COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the compensation earned during the years ended December 31, 2019 and 2018 by (i) our Chief Executive Officer; (ii) our former Chief Executive Officer; (iii) our Chief Financial Officer; (iv) our VP Hardware Engineering; and (v) our VP Research & Development. We refer to the persons listed in (i) through (v) collectively as the Named Executive Officers. Certain of these officers are included solely to comply with Israeli law.

(1)      Salary payments which were in NIS were translated into U.S. Dollars according to the annual average exchange rate of NIS 3.56 per U.S. Dollar in 2019 and NIS 3.59 per U.S. Dollar in 2018.

(2)      The fair value recognized for the 2018 option awards was determined as of the grant date in accordance with FASB ASC Topic 718 (see Note 10B to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018). The fair value recognized for the 2019 option awards was determined as of the grant date in accordance with FASB ASC Topic 718 (see Note 11C to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019).

(3)      This cost reflects social benefits (as required under applicable Israeli law), car expenses and termination payments.

(4)      The 2019 “All Other Compensation” of Mr. Holtzman, as shown in the table above, is comprised of $1,788 of car expenses and $6,085 of social benefits.

(5)      The 2019 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of $20,704 of car expenses, $33,973 of social benefits and $180,938 of termination payments. The 2018 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of $20,529 of car expenses and $50,950 of social benefits. Effective August 1, 2019, Mr. Cohen is no longer the Chief Executive Officer of the Company.

(6)      The 2019 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of $17,169 of car expenses and $27,630 of social benefits. The 2018 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of $16,579 of car expenses and $21,806 of social benefits.

(7)      The 2019 “All Other Compensation” of Mr. Itay, as shown in the table above, is comprised of $17,169 of car expenses and $26,883 of social benefits. The 2018 “All Other Compensation” of Mr. Itay, as shown in the table above, is comprised of $17,024 of car expenses and $26,656 of social benefits.

(8)      The 2019 “All Other Compensation” of Mr. Eilam, as shown in the table above, is comprised of $17,169 of car expenses and $31,044 of social benefits. The 2018 “All Other Compensation” of Mr. Eilam, as shown in the table above, is comprised of $17,024 of car expenses and $30,264 of social benefits.

All of the incumbent Named Executive Officers mentioned in the table above and our directors are entitled to acceleration of the vesting of any unvested share options and restricted shares in the event of a change of control of the Company.

Pension, Retirement or Similar Benefit Plans

Except as required by applicable law (relating to severance payments to Israeli employees), and except for an acceleration of unvested options granted to our directors and officers in the event of a change of control of the Company, none of our current officers or employees are entitled to receive any payments upon termination of employment.

Employment Agreements

We maintain written employment and related agreements with all of our current executive officers. These agreements provide for monthly salaries and contributions by us to executive insurance and vocational studies funds. The employment agreements of certain executive officers provide for the achievement of an annual bonus, as described above. In addition, we may decide to grant our executive officers share options from time to time. All of our executive officers’ employment and related agreements contain provisions regarding noncompetition, confidentiality of information and assignment of inventions. The enforceability of covenants not to compete in Israel is unclear.

We have the following written agreements and other arrangements concerning compensation with our current executive officers:

(1)    Agreement with Yehuda Holtzman.    We have an employment agreement with Mr. Holtzman, which provides that Mr. Holzman will serve as the Chief Executive Officer of the Company, in consideration of a monthly gross salary of NIS 76,000 (approximately $22,000 based on current exchange rates) and other standard benefits. Mr. Holtzman also received options to purchase 450,000 Ordinary Shares and receives 100,000 options on an annual basis to promote retention and as an incentive, all subject to vesting requirements. The issuance of such options is subject to the discretion and approval of both the Company’s Compensation Committee and the Board of Directors. The options granted under the employment agreement shall fully accelerate upon the consummation of an M&A Transaction (as defined in the employment agreement). According to the employment agreement, Mr. Holtzman is eligible to receive an annual bonus in an amount of up to 10 months’ gross base salary. The employment agreement is for an unlimited duration, provided that each party may terminate it without cause upon serving the other party a written notice of 90 days, prior to termination.

(2)    Agreement with Assaf Cohen.    We have an employment agreement with Mr. Cohen, which provides that Mr. Cohen will serve as Chief Financial Officer of the Company and our subsidiaries, in consideration of a monthly gross salary (effective August 1, 2019 and as described below NIS 45,000; between January 1, 2019 and July 31, 2019 NIS 35,000; between March 1, 2018 and December 31, 2018 NIS 30,000) and other standard benefits. Mr. Cohen also receives grants of options on an annual basis to promote retention and as an incentive, subject to vesting requirements. The issuance of such options is subject to the discretion and approval of both the Company’s Compensation Committee and the Board of Directors. According to the employment agreement, Mr. Cohen is eligible to receive an annual bonus in an amount up to 4 months’ gross base salary (and up to 6 months’ gross base salary for 2020, as detailed below). The employment agreement is for an unlimited duration, provided that each party may terminate it without cause upon serving the other party a written notice of six months (formerly was three months), prior to termination. Effective August 1, 2019, as approved by our Board and Compensation Committee, and pursuant to the amendment to Mr. Cohen’s employment agreement dated September 30, 2019, Mr. Cohen’s monthly gross salary is NIS 45,000 and the abovementioned written notice for termination is six months. In addition, pursuant to the amendment to Mr. Cohen’s employment agreement, as also approved by the Company’s shareholders, Mr. Cohen received a lump sum bonus, in the amount of NIS 100,000, for his services as the Interim Chief Executive Officer of the Company. On March 17, 2020, our Compensation Committee and Board approved an increase in Mr. Cohen’s 2020 maximum annual bonus from 4 months’ to 6 months’ gross base salary.

Outstanding Equity Awards at Fiscal Year-End

The following table shows options to purchase our Ordinary Shares outstanding on December 31, 2019, held by each of our Named Executive Officers.

(1)      On April 14, 2020, 100,000 options were granted to Mr. Holtzman under the Company’s Amended and Restated 2001 Stock Option Plan, as amended to date (the “Plan”). The options vest in three equal annual installments, commencing January 1, 2021. Also on April 14, 2020, 450,000 options were granted to Mr. Holtzman under the Plan. The options vest in three equal annual installments, commencing November 25, 2020.

(2)      All the options granted to Mr. Cohen under the Plan have been forfeited as a result of Mr. Cohen’s resignation from the Company.

(3)      On November 11, 2015, 10,000 options were granted to Mr. Cohen under the Plan. The options vest in three equal annual installments, commencing November 11, 2016. On November 30, 2016, 15,000 options were granted to Mr. Cohen under the Plan. The options vest in three equal annual installments, commencing November 30, 2017. On November 28, 2017, 15,000 options were granted to Mr. Cohen under the Plan. The options vest in three equal annual installments, commencing November 28, 2018. On November 27, 2018, 20,000 options were granted to Mr. Cohen under the Plan. The options vest in three equal annual installments, commencing November 27, 2019. On August 13, 2019, 100,000 options were granted to Mr. Cohen under the Plan. The options vest in three equal annual installments, commencing August 13, 2020.

(4)      On November 30, 2016, 15,000 options were granted to Mr. Itay under the Plan. The options vest in three equal annual installments, commencing November 30, 2017.

(5)      On January 1, 2015, 15,000 options were granted to Mr. Eilam under the Plan, of which 10,000 options were exercised by Mr. Eilam as of December 31, 2019. The options vest in three equal annual installments, commencing January 1, 2016. On December 15, 2016, 20,000 options were granted to Mr. Eilam under the Plan. The options vest in three equal annual installments, commencing November 30, 2017.

(1)      This column represents the sums that our non-executive directors received according to the Israeli regulations as an annual fee as well as for attending Board and Board committee meetings.

(2)      The fair value recognized for the 2019 option awards was determined as of the grant date in accordance with FASB ASC Topic 718 (see Note 11C to our consolidated financial statements included in our Annual Report on Form 10-K).

As of December 31, 2019, our directors held options to purchase our Ordinary Shares as follows:

During 2019, we reimbursed our directors for expenses incurred in connection with attending board meetings and committee meetings and provide the following compensation for directors: annual compensation of $17,840; meeting participation fees of $925 per in-person meeting; meeting participation by telephone of $555 per meeting; and $463 per written resolution.

Our executive directors do not receive additional separate compensation for their service on the Board or any committee of the Board. During 2019, our non-executive directors were reimbursed for their expenses for each board meeting, and committee meeting attended and in addition received the foregoing compensation with respect to attendance at such meetings. The aggregate amount paid by us to our non-executive directors for their service during 2019 was $141,163.

See “Security Ownership of Certain Beneficial Owners and Management” for information on beneficial ownership of our shares by our directors and executive officers. We have no outstanding loans to any of our directors or executive officers.

Under the Companies Law, an External Director is entitled to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited from receiving any other compensation, directly or indirectly, in connection with services provided as an External Director.

Other than described above, and except for (i) the share purchase agreement (the “Purchase Agreement”) dated December 23, 2019 by and among the Company, Jerry L. Ivy, Jr. Descendants’ Trust (“Ivy”), and two of our directors, Mr. Anderson and Mr. Medford, and (ii) two of our directors, Mr. Shanahan and Ms. Hardardottir, who were designated by Ivy pursuant to the Share Purchase Agreement, none of our directors, executive officers or shareholders holding more than 5% of our outstanding Ordinary Shares, or members of any such person’s immediate family, has any relationship with the Company besides serving as directors or executive officers.

Agreements with Directors and Officers

We have entered into employment agreements with all of our executive officers as mentioned above and indemnification agreements with all of our executive officers and directors. In addition, we have granted options to purchase our Ordinary Shares to our directors and executive officers, as mentioned elsewhere in this proxy statement.

Other than described above and except for the Purchase Agreement, none of our directors, executive officers or shareholders holding more than 5% of our outstanding shares, or members of any such person’s immediate family, has any relationship with the Company besides serving as directors or executive officers.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have engaged PwC, as our principal independent registered public accounting firm until the 2020 annual general meeting. Under Item No. 3 above, we are seeking shareholder approval to appoint PwC until our 2021 annual general meeting.

Our Audit Committee is generally responsible for the oversight of our independent auditors’ work. The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services, as further described below. The Audit Committee sets forth the basis for its pre-approval in detail, listing the particular services or categories of services which are pre-approved, and setting forth a specific budget for such services. Additional services may be pre-approved by the Audit Committee on an individual basis. Once services have been pre-approved, our independent registered public accounting firm and our management then report to the Audit Committee on a periodic basis regarding the extent of services actually provided in accordance with the applicable pre-approval, and regarding the fees for the services performed.

Our Audit Committee pre-approved all audit and non-audit services provided to us and to our subsidiaries during the periods listed below. The Audit Committee approves discrete projects on a case-by-case basis that may have a material effect on our operations and also considers whether proposed services are compatible with the independence of the independent auditors.

Pursuant to our pre-approval policy, the Audit Committee pre-approves and delegates to our Chairman of the Board the authority to approve the retention of ad-hoc audit and non-audit services from our independent auditors, beyond the scope approved by the Audit Committee as part of the annual audit plan.

(1)      The audit fees for the years ended December 31, 2019 and 2018, are the aggregate fees billed or billable (for the year) for the professional services rendered for the audits of our 2019 and 2018 annual consolidated financial statements, review of consolidated quarterly financial statements of 2019 and 2018, and services that are normally provided in connection with statutory audits of us and our subsidiaries, consents and assistance with review of documents filed with the SEC.

(2)      Audit-related fees for fiscal year 2018 consisted primarily of agreed upon procedures reports.

(3)      Tax fees are the aggregate fees billed (in the year) for professional services rendered for tax compliance and tax advice other than in connection with the audit.

(4)      All other fees are fees billed for accounting standard procedure.