following a change of
control event if they are assured that their long-term
employment interests are reasonably provided for with a
competitive market severance arrangement. We believe that these
executive severance agreements thus help ensure the best
interests of our shareholders.
The potential payments under the executive severance benefits
agreements as of December 31, 2008 are set forth below
under the heading Potential Payments Following a Change in
Control.
Perquisites
Historically, from time to time, our compensation committee and
board of directors have provided certain of our named executive
officers with perquisites that we believe are reasonable. We do
not view perquisites as a significant element of our
comprehensive compensation structure, but do believe they can be
useful in attracting, motivating and retaining the executive
talent for which we compete. We believe that these additional
benefits may assist our executive officers in performing their
duties and provide time efficiencies for our executive officers
in appropriate circumstances, particularly when we require
frequent or lengthy travel, and we may consider providing
additional perquisites in the future. In 2008, our named
executive officers received the perquisites set forth in the
28
table below, which our compensation committee determined were
appropriate in order to facilitate each named executive
officers efforts on behalf of our company while at our
California headquarters.
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Name
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Perquisite
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Eyal Waldman
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Housing and housing-related expense reimbursement
Car expense reimbursement
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Michael Gray
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Select travel reimbursement
Housing-related expense reimbursement
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Marc Sultzbaugh
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Housing and housing-related expense reimbursement
Car expense reimbursement
California income tax reimbursement
Select travel reimbursement
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The table above does not include automobile-related expense
reimbursement, insurance reimbursement, retirement fund
contributions, severance fund contributions and education fund
contributions, all of which are provided to all of our
employees, including our named executive officers, who are based
in Israel.
In the future, we may provide additional perquisites to our
executive officers as an element of their overall compensation
structure. We do not expect these perquisites to be a
significant element of our compensation structure. All future
practices regarding perquisites will be approved and subject to
periodic review by our compensation committee
and/or board
of directors.
Tax
Considerations
Section 162(m) of the U.S. Internal Revenue Code,
establishes a limitation on the deductibility of compensation
payable in any particular tax year to our named executive
officers. Section 162(m) generally provides that
publicly-held companies cannot deduct compensation paid to
certain named executive officers to the extent that such
compensation exceeds $1 million per officer. Compensation
that is performance-based compensation within the
meaning of the U.S. Internal Revenue Code does not count toward
the $1 million limit. While the compensation committee
considers Section 162(m) in making its compensation
decisions, the deductibility of compensation under
Section 162(m) is not a definitive or dispositive factor in
the compensation committees determination process. The
compensation committee will monitor the level of compensation
paid to the companys executive officers and may act in
response to the provisions of Section 162(m).
During 2008, our compensation committee and board of directors
also considered the impact of tax regulations in Israel with
respect to stock option grants and delayed the grant of options
approved on December 18, 2008 until December 26, 2008
to allow time for a tax ruling in Israel that provides for lower
tax rates on certain stock options to become effective.
29
2008
Summary Compensation Table
The following table summarizes the compensation awarded to,
earned by, or paid to each named executive officer for the years
ended December 31, 2008, 2007 and 2006.
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Option Awards
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All Other
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Name and Principal Position
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Year
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Salary ($)
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Bonus ($)
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($)(1)
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Compensation ($)
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Total ($)
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(a)
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(b)
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(c)
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(d)
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(f)
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(i)
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(j)
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Eyal Waldman
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2008
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307,643
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162,500
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291,916
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112,620
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(2)
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874,679
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President & Chief
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2007
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250,000
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100,000
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212,104
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55,850
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(3)
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617,954
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Executive Officer
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2006
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225,000
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50,000
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38,573
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(4)
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313,573
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Michael Gray
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2008
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225,794
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47,000
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121,711
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5,110
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399,615
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Chief Financial
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2007
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213,200
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34,200
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53,449
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300,849
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Officer
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2006
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205,000
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20,317
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29,919
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255,236
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Marc Sultzbaugh
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2008
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215,463
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47,000
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303,684
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39,601
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(5)
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605,748
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Vice President
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2007
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185,192
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32,100
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13,203
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25,078
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(6)
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255,573
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Worldwide Sales
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2006
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164,975
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20,027
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(7)
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2,843
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7,200
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195,045
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Michael Kagan(12)
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2008
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182,326
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37,000
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245,202
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41,668
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(8)
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506,196
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Vice President Architecture
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2007
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136,251
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24,000
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215,562
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34,986
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(9)
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410,799
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2006
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131,657
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15,000
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5,548
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27,623
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(10)
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179,828
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Shai Cohen(12)
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2008
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180,737
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37,000
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86,748
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43,806
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(11)
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348,292
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Vice President Operations and Engineering
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(1) |
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The value of option awards granted to our named executive
officers is the compensation cost recognized for financial
statement reporting purposes for the fiscal years 2008, 2007 and
2006 in accordance with the provisions of Statement of Financial
Accounting Standards No. 123R (SFAS 123R)
. See Note 11 of the consolidated financial statements in
the companys Annual Report on
Form 10-K
for the year ended December 31, 2008 regarding assumptions
underlying the valuation of equity awards and the calculation
method. |
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(2) |
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Includes $39,462 in housing and housing-related expense
reimbursements, $21,663 contributed to a severance fund, which
is mandated by Israeli Law, $13,003 contributed to a retirement
fund on behalf of Mr. Waldman, $19,504 contributed to an
employee education fund on behalf of Mr. Waldman, $17,428
automobile related expense reimbursement, $1,560 insurance
reimbursement. |
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(3) |
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Includes $20,998 contributed to a severance fund, which is
mandated by Israeli Law, $19,035 contributed to a retirement
fund on behalf of Mr. Waldman, $9,393 contributed to an
employee education fund on behalf of Mr. Waldman and $5,486
in housing and housing-related expense reimbursement. |
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(4) |
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Includes $18,690 contributed to a severance fund, which is
mandated by Israeli Law, $16,517 contributed to a retirement
fund on behalf of Mr. Waldman and $3,366 contributed to an
employee education fund on behalf of Mr. Waldman. |
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(5) |
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Includes automobile related expense reimbursement of $8,214,
housing and housing related expense reimbursement of $16,741,
select travel reimbursement of $9,993 and California tax
equalization payments of $4,653. |
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(6) |
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Includes automobile related expense reimbursement of $7,161,
housing and housing related expense reimbursement of $9,186,
select travel reimbursement of $8,041 and California tax
equalization payments of $690. |
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(7) |
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Mr. Sultzbaugh was appointed to vice president worldwide
sales in March 2007. His bonus earned in 2006 was related to
meeting sales objectives he achieved in 2005 prior to his
appointment as vice president worldwide sales. |
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(8) |
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Includes $14,277 contributed to a severance fund, which is
mandated by Israeli Law, $8,430 contributed to a retirement fund
on behalf of Mr. Kagan, $5,078 for automobile related
expenses pursuant to the companys automobile leasing
program, $12,855 contributed to an employee education fund on
behalf of Mr. Kagan and $1,028 insurance reimbursement. Mr.
Kagan was promoted to chief technology officer and vice
president architecture in January 2009. |
30
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(9) |
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Includes $11,308 contributed to a severance fund, which is
mandated by Israeli Law, $6,813 contributed to a retirement fund
on behalf of Mr. Kagan, $5,842 for automobile related
expenses pursuant to the companys automobile leasing
program and $10,218 contributed to an employee education fund on
behalf of Mr. Kagan. |
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(10) |
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Includes $8,293 contributed to a severance fund, which is
mandated by Israeli law, $6,226 contributed to a retirement fund
on behalf of Mr. Kagan, $5,637 for automobile related
expenses pursuant to the companys automobile leasing
program and $7,467 contributed to an employee education fund on
behalf of Mr. Kagan. |
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(11) |
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Includes $15,188 contributed to a severance fund, which is
mandated by Israeli Law, $9,116 contributed to a retirement fund
on behalf of Mr. Cohen, $4,734 for automobile related
expenses pursuant to the companys automobile leasing
program, $13,674 contributed to an employee education fund on
behalf of Mr. Cohen and $1,094 insurance reimbursement. |
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(12) |
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Amounts reported for Messrs. Kagan and Cohen in 2008 are
converted from New Israeli Shekels to U.S. dollars using the
2008 average exchange rate of 3.54 Shekels to 1 U.S. dollar. |
2008
Grants of Plan-Based Awards
The table below sets forth information regarding grants of
plan-based awards made to our named executive officers during
the year ended December 31, 2008.
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All Other
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Option Awards:
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Date of Board or
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Number of
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Grant Date
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Compensation
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Securities
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Exercise or Base
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Fair Value of
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Committee
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Underlying
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Price of Option
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Stock and
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Action
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Options
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Awards
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Option Awards
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Name
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Grant Date
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(1)
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(#)
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|
|
($/Sh)
|
|
|
($) (2)
|
|
(a)
|
|
(b)
|
|
|
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
|
Eyal Waldman
|
|
|
12/26/2008
|
|
|
|
12/18/2008
|
|
|
|
90,000
|
|
|
|
8.23
|
|
|
|
448,659
|
|
Michael Gray
|
|
|
12/26/2008
|
|
|
|
12/18/2008
|
|
|
|
19,808
|
|
|
|
8.23
|
|
|
|
98,745
|
|
Marc Sultzbaugh
|
|
|
12/26/2008
|
|
|
|
12/18/2008
|
|
|
|
27,800
|
|
|
|
8.23
|
|
|
|
138,586
|
|
Michael Kagan
|
|
|
12/26/2008
|
|
|
|
12/18/2008
|
|
|
|
22,588
|
|
|
|
8.23
|
|
|
|
112,603
|
|
Shai Cohen
|
|
|
12/26/2008
|
|
|
|
12/18/2008
|
|
|
|
19,113
|
|
|
|
8.23
|
|
|
|
95,280
|
|
|
|
|
(1) |
|
Options were approved by our board of directors or compensation
committee on December 18, 2008 with an effective date of
grant of December 26, 2008 to allow time for a tax ruling
in Israel to become final. |
|
(2) |
|
Represents the grant date fair value of each option on the date
of grant calculated in accordance with the provisions of SFAS
123R. See Note 11 of the consolidated financial statements
in the companys Annual Report on
Form 10-K
for the year ended December 31, 2008 regarding assumptions
underlying the valuation of equity awards and the calculation
method. |
31
2008
Outstanding Equity Awards At Fiscal Year-End Table
The following table provides information on the stock options
held by each of our named executive officer as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
Vesting
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
|
Commencement
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Date
|
|
|
(#)
|
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
Date
|
|
(a)
|
|
|
|
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
|
(f)
|
|
|
Eyal Waldman
|
|
|
10/26/2006
|
|
|
|
88,094
|
|
|
|
26,190
|
|
|
|
9.19
|
|
|
|
10/26/2016
|
|
|
|
|
12/31/2007
|
|
|
|
12,395
|
|
|
|
37,183
|
|
|
|
18.22
|
|
|
|
12/31/2007
|
|
|
|
|
12/26/2008
|
|
|
|
|
|
|
|
90,000
|
|
|
|
8.23
|
|
|
|
12/26/2018
|
|
Michael Gray
|
|
|
10/15/2004
|
|
|
|
134,285
|
|
|
|
|
|
|
|
3.5
|
|
|
|
10/15/2014
|
|
|
|
|
12/8/2005
|
|
|
|
10,000
|
(3)
|
|
|
|
|
|
|
6.65
|
|
|
|
1/28/2015
|
|
|
|
|
10/26/2006
|
|
|
|
22,857
|
(3)
|
|
|
|
|
|
|
9.19
|
|
|
|
10/26/2016
|
|
|
|
|
12/31/2007
|
|
|
|
9,250
|
|
|
|
27,750
|
|
|
|
18.22
|
|
|
|
12/31/2017
|
|
|
|
|
12/26/2008
|
|
|
|
|
|
|
|
19,808
|
|
|
|
8.23
|
|
|
|
12/26/2018
|
|
Marc Sultzbaugh
|
|
|
2/28/2001
|
|
|
|
11,714
|
|
|
|
|
|
|
|
1.3
|
|
|
|
2/28/2011
|
|
|
|
|
6/19/2002
|
|
|
|
2,510
|
|
|
|
|
|
|
|
1.47
|
|
|
|
6/19/2012
|
|
|
|
|
12/28/2003
|
|
|
|
3,428
|
|
|
|
|
|
|
|
2.63
|
|
|
|
12/28/2013
|
|
|
|
|
12/3/2004
|
|
|
|
2,714
|
|
|
|
|
|
|
|
3.85
|
|
|
|
12/3/2014
|
|
|
|
|
6/2/2005
|
|
|
|
4,000
|
(3)
|
|
|
|
|
|
|
5.08
|
|
|
|
6/2/2015
|
|
|
|
|
12/8/2005
|
|
|
|
5,295
|
(3)
|
|
|
|
|
|
|
6.65
|
|
|
|
1/28/2015
|
|
|
|
|
10/26/2006
|
|
|
|
5,857
|
(3)
|
|
|
|
|
|
|
9.19
|
|
|
|
10/26/2016
|
|
|
|
|
4/13/2007
|
|
|
|
41,666
|
|
|
|
58,334
|
|
|
|
14.95
|
|
|
|
4/13/2017
|
|
|
|
|
12/31/2007
|
|
|
|
8,000
|
|
|
|
24,000
|
|
|
|
18.22
|
|
|
|
12/31/2017
|
|
|
|
|
12/26/2008
|
|
|
|
|
|
|
|
27,800
|
|
|
|
8.23
|
|
|
|
12/26/2018
|
|
Michael Kagan
|
|
|
2/28/2001
|
|
|
|
65,714
|
|
|
|
|
|
|
|
1.3
|
|
|
|
2/28/2011
|
|
|
|
|
6/19/2002
|
|
|
|
28,571
|
|
|
|
|
|
|
|
1.47
|
|
|
|
6/19/2012
|
|
|
|
|
12/8/2005
|
|
|
|
3,011
|
|
|
|
2,946
|
|
|
|
6.65
|
|
|
|
12/8/2015
|
|
|
|
|
10/26/2006
|
|
|
|
61,905
|
|
|
|
52,380
|
|
|
|
9.19
|
|
|
|
10/26/2016
|
|
|
|
|
12/31/2007
|
|
|
|
7,500
|
|
|
|
22,500
|
|
|
|
18.22
|
|
|
|
12/31/2017
|
|
|
|
|
12/26/2008
|
|
|
|
|
|
|
|
22,588
|
|
|
|
8.23
|
|
|
|
12/26/2018
|
|
Shai Cohen
|
|
|
2/28/2001
|
|
|
|
57,142
|
|
|
|
|
|
|
|
1.3
|
|
|
|
2/28/2011
|
|
|
|
|
6/19/2002
|
|
|
|
30,000
|
|
|
|
|
|
|
|
1.47
|
|
|
|
6/19/2012
|
|
|
|
|
12/28/2003
|
|
|
|
2,857
|
|
|
|
|
|
|
|
2.63
|
|
|
|
12/28/2013
|
|
|
|
|
12/31/2007
|
|
|
|
9,250
|
|
|
|
27,750
|
|
|
|
18.22
|
|
|
|
12/31/2017
|
|
|
|
|
12/26/2008
|
|
|
|
|
|
|
|
19,113
|
|
|
|
8.23
|
|
|
|
12/26/2018
|
|
|
|
|
(1) |
|
This option vests with respect to twenty-five percent (25%) of
the shares subject thereto on the first anniversary of the
vesting commencement date and with respect to 1/48th of the
shares subject to the option on each monthly anniversary of the
vesting commencement date thereafter. |
|
(2) |
|
Options are granted at an exercise price equal to the closing
market price per share on the date of grant. |
|
(3) |
|
This option vests with respect to twenty-five percent (25%) of
the shares subject thereto on the first anniversary of the
vesting commencement date and with respect to 1/48th of the
shares subject to the option on each monthly anniversary of the
vesting commencement date thereafter. This option may be
exercised prior to vesting with any unvested shares purchased
upon such exercise subject to repurchase by the company at the
original exercise price until such shares vest. |
32
2008
Option Exercises and Shares Vested Table
The following table summarizes share option exercises by our
named executive officers in 2008.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on Exercise
|
|
|
Exercise(1)
|
|
Name
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
Eyal Waldman
|
|
|
|
|
|
|
|
|
Michael Gray
|
|
|
50,000
|
|
|
|
682,904
|
|
Marc Sultzbaugh
|
|
|
12,858
|
|
|
|
193,806
|
|
Michael Kagan
|
|
|
44,042
|
|
|
|
576,195
|
|
|
|
|
(1) |
|
The value realized upon exercise is the difference between the
option exercise price and the market price of the underlying
shares at exercise multiplied by the number of shares covered by
the exercised option. |
Pension
Benefits
None of our named executive officers participate in or have
account balances in qualified or non-qualified defined benefit
plans sponsored by us.
Nonqualified
Deferred Compensation
None of our named executives participate in or have account
balances in non-qualified defined contribution plans or other
deferred compensation plans maintained by us.
Potential
Payments Following a Change of Control
The following table sets forth quantitative estimates of the
benefits to be received by each of our named executive officers
if his employment were terminated without cause or
constructively terminated (as these terms are defined in the
executive severance benefits agreements) on December 31,
2008, assuming that such termination occurred during the
12-month
period following a change of control (as such term is defined in
the executive severance benefits agreements) of our company.
Potential
Payments Following a Change of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli
|
|
|
Value of
|
|
|
|
|
|
|
Salary
|
|
|
COBRA
|
|
|
Severance
|
|
|
Accelerated
|
|
|
|
|
|
|
Continuation
|
|
|
Coverage
|
|
|
Benefits
|
|
|
Equity Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Eyal Waldman
|
|
|
195,000
|
|
|
|
7,296
|
|
|
|
243,750
|
|
|
|
|
|
|
|
446,046
|
|
Michael Gray
|
|
|
138,000
|
|
|
|
20,520
|
|
|
|
|
|
|
|
1,387
|
|
|
|
159,907
|
|
Marc Sultzbaugh
|
|
|
132,000
|
|
|
|
10,452
|
|
|
|
|
|
|
|
1,429
|
|
|
|
143,881
|
|
Michael Kagan
|
|
|
98,219
|
|
|
|
|
|
|
|
120,773
|
|
|
|
1,782
|
|
|
|
220,774
|
|
Shai Cohen
|
|
|
104,726
|
|
|
|
|
|
|
|
128,774
|
|
|
|
|
|
|
|
233,500
|
|
|
|
|
(1) |
|
The value of accelerated equity awards represents the aggregate
intrinsic value of each named executive officers unvested
options as of December 31, 2008. The intrinsic value with
respect to each option is the positive difference, if any,
between the aggregate exercise price of the option and the
aggregate fair market value of the ordinary shares subject to
the option as of December 31, 2008. The closing price of
our ordinary shares on December 31, 2008 was $7.86 per
share. |
33
Equity
Compensation Plan Information
The following table provides certain information with respect to
all of our equity compensation plans in effect as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Securities to be
|
|
|
|
|
|
Under Equity
|
|
|
|
Issued Upon
|
|
|
Weighted Average
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Reflected in
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
Column
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(a))(c)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
6,928,617
|
|
|
|
10.20
|
|
|
|
718,335
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,928,617
|
|
|
|
10.20
|
|
|
|
718,335
|
|
|
|
|
(1) |
|
Consists of 1999 United States Equity Incentive Plan, 1999
Israeli Share Option Plan, 2003 Israeli Share Option Plan and
2006 Global Incentive Share Plan. |
SECURITY
OWNERSHIP
Security
Ownership of Certain Beneficial Owners and Management
The following table provides information relating to the
beneficial ownership of our ordinary shares as of
February 28, 2009, by:
|
|
|
|
|
each shareholder known by us to own beneficially more than 5% of
our ordinary shares (based on information supplied in Schedules
13D and 13G filed with the SEC, as indicated);
|
|
|
|
each of our executive officers named in the summary compensation
table on page 29 (our principal executive officer, our
principal financial officer and our three other most highly
compensated executive officers);
|
|
|
|
each of our directors and nominees for director; and
|
|
|
|
all of our directors and executive officers as a group.
|
Beneficial ownership is determined according to the rules of the
SEC and generally means that a person has beneficial ownership
of a security if he, she or it possesses sole or shared voting
or investment power of that security, and includes options that
are currently exercisable or exercisable within 60 days.
Except as indicated by footnote, and subject to community
property laws where applicable, we believe the persons named in
the table have sole voting and investment power with respect to
all ordinary shares shown as beneficially owned by them.
34
Unless otherwise indicated below, the address for each
beneficial owner listed is
c/o Mellanox
Technologies, Inc., 350 Oakmead Parkway, Suite 100,
Sunnyvale, California 94085.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
|
Shares
|
|
|
Options
|
|
|
Percentage of
|
|
|
|
Beneficially
|
|
|
Exercisable
|
|
|
Shares
|
|
Name of Beneficial Owner
|
|
Owned
|
|
|
within 60 Days
|
|
|
Outstanding(2)
|
|
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
FMR LLC(3)
|
|
|
3,025,800
|
|
|
|
|
|
|
|
10.134
|
%
|
Alger Associates, Inc.(4)
|
|
|
5,168,256
|
|
|
|
|
|
|
|
16.32
|
%
|
Chilton Investment Company, LLC(5)
|
|
|
1,639,093
|
|
|
|
|
|
|
|
5.2
|
%
|
Executive Officers, Directors and Nominees for Director:
|
|
|
|
|
|
|
|
|
|
|
|
|
Eyal Waldman(6)
|
|
|
1,928,655
|
|
|
|
109,383
|
|
|
|
6.39
|
%
|
Rob S. Chandra(7)
|
|
|
201,759
|
|
|
|
58,411
|
|
|
|
*
|
|
Irwin Federman
|
|
|
26,633
|
|
|
|
58,411
|
|
|
|
*
|
|
Michael Gray(8)
|
|
|
439
|
|
|
|
179,475
|
|
|
|
*
|
|
Shai Cohen
|
|
|
374,000
|
|
|
|
102,332
|
|
|
|
1.49
|
%
|
Amal M. Johnson
|
|
|
10,000
|
|
|
|
39,206
|
|
|
|
*
|
|
Michael Kagan
|
|
|
240,400
|
|
|
|
179,796
|
|
|
|
1.32
|
%
|
Thomas J. Riordan
|
|
|
35,544
|
|
|
|
10,793
|
|
|
|
*
|
|
Marc Sultzbaugh
|
|
|
2,266
|
|
|
|
96,185
|
|
|
|
*
|
|
Thomas Weatherford
|
|
|
37,142
|
|
|
|
39,602
|
|
|
|
*
|
|
All executive officers and directors as a group (13 persons)
|
|
|
3,232,346
|
|
|
|
1,014,672
|
|
|
|
13.31
|
%
|
|
|
|
* |
|
Represents beneficial ownership of less than one percent (1%) of
the outstanding ordinary shares. |
|
(1) |
|
Represents ordinary shares subject to a right of repurchase, at
the original option exercise price, in the event the holder
ceases to provide services to us. The option exercise
prices range from $1.30 to $9.19. |
|
(2) |
|
The applicable percentage ownership for members of our board of
directors and named executive officers is based on 31,902,998
ordinary shares outstanding as of February 28, 2009,
together with applicable options for such shareholder. The
applicable percentage ownership for the beneficial owners listed
in the table is based on the number of outstanding shares as of
December 31, 2008, as indicated in the relevant 13G filings
described in footnotes 3, 4 and 5 below. Beneficial ownership is
determined in accordance with the rules of the SEC, based on
factors including voting and investment power with respect to
shares. Ordinary shares subject to the options currently
exercisable, or exercisable within 60 days of March 1,
2009, are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other
person. |
|
(3) |
|
This information is based on Amendment No. 2 of the
Schedule 13G/A filed with the SEC on February 17, 2009
by FMR LLC (FMR), Fidelity Management & Research
Company (Fidelity), Fidelity Growth Company Fund (Fidelity
Growth) and Edward C. Johnson 3d, pursuant to a joint filing
agreement. Fidelity, a wholly-owned subsidiary of FMR and an
investment adviser, is the beneficial owner of 3,025,800 of our
ordinary shares. The ownership of Fidelity Growth Company Fund,
a wholly-owned subsidiary of FMR and an investment adviser,
amounted to 3,023,300 ordinary shares. Edward C. Johnson 3d and
FMR, through its control of Fidelity, and the funds each has
sole power to dispose of the 3,025,800 shares owned by FMR
funds. Members of the family of Edward C. Johnson 3d, Chairman
of FMR, are the predominant owners, directly or through trusts,
of Series B voting common shares of FMR, representing 49%
of the voting power of FMR LLC. The Johnson family group and all
other Series B shareholders of FMR have entered into a
shareholders voting agreement under which all
Series B voting common shares of FMR will be voted in
accordance with the majority vote of Series B voting common
shares of FMR. Accordingly, through their ownership of voting
common shares and the execution of the shareholders voting
agreement, members of the Johnson family may be deemed, under
the Investment Company Act of 1940, to form a controlling group
with respect to FMR. Neither FMR nor Edward C. Johnson 3d,
Chairman of FMR, has the sole power to vote or direct the voting
of the shares owned directly by the Fidelity |
35
|
|
|
|
|
funds, which power resides with the funds Boards of
Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the funds Boards of
Trustees. Fidelity, FMR and Fidelity Growth have their principal
business office at 82 Devonshire Street, Boston, Massachusetts
02109. |
|
(4) |
|
This information is based on Amendment No. 1 to the
Schedule 13G/A filed with the SEC on February 17, 2009
by Alger Associates, Inc. and Fred Alger Management, Inc. By
virtue of the Alger familys ownership of a controlling
interest in Alger Associates, Inc., which directly owns Fred
Alger Management, Inc., ownership of the shares may be imputed
to the Alger family. The address of the principal business
office for each of these reporting persons is 111 Fifth
Avenue, New York, New York 10003. |
|
(5) |
|
This information is based on the Schedule 13G filed with
the SEC on February 13, 2009 by Chilton Investment Company,
LLC. The address of the principal office for Chilton Investment
Company, LLC is 1266 East Main Street, 7th Floor, Stamford,
Connecticut 06902. |
|
(6) |
|
Includes 1,928,655 ordinary shares held by Waldo Holdings 2, a
general partnership formed pursuant to the laws of Israel, of
which Eyal Waldman is a general partner. Mr. Waldman has
sole voting and dispositive power over all of the shares. |
|
(7) |
|
Includes (i) 201,759 shares held by Bessec Ventures V
L.P., Bessemer Venture Investors III L.P., Bessemer Venture
Partners V L.P., BIP 2001 L.P., BVE 2001 (Q) LLC and BVE
2001 LLC. The general partner of each of the Bessemer-related
entities that owns shares of the company is Deer V &
Co. LLC. Robert Goodman, Rob S. Chandra, J. Edmund
Colloton and David J. Cowan are the executive managers of Deer
V & Co. LLC and share voting and dispositive power
over the shares of the company held by the Bessemer-related
entities. Mr. Chandra is also a member of Deer Management
Co. LLC (DMC), the management company affiliate of the
Bessemer-related entities that own shares of the company. Unless
otherwise agreed by DMCs members, members of DMC are
required to contribute shares acquired from the exercise of
options granted to them in their capacity as a director of a
portfolio company, or the profits derived from the sale of the
underlying shares, to DMC. It is expected that the options held
by Mr. Chandra will be subject to this arrangement.
Mr. Chandra disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest therein. |
|
(8) |
|
Includes 439 ordinary shares held by the M&M Gray Family
2001 Trust U/T/A, for which Mr. Gray is a trustee. |
Compliance
with Section 16(a) Filing Requirements
Section 16(a) of the Exchange Act requires directors,
executive officers and persons who own more than 10% of a
registered class of our equity securities to file initial
reports of ownership and reports of changes in ownership with
the SEC and The Nasdaq Stock Market. Such persons are required
by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based solely on a review of
copies of such forms received with respect to the fiscal year
2008 and the written representations received from certain
reporting persons that no other reports were required, we
believe that all directors, executive officers and persons who
own more than 10% of our ordinary shares have complied with the
reporting requirements of Section 16(a).
36
EXECUTIVE
OFFICERS
Set forth below is certain information regarding each of our
executive officers as of March 1, 2009.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position(s)
|
|
Eyal Waldman
|
|
|
48
|
|
|
Chief Executive Officer, President, Chairman of the Board and
Director
|
Roni Ashuri
|
|
|
48
|
|
|
Vice President Engineering
|
Shai Cohen
|
|
|
45
|
|
|
Vice President Operations and Engineering
|
Michael Gray
|
|
|
52
|
|
|
Chief Financial Officer
|
Michael Kagan
|
|
|
51
|
|
|
Chief Technology Officer and Vice President Architecture
|
Marc Sultzbaugh
|
|
|
44
|
|
|
Vice President Worldwide Sales
|
Eyal Waldman is a co-founder of Mellanox, and has served
as Mellanoxs chief executive officer, president and
chairman of Mellanoxs board of directors since March 1999.
From March 1993 to February 1999, Mr. Waldman served as
vice president of engineering and was a co-founder of Galileo
Technology Ltd., or Galileo, a semiconductor company, which was
acquired by Marvell Technology Group Ltd. in January 2001. From
August 1989 to March 1993, Mr. Waldman held a number of
design and architecture related positions at Intel Corporation,
a manufacturer of computer, networking and communications
products. Mr. Waldman serves on the board of directors of a
number of private companies. Mr. Waldman holds a Bachelor
of Science in Electrical Engineering and a Master of Science in
Electrical Engineering from the Technion Israel
Institute of Technology. Mr. Waldman is located in Israel.
Roni Ashuri is a co-founder of Mellanox and has served as
our vice president engineering since June 1999. From March 1998
to May 1999, Mr. Ashuri served as product line director of
system controllers at Galileo. From May 1987 to February 1998,
Mr. Ashuri worked at Intel Corporation, where he was a
senior staff member in the Pentium processors department and a
cache controller group staff member. Mr. Ashuri holds a
Bachelor of Science in Electrical Engineering from the
Technion Israel Institute of Technology.
Mr. Ashuri is located in Israel.
Shai Cohen is a co-founder of Mellanox and has served as
our vice president operations and engineering since June 1999.
From September 1989 to May 1999, Mr. Cohen worked at Intel
Corporation, where he was a senior staff member in the Pentium
processors department and a circuit design manager at the cache
controllers group. Mr. Cohen holds a Bachelor of Science in
Electrical Engineering from the Technion Israel
Institute of Technology. Mr. Cohen is located in Israel.
Michael Gray has served as our chief financial officer
since December 2004. Prior to joining Mellanox, from March 1995
until July 2004, Mr. Gray served in various capacities at
SanDisk Corporation, a data storage company, including director
of finance from March 1995 to July 1999, vice president of
finance from August 1999 to February 2002 and as senior vice
president of finance and administration and chief finance
officer from March 2002 to July 2004. From July 1990 to February
1995, Mr. Gray served as controller of Consilium, Inc., a
systems software development company which was acquired by
Applied Materials, Inc. in December 1998. From October 1981 to
June 1990, Mr. Gray served in various capacities at ASK
Computer Systems, Inc., an enterprise resource planning
solutions provider, including as treasury manager. Mr. Gray
holds a Bachelor of Science in Finance from the University of
Illinois and a Master of Business Administration from
Santa Clara University. Mr. Gray is located in the
United States.
Michael Kagan is a co-founder of Mellanox and has served
as our vice president architecture since May 1999. In
January 2009, Mr. Kagan was promoted to chief technology
officer and vice president architecture. From August 1983 to
April 1999, Mr. Kagan held a number of architecture and
design positions at Intel Corporation. While at Intel
Corporation, between March 1993 and June 1996, Mr. Kagan
managed Pentium MMX design, and from July 1996 to April 1999, he
managed the architecture team of the Basic PC product group.
Mr. Kagan holds a Bachelor of Science in Electrical
Engineering from the Technion Israel Institute of
Technology. Mr. Kagan is located in Israel.
Marc Sultzbaugh has served as our vice president
worldwide sales since April 2007. Mr. Sultzbaugh joined
Mellanox in 2001 as director of high performance computing and
director of central area sales, and was later
37
promoted to senior director of sales in October 2005. Prior to
joining Mellanox, he held various executive sales and marketing
positions with Brooktree Semiconductor. From 1985 to 1989,
Mr. Sultzbaugh was an engineer at AT&T
Microelectronics. He holds a Bachelor of Science degree in
Electrical Engineering from The University of Missouri-Rolla,
and a Masters of Business Administration from The University of
California, Irvine.
CORPORATE
GOVERNANCE AND BOARD OF DIRECTORS MATTERS
Director
Independence
The board of directors consists of six directors. Our board of
directors has determined that each of our current directors
other than Eyal Waldman, our president, chief executive officer
and chairman of the board, are independent under the director
independence standards of The Nasdaq Stock Market.
Director
Compensation
In October 2006, our board of directors adopted a compensation
program for non-employee directors which became effective on
February 6, 2007 and was amended at our 2008 Annual General
Meeting of shareholders with respect to the annual retainer
amount we pay Mr. Weatherford for his service as
chairperson of our audit committee. Pursuant to this program,
each member of our board of directors who is not our employee
will receive the following cash compensation for board services,
as applicable:
|
|
|
|
|
$20,000 per year for service as a board member;
|
|
|
|
$25,000 per year for service as chairperson of the audit
committee and $5,000 per year each for service as chairperson of
the compensation and of the nominating and corporate governance
committees;
|
|
|
|
$5,000 per year for service as a member of the audit committee
and $2,500 per year each for service as a member of the
compensation and of the nominating and corporate governance
committees; and
|
|
|
|
$750 for each board or committee meeting attended in person
($500 for meetings attended by video or telephone conference).
|
The foregoing amounts also represent the current annual
compensation for non-employee directors for fiscal year 2009.
In addition, each of our non-employee directors will receive
initial and annual, automatic, non-discretionary grants pursuant
to our Non-Employee Director Option Grant Policy, which was
established under the Global Plan, of nonqualified share
options, in the case of non-employee directors who are
U.S. taxpayers, and options that qualify in accordance with
Section 102 of the Israeli Tax Ordinance, 1961, in the case
of non-employee directors who are Israeli taxpayers. Each new
non-employee director will receive an option to purchase 57,142
ordinary shares as of the date he or she first becomes a
non-employee director. Following the date of each annual general
meeting, each individual who continues to serve as a
non-employee director on such date will receive an automatic
option grant to purchase 11,428 ordinary shares. These option
grants vest in equal monthly installments over three years.
The exercise price of each option granted to a non-employee
director will be equal to 100% of the fair market value on the
date of grant of the shares covered by the option. Options will
have a maximum term of ten years measured from the grant date,
subject to earlier termination in the event of the
optionees cessation of board service.
Under our Non-Employee Director Option Grant Policy, our
directors will have a three-month period following cessation of
board service in which to exercise any outstanding vested
options, except in the case of a directors death or
disability, in which case the options will be exercisable by the
director or his or her estate or beneficiary for a
12-month
period following the cessation of board services. Options
granted to our non-employee directors pursuant to our
Non-Employee Director Option Grant Policy will fully vest and
become immediately exercisable upon a change in control of our
company.
38
The compensation of our outside directors is subject to
restrictions imposed by Israeli law, and cannot be greater than
the average compensation paid to all other non-executive
directors nor less than the lowest compensation paid to any
other non-executive director at the time of determination of the
outside directors compensation.
The table below sets forth information regarding compensation
provided by us to our non-employee directors during the year
ended December 31, 2008.
Director
Compensation in Fiscal Year 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Option Awards
|
|
|
|
|
Name
|
|
($)
|
|
|
($)(1)(2)
|
|
|
Total
|
|
|
|
(b)
|
|
|
(d)
|
|
|
(h)
|
|
|
Thomas Riordan
|
|
$
|
45,750
|
|
|
$
|
58,439
|
|
|
$
|
104,189
|
|
Thomas Weatherford
|
|
|
72,625
|
|
|
|
58,439
|
|
|
|
131,064
|
|
Irwin Federman
|
|
|
53,875
|
|
|
|
58,439
|
|
|
|
112,314
|
|
Rob S. Chandra
|
|
|
43,250
|
|
|
|
58,439
|
|
|
|
101,689
|
|
Amal M. Johnson
|
|
|
55,477
|
|
|
|
105,724
|
|
|
|
161,201
|
|
|
|
|
(1) |
|
This column reflects the expense recognized for each
non-employee director for 2008 computed in accordance with SFAS
123R. On May 20, 2008, each non-employee director was
granted an option to purchase 11,428 ordinary shares at an
exercise price equal to $15.56 per share and having a grant date
fair value of $101,252 computed in accordance with
SFAS 123R. See Note 11 of the consolidated financial
statements in the Companys Annual Report on from
10-K for the
year ended December 31, 2008 regarding assumptions
underlying the valuation of the equity awards and the
calculation method. |
|
(2) |
|
The aggregate number of ordinary shares subject to outstanding
option awards for each person in the table set forth above as of
December 31, 2008 is as follows: |
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Thomas Riordan
|
|
|
22,856
|
|
Thomas Weatherford
|
|
|
59,998
|
|
Irwin Federman
|
|
|
79,998
|
|
Rob S. Chandra
|
|
|
79,998
|
|
Amal M. Johnson
|
|
|
68,570
|
|
Committees
of the Board of Directors
Our board of directors has three standing committees: the audit
committee, the compensation committee and the nominating and
corporate governance committee. From time to time, the board of
directors may also create various ad hoc committees for special
purposes. The membership of each of the three standing
committees of the board of directors as of December 31,
2008 is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating and
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
Compensation
|
|
|
Governance
|
|
Name of Director
|
|
Audit Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Rob S. Chandra
|
|
|
|
|
|
|
Chairperson
|
|
|
|
|
|
Irwin Federman
|
|
|
Member
|
|
|
|
Member
|
|
|
|
|
|
Thomas Riordan
|
|
|
Member
|
|
|
|
|
|
|
|
|
|
Amal M. Johnson
|
|
|
Member
|
|
|
|
Member
|
|
|
|
Chairperson
|
|
Thomas Weatherford
|
|
|
Chairperson
|
|
|
|
|
|
|
|
Member
|
|
Mr. Waldman is not a member of any committee of our board
of directors.
Mr. Chandra is retiring and not standing for reelection.
See Form 8-K previously filed with the SEC on February 13,
2009.
39
Audit
Committee
Our board of directors must appoint an audit committee comprised
of at least three directors including all of the outside
directors, but excluding the chairman of our board of directors,
our general manager, our chief executive officer, any
controlling shareholder, any relative of the foregoing persons
and any director employed by the company or who provides
services to the company on a regular basis.
Our audit committee oversees our corporate accounting and
financial reporting process. Among other matters, our audit
committee evaluates the independent auditors
qualifications, independence and performance, determines the
engagement of the independent auditors, reviews and approves the
scope of the annual audit and the audit fee, discusses with
management and the independent auditors the results of the
annual audit and the review of our quarterly financial
statements, approves the retention of the independent auditors
to perform any proposed permissible non-audit services, monitors
the rotation of partners of the independent auditors on the
Mellanox engagement team as required by law, reviews our
critical accounting policies and estimates, oversees our
internal audit function, reviews, approves and monitors our code
of ethics and whistleblower procedures for the
treatment of reports by employees of concerns regarding
questionable accounting or auditing matters and annually reviews
the audit committee charter and the committees performance.
Our audit committee must approve specified actions and
transactions with office holders and controlling shareholders. A
controlling shareholder is a shareholder who has the
power to direct the companys operations, other than by
virtue of being a director or other office holder of the
company, and includes a shareholder who holds 50% or more of our
voting rights or, if we have no shareholder who owns more than
50% of the voting rights, then a controlling
shareholder also includes any shareholder who holds 25% or
more of the voting rights. Our audit committee may not approve
any action or a transaction with a controlling shareholder or
with an office holder unless, at the time of approval, our two
outside directors are serving as members of the audit committee
and at least one of them is present at the meeting at which the
approval is granted.
Additionally, under the Companies Law, the role of the audit
committee is to identify any irregularities in the business
management of the company in consultation with the
companys independent accountants and internal auditor and
to suggest an appropriate course of action. Our audit committee
charter allows the committee to rely on interviews and
consultations with our management, our internal auditor and our
independent public accountant, and does not obligate the
committee to conduct any independent investigation or
verification. We designated an internal auditor during the
fiscal year ended December 31, 2008.
All members of our audit committee meet the requirements for
financial literacy under the applicable rules and regulations of
the SEC and The Nasdaq Stock Market. Our board has determined
that Mr. Weatherford is an audit committee financial expert
as defined by the SEC rules and has the requisite financial
sophistication as defined by The Nasdaq Stock Market rules and
regulations. Our board has determined that Amal Johnson, as an
outside director, has the requisite financial and accounting
expertise required under the Companies Law. Our board has also
determined that each of the members of our audit committee is
independent within the meaning of the independent director
standards of The Nasdaq Stock Market and the SEC. Our board of
directors has adopted a written charter for the audit committee.
A copy of the charter is available on our website at
www.mellanox.com under Investor
Relations Corporate Governance.
Compensation
Committee
Our compensation committee reviews and recommends policies
relating to compensation and benefits of our officers and
employees. The compensation committee, in consultation with our
chief executive officer and our board of directors, decides how
much cash compensation should be part of each officers
total compensation by comparing the officers compensation
against a peer group of companies listed in the survey data we
utilize and considering the relative importance of short-term
incentives. In addition, the compensation committee, in
consultation with our chief executive officer, makes
recommendations to our board of directors regarding equity-based
compensation to align the interests of our management with
shareholders, considering each officers equity holdings.
The compensation committee also manages the issuance of share
options and other awards under our share option plans. The
compensation committee will review and evaluate, at least
annually, the goals and objectives of our incentive compensation
plans and monitors the results against the approved goals and
objectives. All members of our compensation committee are
independent under the applicable rules and regulations of the
SEC, The Nasdaq Stock Market and the U.S. Internal Revenue
Code. Our board of directors has adopted a written charter
40
for the compensation committee. A copy of the charter is
available on our website at www.mellanox.com under
Investor Relations Corporate Governance.
Nominating
and Corporate Governance Committee
Our nominating and corporate governance committee is responsible
for making recommendations to the board of directors regarding
candidates for directorships and the composition and
organization of our board. In addition, the nominating and
corporate governance committee is responsible for overseeing our
corporate governance guidelines and reporting and making
recommendations to the board concerning governance matters. We
believe that the composition of our nominating and corporate
governance committee meets the criteria for independence under,
and the functioning of our nominating and corporate governance
committee complies with, the applicable rules and regulations of
the SEC and The Nasdaq Stock Market. Our board of directors has
adopted a written charter for the nominating and corporate
governance committee. A copy of the charter, as amended to date,
is available on our website at www.mellanox.com under
Investor Relations Corporate Governance.
Meetings
Attended by Directors
The board of directors held a total of eight meetings during
2008. The audit committee, compensation committee and nominating
and corporate governance committee held nine, thirteen and three
meetings, respectively, during 2008. During 2008, each of our
directors attended or participated in at least 75% of the
aggregate of the total number of meetings of the board of
directors and the total number of meetings held by the
committee(s) of the board of directors on which he or she served.
Our directors are encouraged to attend our annual general
meeting of shareholders although we do not maintain a formal
policy regarding director attendance at the annual general
meeting of shareholders. In 2008, Mr. Waldman was the sole
member of our board who attended the annual general meeting of
shareholders.
Consideration
of Director Nominees
Shareholder Nominations and
Recommendations. Our articles of association set
forth the procedure for the proper submission of shareholder
nominations for membership on the board of directors as
previously discussed. In addition, the nominating and corporate
governance committee may consider properly submitted shareholder
recommendations for candidates for membership on the board of
directors. A shareholder may make such a recommendation by
submitting the following information to the secretary of the
company at the offices of Mellanox Technologies, Ltd., 350
Oakmead Parkway, Suite 100, Sunnyvale, California 94085:
the candidates name and address; a representation that the
recommending shareholder is a holder of record of our stock and
is entitled to vote at the meeting, and intends to appear in
person or by proxy at the meeting to nominate the candidate; if
applicable, a description of all arrangements or understandings
between the shareholder and each nominee pursuant to which
nominations are to be made by the shareholder; such other
information regarding each nominee as would be required to be
included in a proxy statement had the nominee been nominated or
intended to be nominated by the board of directors; the consent
of each nominee to serve as a director if so elected; and a
declaration signed by each nominee declaring that there is no
limitation under the Companies Law for the appointment of such
nominee. The chairman of the board of directors may refuse to
acknowledge the nomination of any person not made in compliance
with these procedures.
Director Qualifications. Members of the board
of directors should have the highest professional and personal
ethics and values, and conduct themselves in a manner that is
consistent with our Code of Business Conduct and Ethics. While
the nominating and corporate governance committee has not
established specific minimum qualifications for director
candidates, the committee believes that candidates and nominees
must reflect a board of directors that comprises directors who
have: personal and professional integrity, ethics and values;
experience in corporate management, such as serving as an
officer or former officer of a publicly held company, and a
general understanding of marketing, finance and other elements
relevant to the success of a publicly-traded company in
todays business environment; experience in the
companys industry and with relevant social policy
concerns; experience as a board member of another publicly held
company; academic expertise in an area of the
41
companys operations; and practical and mature business
judgment, including ability to make independent analytical
inquiries.
Identifying and Evaluating Director
Nominees. Although candidates for nomination to
the board of directors typically are suggested by existing
directors or by our executive officers, candidates may come to
the attention of the board of directors through professional
search firms, shareholders or other persons. The nominating and
corporate governance committee reviews the qualifications of any
candidates who have been properly brought to the
committees attention. Such review may, at the
committees discretion, include a review solely of
information provided to the committee or may also include
discussions with persons familiar with the candidate, an
interview with the candidate or other actions that the committee
deems proper. The nominating and corporate governance committee
considers the suitability of each candidate, including the
current members of the board of directors, in light of the
current size and composition of the board of directors. In
evaluating the qualifications of the candidates, the committee
considers many factors, including issues of character, judgment,
independence, age, expertise, diversity of experience, length of
service, other commitments and other similar factors. The
committee evaluates such factors, among others, and does not
assign any particular weighting or priority to any of these
factors. Candidates properly recommended by shareholders are
evaluated by the committee using the same criteria as other
candidates.
Code of
Business Conduct and Ethics
We are committed to maintaining the highest standards of
business conduct and ethics. Our Code of Business Conduct and
Ethics reflects our values and the business practices and
principles of behavior that support this commitment. The code
applies to all of our officers, directors and employees and
satisfies SEC rules for a code of ethics required by
Section 406 of the Sarbanes-Oxley Act of 2002, as well as the
Nasdaq listing standards requirement for a code of
conduct. The code is available on our website at
www.mellanox.com under Investor
Relations Corporate Governance. We will post
any amendment to the code, as well as any waivers that are
required to be disclosed by the rules of the SEC or The Nasdaq
Stock Market, on our website.
Compensation
Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any
time been one of our executive officers or employees. None of
our executive officers currently serves, or in the past fiscal
year has served, as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving on our board of directors or
compensation committee.
Certain
Relationships and Related Transactions
In our last fiscal year, there has not been, nor is there
currently proposed, any transaction or series of similar
transactions to which we were or are to be a party in which the
amount involved exceeds $120,000 and in which any of our
directors, executive officers, holders of more than 5% of our
ordinary shares or any members of the immediate family of any of
the foregoing persons, had or will have a direct or indirect
material interest.
Family
Relationships
There are no family relationships among any of our directors or
executive officers.
Communications
with the Board of Directors
We provide a process for shareholders to send communications to
our board of directors, any committee of our board of directors
or any individual director, including non-employee directors.
Shareholders may communicate with our board of directors by
writing to: Board of Directors,
c/o Corporate
Secretary, Mellanox Technologies, Ltd., 350 Oakmead Parkway,
Suite 100, Sunnyvale, California 94085. The secretary will
forward correspondence to our board of directors, one of the
committees of our board of directors or an individual director,
as the case may be, or, if the secretary determines in
accordance with his best judgment that the matter can be
addressed by management, then to the appropriate executive
officer.
42
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file with the SEC at the SECs facilities
located at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at the offices of
the National Association of Securities Dealers, Inc. located at
1735 K Street, N.W., Washington, D.C. 20006. You
may call the SEC at
1-800-SEC-0330
for further information about the SECs public reference
rooms. Our SEC filings are also available to the public at the
SECs website at www.sec.gov and through our website
at www.mellanox.com.
OTHER
MATTERS
As of the date of this proxy statement, no shareholder had
advised us of the intent to present any other matters, and we
are not aware of any other matters to be presented, at the
meeting. Accordingly, the only items of business that our board
of directors intends to present at the meeting are set forth in
this proxy statement.
If any other matter or matters are properly brought before the
meeting, the persons named as proxyholders will use their
discretion to vote on the matters in accordance with their best
judgment as they deem advisable.
By order of the board of directors,
Alan C. Mendelson
Secretary
Sunnyvale, California
April , 2009
43
APPENDIX A
Mellanox
Technologies, Ltd
Global Share Incentive Plan (2006)
Initially
Adopted by the Board of Directors on October 26, 2006
Initial Stockholder Approval on December 5, 2006
Amendment and Restatement adopted by the board of directors on
March , 2009
Stockholder Approval of Amendment and Restatement
on ,
2009
1. Name and Purpose.
1.1 This plan, which has been adopted by the Board of
Directors, and approved by the shareholders, of Mellanox
Technologies, Ltd., as amended from time to time, shall be known
as the Mellanox Technologies, Ltd. Global Share Incentive Plan
(2006), as amended and restated herein (the
Plan).
1.2 The purposes of the Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Service
Providers of the Company and its affiliates and subsidiaries, if
any, and to promote the Companys business by providing
such individuals with opportunities to receive Awards pursuant
to the Plan and to strengthen the sense of common interest
between such individuals and the Companys shareholders.
1.3 Awards granted under the Plan to Service
Providers in various jurisdictions may be subject to specific
terms and conditions for such grants may be set forth in one or
more separate appendix to the Plan, as may be approved by the
Board of Directors of the Company from time to time.
2. Definitions
Administrator shall mean the Board of
Directors or a Committee.
Appendix shall mean any appendix to the Plan
adopted by the Board of Directors containing country-specific or
other special terms relating to Awards including grants of
restricted stock and other equity-based Awards.
Award shall mean a grant of Options, other
equity-based awards granted in accordance with the provisions of
an Appendix, including a Performance-Based Award, or other
allotment of Shares hereunder. All Awards shall be confirmed by
an Award Agreement, and subject to the terms and conditions of
such Award Agreement.
Award Agreement shall mean a written
instrument setting forth the terms applicable to a particular
Award.
Board of Directors shall mean the board of
directors of the Company.
Cause shall have the meaning ascribed to such
term or a similar term as set forth in the Participants
employment agreement or the agreement governing the provision of
services by a non-employee Service Provider, or, in the absence
of such a definition: (i) conviction (or plea of nolo
contendere) of any felony or crime involving moral turpitude
or affecting the Company; (ii) repeated and unreasonable
refusal to carry out a reasonable and lawful directive of the
Company or of Participants supervisor which involves the
business of the Company or its affiliates and was capable of
being lawfully performed; (iii) fraud or embezzlement of
funds of the Company or its affiliates; (iv) any breach by
a director of his / her fiduciary duties or duties of
care towards the Company; and (v) any disclosure of
confidential information of the Company or breach of any
obligation not to compete with the Company or not to violate a
restrictive covenant.
Change in Control shall mean and includes
each of the following:
(a) A transaction or series of transactions (other than an
offering of Shares to the general public through a registration
statement filed under the laws of any applicable jurisdiction)
whereby any person or related group of persons (other than the
Company, any of its subsidiaries, an employee benefit plan
maintained by the Company or any of its subsidiaries or a person
that, prior to such transaction, directly or indirectly
controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial
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ownership of securities of the Company possessing more than 50%
of the total combined voting power of the Companys
securities outstanding immediately after such
acquisition; or
(b) During any period of two consecutive years, individuals
who, at the beginning of such period, constitute the Board of
Directors together with any new director(s) (other than a
director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in
Subsections (a) or (c) hereof) whose election by the
Board of Directors or nomination for election by the
Companys shareholders was approved by a vote of at least
two thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) The consummation by the Company (whether directly
involving the Company or indirectly involving the Company
through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or
(y) a sale or other disposition of all or substantially all
of the Companys assets in any single transaction or series
of related transactions or (z) the acquisition of assets or
shares of another entity, in each case other than a transaction:
(i) Which results in the Companys voting securities
outstanding immediately before the transaction continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the Company or the person that, as a
result of the transaction, controls, directly or indirectly, the
Company or owns, directly or indirectly, all or substantially
all of the Companys assets or otherwise succeeds to the
business of the Company (the Company or such person, the
Successor Entity)) directly or indirectly, at
least a majority of the combined voting power of the Successor
Entitys outstanding voting securities immediately after
the transaction, and
(ii) After which no person or group beneficially owns
voting securities representing 50% or more of the combined
voting power of the Successor Entity; provided, however, that no
person or group shall be treated for purposes of this Subsection
(c)(ii) as beneficially owning 50% or more of combined voting
power of the Successor Entity solely as a result of the voting
power held in the Company prior to the consummation of the
transaction; or
(d) The Companys shareholders approve a liquidation
or dissolution of the Company.
The Administrator shall have full and final authority, which
shall be exercised in its discretion, to determine conclusively
whether a Change in Control of the Company has occurred pursuant
to the above definition, and the date of the occurrence of such
Change in Control and any incidental matters relating thereto.
Code shall mean the U.S. Internal
Revenue Code of 1986, as amended. Any reference to any section
of the Code shall also be a reference to any successor provision
and any Treasury Regulation promulgated thereunder.
Committee shall mean the compensation
committee or other committee as may be appointed and maintained
by the Board of Directors, in its discretion, to administer the
Plan, to the extent permissible under applicable law, as amended
from time to time.
Company shall mean Mellanox Technologies,
Ltd., an Israeli company, and its successors and assigns.
Companies Law shall mean the Israeli
Companies Law
5759-1999,
as amended from time to time.
Consultant shall mean any individual who
(either directly or through his or her employer) is an advisor
or consultant to the Company or any affiliate thereof.
Corporate Charter shall mean the Articles of
Association of the Company, and any subsequent amendments or
replacements thereto.
Covered Employee means an employee, including
an officer, of the Company or any subsidiary thereof who is, or
could be, a covered employee within the meaning of
Section 162(m) of the Code.
Disability shall have the meaning ascribed to
such term or a similar term in the Participants employment
agreement (where applicable), or in the absence of such a
definition, the inability of the Participant, in the opinion of
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a qualified physician acceptable to the Company, to perform the
major duties of the Participants position with the Company
because of the sickness or injury of the Participant for a
consecutive period of 180 days.
Equity Restructuring shall mean a
non-reciprocal transaction between the Company and its
shareholders, such as a stock dividend, stock split, spin-off,
rights offering or recapitalization through a large,
nonrecurring cash dividend, that affects the Shares (or other
securities of the Company) or the share price of Shares (or
other securities) and causes a change in the per share value of
the Shares underlying outstanding Awards.
Exchange Act shall mean the
U.S. Securities Exchange Act of 1934, as amended. Any
references to any section of the Exchange Act shall also be a
reference to any successor provision.
Non-Employee Director shall mean a member of
the Board of Directors who is not an employee of the Company or
any of its affiliates.
Options shall mean options to purchase Shares
awarded under the Plan.
Participant shall mean a recipient of an
Award hereunder who executes an Award Agreement.
Performance-Based Award means an Award
granted to selected Covered Employees pursuant to this Plan,
including pursuant to the provisions of an Appendix, but which
is subject to the terms and conditions set forth in
Section 10 hereof.
Performance Criteria means the criteria that
the Committee selects for purposes of establishing the
Performance Goal or Performance Goals for a Participant for a
Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net
earnings (either before or after interest, taxes, depreciation
and amortization), economic value-added, sales or revenue, net
income (either before or after taxes), operating earnings, cash
flow (including, but not limited to, operating cash flow and
free cash flow), cash flow return on capital, return on net
assets, return on stockholders equity, return on assets,
return on capital, stockholder returns, return on sales, gross
or net profit margin, productivity, expense, margins, operating
efficiency, customer satisfaction, working capital, earnings per
Share, price per Share, and market share, any of which may be
measured either in absolute terms or as compared to any
incremental increase or as compared to results of a peer group.
The Committee shall define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such
Performance Period for such Participant.
Performance Goals means, for a Performance
Period, the goals established in writing by the Committee for
the Performance Period based upon the Performance Criteria.
Depending on the Performance Criteria used to establish such
Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a
division, business unit, or an individual. The Committee, in its
discretion, may, within the time prescribed by
Section 162(m) of the Code, adjust or modify the
calculation of Performance Goals for such Performance Period in
order to prevent the dilution or enlargement of the rights of
Participants (a) in the event of, or in anticipation of,
any unusual or extraordinary corporate item, transaction, event,
or development, or (b) in recognition of, or in
anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business
conditions.
Performance Period means the one or more
periods of time, which may be of varying and overlapping
durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for
the purpose of determining a Participants right to, and
the payment of, a Performance-Based Award.
Prior Plans shall mean the Company 1999
United State Equity Incentive Plan, Company 1999 Israeli Share
Option Plan and Company 2003 Israeli Share Option Plan.
Qualified Performance-Based Compensation
means any compensation that is intended to qualify as
qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code.
Service Provider shall mean an employee,
member of the Board of Directors, office holder or Consultant of
the Company or any affiliate thereof.
Shares shall mean Ordinary Shares, nominal
value NIS 0.0175 per share, of the Company.
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3. Administration of the Plan.
3.1 The Plan shall be administered by the
Administrator. If the Administrator is a Committee, such
Committee shall consist of such number of members of the Board
of Directors of the Company (not less than two in number), as
may be determined from time to time by the Board of Directors.
The Board of Directors shall appoint such members of the
Committee, may from time to time remove members from, or add
members to, the Committee, and shall fill vacancies in the
Committee however caused.
3.2 In order to comply with the requirements of
Section 162(m) of the Code,
Rule 16b-3
promulgated under the Exchange Act or to the extent required by
any other applicable rule or regulation, the Plan shall be
administered jointly by the Board of Directors and a Committee
consisting solely of two or more members of the Board of
Directors each of whom is an outside director,
within the meaning of Section 162(m) of the Code, a member
of the Board of Directors who qualifies as a Non-Employee
Director as defined in
Rule 16b-3(b)(3)
under the Exchange Act or any successor rule and an
independent director under the NASDAQ rules (or
other principal securities market on which Shares are traded).
Without limiting the application of this Section 3.2, to
the extent necessary to comply with the requirements of
Section 162(m) of the Code and
Rule 16b-3
promulgated under the Exchange Act, Awards shall be granted by a
Committee consisting of members who satisfy the requirements
specified in the foregoing sentence and shall be ratified by the
Board of Directors. Notwithstanding the foregoing, but subject
to Section 4.1 hereof, the full Board of Directors, acting
by a majority of its members in office, shall conduct the
general administration of the Plan with respect to all Awards
granted to a member of the Board of Directors who is not an
employee of the Company or any affiliate thereof, and for
purposes of such Awards the term Committee as used
in this Plan shall be deemed to refer to the Board of Directors.
In its sole discretion, the Board of Directors may at any time
and from time to time exercise any and all rights and duties of
the Committee under the Plan except with respect to matters
which under
Rule 16b-3
under the Exchange Act or Section 162(m) of the Code, or
any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.
3.3 The Committee, if appointed, shall select one of
its members as its Chairman and shall hold its meetings at such
times and places as it shall determine. Actions at a meeting of
the Committee at which a majority of its members are present or
acts approved in writing by all members of the Committee, shall
be the valid acts of the Committee. The Committee shall appoint
a Secretary, who shall keep records of its meetings and shall
make such rules and regulations for the conduct of its business
and the implementation of the Plan, as it shall deem advisable,
subject to the directives of the Board of Directors and in
accordance with applicable law.
3.4 Subject to the general terms and conditions of
the Plan, and in particular Section 3.5 below, the
Administrator shall have full authority in its discretion, from
time to time and at any time, to determine (i) eligible
Participants, (ii) the number of Options or Shares to be
covered by each Award, (iii) the time or times at which the
Award shall be granted, (iv) the vesting schedule and other
terms and conditions applying to Awards, (v) the form(s) of
Award Agreements, and (vi) any other matter which is
necessary or desirable for, or incidental to, the administration
of the Plan. The Board of Directors may, in its sole discretion,
delegate some or all of the powers listed above to the
Committee, to the extent permitted by the Companies Law, its
Corporate Charter or other applicable law, rules or regulations
to which the Company is subject.
3.5 In the event that the Administrator is a
Committee, the Committee shall not be entitled to grant Options
to the Participants (unless permitted to do so by the Companies
Law). However, in the event that the Committee is authorized to
do so by the Board of Directors, it may issue Shares underlying
Options which have been granted by the Board of Directors and
duly exercised pursuant to the provisions hereof, in accordance
with Sections 112(a)(5) and 288 of the Companies Law.
3.6 No member of the Board of Directors or of the
Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Award granted
hereunder. Subject to the Companys decision and to all
approvals legally required, each member of the Board of
Directors or the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including
counsel fees) reasonably incurred by him, or any liability
(including any sum paid in settlement of a claim with the
approval of the Company) arising out of any act or omission to
act in connection with the Plan unless arising out of such
members own willful misconduct or bad faith, to the
fullest extent permitted by applicable law. Such indemnification
shall be in addition to any rights of
A-4
indemnification the member may have as a director or otherwise
under the Companys Corporate Charter, any agreement, any
vote of shareholders or disinterested directors, any insurance
policy or otherwise.
3.7 The interpretation and construction by the
Administrator of any provision of the Plan or of any Option
hereunder shall be final and conclusive. In the event that the
Board of Directors appoints a Committee, the interpretation and
construction by the Committee of any provision of the Plan or of
any Option hereunder shall upon ratification by the Board of
Directors, be final and conclusive unless otherwise determined
by the Board of Directors. To avoid doubt, subject to
Section 3.2 hereof, the Board of Directors may at any time
exercise any powers of the Administrator, notwithstanding the
fact that a Committee has been appointed.
3.8 The Administrator shall have the authority to
adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan and perform all acts, including
the delegation of its responsibilities (to the extent permitted
by applicable law and applicable stock exchange rules), as it
shall, from time to time, deem advisable; to construe and
interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreements relating thereto); and
to otherwise supervise the administration of the Plan. The
Administrator may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any agreement
relating thereto in the manner and to the extent it shall deem
necessary to effectuate the purpose and intent of the Plan.
Notwithstanding the foregoing, no action of the Administrator
under this Section 3.8 shall reduce the rights of any
Participant without the Participants consent.
3.9 Without limiting the generality of the foregoing,
the Administrator may adopt special Appendices
and/or
guidelines and provisions for persons who are residing in or
employed in, or subject to, the taxes of, any domestic or
foreign jurisdictions, to comply with applicable laws,
regulations, or accounting, listing or other rules with respect
to such domestic or foreign jurisdictions.
4. Eligible Participants.
4.1 No Award may be granted pursuant to the Plan to
any person serving as a member of the Committee or to any other
member of the Board of Directors at the time of the grant,
unless such grant is approved in the manner prescribed for the
approval of compensation of directors under Section 273 of
the Companies Law. To avoid doubt, such Awards require approval
of the audit committee of the Board of Directors, the Board of
Directors and the shareholders of the Company.
4.2 Subject to the limitation set forth in
Sub-section 4.1
above and any restriction imposed by applicable law, Awards may
be granted to any Service Provider of the Company, whether or
not the Service Provider is a member of the Board of Directors
or a member of the board of directors of an affiliate of the
Company. The grant of an Award to a Participant hereunder shall
neither entitle such Participant to receive an additional Award
or participate in other incentive plans of the Company, nor
disqualify such Participant from receiving and additional Award
or participating in other incentive plans of the Company.
5. Reserved Shares.
5.1 Subject to Section 12.1 hereof, the
aggregate number of Shares which may be issued or transferred
pursuant to Awards under the Plan shall be the sum of
(i) 5,212,710 Shares and (ii) any Shares which,
as of February 28, 2009, are subject to awards outstanding
under the Prior Plans that expire, are cancelled or otherwise
terminate unexercised, or Shares that otherwise would have
reverted to the share reserve of the Prior Plans following
February 28, 2009. In addition, subject to
Section 12.1 hereof, the aggregate number of Shares
available for issuance under the Plan shall automatically
increase each year during the term of the Plan commencing on the
first day of the Companys 2010 fiscal year by a number
equal to the lesser of (i) 3.75% of the total number of
Shares outstanding on a fully diluted basis on the date of the
increase and (ii) 1,400,000 Shares. Notwithstanding
the foregoing, the Board of Directors may act prior to the first
day of any fiscal year to provide that there shall be no
increase in the share reserve for such fiscal year or that the
increase in the share reserve for such fiscal year shall be a
lesser number of Shares than would otherwise occur pursuant to
the preceding sentence. Anything to the contrary herein
notwithstanding, the maximum aggregate number of Shares that may
be issued or transferred pursuant to Awards under the Plan
during the term of the Plan shall not exceed
15,474,018 Shares, subject to Section 12.1 hereof.
Subject to Section 14.2 hereof, the Company shall determine
the number of Shares reserved hereunder from time to time, and
such number may be increased or decreased by the Company from
time to time.
A-5
5.2 Any Shares subject to an Award that shall for any
reason terminate, expire or otherwise lapse shall again be
available for grant as Awards under the Plan. Additionally, any
Shares tendered or withheld to satisfy the grant or exercise
price or tax withholding obligation pursuant to any Award shall
again be available for the grant of an Award pursuant to the
Plan. To the extent permitted by applicable law or any exchange
rule, Shares issued in assumption of, or in substitution for,
any outstanding awards of any entity acquired in any form of
combination by the Company or any affiliate shall not be counted
against Shares available for grant pursuant to this Plan. Any
Shares that remain unissued and are not subject to Awards at the
termination of the Plan shall cease to be reserved for purposes
of the Plan. Until termination of the Plan the Company shall at
all times reserve a sufficient number of Shares to meet the
requirements of the Plan.
5.3 Notwithstanding any provision in the Plan to the
contrary, and subject to Section 12.1 hereof, the maximum
number of Shares with respect to one or more Awards that may be
granted to any one Participant during any calendar year
(measured from the date of any grant) shall be
2,285,714 Shares.
6. Award Agreement.
6.1 The Board of Directors, and to the extent
contemplated under Section 3.2 hereof, a Committee and the
Board of Directors, in their discretion may award to
Participants Awards available under the Plan. The terms of the
Award will be set forth in the Award Agreement. The date of
grant of each Award shall be the date specified by the Board of
Directors, and the Committee, as applicable, at the time such
award is made, or in the absence of such specification, the date
of approval of the award by the Board of Directors, and the
Committee, as applicable.
6.2 The Award Agreement shall state, inter
alia, the number of Options or Shares covered thereby, the
type of Option or other Award, any special terms applying to
such Award (if any), including the terms of any country-specific
or other Appendix, as determined by the Board of Directors, and
the Committee, as applicable.
7. Option Prices.
The exercise price for each Share to be issued upon exercise of
an Option shall be such price as is determined by the Board of
Directors in its discretion, provided that the price per Share
is not less than the nominal value of each Share, and subject to
any further restrictions set forth in an applicable Appendix.
8. Exercise Of Option.
8.1 Options shall be exercisable pursuant to the
terms under which they were awarded and subject to the terms and
conditions of the Plan and any applicable Appendix, as specified
in the Award Agreement.
8.2 An Option, or any part thereof, shall be
exercisable by the Participants signing and returning to
the Company at its principal office (and to the Trustee, where
applicable), a Notice of Exercise in such form and
substance as may be prescribed by the Administrator from time to
time, together with full payment for the Shares underlying such
Option.
8.3 Each payment for Shares under an Option shall be
in respect of a whole number of Shares, shall be effected in
(i) cash, (ii) by check payable to the order of the
Company, (iii) Shares held for such period of time as may
be required by the Administrator in order to avoid adverse
accounting consequences and having a fair market value on the
date of delivery equal to the aggregate exercise price of the
Option or exercised portion thereof, or (iv) such other
method of payment acceptable to the Company as determined by the
Administrator, and shall be accompanied by a notice stating the
number of Shares being paid for thereby.
8.4 Until the Shares are issued (as evidenced by the
appropriate entry in the share register of the Company or of a
duly authorized transfer agent of the Company) a Participant
shall have no right to vote or right to receive dividends or any
other rights as a shareholder shall exist with respect to such
Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such Shares promptly after
the Option is exercised. No adjustment shall be made for a
dividend or other right the record date for which is prior to
the date the Shares are issued, except as provided in
Section 12.1 of the Plan.
8.5 To the extent permitted by law, if the Shares are
traded on a national securities exchange, NASDAQ or quoted on a
national quotation system or otherwise publicly traded or
quoted, payment for the Shares underlying an Option may be made
all or in part by the delivery (on a form prescribed by the
Company) of an irrevocable direction
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to a securities broker approved by the Company to sell Shares
and to deliver all or part of the sales proceeds to the Company
in payment of the exercise price (or the relevant portion
thereof, as applicable) and any withholding taxes, or on such
other terms and conditions as may be acceptable to the
Administrator. No Shares shall be issued until payment therefor,
as provided herein, has been made or provided for.
9. Cancellation and Re-Grant of Options
9.1 The Administrator shall have the authority to
effect, at any time and from time to time, with the consent of a
Participant whose rights are impaired or altered under an
outstanding Option, a reduction of the exercise price per Share
of Shares subject to an outstanding Option (a) to the
then-current fair market value if the fair market value of the
Shares has declined since the date the Option was granted,
(b) pursuant to an option exchange program, including a
program pursuant to which an outstanding Option is cancelled and
any of the following is granted in substitution therefor
(i) a new Option under the Plan or another equity plan of
the Company covering the same or a different number of Shares,
(ii) another Award, (iii) cash, or (iv) other
valuable consideration (as determined by the Administrator, in
its sole discretion), (c) pursuant to any other action that
is treated as a repricing under Generally Accepted Accounting
Principles.
9.2 Shares subject to an Option canceled under this
Section 9 shall continue to be counted against the maximum
award of Options permitted to be granted pursuant to
Section 5.2 hereof. The repricing of an Option under this
Section 9, resulting in a reduction of the exercise price,
shall be deemed to be a cancellation of the original Option and
the grant of a substitute Option; in the event of such
repricing, both the original and the substituted Options shall
be counted against the maximum awards of Options permitted to be
granted pursuant to Section 5.2 hereof. The provisions of
this Section 9.2 shall be applicable only to the extent
required by Section 162(m) of the Code.
10. Performance Based Awards
10.1 Purpose. The purpose of this
Section 10 is to provide the Committee the ability to
qualify Awards other than Options and that are granted pursuant
to this Plan as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a
Performance-Based Award to a Covered Employee, the provisions of
this Section 10 shall control over any contrary provision
contained in this Plan or an Appendix; provided,
however, that the Committee may in its discretion grant
Awards to Covered Employees that are based on Performance
Criteria or Performance Goals but that do not satisfy the
requirements of this Section 10.
10.2 Applicability. This
Section 10 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards.
The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the
Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a
particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a
Participant shall not require designation of any other Covered
Employees as a Participant in such period or in any other period.
10.3 Procedures with Respect to Performance-Based
Awards. To the extent necessary to comply with
the Qualified Performance-Based Compensation requirements of
Section 162(m)(4)(C) of the Code, with respect to any Award
granted under this Plan, including under an Appendix, which may
be granted to one or more Covered Employees, no later than
ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period
of service (or such other time as may be required or permitted
by Section 162(m) of the Code), the Committee shall, in
writing, (a) designate one or more Covered Employees,
(b) select the Performance Criteria applicable to the
Performance Period, (c) establish the Performance Goals,
and amounts of such Awards, as applicable, which may be earned
for such Performance Period, and (d) specify the
relationship between Performance Criteria and the Performance
Goals and the amounts of such Awards, as applicable, to be
earned by each Covered Employee for such Performance Period.
Following the completion of each Performance Period, the
Committee shall certify in writing whether the applicable
Performance Goals have been achieved for such Performance
Period. In determining the amount earned by a Covered Employee,
the Committee shall have the right to reduce or eliminate (but
not to increase) the amount payable at a given level of
performance to take into
A-7
account additional factors that the Committee may deem relevant
to the assessment of individual or corporate performance for the
Performance Period.
10.4 Payment of Performance-Based
Awards. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by
the Company or a subsidiary of the Company on the day a
Performance-Based Award for such Performance Period is paid to
the Participant. Furthermore, a Participant shall be eligible to
receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period
are achieved. In determining the amount earned under a
Performance-Based Award, the Committee may reduce or eliminate
the amount of the Performance-Based Award earned for the
Performance Period, if in its sole and absolute discretion, such
reduction or elimination is appropriate.
10.5 Additional
Limitations. Notwithstanding any other provision
of the Plan, any Award which is granted to a Covered Employee
and is intended to constitute Qualified Performance-Based
Compensation shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations
or rulings issued thereunder that are requirements for
qualification as qualified performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan
shall be deemed amended to the extent necessary to conform to
such requirements.
11. Termination Of Relationship As Service
Provider.
11.1 Effect of Termination; Exercise After
Termination. Unless otherwise determined by the
Administrator, if a Participant ceases to be a Service Provider,
such Participant may exercise any outstanding Options within
such period of time as is specified in the Award Agreement or
the Plan to the extent that the Options are vested on the date
of termination (but in no event later than the expiration of the
term of the Option as set forth in the Award Agreement). If, on
the date of termination, any Options or other Awards are
unvested, the Shares covered by the unvested portion of the
Option or other Award shall revert to the Plan. If, after
termination, the Participant does not exercise the vested
Options within the time specified in the Award Agreement or the
Plan, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
In the absence of a provision specifying otherwise in the
relevant Award Agreement, then:
(a) in the event that the Participant ceases to be a
Service Provider for any reason other than termination for Cause
as a result of the Participants death or Disability, the
vested Options shall remain exercisable for a period of three
(3) months from the effective date of termination of the
Participants status as a Service Provider;
(b) in the event that the Participant ceases to be a
Service Provider for Cause, any outstanding unexercised Option
(whether vested or unvested) will immediately expire and
terminate, and the Participant shall not have any rights in
connection with such Options.
(c) in the event that the Participant ceases to be a
Service Provider as a result of the Participants
Disability, the Option shall remain exercisable for twelve
(12) months following the Participants date of
termination for Disability.
(d) in the event that the Participant dies while a Service
Provider, the Option shall remain exercisable by the
Participants estate or by a person who acquires the right
to exercise the Option by bequest or inheritance for twelve
(12) months following the Participants date of death.
11.2 Date of Termination. For
purposes of the Plan and any Option or Option Agreement, the
date of termination (whether for Cause or otherwise) shall be
the effective date of termination of the Participants
employment or engagement as a Service Provider.
11.3 Leave of Absence. Unless the
Administrator provides otherwise, vesting of Options granted
hereunder shall be suspended during any unpaid leave of absence.
A Service Provider shall not cease to be considered as such in
the case of any (a) leave of absence approved by the
Company, or (b) transfers between locations of the Company
or between the Company, and its parent, subsidiary, affiliate,
or any successor thereof; or (c) changes in status
(employee to member of the Board of Directors, employee to
Consultant, etc.), provided that such change does not affect the
specific terms applying to the Service Providers Award.
A-8
12. Change in Capital Structure.
Upon the occurrence of any of the following described events, a
Participants rights to purchase Shares under the Plan
shall be adjusted as hereinafter provided:
12.1 Adjustments.
(a) In the event of any dividend or other distribution,
reorganization, merger, consolidation, combination, repurchase,
or exchange of Shares or other securities of the Company, or
other change in the corporate structure of the Company affecting
the Shares (other than an Equity Restructuring) occurs such that
an adjustment is determined by the Administrator (in its sole
and absolute discretion) to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the
Administrator shall, in such manner as it may deem equitable,
adjust: (a) the aggregate number and kind of shares that
may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Section 5; (b) the
terms and conditions of any outstanding Awards (including,
without limitation, any applicable performance targets or
criteria with respect thereto); and (c) the grant or
exercise price per share for any outstanding Awards under the
Plan.
(b) In the event of any transaction or event described in
Section 12.1(a) hereof or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of
the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations or
accounting principles, the Administrator, in its sole and
absolute discretion, and on such terms and conditions as it
deems appropriate, either by the terms of the Award or by action
taken prior to the occurrence of such transaction or event and
either automatically or upon the Participants request, is
hereby authorized to take any one or more of the following
actions whenever the Administrator determines that such action
is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available
under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:
(i) To provide for either (A) termination of any such
Award in exchange for an amount of cash, if any, equal to the
amount that would have been attained upon the exercise of such
Award or realization of the Participants rights (and, for
the avoidance of doubt, if as of the date of the occurrence of
the transaction or event described in this Section 12.1(b),
the Administrator determines in good faith that no amount would
have been attained upon the exercise of such Award or
realization of the Participants rights, then such Award
may be terminated by the Company without payment) or
(B) the replacement of such Award with other rights or
property selected by the Administrator in its sole discretion;
(ii) To provide that such Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of Shares
(or other securities or property) subject to outstanding Awards,
and/or in
the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may be
granted in the future;
(iv) To provide that such Award shall be exercisable or
payable or fully vested with respect to all shares covered
thereby, notwithstanding anything to the contrary in the Plan or
the applicable Award Agreement; and
(v) To provide that the Award cannot vest, be exercised or
become payable after such event.
(c) In connection with the occurrence of any Equity
Restructuring, and notwithstanding anything to the contrary in
Sections 12.1(a) or 12.1(b) hereof:
(i) The number and type of securities subject to each
outstanding Award and the exercise price or grant price thereof,
if applicable, will be proportionately adjusted. The adjustments
provided under this Section 11.1(c) shall be
nondiscretionary and shall be final and binding on the affected
Participant and the Company.
A-9
(ii) The Administrator shall make such proportionate
adjustment, if any, as the Administrator in its discretion may
deem appropriate to reflect such Equity Restructuring with
respect to the aggregate number and type of securities that may
be issued under the Plan (including, but not limited to,
adjustment of the limitations in Section 5).
12.2 Change in Control.
(a) Anything to the contrary in Section 12.1 hereof
notwithstanding, in the event of a Change in Control, the
unexercised or restricted portion of each outstanding Award
shall be assumed or an equivalent Award or right substituted, by
the successor corporation or an affiliate of the successor
corporation, as shall be determined by such entity, subject to
the terms hereof. In the event that the successor corporation or
a parent or subsidiary of the successor corporation does not
provide for such an assumption or substitution of Awards (in
circumstances in which the Company is not the successor entity),
all Awards shall become exercisable in full and all forfeiture
restrictions on such Awards shall lapse, provided that unless
otherwise determined by the Administrator, the exercise of all
Options that otherwise would not have been exercisable and the
lapsing of all forfeiture restrictions that would not have
otherwise lapsed in the absence of a Change in Control, shall be
contingent upon the actual consummation of the Change in
Control. Upon, or in anticipation of, a Change in Control, the
Administrator may cause any and all Awards outstanding hereunder
to terminate at a specific time in the future, including but not
limited to the date of such Change in Control, and shall give
each Participant the right to exercise such Awards during a
period of time as the Committee, in its sole and absolute
discretion, shall determine.
(b) For the purposes of this Section 12.2, an Award
shall be considered assumed if, following a Change in Control,
the option confers the right to purchase or receive, for each
Share subject to the Award immediately prior to the Change in
Control, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets
by holders of Shares of the Company for each Share held on the
effective date of the Change in Control (and if holders were
offered a choice of consideration, the type of consideration
determined by the Administrator, at its sole discretion);
provided, however, that if the consideration received in the
Change in Control is not solely ordinary shares (or the
equivalent) of the successor corporation or its direct or
indirect parent, the Administrator may, with the consent of the
successor corporation, provide for the per share consideration
to be received upon the exercise of the Option or upon the
lapsing of the forfeiture restrictions to be solely ordinary
shares (or the equivalent) of the successor corporation or its
direct or indirect parent equal in fair market value to the per
share consideration received by holders of Shares in the Change
in Control, as determined by the Administrator.
(c) In the event that the Board of Directors determines in
good faith that, in the context of a Change in Control, certain
Options have no monetary value and thus do not entitle the
holders of such Options to any consideration under the terms of
the Change in Control, the Board of Directors may determine that
such Options shall terminate effective as of the effective date
of the Change in Control.
(d) It is the intention that the Administrators
authority to make determinations, adjustments and clarifications
in connection with the treatment of Awards shall be interpreted
as widely as possible, to allow the Administrator maximal power
and flexibility to interpret and implement the provisions of the
Plan in the event of Change in Control.
13. Non-Transferability of Options, Other Awards
and Shares.
13.1 Except as may be permitted under an applicable
Appendix, no Option or other Award may be transferred other than
by will or by the laws of descent and distribution, and during
the Participants lifetime an Option may be exercised only
by such Participant.
13.2 Except as may be permitted under an applicable
Appendix, Shares for which full payment has not been made, may
not be assigned, transferred, pledged or mortgaged, other than
by will or laws of descent and distribution. For avoidance of
doubt, the foregoing shall not be deemed to restrict the
transfer of an Participants rights in respect of Options
or Shares purchasable pursuant to the exercise thereof upon the
death of such Participant to such Participants estate or
other successors by operation of law or will, whose rights
therein shall be governed by Section 11.1(d) hereof, and as
may otherwise be determined by the Administrator.
A-10
14. Term And Amendment Of The Plan.
14.1 The Plan became effective as of February 7,
2007. The Plan shall expire on the date which is ten
(10) years from the date of its adoption by the Board of
Directors (except as to Options or other Awards outstanding on
that date).
14.2 Notwithstanding any other provision of the Plan,
the Board of Directors (or a duly authorized Committee thereof)
may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of the Plan (including any
amendment deemed necessary to ensure that the Company may comply
with any regulatory requirement), or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that
(a) to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, or as
contemplated in any Appendix, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and
to such a degree as required, and (b) shareholder approval
is required for any amendment to the Plan that
(i) increases the number of Shares available under the Plan
(other than any adjustment as provided by Section 12.1
hereof), or (ii) permits the Administrator to extend the
exercise period for an Option beyond ten years from the date of
grant; and provided further, however, that, except (x) to
correct obvious drafting errors or as otherwise required by law
or (y) as specifically provided herein, the rights of a
Participant with respect to Awards granted prior to such
amendment, suspension or termination, may not be reduced without
the consent of such Participant The Administrator may amend the
terms of any Award theretofore granted, prospectively or
retroactively, but except (x) to correct obvious drafting
errors or as otherwise required by law or applicable accounting
rules, or (y) as specifically provided herein, no such
amendment or other action by the Administrator shall reduce the
rights of any Participant without the Participants consent.
15. Term Of Option.
Anything herein to the contrary notwithstanding, but without
derogating from the provisions of Section 11 hereof, if any
Option, or any part thereof, has not been exercised and the
Shares covered thereby not paid for within ten (10) years
after the date on which the Option was granted, as set forth in
the Award Agreement (or any other period set forth in the
instrument granting such Option pursuant to Section 6
hereof), such Option, or such part thereof, and the right to
acquire such Shares shall terminate, all interests and rights of
the Participant in and to the same shall expire, and, in the
event that in connection therewith any Shares are held in trust
as aforesaid, such trust shall expire.
16. Continuance Of Engagement.
Neither the Plan nor any offer of Shares or Awards to a
Participant shall impose any obligation on the Company or a
related company thereof, to continue the employment or
engagement of any Participant as a Service Provider, and nothing
in the Plan or in any Award granted pursuant thereto shall
confer upon any Participant any right to continue to serve as a
Service Provider of the Company or a related company thereof or
restrict the right of the Company or a related company thereof
to terminate such employment or engagement at any time.
17. Governing Law.
The Plan and all instruments issued thereunder or in connection
therewith, shall be governed by, and interpreted in accordance
with, the laws of the State of Israel.
18. Application Of Funds.
The proceeds received by the Company from the sale of Shares
pursuant to Options granted under the Plan will be used for
general corporate purposes of the Company or any related company
thereof.
19. Taxes.
19.1 Any tax consequences arising from the grant,
vesting or exercise of any Award, from the payment for Shares
covered thereby, or from any other event or act (of the Company,
and/or its
affiliates, or the Participant), hereunder shall be borne solely
by the Participant. The Company
and/or its
affiliates shall withhold taxes according to the requirements
under the applicable laws, rules, and regulations, including
withholding taxes at source. Furthermore, the Participant shall
agree to indemnify the Company
and/or its
affiliates and hold them harmless against and from any and all
liability for any such tax or interest or penalty thereon,
including without limitation,
A-11
liabilities relating to the necessity to withhold, or to have
withheld, any such tax from any payment made to the Participant.
The Company or any of its affiliates may make such provisions
and take such steps as it may deem necessary or appropriate for
the withholding of all taxes required by law to be withheld with
respect to Awards granted under the Plan and the exercise
thereof, including, but not limited, to (i) deducting the
amount so required to be withheld from any other amount (or
Shares issuable) then or thereafter to be provided to the
Participant, including by deducting any such amount from a
Participants salary or other amounts payable to the
Participant, to the maximum extent permitted under law
and/or
(ii) requiring the Participant to pay to the Company or any
of its affiliates the amount so required to be withheld as a
condition of the issuance, delivery, distribution or release of
any Shares
and/or
(iii) by causing the exercise and sale of any Awards or
Shares held by on behalf of the Participant to cover such
liability, up to the amount required to satisfy minimum
statutory withholding requirements. In addition, the Participant
will be required to pay any amount due in excess of the tax
withheld and transferred to the tax authorities, pursuant to
applicable tax laws, regulations and rules.
19.2 The receipt of an Award
and/or the
acquisition of Shares issued upon the exercise of the Options
may result in tax consequences. The description of tax
consequences set forth in the Plan or any Appendix hereto does
not purport to be complete, up to date or to take into account
any special circumstances relating to a Participant.
19.3 THE PARTICIPANT IS ADVISED TO CONSULT WITH A TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF RECEIVING OR
EXERCISING ANY AWARD IN LIGHT OF HIS OR HER PARTICULAR
CIRCUMSTANCES.
20. Conditions Upon Issuance Of Shares.
Shares shall not be issued pursuant to an Award unless the
issuance and delivery of such Shares shall comply with
applicable laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance. The
inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the
Companys counsel to be necessary to the lawful issuance
and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been
obtained.
21. Miscellaneous.
Whenever applicable in the Plan, the singular and the plural,
and the masculine, feminine and neuter shall be freely
interchangeable, as the context requires. The Section headings
or titles shall not in any way control the construction of the
language herein, such headings or titles having been inserted
solely for the purpose of simplified reference. Words such as
herein, hereof, hereto,
hereinafter, hereby, and
hereinabove when used in the Plan refer to the Plan
as a whole, including any applicable Appendices, unless
otherwise required by context.
* * *
A-12
DETACH PROXY CARD HERE
MELLANOX TECHNOLOGIES, LTD.
PROXY
PROXY FOR THE 2009 ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Mellanox Technologies, Ltd., an
Israeli company, hereby acknowledges receipt of the Notice of 2009
Annual General Meeting of Shareholders and Proxy Statement each dated
April , 2009 and hereby appoints Eyal Waldman and Michael Gray,
as each proxy and attorney-in-fact, with full power of substitution,
on behalf and in the name of the undersigned to represent the
undersigned at the 2009 Annual General Meeting of Shareholders of
Mellanox Technologies, Ltd. to be held on May 18, 2009 at 6:00 p.m.
local Israeli time (11:00 a.m. Eastern Daylight Time) at the offices
of Mellanox Technologies, Ltd., located at Binyan Hermon, Industrial
Area, Yokneam, Israel, and at any postponement or adjournment
thereof, and to vote all ordinary shares which the undersigned would
be entitled to vote if then and there personally present, on the
matters set forth below.
(Continued, and to be marked, dated and signed, on the other side)
MELLANOX TECHNOLOGIES, LTD.
DETACH PROXY CARD HERE
MELLANOX TECHNOLOGIES, LTD.
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PLEASE INDICATE YOUR VOTES BELOW BY CHECKING THE APPROPRIATE SELECTION |
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1. Election of
Directors (Non-Outside)
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THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED
AS FOLLOWS: (1) FOR THE ELECTION OF THE
NOMINATED DIRECTORS; (2) FOR THE BONUS TO EYAL
WALDMAN, (3) FOR THE AMENDMENT TO THE
INDEMNIFICATION UNDERTAKING BY AND AMONG THE
COMPANY AND ITS OFFICERS AND DIRECTORS; (4) FOR THE APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE MELLANOX TECHNOLOGIES LTD. GLOBAL INCENTIVE PLAN (2006); AND
(5) FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AND AUTHORIZATION
OF AUDIT COMMITTEE DETERMINATION OF THEIR
REMUNERATION AND AS THE PROXY HOLDERS DEEM
ADVISABLE ON SUCH OTHER MATTERS THAT ARE
PROPERLY BROUGHT BEFORE THE MEETING. |
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If you wish to vote AGAINST any individual nominee, strike a line through that nominees name in the list below: |
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NOMINEES: |
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Eyal Waldman
Irwin Federman
Thomas Weatherford |
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FOR all nominees
listed above
(except as indicated)
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AGAINST
all nominees
listed above
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ABSTAIN with respect
to the following
nominee(s) (list): |
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2. Proposal to approve the cash bonus to Mr. Waldman in the amount of $162,500 for services rendered for the fiscal year
ended December 31, 2008. |
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PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. IF THE SHARES ARE REGISTERED IN THE
NAME OF TWO OR MORE PERSONS, EACH SHOULD SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS
AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES.
IF SIGNER IS A CORPORATION, PLEASE GIVE FULL
CORPORATE NAME AND HAVE A DULY AUTHORIZED
OFFICER SIGN, STATING TITLE. IF SIGNER IS A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
Please sign, date and promptly return this
proxy in the enclosed return envelope, which
is postage prepaid if mailed in the United
States. |
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FOR
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AGAINST
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ABSTAIN |
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3. Proposal to approve amendment to the indemnification undertaking by and among the Company and its officers and
directors. |
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AGAINST
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4. Proposal to approve the amendment and restatement of the Mellanox Technologies, Ltd. Global Share Incentive Plan
(2006). |
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Dated: , 2009 |
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AGAINST
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NOTE: This Proxy should be marked, signed by
the shareholder(s) exactly as his or her name
appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If
shares are held by joint tenants or as
community property, both should sign. |
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5. Proposal to approve the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting
firm of Mellanox Technologies, Ltd. for the fiscal year ending December 31, 2009 and the authorization of the audit
committee to determine the remuneration of PricewaterhouseCoopers
LLP. |
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