SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) Of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
CLICKSOFTWARE TECHNOLOGIES LTD.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CLICKSOFTWARE TECHNOLOGIES LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 20, 2004
To the Shareholders of ClickSoftware Technologies Ltd.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
ClickSoftware Technologies Ltd., an Israeli company, referred to in this
document as the Company, for the year 2004 will be held on Tuesday , July 20,
2004 at 2:00 p.m. local time at the offices of the Company at 34 Habarzel
Street, Tel Aviv, Israel 69710 for the following purposes:
1. To elect James W. Thanos as a Class I director and Israel Borovich
as an external director, each to hold office until the annual
meeting of shareholders of the Company to be held in 2007 or until
his successor has been duly elected;
2. To ratify the audit committee's appointment of Brightman Almagor &
Co., a member of Deloitte Touche Tohmatsu, as independent
accountants for the Company for the year ending December 31, 2004,
and to authorize the board of directors, upon the recommendation
of the audit committee, to determine the auditors' related
compensation;
3. To ratify and approve the execution of a revised employment
agreement with Moshe BenBassat, the Company's Chairman of the
Board of Directors and Chief Executive Officer, substantially in
the form attached hereto as Annex A;
4. To ratify and approve a special cash bonus of $149,500 to be
granted to Dr. BenBassat in connection with his and the Company's
performance in 2003;
5. To ratify and approve a grant of an option to purchase 250,000
ordinary shares to Dr. BenBassat;
6. To ratify and approve the appointment of Dr. BenBassat as both
Chairman of the Board of Directors and Chief Executive Officer of
the Company;
7. To ratify and approve the amendment to and the material provisions
of the Company's 2000 Share Option Plan, substantially in the form
attached hereto as Annex B, including the provisions limiting the
granting of options pursuant to Section 162(m) of the United
States Internal Revenue Code; and
8. To receive and consider the directors' report and the audited
financial statements for the year ended December 31, 2003.
The foregoing matters are more fully described in the proxy statement
accompanying this notice.
Only shareholders of record at the close of business on June 16, 2004 are
entitled to receive notice of and vote at the annual meeting of shareholders.
All shareholders are cordially invited to attend the annual meeting in
person. However, to assure your representation at the annual meeting, you are
urged to mark, sign, date and return the enclosed proxy as promptly as possible
in the postage-prepaid envelope for that purpose. All proxies must be received
at least 48 hours prior to the meeting to be validly included in the tally of
shares voted at the meeting. Your shares will be voted in accordance with the
instructions you have given. Any shareholder attending the annual meeting may
vote in person even if he or she has previously returned a proxy. Please note,
however, that if your shares are held of record by a broker, bank or other
nominee and you wish to attend and vote in person at the annual meeting, you
must obtain from the record holder a proxy issued in your name.
BY ORDER OF THE BOARD OF DIRECTORS
MOSHE BENBASSAT
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF
EXECUTIVE OFFICER
Tel Aviv, Israel
June 21, 2004
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IMPORTANT: YOUR VOTE IS IMPORTANT. IN ORDER TO ENSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
CLICKSOFTWARE TECHNOLOGIES LTD.
34 Habarzel Street
Tel Aviv, Israel 69710
------------------------
PROXY STATEMENT
------------------------
The enclosed proxy is solicited on behalf of the board of directors of
ClickSoftware Technologies Ltd., referred to in this document as the Company,
for use at the annual meeting of shareholders for the year 2004, referred to in
this document as the annual meeting, to be held on Tuesday, July 20, 2004 at
2:00 p.m. local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying notice of the annual meeting. The annual meeting
will be held at the offices of the Company at 34 Habarzel Street, Tel Aviv,
Israel 69710. The telephone number at that location is 972-3-765-9422.
These proxy solicitation materials were mailed on or about June 21, 2004
to all shareholders of record entitled to vote at the annual meeting.
RECORD DATE; OUTSTANDING SHARES; MARKET PRICE
Shareholders of record as of the close of business onJune 16, 2004,
referred to in this document as the record date, are entitled to notice of and
to vote at the annual meeting. At the record date, [__________] ordinary shares
of the Company, referred to in this document as ordinary shares, were issued and
outstanding. For information regarding holders of more than 5% of the
outstanding ordinary shares, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT." The closing sale price of the Company's ordinary shares
as reported on The Nasdaq SmallCap Market on June 16, 2004 was $[____] per
share.
COUNTING OF VOTES
Proxies properly executed, duly returned to the Company and not revoked
will be voted in accordance with the specifications made. Subject to the rules
of The Nasdaq SmallCap Market, where no specifications are given, such proxies
will be voted "FOR" each proposition for which the board of directors recommends
a vote "FOR." No matters other than those referred to in this proxy statement
will be brought before the annual meeting.
Each shareholder is entitled to one vote for each ordinary share held on
all matters presented at the meeting. The required quorum for the transaction of
business at the annual meeting is two or more shareholders present in person or
by proxy, holding or representing in the aggregate at least thirty-three percent
(33%) of the total voting rights in the Company. Shares that are voted in person
or by proxy "FOR" or "AGAINST," referred to in this document as votes cast, are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as voted at the annual meeting with respect to such
matters. Broker non-votes and shares that are voted in person or by proxy
"ABSTAIN" will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but such non-votes and abstentions
will not be counted for purposes of determining the number of votes cast with
respect to the particular proposal on which a broker or shareholder has
expressly not voted. Thus, a broker non-vote or an abstention will help to
establish a quorum but otherwise will not affect the outcome of the voting on a
proposal.
SOLICITATION OF PROXIES
The Company will bear the cost of soliciting proxies for the annual
meeting. The Company will ask banks, brokerage houses, fiduciaries and
custodians holding ordinary shares in their names for others to send proxy
materials to and obtain proxies from the beneficial owners of such ordinary
shares, and the Company may also reimburse them for their reasonable expenses in
doing so. In addition to soliciting proxies by mail, the Company and its
directors, officers and employees may also solicit proxies personally, by
telephone or by other appropriate means. No additional compensation will be paid
to directors, officers or employees for such services.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at the above address, written notice of revocation or a duly
executed proxy bearing a later date, or by attending the meeting and voting in
person (attendance at the meeting will not, by itself, revoke a proxy).
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY
STATEMENT
Shareholders may submit proper proposals for consideration at the
Company's 2005 annual meeting of shareholders by submitting their proposals in
writing to the Secretary of the Company in a timely manner. Proposals that
shareholders desire to have included in the Company's proxy materials for its
2005 annual meeting must be received by the Secretary of the Company no later
than February 22, 2005, and must be in compliance with applicable laws and
regulations, in order to be considered for possible inclusion in the proxy
statement and form of proxy for that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Articles of Association currently provide for a board of
directors of not less than two members nor more than eleven members. There are
currently seven members on the Company's board. The Company has a classified
board of directors as set forth in the following table:
YEAR OF ANNUAL MEETING AT
NAME OF DIRECTOR AND CLASS WHICH TERM EXPIRES AGE
- --------------------------------------------- ------------------------------- -----------------
James W. Thanos, Class I 2004 55
Roni A. Einav, Class II 2005 60
Gil Weiser, Class II 2005 62
Moshe BenBassat, Class III 2006 56
Israel Borovich, external director 2004 62
Naomi Atsmon, external director 2006 51
Dan Falk, external director 2006 59
Eddy Shalev resigned as a Class III director effective December 31, 2003.
There are no family relationships among any directors or executive
officers of the Company.
Under the Israeli Companies Law, 1999, Israeli companies whose shares
have been offered to the public in or outside of Israel (such as the Company)
are required to appoint two people to serve as external directors on the board
of directors of the company. The Companies Law provides that a person may not be
appointed as an external director if the person or the person's relative,
partner, employer or any entity controlled by that person has at the date of
appointment, or has had at any time during the two years preceding that date,
any affiliation with the company, any entity controlling the company or any
entity controlled by the company or by this controlling entity. The term
"affiliation" includes:
o an employment relationship,
o a business or professional relationship maintained on a regular
basis,
o control, or
o service as an officer.
No person can serve as an external director if the person's position or
other business creates, or may create, conflicts of interest with the person's
responsibilities as an external director or if such position or other business
may impair such director's ability to serve as an external director. No person
who is a director in one company can serve as an external director in another
company, if at that time a director of the other company serves as an external
director in the first company. The Companies Law further provides that when, at
the time of appointment of an external director, all members of the board of
directors of the company are of one gender, then the external director appointed
must be of the other gender.
2
NOMINEE FOR CLASS I DIRECTOR
The Company proposes that James W. Thanos be elected as a Class I
director to hold office until the annual meeting of shareholders of the Company
to be held in 2007 or until his successor has been duly elected, according to
the provisions of the Companies Law and the regulations thereunder. Certain
information about Mr. Thanos is set forth below.
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ------------------------------------------------------------------ ---------------- -------------------------
JAMES W. THANOS 55 May 2000
From October 1999 to June 2002, Mr. Thanos served as Executive
Vice President, Worldwide Field Operations of BroadVision, Inc.
From March 1998 to June 2002, Mr. Thanos served as BroadVision's
Vice President and General Manager, Americas. Prior to working for
BroadVision, Mr. Thanos served as Senior Vice President of
Worldwide sales at Aurum Software Inc. Mr. Thanos holds a Bachelor
of Arts degree in International Relations and a Bachelor of Arts
degree in Behavioral Sciences from Johns Hopkins University.
VOTE REQUIRED
Mr. Thanos is to be elected as a Class I director by a simple majority of
votes cast.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF JAMES W. THANOS AS A CLASS I DIRECTOR TO
HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI COMPANIES LAW.
NOMINEE FOR EXTERNAL DIRECTOR
The Company proposes that Israel Borovich be elected as an external
director to hold office until the annual meeting of shareholders of the Company
to be held in 2007 or until his successor has been duly elected, according to
the provisions of the Companies Law and the regulations thereunder. Dr. Borovich
will continue to serve as an external director in addition to Naomi Atsmon and
Dan Falk, the Company's other external directors whose terms expire in 2006.
Certain information about Dr. Borovich is set forth below.
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ------------------------------------------------------------------ ---------------- -------------------------
ISRAEL BOROVICH 62 July 1997
Dr. Borovich has served as a director of the Company since July
1997 and as an external director according to the Israeli
Companies Law since July 2001. Since 1988, Dr. Borovich has served
as President and CEO of Arkia Israeli Airlines Ltd. and
Knafaim-Arkia Holdings Ltd., an investment management company. Dr.
Borovich currently serves as a director of Issta Lines Israel
Students Travel Company Ltd., Arkia International (1981) Ltd. and
other companies of Arkia's group in the aviation and tourism
business. CR. Borovich also serves as Chairman of Granit Hacarmel
Investments Ltd. and Sonol Israel Ltd., an investment management
company. Dr. Borovich also serves as a director of Knafaim-Arkia
Holdings, Ltd., an investment management company, Maman-Cargo
Terminals & Handling Ltd. and Ayalon Highways (Israel) Ltd. Dr.
Borovich served as a Professor on the Faculty of Management of Tel
Aviv University. Dr. Borovich holds Bachelor of Science, Master of
Science and Ph.D. degrees in Industrial Engineering from the
Polytechnic Institute in Brooklyn.
3
VOTE REQUIRED
Dr. Borovich is to be elected as an external director by a simple
majority of votes cast (not including abstentions) provided that either:
o A majority of the votes cast, including at least one-third of the
shares held by non-controlling shareholders voted at the meeting,
vote in favor of the election of Dr. Borovich, or
o The total number of shares held by non-controlling shareholders
who vote against the election of Dr. Borovich does not exceed one
percent (1%) of the Company's aggregate voting rights.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF ISRAEL BOROVICH AS AN EXTERNAL DIRECTOR
TO HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI COMPANIES LAW.
DIRECTORS NOT STANDING FOR ELECTION
Certain information about the members of the board of directors who are
not standing for election at the annual meeting of shareholders for 2004 is set
forth below.
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ------------------------------------------------------------------ ---------------- -------------------------
RONI A. EINAV 60 April 2000
Mr. Einav is the General Manager of Einav High-Tec Assets Ltd., an
investment company focused on technology ventures, founded by him
in 1995. From 1983 to April 1999, Mr. Einav served as Chairman of
the Board of Directors of New Dimension Software, Ltd., a systems
software company he had founded, which was subsequently acquired
by BMC Software for over $650 million. Mr. Einav has also played a
key role in founding approximately a dozen other software
companies, including Liraz Computers, Jacada Ltd., UDS, XciTel,
CePost, CeDimension, ComDa, Computer Systems and Einav Systems.
Mr. Einav was a Major in the Israeli Defense Forces and served as
a systems analyst in a research and development division. Mr.
Einav holds a Bachelor of Science degree in Management and
Industrial Engineering as well as a Master of Science degree in
Operations Research from the Technion Institute, Haifa, Israel.
GIL WEISER 62 May 2003
Mr. Weiser is currently Chairman or a member of the Board of
Directors of the following companies: Fundtech, a software
company, BBP, a subsidiary of Fundtech, Tescom, a service company,
and Carmel, a company connected with Haifa University. Mr. Weiser
is also currently a member of the Board of Directors of the Tel
Aviv Stock Exchange. From January to December 2002, he was the
Acting Vice Chairman of ORAMA, an international investment banking
group. From 1995 to 2000, Mr. Weiser served as Chief Executive
Officer of Hewlett-Packard Israel, a technology company. From 1993
to 1995, Mr. Weiser served as Chief Executive Officer of Fibronics
Corporation, a communications company. From 1976 to 1993, he
served as Chief Executive Officer of Digital Israel, a computing
company. Mr. Weiser is Chairman of the Executive Committee of
Haifa University. Mr. Weiser was the Vice Chairman of the Israel
Management Center and is a member of the Israel High-Tech
Association Executive Committee. Mr. Weiser holds a Bachelor of
Science degree in Electrical Engineering from the Technion
Institute and a Master of Science degree in Electronics and
Computers from the University of Minnesota in Minneapolis.
4
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ------------------------------------------------------------------ ---------------- -------------------------
MOSHE BENBASSAT 56 1979
Dr. BenBassat co-founded the Company and has served as its
Chairman and Chief Executive Officer since its inception. From
1987 to 1999, Dr. BenBassat served as a Professor of Information
Systems at the Faculty of Management of Tel Aviv University. Dr.
BenBassat has also held academic positions at the University of
Southern California and the University of California at Los
Angeles. From 1996 to January 1999, Dr. BenBassat also served as a
board member of Tadiran Telecommunications Inc., a
telecommunications company. From 1990 to 1996, Dr. BenBassat
served as a board member of Tadiran Electronic Systems Ltd., a
defense electronics company. Dr. BenBassat holds Bachelor of
Science, Master of Science and Ph.D. degrees in Mathematics and
Statistics from Tel Aviv University.
NAOMI ATSMON 51 May 2003
Ms. Atsmon was employed by Amdocs Ltd., a customer care and
billing software company, from 1986 until the end of 2002. From
1997 until 2002, Ms. Atsmon served as a division President at
Amdocs Ltd., managing large scale billing projects for telephone
companies in North America and Europe, with overall responsibility
for the profit and loss statement of the division. From 1994 until
1997, Ms. Atsmon served as a Vice President at Amdocs Ltd. From
1991 until 1994, she was a director for Amdocs Ltd. in charge of
software development and customer relations with one of the
largest telephone companies in the United States. Prior to joining
Amdocs Ltd., Ms. Atsmon was a project manager at Bank Hapoalim, in
charge of a large financial project for the bank controller. From
1976 to 1981, Ms. Atsmon was a system analyst with Agrexco Ltd.
Ms. Atsmon also currently serves as a board member of Jacada Ltd.,
a software provider. Ms. Atsmon holds a Bachelor of Science degree
in Management & Industrial Engineering from the Technion
Institute, and studied business administration at Tel Aviv
University.
DAN FALK 59 May 2003
From 2000 to May 2003 Mr. Falk served as the Chairman of the Board
of Directors of Atara Technology Ventures Ltd., an Israeli company
engaged in investment in advanced technology enterprises. He is
also a member of the Boards of Directors of Orbotech Ltd., Nice
System Ltd., Orad Ltd, Netafim, Dor Chemicals Ltd, Attunity Ltd.,
Visionix Ltd., Ramdor Ltd., Medcon Ltd. and Poalim Ventures I, all
of which are Israeli high technology companies. From July 1999 to
November 2000, Mr. Falk served as President and Chief Operating
Officer of Sapiens International Corporation N.V., a Netherlands
Antilles company engaged in the development of software solutions
for large-scale, cross-platform systems. Mr. Falk was Executive
Vice President of Orbotech, a high technology company, from August
1995 to July 1999, and between June 1994 and August 1995 served as
its Executive Vice President and Chief Financial Officer. From
October 1992 until June 1994, Mr. Falk was Vice President and
Chief Financial Officer of Orbotech. Mr. Falk was Director of
Finance and Chief Financial Officer of Orbot Systems, predecessor
of Orbotech Ltd., from 1985 until 1992. Mr. Falk received a Master
of Business Administration degree in 1973 from the Hebrew
University School of Business and had 15 years experience in
finance and banking, including senior positions at Israel Discount
Bank Ltd., prior to joining Orbot.
5
BOARD MEETINGS AND COMMITTEES
BOARD MEETINGS. The board of directors of the Company held four meetings
during 2003. The board has a compensation committee, an audit committee and a
corporate governance and nominating committee, referred to in this proxy
statement as the nominating committee. No director attended less than 75% of the
meetings held while he or she was in office during 2003 by the Company's board
of directors and the committees on which that director served. See "Director
Compensation" for information on the compensation of non-employee directors.
DIRECTOR ATTENDANCE AT SHAREHOLDER MEETINGS. The Company does not have a
policy regarding the attendance of its directors at each annual meeting of
shareholders. Other than Dr. BenBassat, no current directors attended that
meeting.
AUDIT COMMITTEE. As of the date of this proxy statement, the audit
committee consists of Ms. Atsmon, Dr. Borovich, Mr. Falk and Mr. Weiser, each of
whom is "independent," as such term is defined under Rule 4200(a)(15) of the
listing standards of the National Association of Securities Dealers. The
Company's board of directors has determined that Mr. Falk also qualifies as a
"financial expert" within the meaning of the proxy rules of the Securities and
Exchange Commission, or SEC. The audit committee met six times in 2003. See
"Audit Committee Report."
The audit committee operates pursuant to a written charter, referred to
in this document as the audit committee charter, which was revised by the board
of directors on March 25, 2004, a copy of which is attached to this proxy
statement as ANNEX C. Under the provisions of the audit committee charter, the
purpose and responsibilities of the audit committee include: (1) overseeing the
accounting and financial reporting processes of the Company and audits of its
financial statements; (2) recommending to the shareholders of the Company the
appointment, and recommending to the shareholders or to the board of directors,
as applicable, the compensation, of the Company's independent auditors, as well
as overseeing the work of the independent auditors; (3) overseeing and
monitoring the integrity of the Company's financial statements, the Company's
compliance with legal and regulatory requirements as they relate to financial
statements or accounting matters, the independent auditor's qualifications,
independence and performance, and the Company's internal accounting and
financial controls; (4) providing the board of directors with the results of its
monitoring and recommendations derived therefrom; (5) providing the board of
directors such additional information and materials as it may deem necessary to
make it aware of significant financial matters that require its attention; (6)
monitoring deficiencies in the management of the Company, in consultation with
the independent auditors and internal auditor, and advising the board of
directors on how to correct the deficiencies; and (7) deciding whether to
approve engagements or transactions that require audit committee approval under
the Israeli Companies Law relating generally to certain related party
transactions.
COMPENSATION COMMITTEE. As of the date of this proxy statement, the
compensation committee consists of Dr. Borovich, Mr. Thanos and Mr. Weiser, each
of whom is "independent," as such term is defined under Rule 4200(a)(15) of the
listing standards of the National Association of Securities Dealers. The purpose
of the compensation committee is to discharge the board of director's
responsibilities relating to compensation of the Company's executive officers.
The compensation committee has overall responsibility for approving and
evaluating the compensation plans, policies and programs of the Company and
administers the Company's stock option plans and employee stock purchase plan.
In addition, the compensation committee reviews and makes recommendations to the
board of directors and shareholders of the Company relating to compensation to
be provided to directors. The compensation committee did not formally meet in
2003. The members of the compensation committee separately discussed issues in
telephone conversations and email exchanges, and approved decisions through four
unanimous actions by written consent.
NOMINATING COMMITTEE. As of the date of this proxy statement, the
Company's nominating committee consists of Ms. Atsmon, Mr. Einav and Mr. Falk,
each of whom is "independent," as such term is defined under Rule 4200(a)(15) of
the listing standards of the National Association of Securities Dealers. The
nominating committee is responsible for monitoring the composition of the board
of directors and, when appropriate, seeking, screening and recommending for
nomination candidates for election to the board of directors. In addition, the
nominating committee evaluates the structure and practices of the board of
directors and, when appropriate, may recommend new policies to the full board of
directors. The nominating committee acts under a written charter, a current copy
of which is attached as ANNEX D. The nominating committee did not meet during
2003, but on March 31, 2004 the committee approved the nomination of Mr. Thanos
for election as a Class I director and Dr. Borovich for election as an external
director at the 2004 annual meeting.
6
IDENTIFICATION AND EVALUATION OF CANDIDATES FOR BOARD MEMBERSHIP
The nominating committee may utilize a variety of methods for identifying
and evaluating candidates for director. Candidates may come to the attention of
the nominating committee through current directors, management, professional
search firms, shareholders or other persons. Candidates are evaluated at regular
or special meetings of the nominating committee and may be considered at any
point during the year. The nominating committee may take such measures that it
considers appropriate in connection with its evaluation of a candidate,
including candidate interviews, inquiry of the person recommending the
candidate, engagement of an outside search firm to gather additional
information, or reliance on the knowledge of the members of the nominating
committee, the board of directors or management.
In evaluating a candidate, the nominating committee may consider, among
other things, a candidate's decision-making abilities, business experience,
relevant expertise, personal integrity and reputation. The nominating committee
may also consider the current size and composition of the board of directors and
the needs of the board of directors and its committees. The nominating committee
has also specified the following minimum qualifications that it believes must be
met by a candidate:
o The highest personal and professional ethics and integrity;
o Proven achievement and competence in the candidate's field and the
ability to exercise sound business judgment;
o Skills that are complementary to those of the existing directors;
o The ability to assist and support management and make significant
contributions to the Company's success; and
o An understanding of the fiduciary responsibilities that is
required of a director and the commitment of time and energy
necessary to diligently carry out those responsibilities.
SHAREHOLDER RECOMMENDATIONS OF CANDIDATES FOR MEMBERSHIP ON THE BOARD OF
DIRECTORS
Shareholders may submit names of prospective candidates for election to
the board of directors to the Secretary of the Company at www.clicksoftware.com
for referral to the nominating committee. Any shareholder recommendations should
include the candidate's name and qualifications for membership on the board of
directors. The nominating committee will consider persons properly recommended
by the Company's shareholders in the same manner as persons recommended by the
board of directors, individual directors or management.
Any shareholder who wishes to make a nomination for election to the board
of directors at an annual or special meeting for the election of directors must
comply with procedures set forth in the Company's articles of association.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders may communicate with the directors of the Company by sending
an email to the Secretary of the Company at www.clicksoftware.com. The Secretary
will collect, organize and monitor these communications and will ensure that
appropriate summaries of all received messages are provided to the board of
directors at its regularly scheduled meetings. Shareholders who would like their
submission directed to a specific director may so specify, and the communication
will be so forwarded, as appropriate. Where the nature of a communication
warrants, the Secretary may decide to obtain the more immediate attention of the
appropriate committee of the board of directors or an independent director, or
the Company's management or independent advisors, as the Secretary considers
appropriate.
7
DIRECTOR COMPENSATION
CASH COMPENSATION. Regulations under the Israeli Companies Law govern the
compensation paid by the Company to its external directors. In addition, all
compensation paid to directors is subject to approval of shareholders.
In accordance with these regulations, on December 5, 2002, the board of
directors adopted a resolution, approved by the Company's shareholders on May
28, 2003, and following the recommendation and approval by the audit committee,
approving a cash compensation arrangement for outside directors (the Company's
external directors and all other directors, other than directors that are
employees of the Company and directors that beneficially own, or otherwise
represent a shareholder that beneficially owns, 5% or more of the outstanding
shares of the Company). Under this arrangement, outside directors receive the
fixed annual and per meeting participation fees provided in the regulations
under the Companies Law that are payable by the Company to its external
directors. The fixed fees are be based upon the "fixed amounts" set forth in the
second and third supplements to the Israeli Companies Regulations (Rules for
Compensation and Expenses of External Directors), as amended, updated and
adjusted from time to time. Based on the category to which the Company belongs,
under the regulations, the current participation fees payable by the Company to
its external directors equal NIS 19,700 for the annual fee and NIS 990 for the
per meeting participation fees. Such amounts may be updated from time to time as
provided in the Israeli Companies Regulations.
STOCK OPTIONS. Following the Company's May 28, 2003, annual meeting and
in accordance with the Company's 2000 Share Option Plan or 2003 Israeli Share
Option Plan, as applicable, each of the Company's non-employee directors
received option grants. The three continuing non-employee directors, Dr.
Borovich, Mr. Einav and Mr. Thanos, each received an automatic grant of options
to purchase 15,000 ordinary shares, 7,500 with respect to service during 2002
and 7,500 with respect to service during 2003, at an exercise price of $1.30
(the closing sale price for the ordinary shares on the last market trading day
prior to grant). Those options vest as to 100% of the underlying stock on the
first anniversary of the date of grant, provided that the respective director
continues to serve as a director on such date. Also on May 28, 2003, in
connection with their initial election to the board of directors, Ms. Atsmon,
Mr. Falk and Mr. Weiser each received an automatic grant of options to purchase
30,000 ordinary shares at an exercise price of $1.30. These options vest as to
25% of the underlying stock on the first anniversary of the date of grant and as
to an additional 25% of the underlying stock on each anniversary of the date of
grant thereafter, provided that the respective director continues to serve as a
director on such date. For more information concerning the automatic granting of
options to the Company's non-employee directors, see Proposal No. 7, "Essential
Features of the Plan - Terms and Conditions of Automatic Grants to Outside
Directors."
PROPOSAL NO. 2
APPOINTMENT AND COMPENSATION OF INDEPENDENT ACCOUNTANTS
1. The audit committee has recommended the appointment of Brightman
Almagor & Co., a member firm of Deloitte Touche Tohmatsu, independent
accountants, referred to in this document as Brightman Almagor, as the Company's
independent accountants for the year ending December 31, 2004. Brightman Almagor
has been the Company's independent accountants since December 31, 2002.
2. Luboshitz Kasierer & Co., an affiliate member firm of Ernst & Young
International, formerly a member firm of Arthur Andersen LLP and referred to in
this document as Luboshitz Kasierer, was the Company's independent accountants
until December 31, 2002. On December 31, 2002, at a special meeting and pursuant
to a recommendation from the audit committee, the shareholders approved the
termination of Luboshitz Kasierer and the appointment of Brightman Almagor as
the Company's independent accountants.
3. As the Company announced on October 21, 2002, during the third quarter
of 2002, the audit committee, with the assistance of outside advisors, conducted
a review of the Company's financial statements for 2000 and 2001 and for the
first six months of 2002. Upon the conclusion of this review, the Company
determined to restate its historical financial statements for these periods and
the audit committee decided to recommend to the Company's shareholders that they
dismiss Luboshitz Kasierer as the Company's auditors and engage Brightman
Almagor as the Company's new auditors.
4. Luboshitz Kasierer's reports on the Company's consolidated financial
statements for 2001 and 2002, the two fiscal years prior to its termination, did
not contain an adverse opinion or disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope or accounting principles.
8
5. Additionally, except to the extent discussed below, during the two
fiscal years prior to the termination of Luboshitz Kasierer and through the date
of such termination, there were no disagreements between the Company and
Luboshitz Kasierer on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope of procedure which, if not
resolved to Luboshitz Kasierer's satisfaction, would have caused Luboshitz
Kasierer to make reference to the subject matter of the disagreement in
connection with its reports. Furthermore, there were no reportable events, as
listed in Item 304(a)(1)(v) of Regulation S-K.
6. During fiscal year 2001, the Company entered into an agreement to sell
certain receivables to a bank. As a result of the sale, the Company's management
believed that it was appropriate to reduce accounts receivable in the Company's
financial statements and to increase cash to reflect proceeds of the sale.
Because the language in the agreement with the bank provided the bank with
recourse to the Company in the event the receivables could not be collected,
Luboshitz Kasierer recommended that the receivables sold continue to be recorded
as receivables and not cash. Following discussions between the Company's
management and audit committee and Luboshitz Kasierer in connection with the
audit of the Company's financial statements for the year ended December 31,
2001, the Company accepted the recommendation of Luboshitz Kasierer. The Company
has authorized Luboshitz Kasierer to respond fully to the inquiries of Brightman
Almagor concerning the subject matter of this disagreement.
7. Further, during 2000 and 2001, the Company's two most recent fiscal
years prior to the termination of Luboshitz Kasierer, and through the date of
such termination, except as provided below, the Company did not consult
Brightman Almagor with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.
8. Brightman Almagor and another independent advisor were retained by the
audit committee as outside advisors. Brightman Almagor was specifically retained
for the following services: (i) to perform a special internal corporate
investigation regarding software revenue recognition by the Company and the
Company's United Kingdom subsidiary in the years 2000 and 2001, (ii) to review
the work of the other advisor retained by the audit committee regarding the
United States subsidiary of the Company, on the same issues, and (iii) to submit
to the audit committee Brightman Almagor's recommendations following such work.
The results of the work done by the outside advisors pointed out what was
perceived to be erroneous accounting treatment of revenue recognition in certain
situations. Following receipt of the results of the investigations made by the
Audit Committee, with the assistance of the outside advisors, the Company made
the determination to restate its historical financial statements for the years
2000, 2001 and the first six months of 2002.
9. Luboshitz Kasierer was consulted regarding the revenue recognition
issues raised in the investigation mentioned above. Luboshitz Kasierer presented
its views to the audit committee that the recognition of revenue in the
financial statements for 2000 and 2001 and for the first six months of 2002 was
proper in light of the Company's historical sales experience.
10. The Company provided Brightman Almagor with a substantially similar
copy of the foregoing disclosure and with an opportunity to furnish the Company
with a letter addressed to the Commission containing any new information,
clarification of the Company's expression of Brightman Almagor's views, or the
respects in which Brightman Almagor does not agree with the statements made
herein. Brightman Almagor indicated that it concurs with the foregoing
disclosure and that such a letter is not required.
11. Prior to the special meeting of shareholders held on December 31,
2002, the Company provided Luboshitz Kasierer a copy of proposed disclosure
regarding the foregoing matters. The disclosure provided to Luboshitz Kasierer,
and later filed on December 5, 2002 as a section of the Company's proxy
statement entitled "Appointment of Independent Accountants," was substantially
in the form of paragraphs 1-10 above. Luboshitz Kasierer's response to such
disclosure is set forth below.
RESPONSE OF LUBOSHITZ KASIERER. "We have read the statements made by the
Company in the section `Appointment of Independent Accountants' of this Proxy
Statement, which we understand will be filed with the Securities and Exchange
Commission as part of the Company's proxy statement for the special meeting of
the Company's shareholders to be held on December 31, 2002 (the "Proxy
Statement"), and have the following comments regarding the statements made in
the paragraphs numbered 3 through 9 above, which are made pursuant to the
requirements of Section 304(a) of Regulation S-K and are substantially similar
to the statements made by the Company in Item 4, Changes in Registrant's
Certifying Accountant, of its Form 8-K, dated October 7, 2002 filed October 28,
2002, as amended by the Company's Form 8-K/A, dated November 7, 2002 filed
November 13, 2002:
9
1. We are not in a position to agree or disagree with the Company's
statements made in paragraphs 3, 7 and 8 above.
2. We disagree with the statements made in paragraph 9 above. We were
informed by the Audit Committee of Brightman Almagor's
investigation, and we advised the Audit Committee that, in our
opinion, based on management representations to us and the audit
work conducted by us, the consolidated balance sheets of the
Company and its subsidiaries as of December 31, 2000 and 2001, and
the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the years ended December
31, 2000 and 2001, as initially filed publicly by the Company,
presented fairly, in all material respects, the consolidated
financial position of the Company and its subsidiaries as of
December 31, 2000 and 2001, and the consolidated results of
operations, changes in shareholders' equity and cash flows for the
years ended December 31, 2000 and 2001, in conformity with
generally accepted accounting principles in the United States
("GAAP"). We have also advised the Audit Committee that, based on
management representations to us and our review, we were not aware
of any material modifications that should have been made to the
Company's financial statements for the first six months of 2002 in
order for them to be in conformity with GAAP at the time they were
filed publicly by the Company.
We are not required or have no basis to agree or disagree with any of the
other statements contained in the Proxy Statement."
12. Representatives of Brightman Almagor are expected to be present at
the annual meeting. They will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
shareholders.
COMPENSATION OF AUDITORS FOR 2002 AND 2003
The compensation of the auditors is either determined by the Company's
shareholders or, upon shareholder authorization, by the board of directors upon
the recommendation of the audit committee. Auditor compensation is determined
according to the nature and volume of the auditors' services.
The approximate fees billed to us by Brightman Almagor and by Luboshitz
Kasierer for services rendered with respect to 2002 and 2003 were as follows:
AUDIT FEES. Brightman Almagor billed to the Company an aggregate of
approximately $65,000 for professional services rendered in connection with its
audit of the Company's financial statements for the fiscal year ended December
31, 2003 and its review of the Company's financial statement included in
quarterly reports on Form 10-Q during fiscal year 2003.
Brightman Almagor billed to the Company an aggregate of approximately
$32,000 for professional services rendered in connection with its audit of the
Company's financial statements for the fiscal year ended December 31, 2002 and
its review of the Company's financial statement included in quarterly reports on
Form 10-Q during fiscal year 2002. Brightman Almagor also billed the Company an
aggregate of $40,000 for professional services rendered in connection with the
reaudit of the financial statements for 1999, 2000 and 2001 and for the first
six months of 2002.
Luboshitz Kasierer billed to the Company an aggregate of approximately
$17,000 for professional services rendered in connection with its audit of the
Company's financial statements for fiscal year 2002 and its review of the
Company's financial statements included in quarterly reports on Form 10-Q during
fiscal year 2002.
AUDIT-RELATED FEES. During fiscal years 2002 and 2003, neither Brightman
Almagor nor Luboshitz Kasierer billed the Company for any assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees" above.
TAX FEES. Brightman Almagor billed the Company an aggregate of
approximately $11,000 for tax compliance, tax advice and tax planning services
during 2003. Neither Brightman Almagor nor Luboshitz Kasierer billed the Company
for tax compliance, tax advice and tax planning services during 2002.
10
ALL OTHER FEES. Brightman Almagor did not bill the Company for any other
fees during 2003. Brightman Almagor billed the Company an aggregate of
approximately $50,000 for a special investigation during 2002. Luboshitz
Kasierer did not bill the Company for any other fees during 2002.
PRE-APPROVAL OF AUDITORS' COMPENSATION. Pursuant to its charter, the
audit committee is responsible for pre-approving audit and non-audit services
provided to the Company by the independent auditors and, as requested by the
board of directors, other public accounting firms (or subsequently approving
non-audit services in those circumstances where a subsequent approval is
necessary and permissible). Absent such a request from the board of directors,
the Company's management approves the non-audit services provided to the Company
by accountants other than the auditors. The audit committee's policy is to
pre-approve, as a full committee, all non-audit services provided to the Company
by the independent auditors. 100% of the non-audit services provided to the
Company by the independent auditors in 2003 were pre-approved by the full audit
committee.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a majority
of the votes cast on the proposal at the annual meeting.
The Company's board of directors unanimously recommends that the
shareholders vote "FOR" the audit committee's appointment of Brightman Almagor
as the Company's independent accountants for the year ending December 31, 2004
and to authorize the board of directors, upon the recommendation of the audit
committee, to determine the auditors' related compensation.
AUDIT COMMITTEE REPORT
In connection with the issuance of the Company's Annual Report on Form
10-K, the audit committee of the board of directors of the Company:
1. Reviewed and discussed the Company's audited financial statements
for the year ended December 31, 2003 with Company management.
2. Met with Brightman Almagor, the Company's independent auditors, to
review the audited financial statements and to discuss with the
auditors all matters required to be discussed by the Auditing
Standards Board Statement of Auditing Standards (SAS) No. 61, as
amended.
3. Requested, obtained from and discussed with the independent
auditors written disclosures and a letter required by Independent
Standards Board (ISB) Standard No. 1, as amended, that the
auditors were in all respects independent.
As a result of the above-referenced review and discussions with the
Company's management and independent auditors, the audit committee recommended
to the board of directors that the audited financial statements for the fiscal
year 2003 be accepted and included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 for filing with the SEC.
Respectfully Submitted by the Audit Committee of
the Board of Directors:
Dan Falk - Chairman of the Audit Committee
Naomi Atsmon
Israel Borovich
Gil Weiser
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF REVISED EMPLOYMENT AGREEMENT WITH DR. BENBASSAT
The Israeli Companies Law requires shareholders to approve the
compensation paid by the Company to its directors. The Company is asking its
shareholders to ratify and approve the execution of a revised employment
agreement with Moshe BenBassat, the Company's Chairman of the Board of Directors
and Chief Executive Officer.
11
The terms of the revised employment agreement remain substantially the
same as contained within the previous agreement, except with respect to two
material changes to Dr. BenBassat's current employment agreement. First, the
board of directors has recommended that the maximum annual performance bonus
that may be awarded to Dr. BenBassat under the employment agreement be increased
from 100% to 299% of his base salary in light of Dr. BenBassat's and the
Company's performance in 2003, subject to a limit that any bonus amount in
excess of 100% of Dr. BenBassat's base salary shall not exceed 6% of the
company's annual operating income for the year. Part of the bonus, totaling up
to 25% of Dr. Benbassat's base salary, shall be paid each quarter, based on the
achievement of quarterly target milestones during the relevant quarter, with the
remainder of the bonus, if any, to be awarded based on the achievement of annual
target milestones. Second, the board of directors has recommended that Dr.
BenBassat's base salary be increased from $225,000 per year to $240,000 per
year. The board of directors also approved certain other minor changes to the
employment agreement. The revised employment agreement will be substantially in
the form attached hereto as Annex A.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a majority
of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE APPROVAL OF
THE EXECUTION OF THE REVISED EMPLOYMENT AGREEMENT WITH DR. BENBASSAT AS ATTACHED
AS ANNEX A.
PROPOSAL NO. 4
RATIFICATION AND APPROVAL OF SPECIAL CASH BONUS TO DR. BENBASSAT
Pursuant to the terms of the existing employment agreement between Moshe
BenBassat, the Company's Chairman of the Board of Directors and Chief Executive
Officer, and the Company, which was approved by the Company's shareholders at
the May 28, 2003 annual meeting, Dr. BenBassat is entitled to earn an annual
performance bonus of up to 100% of his base salary. The bonus is based on the
achievement of target milestones to be determined by the compensation committee
of the board of directors after consultation with Dr. BenBassat and paid on a
quarterly basis. The bonus feature may be reviewed annually by the compensation
committee for possible increases in light of Dr. BenBassat's performance.
In light of Dr. BenBassat's and the Company's performance in 2003, the
compensation committee has recommended that the Company pay to Dr. BenBassat a
special cash bonus of $149,500, in addition to the $225,000 bonus that the
Company has already granted to Dr. BenBassat under the terms of his employment
agreement for 2003. The compensation committee has reached this determination
based on certain quantitative measures of the Company's financial performance in
2003.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a majority
of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE SPECIAL CASH BONUS TO DR. BENBASSAT AS SET FORTH ABOVE.
PROPOSAL NO. 5
RATIFICATION AND APPROVAL OF GRANT OF STOCK OPTION TO DR. BENBASSAT
Following the recommendation of and approval by the audit committee, and
subject to shareholder approval, the board of directors has approved the grant
to Moshe BenBassat, the Company's Chairman of the Board of Directors and Chief
Executive Officer, of an option to purchase 250,000 ordinary shares following
the annual meeting. The exercise price will be the fair market value per share
of the ordinary shares on the date of grant, determined with reference to the
closing sale price for the ordinary shares (or the closing bid if no sales were
reported) on the last market trading day prior to grant. This option will vest
over a period of 24 months commencing on the date of grant, assuming the
continue service of Dr. BenBassat at such times.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a majority
of the votes cast on the proposal at the annual meeting.
12
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE STOCK OPTION GRANT TO DR. BENBASSAT AS SET FORTH ABOVE.
PROPOSAL NO. 6
RATIFICATION AND APPROVAL OF THE APPOINTMENT OF DR. BENBASSAT AS BOTH
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
Under the Israeli Companies Law, the chief executive officer in a
publicly traded company may not serve as chairman of the board of directors, and
the powers of the chief executive officer may not be vested in the chairman of
the board of directors, unless the shareholders of the company resolve in a
general meeting, with respect to a period of not more than three years following
such resolution, that the chairman of the board is authorized to hold the
position of chief executive officer or exercise its powers.
In light of the Company's and Dr. BenBassat's performance in 2003, the
board of directors has recommended that Dr. BenBassat continue to service as
both the Chief Executive Officer and the Chairman of the Board of Directors. In
the event the shareholders do not approve this proposal, the Company will assess
its alternatives for complying with the Israeli Companies Law.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of at least a
majority of the votes of shareholders present and voting at the meeting in
person or by proxy, provided that such majority vote at the meeting will include
at least two-thirds (2/3) of the total votes of shareholders who are not the
controlling shareholders of the Company, or anyone on their behalf, present and
voting at the meeting. Votes abstaining will not be counted as shareholders'
votes.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE APPOINTMENT OF MOSHE BENBASSAT AS BOTH CHAIRMAN OF THE BOARD OF
DIRECTORS AND CHIEF EXECUTIVE OFFICER OF THE COMPANY.
PROPOSAL NO. 7
RATIFICATION OF THE AMENDMENT TO AND THE MATERIAL PROVISIONS OF THE COMPANY'S
2000 SHARE OPTION PLAN, INCLUDING THE SECTION 162(m) LIMITATIONS
PROPOSAL
The board of directors of the Company recommends that the Company's
shareholders approve the amendment to the provisions of the Company's 2000 Share
Option Plan, as amended (the "Plan"), to approve an extension of the term of the
Plan to ten (10) years from the date of board approval of the extension on May
27, 2004 , and also to approve the material terms of the Plan so that certain
awards, including options, granted under the Plan would qualify as
"performance-based" compensation under the Plan in compliance with Section
162(m) of the United States Internal Revenue Code. The Company is asking for
this approval so that it may deduct for federal income tax purposes option
compensation in excess of $1,000,000 that may be paid to certain of our
executive officers in any taxable year. The Plan, as so amended, will be
substantially in the form attached hereto as Annex B.
BACKGROUND
The Plan was originally approved by the Board of Directors and
shareholders of the Company in 2000 and was to expire in 2010. The Plan is the
Company's primary equity compensation plan and contains a number of sub-plans
that relate to rules pertaining to specific non-United States jurisdictions. To
facilitate future use of the Plan by the Company to ensure its compensation
goals, on May 27, 2004, the Board of Directors approved an extension of the term
of the Plan to May 27, 2014, ten (10) years from the date of board approval of
the extension.
Pursuant to Section 162(m), the tax deduction the Company may take for
United States federal income tax purposes is limited to $1,000,000 for
compensation paid to its chief executive officer and each or its four other most
highly paid executive officers in any taxable year. However, the Company may
take a deduction for all such compensation that qualifies as "performance-based"
for Section 162(m) purposes. For options to qualify as "performance-based" under
Section 162(m), among other things, our shareholders must approve the material
terms of the Plan, which are described below.
13
Shareholder approval of the material terms of the Plan, such as the
option grant limitations described below, will allow the Company to deduct
certain executive compensation in excess of $1,000,000 in a taxable year, as
described above, and provide the Company with potentially significant future tax
benefits and associated cash flows. In the event the material terms of the Plan
are not ratified by the shareholders, future stock option grants to the chief
executive officer and the four other highest compensated employees of the
Company pursuant to the Plan will not be exempt from the limitations on
deductibility under Section 162(m) of the Internal Revenue Code until such
shareholder approval is obtained.
ESSENTIAL FEATURES OF THE PLAN
The essential features of the Plan as amended are outlined below, but are
qualified in their entirety by reference to the Plan.
PURPOSES. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants of the Company and
any parent or subsidiary of the Company ("Employees," "Directors" and
"Consultants" respectively and each, a "Service Provider") and to promote the
success of the Company's business. As of the date hereof, there are
approximately 145 Employees, Directors and Consultants of the Company or any
parent or subsidiary of the Company who are eligible for awards under the Plan.
Incentive stock options and nonstatutory stock options may be granted under the
Plan.
ADMINISTRATION. The Plan is administered by the board of directors or a
committee appointed by the board of directors (the "Administrator"). The
Administrator generally consist of Directors who qualify as "outside directors"
under Section 162(m) of the Internal Revenue Code (so that the Company is
entitled to receive a federal tax deduction for certain compensation paid under
the Plan) and will meet such other requirements as are established by the
Securities and Exchange Commission for plans intended to qualify for exemption
under Rule 16b-3, to the extent the Administrator determines it is desirable to
meet the requirements of these rules. Subject to the terms of the Plan, the
Administrator determines the terms of the options granted, including the
exercise price, number of ordinary shares subject to the options, and the
exercisability, and selects the Employees, Directors and Consultants who receive
options under the Plan.
SHARES RESERVED FOR ISSUANCE AND AVAILABLE AWARDS. A total of 3,000,000
ordinary shares have initially been reserved for issuance under the Plan, plus
an annual "evergreen" increase on the first day of the Company's fiscal year
equal to the lesser of:
o 5% of the outstanding ordinary shares on such date,
o 1,250,000 ordinary shares, or
o an amount determined by the board of directors.
Pursuant to this "evergreen" provision, in December 2003, the board of
directors approved an increase in the number of ordinary shares reserved for
issuance under the Plan in the amount of 400,000 ordinary shares, for a new
total of 3,400,000 ordinary shares, effective January 1, 2004.
If an option expires or becomes unexercisable without having been fully
exercised in full, the unpurchased ordinary shares generally will be returned to
the available pool of ordinary shares reserved for issuance under the Plan.
ELIGIBILITY. The Administrator selects the Service Providers who will be
granted option under the Plan; however, Outside Directors of the board of
directors are eligible to receive automatic grants of nonstatutory stock options
pursuant to the Plan. Employees and Directors may receive nonstatutory stock
options under the Plan. Only Employees may receive incentive stock options. The
actual number of individuals who will receive an option under the Plan cannot be
determined in advance because the Administrator has the discretion to select the
participants.
TERMS AND CONDITIONS OF OPTIONS (OTHER THAN AUTOMATIC GRANTS TO OUTSIDE
DIRECTORS). The Plan provides for the grant of nonstatutory stock options and
incentive stock options (which are eligible for favorable tax treatment pursuant
to Section 422 of the Internal Revenue Code). The Administrator will determine
the number of ordinary shares covered by each option, but during any fiscal year
of the Company, no Service Provider may be granted options to purchase more than
1,000,000 ordinary shares, except that a Service Provider may be granted options
to purchase up to an additional 1,000,000 ordinary shares in connection with his
or her initial service. The aggregate fair market value of the ordinary shares
(determined on the grant date) covered by incentive stock options which first
become exercisable by any Employee during any calendar year also may not exceed
$100,000. Each option is evidenced by a option agreement between the Company and
the optionee, and is subject to the following additional terms and conditions:
14
(a) EXERCISE PRICE. The exercise price of the ordinary shares subject to
each option is set by the Administrator but cannot be less than 100% of the fair
market value (on the date of grant) of the ordinary shares covered by incentive
stock options or covered by nonstatutory options intended to qualify as
"performance based" under Section 162(m) of the Internal Revenue Code.
In addition, the exercise price of an incentive stock option must be at
least 110% of fair market value if (on the grant date) the participant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any of its subsidiaries.
(b) EXERCISE OF OPTION. An option granted under the Plan generally cannot
be exercised until it becomes vested. The Administrator establishes the vesting
schedule of each option at the time of grant, and the options become exercisable
at the times and on the terms established by the Administrator. Unless otherwise
determined by the Administrator, vesting of options granted under the Plan is
tolled during any unpaid leave of absence. Options granted under the Plan expire
at the times established by the Administrator, but the term of an option may be
no more than ten years after the grant date (such term to be limited to no more
than five years in the case of an incentive stock option granted to a
participant who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its subsidiaries). An
option is exercisable in whole or in part by giving written notice to the
Company, stating the number of ordinary shares with respect to which the option
is being exercised, accompanied by payment in full for such ordinary shares.
(c) FORMS OF CONSIDERATION. The means of payment for ordinary shares
issued upon exercise of an option is specified in each option agreement. The
Plan permits payment to be made, in the discretion of the Administrator, by
cash, check, promissory note, cashless exercises, or any combination thereof.
(d) TERMINATION OF SERVICE. If an optionee's status as a Service Provider
terminates for any reason, then the optionee may exercise the option within a
period of time as determined by the Administrator and specified in the option
agreement (but in no event later than the expiration of the term of the option)
to the extent the option is vested on the date of termination. If the option
agreement does not specify the length of the period and the termination was for
any reason other than death or disability, the optionee will have three months
after termination to exercise such vested options. If the option agreement does
not specify the length of the period and the termination was as a result of the
optionee's death or disability, the optionee (or his or her estate) will have
twelve months after termination to exercise such vested options.
(e) NONTRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
administrator, options granted under the Plan are not transferable other than by
will or the laws of descent and distribution, and may be exercised during the
optionee's lifetime only by the optionee.
(f) OTHER PROVISIONS. The option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.
TERMS AND CONDITIONS OF AUTOMATIC GRANTS TO OUTSIDE DIRECTORS. The Plan
provides for the automatic, nondiscretionary grant of nonstatutory stock options
to Outside Directors. Each Outside Director, except for individuals who are
designated as "External Directors" for purposes of Israeli law, will be
automatically granted an option to purchase 30,000 ordinary shares (the "First
Option") upon the date such individual first becomes a Director, whether through
election by the shareholders of the Company or by appointment by the board of
directors in order to fill a vacancy. Each Outside Director, including External
Directors, will be automatically granted an option to purchase 7,500 ordinary
shares (the "Subsequent Option") following each annual meeting of the
shareholders of the Company if on such date he or she will have served on the
board of directors for at least the preceding six (6) months.
The exercise price of options granted automatically to Outside Directors
under the Plan will be 100% of the fair market value per share of the ordinary
shares on the date of grant, generally determined with reference to the closing
sale price for the ordinary shares (or the closing bid if no sales were
reported) on the date of grant.
The First Option vests as to 25% of the ordinary shares subject to the
option on the first anniversary after the date of grant, and as to an additional
25% of the optioned stock on each anniversary of the date of grant thereafter,
subject to the Director continuing to serve as a Director on each relevant
vesting date. The Subsequent Option vests as to 100% of the ordinary shares
subject to the option on the first anniversary after the date of grant, subject
to the Director continuing to serve as a Director on such date. The First Option
and the Subsequent Option each have a term of ten years from the date of grant.
No option may be exercised after the expiration of its term. To the extent the
terms and conditions of non-automatic options grants described above do not
conflict with the terms of the automatic option grants to Outside Directors,
such terms and conditions of the non-automatic options grants also apply to all
automatic grants made under the Plan.
15
In the future, the board of directors will approve and seek shareholder
approval for option grants to Outside Directors who are designated as External
Directors when they first become members of the board of directors, unless
otherwise required by applicable law and regulations in effect from time to
time. Such options will be to purchase no more ordinary shares than the First
Options under the Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock
of the Company changes by reason of any subdivision, combination into a greater
or smaller number of ordinary shares, reorganization, recapitalization or other
similar change, appropriate adjustments will be made in the number and class of
shares of stock subject to any option outstanding under the Plan. In the event
that Company issues any of its ordinary shares or other securities as bonus
shares or stock dividend, an optionee exercising his or her option will be
entitled to receive the number of ordinary shares as to which the option is
being exercised plus the number of shares of class or classes of Company stock
in which such bonus shares or stock dividend he or she would have received had
the optionee exercised his or her option to the same degree on the date of
grant. In addition, in the event that the stock of the Company changes by reason
of any subdivision, combination into a greater or smaller number of ordinary
shares, stock bonus, stock dividend, reorganization, recapitalization or other
similar change, appropriate adjustments will be made in the number and class of
shares of stock subject to the Plan, the exercise price of any such outstanding
option, the number of shares subject to automatic grants to Outside Directors
and the per person numerical limits on the number of shares which may be granted
subject to an option in any fiscal year.
In the event of a proposed liquidation or dissolution, any unexercised
options will terminate prior to such action. The Administrator may give the
optionee the right to exercise any unexercised options, including shares as to
which the option would not otherwise be exercisable, until fifteen (15) days
prior to their termination.
In the event of a merger of the Company or the sale of substantially all
of the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it will continue to vest as
provided in the Plan. If the successor corporation does not agree to assume or
substitute for the option, each option will become fully vested and exercisable
for a period of fifteen days from the date the Administrator notifies the
optionee of the option's full exercisability, after which period the option will
terminate. If an Outside Director's status is terminated other than upon a
voluntary resignation, his or her outstanding First Options and Subsequent
Options that have been assumed or substituted for will become fully vested and
exercisable.
AMENDMENT AND TERMINATION OF THE PLAN. The board of directors may amend,
alter, suspend or terminate the Plan, or any part thereof, at any time and for
any reason. However, the Company will obtain shareholder approval for any
further amendment to the Plan to the extent necessary to comply with applicable
laws or regulations. No such action by the board of directors or shareholders
may alter or impair any option previously granted under the Plan without the
consent of the optionee. Unless terminated earlier, the amended Plan will
terminate on May 27, 2014.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following discussion
summarizes certain United States federal income tax considerations for persons
receiving options under the Plan and certain tax effects on the Company, based
upon the provisions of the Internal Revenue Code as in effect on the date of
this Proxy Statement, current regulations and existing administrative rulings of
the Internal Revenue Service. However, the summary is not intended to be a
complete discussion of all the United States federal income tax consequences of
these plans.
INCENTIVE STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted an incentive stock option or at the time
he or she exercise the incentive stock option (except for purposes of the
alternative minimum tax, in which case taxation is the same as for nonstatutory
stock options). If the optionee exercises the option and then later sells or
otherwise disposes of the shares more than two years after the grant date and
more than one year after the exercise date, the difference between the sale
price and the exercise price will be taxed as capital gain or loss. If the
optionee exercises the option and then later sells or otherwise disposes of the
shares before the end of the two- or one-year holding periods described above,
he or she generally will have ordinary income at the time of the sale equal to
the fair market value of the shares on the exercise date (or the sale price, if
less) minus the exercise price of the option. Any further gain or loss is
capital gain or loss.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value (on the exercise date) of the shares
purchased over the exercise price. Any additional gain or loss recognized upon
any later disposition of the shares would be capital gain or loss.
TAX EFFECT FOR THE COMPANY. The Company generally will be entitled to a
tax deduction in connection with an option in an amount equal to the ordinary
income realized by an optionee and at the time the optionee recognizes such
income (for example, the exercise of a nonstatutory stock option). As discussed
above, Section 162(m) of the Internal
16
Revenue Code limits the deductibility of compensation paid to our Chief
Executive Officer and to each of our four most highly compensated executive
officers. However, the Plan has been designed to permit (but does not require)
the Plan administrator to grant options that qualify as performance-based
compensation for purposes of satisfying the conditions of Section 162(m),
thereby permitting the Company to receive a federal income tax deduction in
connection with such options.
PLAN BENEFITS
With respect to automatic grants of options to the Company's outside
directors, see above under "Terms and Conditions of Automatic Grants to Outside
Directors." Other than as described in that section, the number of options that
may be granted under the Plan to the Company's employees and its directors is
discretionary and cannot be determined in advance. The following table sets
forth certain information regarding options granted under the Plan during fiscal
year 2003 to (i) each of the executive officers named in the Summary
Compensation Table below, (ii) all current executive officers as a group, (iii)
all current directors who are not executive officers as a group, and (iv) all
employees, including all officers who are not executive officers, as a group:
Number of Shares Weighted Average
Underlying Options Exercise Price
Name Granted ($/Sh)
- --------------------------------------------------------------------- ------------------------- ----------------------
Moshe BenBassat.................................................. 250,000 $1.30
Shmuel Arvatz.................................................... 285,000 $0.60
David Schapiro................................................... 25,000 $4.25
Hannan Carmeli................................................... 125,000 $1.83
Amit BenDov...................................................... 25,505 $4.31
All current executive officers as a group........................ 710,505 $1.32
All current non-executive directors as a group................... 135,000 $1.30
All other employees (including all current officers who are
not executive officers) as a group............................ 700,335 $3.13
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a majority
of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE AMENDMENT TO THE PLAN TO EXTEND ITS TERMS THROUGH 2014 AND THE
MATERIAL TERMS OF THE PLAN, INCLUDING THE SECTION 162(M) LIMITATIONS, AS SET
FORTH ABOVE.
EXECUTIVE OFFICER COMPENSATION
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Moshe BenBassat,
its Chief Executive Officer, and Shmuel Arvatz, its Chief Financial Officer.
Regarding the status of the employment agreement with Dr. BenBassat, please see
Proposal No. 3. The agreements provide that each of the executives' employment
relationships is "at-will" and may be terminated at any time by either the
Company or the executive with or without cause and following three months'
notice to Mr. Arvatz. The agreements provide that in the event the executive is
terminated by the Company without cause, the executive will be entitled to
severance payments in amounts equal to twelve months of annual base salary as of
the date of termination for Dr. BenBassat and up to three months of annual
compensation as of the date of termination for Mr. Arvatz (plus, in the case of
Mr. Arvatz, a severance amount due in accordance with applicable law). Dr.
BenBassat is entitled to full acceleration of option vesting in the event of a
change in control, and Mr. Arvatz is entitled on his unvested options to 50% or
100% vesting, depending on the conditions of a change of control. The
executives' rights to receive the contractual severance benefits set forth above
will immediately terminate if the executive competes with the Company during the
twelve months following termination of employment.
EXECUTIVE COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company and the Company's subsidiaries in all capacities during
the last three years by the named executive officers:
17
ANNUAL COMPENSATION
--------------------------------------------- ----------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION ($)
- ----------------------------------- --------- ------------- -------------- ---------------- --------------- ------------------
Moshe BenBassat................... 2001 222,188 22,500 120,148 (1) - -
CEO 2002 209,297 - 121,838 (1) - -
2003 192,375(2) 374,500 (3) 219,137 (1) 250,000 -
Shmuel Arvatz (4)................. 2001 - - - - -
Chief Financial Officer 2002 24,191 - 4,145 (5) - -
2003 117,996 35,573 21,782 (5) 285,000 -
David Schapiro.................... 2001 128,538 - 39,744 (5) 20,000 -
Executive V.P., 2002 111,378 - 24,905 (5) 10,000 -
Markets and Products 2003 112,102 34,392 19,916 (5) 25,000 -
Hannan Carmeli.................... 2001 116,411 - 31,132 (5) 25,000 -
Executive V.P., 2002 105,488 - 14,967 (5) 10,000 -
Professional Services 2003 101,466 32,987 14,570 (5) 125,000 -
Amit BenDov....................... 2001 122,775 9,000 9,462 (6) 20,000 -
SR. V.P Product 2002 123,473 - 9,677 (6) 8,000 -
Marketing 2003 113,490 19,000 8,165 (6) 25,505 -
- ----------------------------
(1) Other compensation to Dr. BenBassat includes $75,000 housing allowance for
2001 and 2002 and $190,000 housing allowance for 2003 (of which $62,000 was
with respect to the previous year).
(2) This amount reflects a voluntary reduction from Dr. BenBassat's contractual
base salary for 2003, which under his employment agreement was $225,000.
(3) Of this amount, $149,500 is pending the approval of the shareholders at the
2004 annual meeting (see Proposal No. 4) and $225,000 was granted pursuant
to the bonus feature of the employment agreement approved by the
shareholders on May 28, 2003.
(4) Mr. Arvatz was appointed as Chief Financial Officer effective October 20,
2002.
(5) Contributions to employee benefit programs.
(6) Medical insurance and executive disability insurance.
18
OPTION GRANTS IN 2003
The following table sets forth information concerning grants of stock
options to each of the Named Executive Officers during 2003. All such options
were granted under the Company's various option plans approved during 2003, and
generally vest over two to four years.
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED IN 2003 PRICE ($/SH) DATE PRESENT VALUE (1)
---- ------------------ ------------------ --------------- ------------- ---------------------
Moshe BenBassat.............. 250,000 16% $1.30 5/28/13 $249,562
Shmuel Arvatz................ 260,000 17% $0.25 5/28/13 $49,912
25,000 2% $4.25 12/15/13 $82,398
David Schapiro............... 25,000 2% $4.25 12/15/13 $82,398
Hannan Carmeli............... 100,000 6% $1.22 6/11/13 $93,682
25,000 2% $4.25 12/15/13 $82,398
Amit BenDov.................. 15,000 1% $4.25 12/15/13 $49,439
10,505 1% $4.39 12/3/13 $30,837
- ---------------------------
(1) Computed using the Black-Scholes option pricing model. Full vesting of
options is two years from grant date. Assumes the average expected life of the
option is between 2 and 5 years, a volatility of 151%, an annual dividend yield
of 0.0% and a risk-free interest rate of 3.1%.
AGGREGATED OPTION EXERCISES IN 2003 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised by the named executive officers in 2003, and exercisable and
unexercisable stock options held by each of the named executive officers as of
December 31, 2003.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2003 DECEMBER 31, 2003 (1)
ACQUIRED ON VALUE ------------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------- -------------- --------------- -------------- -----------------
Moshe BenBassat............ - - 610,392 136,000 $1,433,802 $378,080
Shmuel Arvatz.............. - - 75,833 209,167 $290,440 $705,360
David Schapiro............. 91,963 $172,846 191,452 29,584 $539,617 $3,350
Hannan Carmeli............. 7,611 $9,617 147,138 103,250 $405,958 $217,850
Amit BenDov................ 158,618 $368,313 46,505 16,000 $95,810 $2,680
- ---------------------------
(1) Based upon the closing price of the ordinary shares on December 31, 2003 of
$4.08, less the exercise price per share.
19
EQUITY COMPENSATION PLAN INFORMATION
(AS OF DECEMBER 31, 2003)
(a) (b) (c)
NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
Equity
compensation plans
approved by
security holders 3,191,351 $2.10 1,122,020
Equity
compensation plans
not approved by
security holders 0 N/A 0
Total 3,191,351 $2.10 1,122,020
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, Dr. Borovich, Mr. Thanos and Mr. Weiser currently serve
on the compensation committee. During 2003, Mr. Shalev also served on the
compensation committee; Mr. Shalev resigned as a director effective December 31,
2003. None of these persons is or was formerly an officer or an employee of the
Company or any of its subsidiaries. No interlocking relationship exists between
the Company's board of directors or its compensation committee and the board of
directors or compensation committee of any other company, nor did any
interlocking relationships exist during the past fiscal year.
COMPENSATION COMMITTEE REPORT
The compensation committee is responsible for setting and administering
the policies governing annual compensation of executive officers, considers
their performance and makes recommendations regarding their cash compensation
and stock options to the full board of directors and, as applicable, its
shareholders. The compensation committee expects, pursuant to its charter, to
periodically review the approach to executive compensation and make changes as
competitive conditions and other circumstances warrant.
In reviewing compensation, the compensation committee seeks to address
the needs of the Company as it continues to grow and mature. The committee
recognizes that in order for the Company to develop new products and scale the
business, the ability to attract, retain and reward executive officers who will
be able to operate effectively in a high growth complex environment is vital. In
that regard, the Company must offer compensation that (a) is competitive in the
industry, (b) motivates executive officers to achieve the Company's strategic
business objectives, and (c) aligns the interests of executive officers with the
long-term interests of shareholders.
The Company currently uses salary, a management incentive plan and stock
options to meet these requirements. For incentive-based compensation, the
compensation committee considers the desirability of structuring such
compensation arrangements so as to qualify for deductibility under Section
162(m) of the Internal Revenue Code. As the compensation committee applies this
compensation philosophy in determining appropriate executive compensation levels
and other compensation factors, the compensation committee reaches its decisions
with a view towards the Company's overall performance.
20
The base salary and option grant for the Company's Chief Executive
Officer in 2003, Dr. Moshe BenBassat, was determined with reference to the
compensation of chief executive officers of other comparable technology
companies. Dr. BenBassat also received an annual bonus, which was awarded on the
basis of the Company's achievement of certain quantitative financial performance
milestones approved by the compensation committee. For information concerning
the compensation committee's bonus recommendation for Dr. BenBassat based on the
Company's performance in 2003, see Proposal No. 4 in this proxy statement.
Respectfully Submitted by the Compensation
Committee of the Board of Directors:
James W. Thanos - Chairman of the Compensation
Committee
Israel Borovich
Gil Weiser
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gilia BenBassat, an employee of the Company during 2003, is the daughter
of Moshe BenBassat, the Company's Chairman and Chief Executive Officer. During
2003, the Company made payments of $73,980 to Gilia BenBassat for services
provided as an employee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's ordinary shares as of April 30, 2004 for:
o the Company's Chief Executive Officer and its four other most
highly compensated executive officers who were serving during and
at the end of 2003, referred to collectively as the named
executive officers;
o each of the Company's directors;
o each person or group known by the Company to beneficially own more
than 5% of its outstanding ordinary shares; and
o all of the Company's executive officers and directors as a group.
Beneficial ownership of ordinary shares is determined in accordance with
the rules of the SEC and generally includes any ordinary shares over which a
person exercises sole or shared voting or investment powers, or of which a
person has a right to acquire ownership at any time within 60 days of March 30,
2004. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in this table have sole voting and investment
power with respect to all ordinary shares held by them. Applicable percentage
ownership in the following table is based on 27,134,819 shares outstanding as of
April 30, 2004.
Unless otherwise indicated below, the address of each of the principal
shareholders is c/o ClickSoftware Technologies Ltd., 34 Habarzel Street, Tel
Aviv, Israel 69710.
21
ORDINARY SHARES
BENEFICIALLY OWNED
------------------------------
NAME AND ADDRESS NUMBER PERCENT
- ---------------------------------------------------------------------------------- ------------- ---------------
Named Executive Officers And Directors
--------------------------------------
Moshe BenBassat (1)................................................... 5,216,022 18.8%
Shmuel Arvatz (2)................................................... 93,233 *
David Schapiro (3)................................................... 181,036 *
Hannan Carmeli (4)................................................... 166,221 *
Amit BenDov (5)................................................... 55,318 *
Naomi Atsmon (6)................................................... 38,100 *
Israel Borovich (7)................................................... 60,000 *
Roni A. Einav (8)................................................... 60,000 *
Dan Falk (9)................................................... 7,500 *
James W. Thanos (10).................................................. 65,000 *
Gil Weiser (11).................................................. 7,500 *
G. Nicholas Farwell (12) 1240 Arbor Road
Menlo Park, CA 94025............................................... 2,745,000 10.1%
RS Investment Management Co. LLC and affiliates (13)
388 Market Street, Suite 200
San Francisco, CA 94111............................................ 1,716,937 6.3%
Liberty Wanger Asset Management, L.P. (14)
227 West Monroe Street, Suite 3000
Chicago, IL 60606-5016............................................. 1,660,000 6.1%
All executive officers and directors as a group (11 persons) (15)...... 5,949,930 21.5%
- ---------------------
* Less than one percent.
(1) Includes 2,246,887 shares held by Dr. BenBassat's spouse, Idit BenBassat.
Dr. BenBassat has disclaimed beneficial ownership of those shares. Also
includes options to purchase 658,392392 ordinary shares exercisable
within 60 days of March 30, 2004 held by Dr. BenBassat.
(2) Includes options to purchase 93,2337 ordinary shares exercisable within
60 days of April 30, 2004 held by Mr. Arvatz.
(3) Includes options to purchase 181,036 ordinary shares exercisable within
60 days of April 30, 2004 held by Mr. Schapiro.
(4) Includes options to purchase 166,221 ordinary shares exercisable within
60 days of April 30, 2004 held by Mr. Carmeli.
(5) Includes options to purchase 42,505 ordinary shares exercisable within 60
days of April 30, 2004 held by Mr. BenDov.
(6) Includes options to purchase 7,500 ordinary shares exercisable within 60
days of April 30, 2004 held by Ms. Atsmon.
(7) Includes options to purchase 60,000 ordinary shares exercisable within 60
days of April 30, 2004 held by Dr. Borovich.
(8) Includes options to purchase 60,000 ordinary shares exercisable within 60
days of April 30, 2004 held by Mr. Einav.
(9) Includes options to purchase 7,500 ordinary shares exercisable within 60
days of April 30, 2004 held by Mr. Falk.
(10) Includes options to purchase 60,000 ordinary shares exercisable within 60
days of April 30, 2004 held by Mr. Thanos.
(11) Includes options to purchase 7,500 ordinary shares exercisable within 60
days of April 30, 2004 held by Mr. Weiser.
(12) As reported by Mr. Farwell to the Company for fiscal 2003.
22
(13) As reported on Schedule 13G filed with the SEC for fiscal 2003. Includes
13,450 ordinary shares held by RS Investment Management Co. LLC and
1,703,487 ordinary shares held by RS Investment Management, L.P. Voting
and dispositive power is shared by RS Investment Management Co. LLC (as
to all shares), G. Randall Hecht (as to all shares), and RS Investment
Management, L.P. (as to 1,703,487 shares).
(14) As reported on Schedule 13G filed with the SEC for fiscal 2001. Includes
260,000 ordinary shares held by Liberty Wanger Asset Management, L.P. and
1,400,000 ordinary shares held by Liberty Acorn Trust. Voting and
dispositive power is shared by Liberty Wanger Asset Management, L.P. (as
to all shares), WAM Acquisition GP, Inc. (as to all shares), and Liberty
Acorn Trust (as to 1,400,000 shares).
(15) Includes options to purchase 1,343,887 ordinary shares exercisable within
60 days of April 30, 2004.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of filings under Section 16(a) of
the Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that during
2003 all Section 16 filing requirements were met, except for the following:
Shmuel Arvatz, Amit Bendov, and David Schapiro each reported one transaction
late; Hannan Carmeli reported two transactions late on two Forms 4; former
director Eddy Shalev reported three transactions late on one Form 4; Naomi
Atsmon reported three transactions late on two Forms 4; and Genesis Partners
reported four transactions late on two Forms 4.
PERFORMANCE GRAPH
The following graph compares the quarterly share price of the Company's
common stock with the index return of the Nasdaq National Market and the Nasdaq
IKX Index of Computer Stocks for the period from June 23, 2000 (the date on
which the Company's common stock began trading on the Nasdaq) through December
31, 2003. The Company has paid no dividends on its common stock. Historical
stock price performance should not be relied upon as indicative of future stock
price performance:
Measurement Date CKSW NASDX
- ---------------- ---- -----
23/06/00 $7.35 3845.34
30/06/00 $7.00 3991.93
29/12/00 $1.75 2470.52
29/06/01 $1.34 2160.54
31/12/01 $1.27 1950.4
28/06/02 $0.42 1463.21
31/12/02 $0.18 1335.51
30/06/03 $1.80 1622.8
31/12/03 $4.08 2003.37
By Order of the Board of Directors
MOSHE BENBASSAT
Chairman of the Board of Directors
and Chief Executive Office
Tel Aviv, Israel
June 21, 2004
23
ANNEX A
-------
CLICKSOFTWARE INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into effective as of January 1, 2004, (the
"Effective Date") by and between ClickSoftware Inc. (the "Company"), and Moshe
Benbassat (the "Executive").
WHEREAS, Executive currently serves as the Chairman of the Board and
Chief Executive Officer of both the Company and its parent company,
Clicksoftware Technologies Ltd. ("Parent Company");
WHEREAS, the parties desire and agree to enter into an employment
relationship by means of this Agreement; and
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. Duties and Scope of Employment.
(a) POSITIONS AND DUTIES. As of the Effective Date, Executive
will continue to serve as Chief Executive Officer of the Company. Executive will
render such business and professional services in the performance of his duties,
consistent with Executive's position within the Company, as shall reasonably be
assigned to him by the Company's Board of Directors (the "Board"). The period of
Executive's employment under this Agreement is referred to herein as the
"Employment Term."
(b) BOARD MEMBERSHIP. During the Employment Term, Executive
will serve as a member of the Board, subject to the Company's Articles of
Incorporation and By Laws.
(c) OBLIGATIONS. During the Employment Term, Executive will
perform his duties faithfully and to the best of his ability and will devote his
full business efforts and time to the Company. For the duration of the
Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board. Notwithstanding the
foregoing, Executive may serve on the board of directors of any other companies
or work in academic pursuits as long as such service does not materially
interfere with the performance of his duties to the Company.
2. AT-WILL EMPLOYMENT. The parties agree that the Executive's
employment with the Company will be "at-will" employment and may be terminated
at any time with or without cause or notice. Executive understands and agrees
that neither his job performance nor promotions, commendations, bonuses or the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of his
employment with the Company.
3. COMPENSATION.
(a) BASE SALARY. During the Employment Term, the Company will
pay Executive as compensation for his services a base salary at the annualized
rate of $240,000 (the "Base Salary"). The Base Salary will be paid periodically
in accordance with the Company's normal payroll practices and be subject to the
usual, required withholding.
(b) BONUS. In addition to his Base Salary, Executive shall be
entitled to earn an annual performance bonus of up to 299% of his Base Salary
(the "Bonus"), provided however, that the portion of the Bonus, if any, in
excess of one times Base Salary shall not exceed 6% of the Company's annual
operating income for the relevant year. Award of the Bonus shall be based on the
achievement of target milestones to be set by the Compensation Committee of the
Board, after consultation with Executive. Part of the Bonus, totaling up to 25%
of the Executive's Base Salary, shall be paid each quarter, based on the
achievement of quarterly target milestones during the relevant quarter, with the
remainder of the
Bonus, if any, to be awarded based on the achievement of the annual target
milestones. The Bonus may be reviewed annually by the Compensation Committee of
the Board for possible increases in light of Executive's performance.
(c) HOUSING AND LIVING ALLOWANCE. During the Employment Term,
the Company will pay to the Executive a housing and living allowance of $75,000
per year for housing and living expenses incurred by the Executive during such
period as he is living outside of Israel. Any taxes which the Executive incurs
by reason of receipt of this allowance shall be borne by the Company, in which
case the allowance (or reimbursement, as applicable) shall be increased to the
extent necessary to ensure that the Executive receives the full allowance
amount.
(d) TEMPORARY REDUCTIONS. The Executive may at any time elect
to waive his right to receive all or part of the amounts sets forth in this
Section 3, provided however, that such amounts shall be returned to their stated
levels upon request of the Executive. Any amounts so waived shall not be
refunded to the Executive.
4. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the Employment Term, Executive will
be entitled to participate in the employee benefit plans currently and hereafter
maintained by the Company of general applicability to other senior executives of
the Company, including, without limitation, the Company's group medical, dental,
disability and life insurance. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time. In
addition, and without limiting the Executive's right to participate in the
foregoing plans, and to the extent permitted under applicable U.S. laws, the
Company shall procure insurance and pension policies in the United States and/or
in Israel, whether management insurance ("bituach menahalim") or otherwise, at
the Executive's direction, provided that the annual cost of all such policies to
the Company shall not exceed $32,000 (the "Annual Premium"). The Annual Premium
with respect to insurance in Israel shall be increased each year by the amount
of any increase during the previous calendar year in the Consumer Price Index
(Cost of Living Index) in Israel as published by the Israeli Central Bureau of
Statistics, or if that index is not published, the substitute index adopted in
its place.
(b) Use of Automobile. The Company will make available to the
Executive the use of an automobile of a make and model appropriate for a Chief
Executive Officer. The Company shall bear all expenses related to the operation
of the automobile (other than parking fines and traffic violations). Upon
termination of the Employment Term for any reason, the Executive shall promptly
return the automobile to the Company. Any taxes which the Executive incurs by
reason of receipt of the automobile benefits provided under this Section 4(b)
shall be borne by the Company, in which case the benefits provided under this
Section 4(b) shall be increased to the extent necessary to ensure that the
Executive receives the full benefits under this Section 4(b).
5. VACATION. Executive will be entitled to paid vacation of
twenty-six (26) days per year in accordance with the Company's vacation policy,
with the timing and duration of specific vacations mutually and reasonably
agreed to by the parties hereto.
6. EXPENSES. The Company will reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
7. SEVERANCE.
(a) INVOLUNTARY TERMINATION. If Executive's employment with the
Company terminates other than for "Cause" (as defined herein), and Executive
signs and does not revoke a standard release of claims with the Company, then,
subject to Section 11, Executive shall be entitled to receive continuing
payments of severance pay (less applicable withholding taxes) at a rate equal to
his Base Salary rate, as then in effect, for a period of twelve (12) months from
the date of such termination, to be paid, in Executive's discretion, (i)
periodically in accordance with the Company's normal payroll policies or (ii) in
a lump-sum within thirty (30) days of such termination.
(b) TERMINATION FOR CAUSE. If Executive's employment with the
Company terminates for Cause by the Company, then Executive will only be
eligible for severance benefits in accordance with the Company's established
policies as then in effect.
8. CHANGE OF CONTROL BENEFITS In the event of a "Change of Control"
(as defined below) of the Parent Company that occurs prior to the Executive's
termination of service to the Company, all options to purchase the Company's
Ordinary Shares held by the Executive (the "Options") will have their vesting
accelerated so as to become 100% vested. Thereafter, the Options will continue
to be subject to the terms, definitions and provisions of the Parent Company's
2000 Share Option
2
Plan, as amended (the "Option Plan") and any subplans of the Option Plan
pursuant to which the Options were granted, and the option agreements pursuant
to which the Options were granted (the "Option Agreements").
9. DEFINITIONS.
(a) CAUSE. For purposes of this Agreement, "Cause" is defined
as (i) an act of dishonesty made by Executive in connection with Executive's
responsibilities as an employee, (ii) Executive's conviction of, or plea of nolo
contendere to, a felony, or (iii) Executive's gross misconduct.
(b) CHANGE OF CONTROL. For purposes of this Agreement, "Change
of Control" of the Parent Company is defined as: (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Parent Company
representing 50% or more of the total voting power represented by the Parent
Company's then outstanding voting securities; or (ii) a change in the
composition of the Board occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" will mean directors who either (A) are directors of the Parent
Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Parent
Company); or (iii) the date of the consummation of a merger or consolidation of
the Parent Company with any other corporation that has been approved by the
stockholders of the Parent Company, other than a merger or consolidation which
would result in the voting securities of the Parent Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the total voting power represented by
the voting securities of the Parent Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Parent Company approve a plan of complete liquidation of the Parent Company; or
(iv) the date of the consummation of the sale or disposition by the Parent
Company of all or substantially all the Parent Company's assets.
10. CONFIDENTIAL INFORMATION. Executive agrees to enter into the
Company's standard Confidential Information and Invention Assignment Agreement
(the "Confidential Information Agreement") upon commencing employment hereunder.
11. CONDITIONAL NATURE OF SEVERANCE PAYMENTS.
(a) NONCOMPETE. Executive acknowledges that the nature of the
Company's and the Parent Company's business is such that if Executive were to
become employed by, or substantially involved in, the business of a competitor
of the Company or the Parent Company during the twelve (12) months following the
termination of Executive's employment with the Company, it would be very
difficult for the Executive not to rely on or use the Company's or the Parent
Company's trade secrets and confidential information. Thus, to avoid the
inevitable disclosure of the Company's and the Parent Company's trade secrets
and confidential information, Executive agrees and acknowledges that Executive's
right to receive the severance payments set forth in Section 7 (to the extent
Executive is otherwise entitled to such payments) shall be conditioned upon the
Executive not directly or indirectly engaging in (whether as an employee,
consultant, agent, proprietor, principal, partner, stockholder, corporate
officer, director or otherwise), nor having any ownership interested in or
participating in the financing, operation, management or control of, any person,
firm, corporation or business that competes with the Company or the Parent
Company or is a customer of the Company or the Parent Company. Upon any breach
of this section, all severance payments pursuant to this Agreement shall
immediately cease.
12. ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive's right to compensation or other benefits will be null
and void.
13. NOTICES. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given (i) on the
date of delivery if delivered personally, (ii) one (1) day after being sent by a
well established commercial overnight service, or (iii) four (4) days after
being mailed by registered or certified mail, return receipt
3
requested, prepaid and addressed to the parties or their successors at the
following addresses, or at such other addresses as the parties may later
designate in writing:
If to the Company:
Clicksoftware Inc.
c/o ClickSoftware Technologies Ltd.
34 HaBarzel Street
Tel Aviv 69710, Israel
Attn: CFO
If to Executive:
at the last residential address known by the Company.
14. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
15. ARBITRATION.
(a) Executive agrees that any dispute or controversy arising
out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Boston,
Massachusetts in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator will be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply California law to the merits
of any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings will be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. The Executive hereby consents
to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS
ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION
CLAIMS.
16. INTEGRATION. This Agreement, together with the Option Plan, Option
Agreements and the Confidential Information Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements whether written or oral.
No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
17. TAX WITHHOLDING. All payments made pursuant to this Agreement will
be subject to withholding of applicable taxes.
18. GOVERNING LAW. This Agreement will be governed by the laws of the
State of Massachusetts (with the exception of its conflict of laws provisions).
19. ACKNOWLEDGMENT. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
4
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by their duly authorized officers, as of the day and
year first above written.
CLICKSOFTWARE INC.
By: Date:
-------------------------------- ------------------
Title:
-----------------------------
EXECUTIVE
Date:
------------------------------------ ------------------
Moshe Benbassat
5
ANNEX B
CLICKSOFTWARE TECHNOLOGIES LTD.
AMENDED AND RESTATED 2000 SHARE OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Share Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. The Plan is
the Company's primary equity compensation plan and contains a number of
sub-plans that relate to rules pertaining to specific non-United States
jurisdictions. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of share option plans under Israeli corporate and securities
laws, U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Shares are listed or
quoted and the applicable laws of any country or jurisdiction where Options are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the U.S. Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "Company" means ClickSoftware Technologies Ltd., a
corporation incorporated under the laws of the State of Israel.
(g) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(h) "Director" means a member of the Board of Directors of the
Company.
(i) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
An Employee shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the value of a
Share determined as follows:
(i) If the Shares are listed on the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, their Fair
Market Value shall be the closing sales price for such Shares (or the
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closing bid, if no sales were reported) as quoted on such system for the last
market trading day prior to the time of determination, as reported in Globes,
HaAretz or such other source as the Administrator deems reliable;
(ii) If the Shares are listed on the Tel Aviv Stock
Exchange, but are not traded on the Nasdaq National Market or The Nasdaq Small
Cap Market, their Fair Market Value shall be the closing sales price for such
Shares (or the closing bid if no sales were reported) as quoted on such exchange
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;
(iii) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, their Fair Market Value
shall be the mean between the high bid and low asked prices for the Shares on
the last market trading day prior to the day of determination, or;
(iv) In the absence of an established market for the
Shares, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Inside Director" means a Director who is an Employee.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(p) "Option" means a share option granted pursuant to the Plan.
(q) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(r) "Optioned Shares" means the Shares subject to an Option.
(s) "Optionee" means the holder of an outstanding Option
granted under the Plan.
(t) "Outside Director" means a Director who is not an Employee.
(u) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 2000 Share Option Plan.
(w) "Service Provider" means an Employee, Director or
Consultant.
(x) "Share" means a share of the Company's Ordinary Shares
having a nominal value of 1.00 NIS, as adjusted in accordance with Section 12
below.
(y) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of Shares that may be subject to
option and sold under the Plan is 3,000,000 Shares, plus an annual increase to
be added on the first day of the Company's fiscal year beginning in 2001 equal
to the lesser of (i) 5% of outstanding shares on such date, (ii) 1,250,000
Shares, or (iii) a lesser amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired.
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If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. Different Committees
with respect to different groups of Service Providers may administer the Plan.
(ii) SECTION 162(M). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16B-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may
from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions of any Option
granted hereunder;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Shares;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value (or the nominal value of the Shares, if higher
than the Fair Market Value), if the Fair Market Value of the Shares covered by
such Option has declined since the date the Option was granted;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.
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6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
1,000,000 Shares, which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 12), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. The Plan was effective upon its adoption by the
Board and was to continue in effect for a term of (10) years until 2010. Subject
to shareholder approval at the Company's 2004 annual general meeting of
shareholders, on May 27, 2004, the Board approved an extension of the term of
the Plan for an additional ten (10) years until May 27, 2014, unless sooner
terminated under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns
shares representing more than ten percent (10%) of the voting power of all
classes of shares of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns shares representing more than ten
percent (10%) of the voting power of all classes of shares of the Company or any
Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(2) granted to any Employee other than an
Employee described in the preceding subparagraph, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
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(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price (other than as required above) of less
than 100% of Fair Market Value on the date of grant pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) consideration received by the Company under a
formal cashless exercise program adopted by the Company in connection with the
Plan, or (5) any combination of the foregoing methods of payment. To the extent
that the consideration paid for the Shares is denominated in a currency other
than New Israeli Shekels, the exchange rate to be used to obtain a New Israeli
Shekel value of such consideration shall be the noon buying rate as reported by
the Federal Reserve Bank of New York (expressed in shekels per unit of
non-Israeli currency) on the date of grant of the Option. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Options shall become exercisable at a rate to be
determined by the Administrator. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in (i) the name of the Optionee or,
if requested by the Optionee, in the name of the Optionee and his or her spouse,
or (ii) the name of the Optionee to Yoav Bruckner as trustee (the "Trustee"), to
be held by the Trustee on behalf of Optionee if so required by Applicable Laws.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the 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 will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option
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Agreement to the extent the Option is vested on the date of termination, but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to the entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan. If such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement to the extent that the Option is vested on the date of
death (but in no event later than the expiration of the term of such Option as
set forth in the Option Agreement) by the Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If the Option is not so exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
11. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
Administrator, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) CHANGES IN CAPITALIZATION. In the event the Shares shall be
subdivided or combined into a greater or smaller number of Shares or if, upon a
reorganization, recapitalization or the like, the Shares shall be exchanged for
other securities of the Company, each Optionee shall be entitled, subject to the
conditions herein stated, to purchase such number of Shares or amount of other
securities of the Company as were exchangeable for the number of Shares of the
Company which such Optionee would have been entitled to purchase except for such
action, and appropriate adjustments shall be made in the purchase price per
share to reflect such subdivision, combination or exchange.
In the event that the Company shall issue any of its Shares or
other securities as bonus shares or a stock dividend upon or with respect to any
Shares which shall at the time be subject to an Option hereunder, each Optionee
upon exercising such Option shall be entitled to receive (for the purchase price
payable upon such exercise), the Shares as to which he or she is exercising such
Option and, in addition thereto (at no additional cost), such number of shares
of the class or classes in which such bonus shares or stock dividend were
declared, and such amount of Shares (and the amount in lieu of fractional
Shares) as is equal to the Shares which he would have received had he been the
holder of the Shares as to which he is exercising his Option at all times
between the date of the granting of such Option and the date of its exercise.
Upon the occurrence of any of the foregoing events, the class and
aggregate number of Shares or other securities issuable pursuant to the Plan, in
respect of which Options have not yet been granted, as well as the number of
Shares which may be granted pursuant to the automatic grant provisions of
Section 13, shall also be appropriately adjusted to reflect the events specified
above. If the Company offers the holders of the Shares, or of any other class of
security for which the Options are then exercisable, rights to purchase
securities of the Company, then the Company shall offer the same rights to the
Optionees as if they had exercised their Options on the record date with respect
to such rights offering.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Shares, including Shares as to which
the Option would not otherwise be exercisable. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
A-6
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. With respect to Options granted to an
Outside Director pursuant to Section 13 that are assumed or substituted for, if
following such assumption or substitution the Optionee's status as a Director or
a director of the successor corporation, as applicable, is terminated other than
upon a voluntary resignation by the Optionee, then the Optionee shall fully vest
in and have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable.
In the event that the successor corporation refuses to assume or
substitute for the Option, the Optionee shall fully vest in and have the right
to exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be vested or exercisable. If an Option becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period.
For the purposes of this Section 12(c), the Option shall be
considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each Share of Optioned Shares
immediately prior to the merger or sale of assets, the consideration (whether
shares, cash, or other securities or property) received in the merger or sale of
assets by holders of Shares for each Share held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely ordinary shares (or their equivalent) of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Shares, to be solely ordinary
shares (or their equivalent) of the successor corporation or its Parent equal in
fair market value to the per Share consideration received by holders of in the
merger or sale of assets.
13. FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors
shall be automatically granted Options each year in accordance with the
following provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
(b) Each Outside Director, except for individuals who became
directors of the Company prior to the Company's 2001 Annual Meeting, and except
for Outside Directors who are designated as External Directors in accordance
with Israeli law, is automatically granted an option to purchase thirty thousand
(30,000) shares (the "First Option"), upon the date such individual first
becomes a director, whether through election by the shareholders of the Company
or by appointment by the Board in order to fill a vacancy (the "Anniversary
Date"); provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
Each Outside Director, including Outside Directors who are
designated as External Directors in accordance with Israeli law, is
automatically granted an option to purchase seven thousand five hundred (7,500)
shares (the "Subsequent Option") following each annual meeting of the
shareholders of the Company, beginning in 2002, if on such date he or she shall
have served on the Board for at least the preceding six (6) months.
(c) The terms of each First Option granted pursuant to this
Section shall be as follows:
(i) the term of the First Option shall be ten (10)
years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.
(iii) the First Option shall vest as to 25% of the Shares
subject to the First Option on each anniversary of its date of grant provided
that the Optionee continues to serve as a Director on such date.
(d) The terms of each Subsequent Option granted pursuant to
this Section shall be as follows:
A-7
(i) the term of the Subsequent Option shall be ten (10)
years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(iii) the Subsequent Option shall vest as to 100% of the
Shares subject to the Subsequent Option on the anniversary of its date of grant
provided that the Optionee continues to serve as a Director on such date.
14. DATE OF GRANT. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Service Provider to whom an Option
is so granted within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and 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.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's 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.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
A-8
ANNEX C
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CLICKSOFTWARE TECHNOLOGIES LTD.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSES:
The purposes of the Audit Committee of the Board of Directors (the "Board") of
ClickSoftware Technologies Ltd. (the "Company") shall be to:
o Oversee the accounting and financial reporting processes of the Company
and audits of the financial statements of the Company;
o Recommend to the shareholders of the Company the appointment, and
recommend to the shareholders or to the Board, as applicable, the
compensation, of the independent auditors engaged to audit the Company's
financial statements;
o Oversee and monitor (i) the integrity of the Company's financial
statements, (ii) the Company's compliance with legal and regulatory
requirements as they relate to financial statements or accounting
matters, (iii) the independent auditor's qualifications, independence and
performance, and (iv) the Company's internal accounting and financial
controls;
o Oversee the preparation of the report that the rules of the Securities
and Exchange Commission (the "SEC") require be included in the Company's
annual proxy statement;
o Provide the Company's Board with the results of its monitoring and
recommendations derived therefrom;
o Provide to the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters
that require the attention of the Board;
o Monitor deficiencies in the management of the Company, in consultation
with the independent auditors and internal auditor, and advise the Board
of Directors on how to correct the deficiencies; and
o Decide whether to approve engagements or transactions that require Audit
Committee approval under the Israeli Companies Law, 1999 (the "Companies
Law"), relating generally to certain related party transactions.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board may from time
to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board. The Audit Committee will consist of at least three
members of the Board. Members of the Audit Committee must meet the following
criteria (as well as any other criteria required by the SEC or the Companies
Law):
o Each member will be an independent director, as defined in (i)
Nasdaq Rule 4200, (ii) Section 10A(m)(3) of the Securities
Exchange Act of 1934, as amended and (iii) the rules and
regulations of the SEC provided, that, one non-independent,
non-employee director may serve on the Audit Committee if (i) the
Board has made the required determination under Nasdaq Rule
4350(d) and (ii) such Nasdaq rule is in effect or has not
otherwise been superseded;
A-1
o Each member will be able to read and understand fundamental
financial statements, in accordance with the Nasdaq National
Market Audit Committee requirements;
o At least one member will qualify as a financial expert, under
Nasdaq and SEC rules and regulations; and
o All of the Company's external directors (dahatzim), as defined
under the Companies Law, will be members.
The Board shall annually appoint the members of the Audit Committee and (if any)
the Chair of the Audit Committee, immediately following the Company's annual
meeting of stockholders.
Without limiting the foregoing, the following persons may not serve on the Audit
Committee:
o The chairman of the Board of Directors;
o Any person employed by the Company or who receives any consulting,
advisory or compensatory fee from the Company, other than in his
or her capacity as a member of the Board or its committees; and
o Any person who owns or controls (or whose relative owns or
controls) more than 10% of the Company's shares.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include the following:
o Reviewing on a continuing basis the adequacy of the Company's
system of internal controls, including meeting periodically with
the Company's management and the independent auditors to review
the adequacy of such controls and to review before release the
disclosure regarding such system of internal controls required
under SEC rules to be contained in the Company's periodic filings
and the attestations or reports by the independent auditors
relating to such disclosure;
o Recommending to the shareholders of the Company the appointment,
and recommending to the shareholders or the Board, as applicable,
the compensation, of the independent auditors, as well as
overseeing the work of the independent auditors (including
resolving disagreements between management and the independent
auditors regarding financial reporting), for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services or related work;
o Pre-approving audit and non-audit services provided to the Company
by the independent auditors and, as requested by the Board of
Directors, other public accounting firms (or subsequently
approving non-audit services in those circumstances where a
subsequent approval is necessary and permissible); in this regard,
subject to shareholder approval, the Audit Committee shall have
the authority to hire and fire the independent auditors, and to
approve all audit engagement fees and terms and all non-audit
engagements, as may be permissible, with the independent auditors;
o Reviewing on a continuing basis the activities, organizational
structure and qualifications of the Company's internal
audit/financial control function;
o Reviewing and providing guidance with respect to the external
audit and the Company's relationship with its independent auditors
by (i) reviewing the independent auditors' proposed audit scope,
approach and independence; (ii) obtaining on a periodic basis a
formal written statement from the independent auditors regarding
relationships and services with the Company which may impact
independence and presenting this statement to the Board; (iii)
actively engaging in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact
the objectivity and independence of the independent auditors and
recommending that the Board take appropriate action to satisfy
itself with regard to the auditors' independence; (iv) discussing
with the Company's independent auditors the financial statements
A-2
and audit findings, including any significant adjustments,
management judgments and accounting estimates, significant new
accounting policies and disagreements with management and any
other matters described in Statement of Accounting Standards
("SAS") No. 61, as may be modified or supplemented; and (v)
reviewing reports submitted to the Audit Committee by the
independent auditors in accordance with the applicable SEC
requirements;
o Reviewing the performance of the Company's independent auditors;
o Reviewing with management and the Company's independent auditors
such accounting policies (and changes therein) of the Company,
including any financial reporting issues which could have a
material impact on the Company's financial statements, as are
deemed appropriate for review by the Audit Committee prior to any
interim or year-end filings with the SEC or other regulatory body;
o Reviewing and discussing with management and the independent
auditors the annual audited financial statements and quarterly
unaudited financial statements, including the Company's
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," prior to filing
the Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q, respectively, with the SEC;
o Directing the Company's independent auditors to review before
filing with the SEC the Company's interim financial statements
included in Quarterly Reports on Form 10-Q, using professional
standards and procedures for conducting such reviews;
o Conducting a post-audit review of the financial statements and
audit findings, including any significant suggestions for
improvements provided to management by the independent auditors;
o Reviewing before release the unaudited quarterly operating results
in the Company's quarterly earnings release;
o Reviewing before release the disclosure regarding the Company's
system of accounting and internal controls required under SEC
rules to be contained in the Company's periodic filings and the
attestations or reports by the independent auditors relating to
such disclosure;
o Overseeing compliance with the requirements of the SEC for
disclosure of auditor's services and Audit Committee members,
member qualifications and activities;
o Receiving periodic reports from the Company's independent auditors
and management of the Company to review the selection, application
and disclosure of the Company's significant accounting policies
and to assess the impact of other financial reporting developments
that may have a bearing on the Company, including an analysis of
the effect of alternative GAAP methods on the Company's financial
statements and a description of any transactions as to which
management obtained SAS No. 50 letters;
o Reviewing with management and the independent auditor the effect
of regulatory and accounting initiatives as well as off-balance
sheet structures on the Company's financial statements;
o Reviewing with management and the independent auditor any
correspondence with regulators or governmental agencies and any
employee complaints or published reports that raise material
issues regarding the Company's financial statements or accounting
policies;
o Reviewing the findings of any examination by regulatory agencies
regarding the Company's financial statements or accounting
policies;
o Recommending to the Board guidelines for the Company's hiring of
employees of the independent auditor who were engaged on the
Company's account;
A-3
o Reviewing, in conjunction with counsel, any legal matters that
could have a significant impact on the Company's financial
statements;
o Reviewing the Company's policies relating to the avoidance of
conflicts of interest and reviewing past or proposed transactions
between the Company, members of the Board and management as well
as internal control policies and procedures with respect to
officers' use of expense accounts and perquisites, including the
use of corporate assets. The Audit Committee shall consider the
results of any review of these policies and procedures by the
Company's independent auditors;
o Providing oversight to the Company's Chief Financial Officer and
reviewing at least annually the Company's risk management
policies, including its investment policies and performance for
cash and short-term investments;
o Reviewing any auditing or accounting issues concerning the
Company's employee benefit plans;
o If necessary, instituting special investigations relating to
financial statements or accounting policies with full access to
all books, records, facilities and personnel of the Company;
o As appropriate, obtaining advice and assistance from outside
legal, accounting or other advisors, and retaining such persons to
provide such services;
o Reviewing and approving in advance any proposed related party
transactions to the extent required under the Companies Law and
Nasdaq and other rules;
o Establishing and maintaining free and open means of communication
between the Audit Committee, the Company's independent auditors,
the Company's internal audit/financial control department and
management with respect to auditing and financial control matters,
including providing such parties with appropriate opportunities to
meet privately with the Audit Committee;
o Establishing procedures for receiving, retaining and treating
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and procedures for the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters;
o Reviewing its own charter, structure, processes and membership
requirements;
o Overseeing the preparation of a report in the Company's proxy
statement in accordance with the rules and regulations of the SEC;
o Determining the appropriate funding to be provided by the Company
for payment of compensation (i) to the independent auditors for
the purpose of rendering or issuing an audit report or performing
other audit, review or attest services and (ii) to any legal,
accounting or other advisors employed by the Audit Committee; and
o At the direction of the Board of Directors, approving the annual
or periodic work plan of the internal auditor of the Company. The
Chairman of the Audit Committee may also require the internal
auditor to conduct an internal audit, in addition to the work
plan, in areas that require prompt attention.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with GAAP and applicable rules and
regulations.
A-4
MEETINGS:
The Audit Committee will meet as often as it determines, but not less frequently
than once quarterly.
The Audit Committee, in its discretion, will ask members of management or others
to attend its meetings (or portions thereof) and to provide pertinent
information as necessary. The Audit Committee will meet separately with the
Chief Executive Officer and separately with the Chief Financial Officer of the
Company at such times as are appropriate to review the financial affairs of the
Company. The Audit Committee will meet periodically in separate executive
session with the independent auditors as well as any financial controllers of
the Company, at such times as it deems appropriate to fulfill the
responsibilities of the Audit Committee under this charter.
The independent auditors shall be invited to every meeting of the Audit
Committee that relates to the financial statements of the Company. The internal
auditor shall be invited to all Audit Committee meetings. In addition, the
internal auditor may request that the chairperson of the Audit Committee convene
a meeting to discuss a particular issue, and the chairperson shall convene the
Audit Committee within a reasonable period of time, if the chairperson finds it
appropriate to do so.
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board.
REPORTS:
In addition to preparing the report in the Company's proxy statement in
accordance with the rules and regulations of the SEC, the Audit Committee will
report on its examinations and recommendations to the Board.
COMPENSATION:
Members of the Audit Committee may receive compensation for their service as
Audit Committee members, subject to the provisions of the Companies Law.
Members of the Audit Committee may not receive any compensation from the Company
except the fees that they receive for service as members of the Board or any
committee thereof.
DELEGATION OF AUTHORITY:
The Audit Committee may delegate to one or more designated members of the Audit
Committee the authority to pre-approve audit and permissible non-audit services,
provided such pre-approval decision is presented to the full Audit Committee at
its scheduled meetings.
A-5
ANNEX D
-------
CLICKSOFTWARE TECHNOLOGIES LTD.
CHARTER OF THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSES:
The Corporate Governance and Nominating Committee ("CGC") of the Board of
Directors (the "Board") of ClickSoftware Technologies Ltd. (the "Company") will
monitor the composition of the Board and, when appropriate, seek, screen and
recommend for nomination qualified candidates for election to the Board at the
Company's Annual Meeting of Stockholders. In addition, the CGC will seek
qualified candidates to fill vacancies on the Board, at the request of, and
subject to appointment by, the Board. The CGC will evaluate candidates
identified on its own initiative as well as candidates referred to it by other
members of the Board, by the Company's management, by stockholders who submit
names to the Company's Secretary for referral to the CGC, or by other external
sources. The CGC will also evaluate the Board's structure and practices and,
when appropriate, recommend new policies to the full Board.
NOMINATION/APPOINTMENT POLICY:
The Board believes that it is in the best interests of the Company and its
stockholders to obtain highly qualified candidates to the Board. The CGC will
seek for nomination and appointment candidates with excellent decision-making
ability, business experience, relevant expertise, personal integrity and
reputation.
MEMBERSHIP:
The CGC will consist of a minimum of three members of the Board, each of whom
shall be an "independent director" within the meaning of Rule 4200 of the Manual
of the National Association of Securities Dealers, Inc. The members of the CGC
will be appointed by and serve at the discretion of the Board. At least one
external director, as defined in the Israeli Companies Law, 1999, (the
"Companies Law") shall be a member of the CGC.
RESPONSIBILITIES:
The responsibilities of the CGC shall include the following:
o Reviewing Board structure, composition, and practices, and making
recommendations on these matters to the Board;
o Establishing procedures for stockholders to submit nominees for
election to the Board;
o Reviewing, soliciting and making recommendations to the Board and
stockholders of the Company with respect to candidates for
election to the Board, including review of and recommendations
regarding nominees submitted by stockholders;
o Establishing a process for shareholders to send communications to
the Board, including a process for collecting and organizing
shareholder communications;
o Overseeing compliance by the Company's chief executive officer and
senior financial officers with the Code of Ethics for Principal
Executive and Senior Financial Officers, as adopted by the
Company;
A-1
o Overseeing compliance by the Company's employees with Code of
Business Conduct and Ethics, as adopted by the Company;
o Establishing procedures for receiving, retaining and treating
complaints received by the Company regarding its practices (except
with respect to accounting, internal accounting controls or
auditing matters, which such matters shall be forwarded to the
Audit Committee) and procedures for the confidential, anonymous
submission by employees of concerns regarding questionable
practices (except with respect to accounting or auditing matters,
which such matters shall be forwarded to the Audit Committee);
o Overseeing and monitoring the Company's compliance with legal and
regulatory requirements, except as compliance relates to financial
statements or accounting matters (which is the duty of the Audit
Committee);
o Reviewing management's monitoring of compliance with the Company's
standards of business conduct and, as applicable, with the Foreign
Corrupt Practices Act and with the Foreign Corrupt Practices Act;
o Reviewing with management and the independent auditor any
correspondence with regulators or governmental agencies and any
employee complaints or published reports that raise material
issues with respect to all matters other than with respect to the
Company's financial statements or accounting policies (which is
the duty of the Audit Committee);
o Reviewing the findings of any examination by regulatory agencies
other than with respect to the Company's financial statements or
accounting policies (which is the duty of the Audit Committee);
o If necessary, instituting special investigations with full access
to all books, records, facilities and personnel of the Company,
other than with respect to financial statements or accounting
policies (which is the duty of the Audit Committee); and
o Performing such other tasks as may be delegated to it from time to
time by the Board.
MEETINGS:
Meetings of the CGC will be held at the pleasure of the Board and the members of
the CGC, from time to time, in response to needs of the Board. Notwithstanding
the foregoing, the CGC will meet at least once annually to evaluate and make
nominations of qualified candidates for election to the Board at the Annual
Meeting of Stockholders.
MINUTES:
The CGC will maintain written minutes of its meetings, which minutes will be
filed with the minutes of the meetings of the Board.
REPORTS:
The CGC will summarize its examinations and recommendations to the Board as may
be appropriate, consistent with the CGC's charter.
The CGC will provide written reports to the Board regarding the CGC's
nominations for election to the Board.
COMPENSATION:
Members of the CGC shall may receive such fees compensation for their service as
CGC members, subject to the provisions of the Companies Law as may be determined
by the Board in its sole discretion. .Such fees may include retainers or per
meeting fees. Fees may be paid in such form of consideration as is determined by
the Board.
A-2
CLICKSOFTWARE TECHNOLOGIES LTD.
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
ANNUAL MEETING OF SHAREHOLDERS, JULY 20, 2004
P R O X Y B A L L O T
THIS PROXY/BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CLICKSOFTWARE TECHNOLOGIES LTD.
The undersigned revokes all previous proxies, acknowledges receipt of the
notice of the annual meeting of shareholders to be held July 20, 2004 and the
proxy statement related thereto and appoints Moshe BenBassat and Shmuel Arvatz,
jointly and severally, the proxy of the undersigned, with full power of
substitution, to vote all ordinary shares of ClickSoftware Technologies Ltd.
which the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the annual meeting of shareholders of the
Company to be held at 34 Habarzel Street, Tel Aviv, Israel 69710 on July 20,
2004 at 2:00 p.m. local time, and at any adjournment or postponement thereof,
with the same force and effect as the undersigned might or could do it
personally present thereat. The shares represented by this proxy shall be voted
in the manner set forth on the reverse side.
I hereby vote my ordinary shares of ClickSoftware Technologies Ltd. as
specified on the reverse side of this card.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
----------------
Please mark votes as in this example.
The board of directors recommends a vote FOR each of the matters listed
below. This proxy/ballot, when properly executed, will be voted as specified
below.
THIS PROXY/BALLOT WILL BE VOTED FOR PROPOSALS NO. 1, 2, 3, 4, 5, 6 and 7
IF NO SPECIFICATION IS MADE.
- -------------------------------------------------------------- ------------------- ------------------- --------------------
1. ELECTION OF DIRECTORS FOR AGAINST
JAMES W. THANOS, CLASS I DIRECTOR
ISRAEL BOROVICH, EXTERNAL DIRECTOR
- -------------------------------------------------------------- ------------------- ------------------- --------------------
2. RATIFY THE APPOINTMENT BY THE AUDIT COMMITTEE OF FOR AGAINST ABSTAIN
BRIGHTMAN ALMAGOR & CO. AS INDEPENDENT AUDITORS FOR
2004 AND AUTHORIZE THE BOARD OF DIRECTORS, UPON THE
RECOMMENDATION OF THE AUDIT COMMITTEE, TO DETERMINE THE
AUDITORS' RELATED COMPENSATION
- -------------------------------------------------------------- ------------------- ------------------- --------------------
3. RAFITY AND APPROVE A REVISED EMPLOYMENT AGREEMENT WITH FOR AGAINST ABSTAIN
MOSHE BENBASSAT
- -------------------------------------------------------------- ------------------- ------------------- --------------------
4. RATIFY AND APPROVE A SPECIAL CASH BONUS OF $149,500 TO FOR AGAINST ABSTAIN
MOSHE BENBASSAT
- -------------------------------------------------------------- ------------------- ------------------- --------------------
5. RATIFY AND APPROVE GRANT OF STOCK OPTION FOR 250,000 FOR AGAINST ABSTAIN
SHARES TO MOSHE BENBASSAT
- -------------------------------------------------------------- ------------------- ------------------- --------------------
6. RATIFY AND APPROVE THE APPOINTMENT OF MOSHE BENBASSAT FOR AGAINST ABSTAIN
AS BOTH CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF
EXECUTIVE OFFICER
- -------------------------------------------------------------- ------------------- ------------------- --------------------
7. RATIFY AND APPROVE THE AMENDMENT TO AND THE MATERIAL FOR AGAINST ABSTAIN
PROVISIONS OF THE COMPANY'S 2000 SHARE OPTION PLAN,
INCLUDING THE SECTION 162(m) LIMITATIONS
- -------------------------------------------------------------- ------------------- ------------------- --------------------
Address Change Information
Please sign your name exactly as it appears hereon. If acting as attorney,
executor, trustee or in other representative capacity, sign name and title.
Signature: Date:
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Signature: Date:
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