OMB
APPROVAL
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OMB
Number: 3235-0070
Expires:
January 31, 2008
Estimated
average burden
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|
(Exact
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Charter)
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contained in this form are not required to respond
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number.
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Q.
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What
is the purpose of the Annual
Meeting?
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At
our Annual Meeting, stockholders will act upon the matters outlined
in the
accompanying Notice of Annual Meeting, including the following
proposals:
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1.
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To
expand the size of the Board of Directors to nine; to fix the number
of
Class III directors at three and to elect three Class III directors
for a
three-year term ending in 2010 and continuing until their successors
are
duly elected and qualified; and to fix the number of Class I directors
at
three and to elect one additional Class I director for a two-year
term
ending in 2009 and continuing until his successor is duly elected
and
qualified (beginning on page 2);
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2.
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To
consider and act upon a proposal to approve and adopt the 2007
Non-Employee Director Equity Compensation Plan (beginning on page
6);
and
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3.
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To
act upon all other business that may properly come before the meeting
or
any postponements or adjournments
thereof.
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Q.
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Why
have I received a Notice of Internet Availability of Proxy
Materials?
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This
year, we are one of the first companies to take advantage of new
SEC rules
enabling us to distribute our proxy materials primarily over the
Internet.
We believe that this method of distribution will encourage more
stockholders to vote their proxies, will reduce the environmental
impact
of mass distribution of paper proxy materials, and will substantially
reduce our costs of distribution. You will not receive a printed
copy of
our proxy materials unless you specifically request one. If you wish
to
receive a paper or e-mail copy of the proxy materials, you may do
so in
accordance with the procedures set forth in the Notice of Internet
Availability of Proxy Materials. However, if you do decide that you
want a
paper copy of these proxy materials, we urge you to simply print
a copy
from off of the Internet rather than having your company incur the
additional costs of printing and
mailing.
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Q.
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Why
is Arotech seeking stockholder approval for the first
proposal?
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A.
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Our
certificate of incorporation and by-laws provide for a Board of three
or
more directors, composed of three classes of similar size. The number
of
directors is currently set at seven. The members of each class are
elected
in different years, so that only one-third of the Board is elected
in any
single year.
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Q.
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Why
is Arotech seeking stockholder approval for the second
proposal?
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A.
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We
believe that stock-based awards are a key component to our ability
to
retain and attract high quality directors to manage our business
and
affairs. Since the plan we had in place for our non-employee directors
has
expired, we are submitting this proposal for the adoption of a new
plan,
which will enable awards of restricted
stock.
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Q.
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What
shares can I vote?
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A.
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All
shares of our common stock owned by you as of the close of business
on the
record date, August 17, 2007, may be voted by you. These shares include
(i) shares held directly in your name as the stockholder of record,
and
(ii) shares held for you as the beneficial owner through a stockbroker,
bank or other nominee. Each share of common stock owned by you entitles
you to cast one vote on each matter to be voted
upon.
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Q.
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What
is the difference between holding shares as a stockholder of record
and as
a beneficial owner?
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A.
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Most
of our stockholders hold their shares through a stockbroker, bank
or other
nominee rather than directly in their own name. As summarized below,
there
are some distinctions between shares held of record and those owned
beneficially.
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Q.
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How
can I vote my shares in person at the Annual
Meeting?
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A.
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Shares
held directly in your name as the stockholder of record may be voted
in
person at the Annual Meeting. If you wish to vote your shares at
the
Annual Meeting, please bring the Notice of Internet Availability
of Proxy
Materials that you received, as well as proof of
identification.
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Q.
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What
vote is required to approve each
proposal?
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A.
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Holders
of a majority of the outstanding shares entitled to vote must be
present,
in person or by proxy, at the Annual Meeting in order to have the
required
quorum for the transaction of
business.
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Q.
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What
are “broker non-votes”?
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A.
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Broker
non-votes occur when nominees, such as banks and brokers holding
shares on
behalf of beneficial owners, do not receive voting instructions from
the
beneficial holders at least ten days before the meeting. If that
happens,
the nominees may vote those shares only on matters deemed “routine” by the
New York Stock Exchange, such as the election of directors and the
adoption of the increase in authorized shares of common stock. Nominees
cannot vote on non-routine matters unless they receive voting instructions
from beneficial holders, resulting in so-called “broker non-votes.” The
effect of broker non-votes on each of the three proposals that will
be
considered at the Annual Meeting is described above and in our proxy
statement.
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Q.
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Where
can I find the voting results of the
meeting?
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A.
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We
will announce preliminary voting results at the meeting and publish
final
results in a Current Report on Form 8-K to be filed by us with the
SEC by
Friday, October 19, 2007, by 5:30 p.m.
e.d.t.
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Q.
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Who
will count the votes?
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A.
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An
attorney with Lowenstein Sandler P.C., our outside counsel, will
tabulate
the votes and act as the inspector of
election.
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Q.
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Who
will bear the costs of this
solicitation?
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A.
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Our
Board of Directors is making this solicitation, and we will pay the
entire
cost of preparing, assembling, printing, mailing and distributing
these
proxy materials. If you choose to access the proxy materials over
the
Internet, however, you are responsible for Internet access charges
you may
incur. The
solicitation of proxies or votes may be made in person, by telephone
or by
electronic communication by our directors, officers and employees,
who
will not receive any additional compensation for such solicitation
activities. We have hired Broadridge Financial Solutions, Inc. to
assist
us in the distribution of proxy materials. We will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for
their
reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to stockholders.
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Q.
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What
should I do now?
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A.
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You
should read this proxy statement carefully and promptly submit your
proxy
card or vote by telephone or the Internet as provided on the proxy
card to
ensure that your vote is counted at the Annual
Meeting.
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Q.
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How
do I vote if I hold shares
directly?
|
A.
|
You
may vote your shares by attending the Annual Meeting in person and
completing a ballot or returning your validly executed proxy card
at the
meeting. The Annual Meeting will begin promptly at 10:00 a.m. local
time on Monday, October 15, 2007 at the offices of Lowenstein Sandler
P.C., 1251 Avenue of the Americas, 18th Floor, New York, New
York. Attendance at the Annual Meeting will not, by itself, result
in the
revocation of a previously submitted proxy. Even if you are planning
to
a
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Q.
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How
do I vote if I hold shares in street
name?
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A.
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If
you do not want to attend the Annual Meeting and hold your shares
in a
stock brokerage account or if your shares are held by a bank or nominee
(i.e., in “street name”), you must provide your broker with
directions on how to vote your shares. Your broker will provide you
with
instructions regarding how to direct your broker to vote your shares.
It
is important to follow these instructions carefully to ensure your
shares
are represented at the Annual Meeting. If you do not provide directions
to
your broker, your shares will not be voted at the Annual
Meeting.
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Q.
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What
does it mean if I receive more than one Notice of Internet Availability
of
Proxy Materials?
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A.
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It
means your shares are registered differently or are in more than
one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
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Q.
|
How
can I change my vote after I have mailed my proxy
card?
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A.
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If
you are a holder of record, you may generally change your vote by
delivering a later-dated proxy or written notice of revocation to
our
Corporate Secretary before the Annual Meeting, or by attending the
Annual
Meeting and voting in person. If your shares are held in “street name” by
your broker, you must follow the instructions received from your
broker
regarding how to change your vote.
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1229
Oak Valley Drive
Ann
Arbor, Michigan 48108
|
Name
|
Age
|
Position
with Arotech
|
Class
|
Director
Since
|
|||||
Dr.
Jay M. Eastman(2)(4)
|
59
|
Director
|
I
|
October
1993
|
|||||
Steven Esses(3) |
43
|
President,
Chief Operating Officer and Director
|
I
|
August
2002
|
|||||
Michael
Marrus
|
44
|
Director
Nominee
|
I
|
–
|
|||||
Jack
E. Rosenfeld(1)(2)(4)
|
69
|
Director
|
II
|
October
1993
|
|||||
Lawrence
M. Miller(1)(3)(4)
|
61
|
Director
|
II
|
November
1996
|
|||||
Prof.
Seymour Jones
|
76
|
Director
|
II
|
August
2005
|
|||||
Robert
S. Ehrlich
(3)
|
69
|
Chairman
of the Board and Chief Executive Officer
|
III
|
May
1991
|
|||||
Edward
J. Borey(2)(3)
|
57
|
Director
|
III
|
December
2003
|
|||||
Elliot
Sloyer
|
43
|
Director
Nominee
|
III
|
–
|
(1)
|
Member
of the Audit Committee.
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(2)
|
Member
of the Compensation Committee.
|
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(3)
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Member
of the Executive and Finance Committee.
|
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(4)
|
Member
of the Nominating Committee.
|
Audit
Committee
|
Compensation
Committee
|
Nominating
Committee
|
Executive
and Finance Committee
|
Seymour
Jones
Lawrence
M. Miller
Jack
E. Rosenfeld
|
Jay
M. Eastman
Jack
E. Rosenfeld
Edward
J. Borey
|
Jack
E. Rosenfeld
Lawrence
M. Miller
Jay
M. Eastman
|
Robert
S. Ehrlich
Steven
Esses
Lawrence
M. Miller
Edward
J. Borey
|
|
Ø
|
Ability
and willingness to contribute special competencies to the Board in
a
collaborative manner. The areas of expertise required at any point
in time
may vary, based on the existing composition of the Board. They may
include, but would not be limited to, capabilities honed as a CEO
or a
senior functional leader in operations, finance, information technology,
marketing, organizational development, and experience making step
change
to transform a business.
|
|
Ø
|
Personal
integrity and highest ethical character. Absence of any conflicts
of
interest, either real or perceived.
|
|
Ø
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Willingness
to apply sound and independent business judgment, enriching management
and
Board proposals or challenging them constructively as
appropriate.
|
|
Ø
|
Willing
to exert influence through strong influence skills and constructive
teamwork. This is essential to effective collaboration with other
directors as well as providing constructive counsel to the
CEO.
|
|
Ø
|
Understanding
of and full commitment to our governance principles and the obligation
of
each director to contribute to good governance, corporate citizenship,
and
corporate image for Arotech.
|
|
Ø
|
Willingness
to devote the time necessary to assume broad fiduciary responsibility
and
to participate fully in Arotech governance requirements with
appropriate due diligence and
attention.
|
|
Ø
|
The
name of the stockholder and evidence of the person’s ownership of our
stock, including the number of shares owned and the length of time
of
ownership; and
|
|
Ø
|
The
name of the candidate, the candidate’s resume or a listing of his or her
qualifications to be a director of Arotech and the person’s consent to be
named as a director if selected by the Nominating Committee and nominated
by the Board of Directors.
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Option
Awards(1)
($)
|
Total
($)
|
||||||||
Dr.
Jay M. Eastman
|
$ |
27,375
|
$ | 30,157 | (2) | $ |
57,532
|
||||
Jack
E. Rosenfeld
|
$ |
42,000
|
$ | 30,157 | (3) | $ |
72,157
|
||||
Lawrence
M. Miller
|
$ |
40,500
|
$ | 30,157 | (4) | $ |
70,657
|
||||
Edward
J. Borey
|
$ |
33,375
|
$ | 20,074 | (5) | $ |
53,449
|
||||
Seymour
Jones
|
$ |
25,125
|
$ | 1,705 | (6) | $ |
26,830
|
||||
(1)
|
This
column reflects the compensation cost for the year ended December 31,
2006 of each director’s options, calculated in accordance with SFAS 123R
and using a Black-Scholes valuation
model.
|
(2)
|
As
of December 31, 2006, Dr. Eastman held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same date.
|
(3)
|
As
of December 31, 2006, Mr. Rosenfeld held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same date.
|
(4)
|
As
of December 31, 2006, Mr. Miller held options to purchase an
aggregate of 13,570 shares of our common stock, 8,570 shares of
which were vested as of that same date.
|
(5)
|
As
of December 31, 2006, Mr. Borey held options to purchase an
aggregate of 10,000 shares of our common stock, 5,000 shares of
which were vested as of that same date.
|
(6)
|
As
of December 31, 2006, Prof. Jones held options to purchase an
aggregate of 2,500 shares of our common stock, none of which was
vested as of that same date.
|
|
Ø
|
Robert
S. Ehrlich, our Chairman and Chief Executive
Officer;
|
|
Ø
|
Steven
Esses, our President and Chief Operating
Officer;
|
|
Ø
|
Thomas
J. Paup, our Vice President – Finance and Chief Financial Officer;
and
|
|
Ø
|
Avihai
Shen, our former Vice President – Finance and Chief Financial Officer, who
ceased to act as our Chief Financial Officer in February 2006, and
whose
employment with us terminated on March 31,
2006.
|
|
Ø
|
cash
salary;
|
|
Ø
|
bonus,
some of which is paid in cash in the year in which it is earned and
some
of which is accrued in the year in which it is earned but is paid
in cash
in a subsequent year;
|
|
Ø
|
stock
options; and
|
|
Ø
|
grants
of restricted stock, where (i) the stock vests over a period of time
or
pursuant to the attainment of set goals, (ii) sale of such stock
is
prohibited for a period of time, and (iii) with respect to certain
grants
of restricted stock, unvested stock is forfeited to us should the
executive officer’s employment be terminated under certain
circumstances.
|
|
Ø
|
accruals
(but not cash payments) in respect of pension plans, which consist
of a
savings plan, life insurance and statutory severance pay benefits,
and a
continuing education fund;
|
|
Ø
|
accruals
(but not cash payments) in respect of contractual termination
compensation in excess of the Israeli statutory
minimum;
|
|
Ø
|
the
use of an automobile and cash reimbursement for certain Israeli taxes
on
the use of that automobile that are paid by our Israeli executive
officers
and reimbursed by us in accordance with Israeli tax
regulations;
|
|
Ø
|
annual
statutory holiday pay; and
|
|
Ø
|
redemption
of all unused vacation days and up to a maximum of 30 unused sick
days.
|
Name
of Executive Officer
|
Title
|
Minimum
Bonus
|
Maximum
Bonus
|
|||
Robert
S. Ehrlich
|
Chairman
and Chief Executive Officer
|
35%
of annual base salary
|
75%
of annual base salary
|
|||
Steven
Esses
|
President
and Chief Operating Officer
|
20%
of annual base salary
|
75%
of annual base salary
|
|||
Thomas
J. Paup
|
Vice
President – Finance and Chief Financial Officer
|
None
|
50%
of annual base salary
|
|||
Avihai
Shen
|
Former
Vice President – Finance and Chief Financial Officer
|
None
|
None
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(2)
($)
|
Option
Awards(3)
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||
Robert
S. Ehrlich
|
2006
|
$ |
312,173
|
$ |
105,000
|
$ |
205,507
|
$ |
–
|
$ |
–
|
$ |
483,331
|
(4) | $ |
1,106,011
|
|||||||
Chairman,
Chief Executive
|
2005
|
$ |
275,362
|
$ |
49,875
|
$ |
309,425
|
$ |
–
|
$ |
–
|
$ |
132,753
|
(5) | $ |
767,415
|
|||||||
Officer
and a director
|
2004
|
$ |
275,907
|
$ |
99,750
|
$ |
103,918
|
$ |
–
|
$ |
75,250
|
$ |
731,372
|
(6) | $ |
1,286,197
|
|||||||
Thomas
J. Paup
|
2006
|
$ |
135,000
|
$ |
20,000
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
2,596
|
(7) | $ |
157,956
|
|||||||
Vice
President – Finance and
|
2005
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
||||||||
Chief
Financial Officer
|
2004
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
$ |
–
|
||||||||
Steven
Esses
|
2006
|
$ |
62,211
|
(8) | $ |
116,000
|
(9) | $ |
65,421
|
$ |
–
|
$ |
–
|
$ |
252,929
|
(10) | $ |
496,561
|
|||||
President,
Chief Operating
|
2005
|
$ |
56,722
|
(11) | $ |
112,000
|
(12) | $ |
110,550
|
$ |
–
|
$ |
–
|
$ |
277,123
|
(13) | $ |
556,395
|
|||||
Officer
and a director
|
2004
|
$ |
65,506
|
(14) | $ |
106,000
|
(15) | $ |
45,129
|
$ |
–
|
$ |
–
|
$ |
54,088
|
(16) | $ |
270,723
|
|||||
Avihai
Shen*
|
2006
|
$ |
41,601
|
$ |
0
|
$ |
(27,585
|
)(17) | $ |
–
|
$ |
–
|
$ |
15,567
|
(18) | $ |
29,583
|
||||||
Former
Vice President – Finance
|
2005
|
$ |
157,013
|
$ |
0
|
$ |
25,950
|
$ |
–
|
$ |
–
|
$ |
140,965
|
(19) | $ |
327,928
|
|||||||
and
Chief Financial Officer
|
2004
|
$ |
155,845
|
$ |
97,000
|
$ |
1,635
|
$ |
–
|
$ |
–
|
$ |
68,743
|
(20) | $ |
323,223
|
*
|
Mr.
Shen ceased to act as our Chief Financial Officer in February 2006,
and
his employment with us terminated on March 31, 2006.
|
(1)
|
We
paid the amounts reported for each named executive officer in U.S.
dollars
and/or New Israeli Shekels (NIS). We have translated amounts paid
in NIS
into U.S. dollars at the exchange rate of NIS into U.S. dollars at
the
time of payment or accrual.
|
(2)
|
Reflects
the value of restricted stock awards granted to our executive officers
based on the compensation cost of the award computed in accordance
with
Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment, which we refer
to as SFAS 123R, but excluding any impact of assumed forfeiture rates.
The
number of shares of restricted stock received by our executive officers
pursuant to such awards in 2006, vesting in equal amounts over three
years, was as follows: Mr. Ehrlich, 320,000; Mr. Paup, 85,000;
Mr. Esses, 160,000. The number of shares of restricted stock received
by our executive officers pursuant to such awards in 2004, vesting
in
equal amounts over three years, was as follows: Mr. Ehrlich, 24,285;
Mr. Esses, 11,785; Mr. Shen, 2,142. There were no such awards in
2005.
|
(3)
|
No
options were issued in 2006. Amounts for 2005 and 2004 do not reflect
compensation cost calculated in accordance with SFAS 123R since SFAS
123R
had not been adopted as at such date.
|
(4)
|
Of
this amount, $151,760 represents payments to Israeli pension and
education
funds; $218,907 represents our accrual for severance pay that will
be
payable to Mr. Ehrlich upon his leaving our employ other than if
he is
terminated for cause, such as a breach of trust; $26,689 represents
the
increase of the accrual for vacation days redeemable by Mr. Ehrlich;
and
$21,217 represents the increase of our accrual for severance pay
that
would be payable to Mr. Ehrlich under the laws of the State of Israel
if
we were to terminate his employment.
|
(5)
|
Of
this amount, $45,362 represents payments to Israeli pension and education
funds; $67,024 represents our accrual for severance pay that will
be
payable to Mr. Ehrlich upon his leaving our employ other than if
he is
terminated for cause, such as a breach of trust; $(51,928) represents
the
decrease of the accrual for vacation days redeemable by Mr. Ehrlich;
$(40,483) represents the decrease of the accrual for sick days redeemable
by Mr. Ehrlich; $(25,976) represents the decrease of our accrual
for
severance pay that would be payable to Mr. Ehrlich under the laws
of the
State of Israel if we were to terminate his employment; $61,195 represents
payment for redemption of accrued but unused vacation days; and $33,394
represents payment for redemption of accrued but unused sick
days.
|
(6)
|
Of
this amount, $548,477 represents payments to Israeli pension and
education
funds, $500,000 of which was deposited by us in a Rabbi Trust for
Mr.
Ehrlich’s benefit (pursuant to the terms of the Rabbi Trust, funds in the
Rabbi Trust continue to be owned by us, and benefit from all gains
and
bear the risk of all losses resulting from investments of Rabbi Trust
funds); $76,766 represents our accrual for severance pay that would
be
payable to Mr. Ehrlich upon a “change of control” or upon the occurrence
of certain other events; $28,603 represents the increase of the accrual
for vacation days redeemable by Mr. Ehrlich; and $28,529 represents
the
increase of our accrual for severance pay that would be payable to
Mr.
Ehrlich under the laws of the State of Israel if we were to terminate
his
employment.
|
(7)
|
Represents
the increase in our accrual for Mr. Paup for accrued but unused vacation
days.
|
(8)
|
Does
not include $178,176 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven Esses’s
immediate family, from which Mr. Esses receives a salary. See “Certain
Relationships and Related Transactions – Consulting Agreement with Sampen
Corporation,” below.
|
(9)
|
Does
not include $30,720 that we paid as a bonus to Sampen Corporation,
a New
York corporation owned by members of Steven Esses’s immediate family, from
which Mr. Esses receives a salary. See “Certain Relationships and Related
Transactions – Consulting Agreement with Sampen Corporation,”
below.
|
(10)
|
Of
this amount, $112,627 represents payments to Israeli pension and
education
funds; and $86,707 represents the increase of our accrual for severance
pay that would be payable to Mr. Esses if we were to terminate his
employment.
|
(11)
|
Does
not include $178,176 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven Esses’s
immediate family, from which Mr. Esses receives a salary. See “Certain
Relationships and Related Transactions – Consulting Agreement with Sampen
Corporation,” below.
|
(12)
|
Includes
a $100,000 signing bonus that was paid to Mr. Esses in 2005 and the
$12,000 minimum bonus to which Mr. Esses is entitled pursuant to
the terms
of his employment contract. Does not include $30,720 that we paid
as a
bonus to Sampen Corporation, a New York corporation owned by members
of
Steven Esses’s immediate family, from which Mr. Esses receives a salary.
See “Certain Relationships and Related Transactions – Consulting Agreement
with Sampen Corporation,” below.
|
(13)
|
Of
this amount, $186,707 represents the increase of our accrual for
severance
pay that would be payable to Mr. Esses if we were to terminate his
employment; and $41,369 represents the increase of the accrual for
sick
leave and vacation days redeemable by Mr. Esses.
|
(14)
|
Does
not include $208,100 that we paid in consulting fees to Sampen
Corporation, a New York corporation owned by members of Steven Esses’s
immediate family, from which Mr. Esses receives a salary. See “Certain
Relationships and Related Transactions – Consulting Agreement with Sampen
Corporation,” below.
|
(15)
|
Does
not include $110,000 that we paid as a bonus to Sampen Corporation,
a New
York corporation owned by members of Steven Esses’s immediate family, from
which Mr. Esses receives a salary. See “Certain Relationships and Related
Transactions – Consulting Agreement with Sampen Corporation,”
below.
|
(16)
|
Of
this amount, $12,116 represents payments to Israeli pension and education
funds; and $3,759 represents the increase of the accrual for vacation
days
redeemable by Mr. Esses.
|
(17)
|
Represents
recapture of expenses in respect of restricted stock that was returned
to
us upon termination of Mr. Shen’s employment.
|
(18)
|
Of
this amount, $3,369 represents payment to Mr. Shen for redemption
of
accrued but unused vacation days.
|
(19)
|
Of
this amount, $26,889 represents payments to Israeli pension and education
funds; $104,602 represents the increase of our accrual for severance
pay
that would be payable to Mr. Shen if we were to terminate his employment;
$(28,597) represents the decrease of the accrual for sick leave and
vacation days redeemable by Mr. Shen; $(5,526) represents the decrease
in
our accrual for severance pay that would be payable to Mr. Shen under
the
laws of the State of Israel if we were to terminate his employment;
and
$35,131 represents payment to Mr. Shen for redemption of accrued
but
unused vacation days. Mr. Shen left our employ effective March 31,
2006,
and these amounts were accordingly paid to him.
|
(20)
|
Of
this amount, $26,889 represents payments to Israeli pension and education
funds; $21,568 represents the increase in our accrual for vacation
days
redeemable by Mr. Shen; and $13,404 represents the increase of our
accrual
for severance pay that would be payable to Mr. Shen under the laws
of the
State of Israel if we were to terminate his
employment.
|
Name
of Borrower
|
Date
of Loan
|
Original
Principal
Amount
of Loan
|
Amount
Outstanding
as
of 12/31/06
|
Terms
of Loan
|
|||||||
Robert
S. Ehrlich
|
12/28/99
|
$ |
167,975
|
$ |
201,570
|
Ten-year
non-recourse loan to purchase our stock, secured by the shares of stock
purchased.
|
|||||
Robert
S. Ehrlich
|
02/09/00
|
$ |
789,991
|
$ |
766,027
|
Twenty-five-year
non-recourse loan to purchase our stock, secured by the shares of
stock
purchased.
|
|||||
Robert
S. Ehrlich
|
06/10/02
|
$ |
36,500
|
$ |
42,818
|
Twenty-five-year
non-recourse loan to purchase our stock, secured by the shares of
stock
purchased.
|
Name
|
Grant
Date
|
Performance
Period
Determining
Release
of
Restrictions
|
Estimate
Future Payouts Under
Equity
Incentive Plan Awards(1)
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock(2)
(#)
|
|||||||||||||
Threshold
(#)
|
Target
1
(#)
|
Target
2
(#)
|
Maximum
(#)
|
||||||||||||||
Robert
S. Ehrlich
|
12/19/06
|
(2)
|
–
|
–
|
–
|
–
|
80,000
|
||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
40,000
|
32,000
|
8,000
|
80,000
|
–
|
|||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
80,000
|
–
|
|||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
80,000
|
–
|
|||||||||||
Thomas
J. Paup
|
12/19/06
|
(2)
|
–
|
–
|
–
|
–
|
21,250
|
||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
10,625
|
8,500
|
2,125
|
21,250
|
–
|
|||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
21,250
|
–
|
|||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
21,250
|
–
|
|||||||||||
Steven
Esses
|
12/19/06
|
(2)
|
–
|
–
|
–
|
–
|
40,000
|
||||||||||
12/19/06
|
01/01/07
to 12/31/07
|
20,000
|
16,000
|
4,000
|
40,000
|
–
|
|||||||||||
12/19/06
|
01/01/08
to 12/31/08
|
(3)
|
(3)
|
(3)
|
40,000
|
–
|
|||||||||||
12/19/06
|
01/01/09
to 12/31/09
|
(3)
|
(3)
|
(3)
|
40,000
|
–
|
|||||||||||
(1)
|
The
threshold number of restricted shares vests based solely based on
continued employment during the performance period. If 90% of the
EBITDA
performance goal is met for the applicable performance period, the
first
target number of shares of restricted stock will be freed of their
restrictions. If 90% of the revenue performance goal is met for the
applicable performance period, the second target number of shares
of
restricted stock will be freed of their restrictions. If 90% of both
the
EBITDA and the revenue performance goals are met for the applicable
performance period, the maximum number of shares of restricted stock
will
be freed of their restrictions. Performance-based shares that do
not vest
in one year roll over to the following year and become part of the
following year’s performance-based pool.
|
||||||||||||||||
(2)
|
Removal
of the restrictions on these shares was made contingent on the executive
officer renouncing certain of his outstanding stock options. This
occurred
in February 2007.
|
||||||||||||||||
(3)
|
Performance
criteria for these shares have not yet been set; hence, there are
no
threshold or target levels listed.
|
Name
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized
on
Vesting(1)
($)
|
||||||
Robert
S. Ehrlich
|
31,428
|
$ |
95,855
|
|||||
Steven
Esses
|
11,785
|
$ |
35,944
|
(1)
|
Reflects
the aggregate market value of the shares of restricted stock
determined
based on a per share price of $3.05, the closing price of our
common stock
on the Nasdaq Global Market on December 29, 2006, which was the last
trading day of 2006.
|
Name
|
Option
Awards
|
Stock
Awards
|
||||||||||||||
Number
of Securities Underlying
Unexercised
Options(1)
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
that
Have
Not
Vested
(#)
|
Market
Value
of
Shares that
Have
Not
Vested(2)
($)
|
Equity
Incentive
Plan
Awards
|
|||||||||||
Number
of
Unearned
Shares
that
Have
Not
Vested
(#)
|
Market
Value
of
Unearned
Shares
that
Have
Not
Vested(2)
($)
|
|||||||||||||||
Exercisable
|
Unexercisable
|
|||||||||||||||
Robert
S. Ehrlich
|
3,571
|
(3) |
0
|
$
5.46
|
08/09/09
|
80,000
|
$ 244,000
|
240,000
|
$ 732,000
|
|||||||
2,036
|
(3) |
0
|
$
5.46
|
10/31/09
|
–
|
–
|
–
|
–
|
||||||||
107,143
|
0
|
$
6.44
|
12/29/10
|
–
|
–
|
–
|
–
|
|||||||||
11,857
|
(3) |
0
|
$
5.46
|
08/24/11
|
–
|
–
|
–
|
–
|
||||||||
3,428
|
(3) |
0
|
$
5.46
|
10/23/11
|
–
|
–
|
–
|
–
|
||||||||
5,179
|
(3) |
0
|
$
5.46
|
12/31/11
|
–
|
–
|
–
|
–
|
||||||||
4,687
|
(3) |
0
|
$
5.46
|
04/01/12
|
–
|
–
|
–
|
–
|
||||||||
1,116
|
(3) |
0
|
$
5.46
|
07/01/12
|
–
|
–
|
–
|
–
|
||||||||
4,688
|
(3) |
0
|
$
5.46
|
10/01/12
|
–
|
–
|
–
|
–
|
||||||||
6,295
|
(3) |
0
|
$
5.46
|
01/01/13
|
–
|
–
|
–
|
–
|
||||||||
Thomas
J. Paup
|
3,571
|
(3) |
0
|
$
5.18
|
12/31/10
|
21,250
|
$ 64,813
|
63,750
|
$ 194,438
|
|||||||
Steven
Esses
|
32,153
|
(3) |
0
|
$
5.46
|
02/24/08
|
40,000
|
$ 122,000
|
120,000
|
$ 366,000
|
|||||||
21,428
|
(3) |
0
|
$
5.46
|
12/31/08
|
–
|
–
|
–
|
–
|
||||||||
8,204
|
(3) |
0
|
$
5.46
|
12/29/10
|
–
|
–
|
–
|
–
|
||||||||
714
|
0
|
$
8.54
|
07/22/12
|
–
|
–
|
–
|
–
|
|||||||||
1,786
|
0
|
$ 11.62
|
07/22/12
|
–
|
–
|
–
|
–
|
|||||||||
2,500
|
(3) |
0
|
$
5.46
|
01/31/13
|
–
|
–
|
–
|
–
|
||||||||
7,143
|
(3) |
0
|
$
5.46
|
07/09/13
|
–
|
–
|
–
|
–
|
||||||||
Avihai
Shen*
|
891
|
0
|
$
8.54
|
03/31/08
|
–
|
–
|
–
|
–
|
||||||||
582
|
0
|
$ 10.22
|
10/15/14
|
–
|
–
|
–
|
–
|
|||||||||
582
|
0
|
$
11.90
|
10/15/14
|
–
|
–
|
–
|
–
|
|||||||||
194
|
0
|
$ 18.20
|
10/15/14
|
–
|
–
|
–
|
–
|
|||||||||
582
|
0
|
$ 19.88
|
10/15/14
|
–
|
–
|
–
|
–
|
*
|
Mr.
Shen ceased to act as our Chief Financial Officer in February 2006,
and
his employment with us terminated on March 31, 2006.
|
|
(1)
|
All
options in the table are vested.
|
|
(2)
|
Reflects
the aggregate market value of the shares of restricted stock determined
based on a per share price of $3.05, the closing price of our common
stock
on the Nasdaq Global Market on December 29, 2006, which was the last
trading day of 2006.
|
|
(3)
|
These
options were renounced and abandoned by the named executive officer
in
February 2007.
|
|
Ø
|
$81,884,
representing statutory severance under the Israeli
law;
|
|
Ø
|
$111,568,
representing additional severance in the amount of (1) $98,733, which
was
7.9 months’ salary at the annual salary rate of $150,000 per year, and (2)
$12,835, which is the value of 7.9 months’ of agreed benefits applicable
to an annual salary rate of $150,000 per year;
and
|
|
Ø
|
Payment
in respect of accrued but unused vacation through the date of
termination.
|
ROBERT
S. EHRLICH
|
|||||||||||||||||||||||||||||||
Payments
and Benefits
|
Non-
Renewal(1)
|
Death
or
Disability(2)
|
Cause(3)
|
Good
Reason(4)
|
Change
of
Control(5)
|
Retirement(6)
|
Termination
at
Will(7)
|
Other
Employee
Termination(8)
|
|||||||||||||||||||||||
Accrued
but unpaid:
|
|||||||||||||||||||||||||||||||
Base
salary
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
$ |
25,000
|
|||||||||||||||
Bonus
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
6,960
|
|||||||||||||||||||||||
Vacation
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
32,352
|
ROBERT
S. EHRLICH
|
|||||||||||||||||||||||||||||||
Payments
and Benefits
|
Non-
Renewal(1)
|
Death
or
Disability(2)
|
Cause(3)
|
Good
Reason(4)
|
Change
of
Control(5)
|
Retirement(6)
|
Termination
at
Will(7)
|
Other
Employee
Termination(8)
|
|||||||||||||||||||||||
Recuperation
pay(9)
|
314
|
314
|
314
|
314
|
314
|
314
|
314
|
314
|
|||||||||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||||||||
Manager’s
insurance(10)
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
3,958
|
|||||||||||||||||||||||
Continuing
education fund(11)
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
1,875
|
|||||||||||||||||||||||
Tax
gross-up on automobile
|
1,777
|
1,777
|
–
|
1,777
|
1,777
|
1,777
|
1,777
|
–
|
|||||||||||||||||||||||
Contractual
severance
|
1,218,750
|
1,625,400
|
–
|
1,625,400
|
3,250,800
|
1,625,400
|
1,218,750
|
–
|
|||||||||||||||||||||||
Statutory
severance(12)
|
407,163
|
407,163
|
–
|
407,163
|
407,163
|
407,163
|
407,163
|
–
|
|||||||||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||||||||
Manager’s
insurance(10)
|
142,470
|
142,470
|
–
|
142,470
|
142,470
|
142,470
|
142,470
|
–
|
|||||||||||||||||||||||
Vacation
|
81,818
|
81,818
|
–
|
81,818
|
81,818
|
81,818
|
81,818
|
–
|
|||||||||||||||||||||||
Continuing
education fund(12)
|
67,500
|
67,500
|
–
|
67,500
|
67,500
|
67,500
|
67,500
|
–
|
|||||||||||||||||||||||
Automobile(13)
|
42,857
|
42,857
|
–
|
42,857
|
42,857
|
42,857
|
42,857
|
–
|
|||||||||||||||||||||||
Tax
gross-up(13)
|
57,858
|
57,858
|
–
|
57,858
|
57,858
|
57,858
|
57,858
|
–
|
|||||||||||||||||||||||
TOTAL:
|
$ |
2,090,652
|
$ |
2,497,302
|
$ |
70,459
|
$ |
2,497,302
|
$ |
4,122,702
|
$ |
2,497,302
|
$ |
2,090,652
|
$ |
70,459
|
(1)
|
“Non-renewal”
is defined in Mr. Ehrlich’s employment agreement as a decision, made with
written notice of at least 120 days in advance of the effective date
of
such decision, by either us or Mr. Ehrlich not to renew Mr. Ehrlich’s
employment for an additional one-year term. Pursuant to the terms
of Mr.
Ehrlich’s employment agreement, in the absence of such notice, Mr.
Ehrlich’s employment agreement automatically renews.
|
(2)
|
“Disability”
is defined in Mr. Ehrlich’s employment agreement as a physical or mental
infirmity which impairs the Mr. Ehrlich’s ability to substantially perform
his duties and which continues for a period of at least 180 consecutive
days.
|
(3)
|
“Cause”
is defined in Mr. Ehrlich’s employment agreement as (i) conviction
for fraud, crimes of moral turpitude or other conduct which reflects
on us
in a material and adverse manner; (ii) a willful failure to carry
out a
material directive of our Board of Directors, provided that such
directive concerned matters within the scope of Mr. Ehrlich’s duties,
would not give Mr. Ehrlich “Good Reason” to terminate his agreement (see
footnote 4 below) and was capable of being reasonably and lawfully
performed; (iii) conviction in a court of competent jurisdiction
for
embezzlement of our funds; and (iv) reckless or willful misconduct
that is
materially harmful to us.
|
(4)
|
“Good
Reason” is defined in Mr. Ehrlich’s employment agreement as (i) a change
in Mr. Ehrlich’s status, title, position or responsibilities which, in Mr.
Ehrlich’s reasonable judgment, represents a reduction or demotion in his
status, title, position or responsibilities as in effect immediately
prior
thereto; (ii) a reduction in Mr. Ehrlich’s base salary; (iii) the failure
by us to continue in effect any material compensation or benefit
plan in
which Mr. Ehrlich is participating; (iv) the insolvency or the filing
(by
any party, including us) of a petition for the winding-up of us;
(v) any
material breach by us of any provision of Mr. Ehrlich’s employment
agreement; (vi) any purported termination of Mr. Ehrlich’s employment for
cause by us which does not comply with the terms of Mr. Ehrlich’s
employment agreement; and (vii) any movement of the location where
Mr.
Ehrlich is generally to render his services to us from the Jerusalem/Tel
Aviv area of Israel.
|
(5)
|
“Change
of Control” is defined in Mr. Ehrlich’s employment agreement as (i) the
acquisition (other than from us in any public offering or private
placement of equity securities) by any person or entity of beneficial
ownership of 20% or more of the combined voting power of our
then-outstanding voting securities; or (ii) individuals who, as of
January
1, 2000, were members of our Board of Directors (the “Original Board”),
together with individuals approved by a vote of at least ⅔ of the
individuals who were members of the Original Board and are then still
members of our Board, cease for any reason to constitute at least
⅓ of our
Board of us; or (iii) approval by our shareholders of a complete
winding-up or an agreement for the sale or other disposition of all
or
substantially all of our assets.
|
(6)
|
“Retirement”
is not defined in Mr. Ehrlich’s employment agreement; in view of Mr.
Ehrlich’s age at the time the employment agreement was negotiated and
entered into, the concept of retirement was subsumed into Termination
at
Will.
|
(7)
|
“Termination
at Will” is defined in Mr. Ehrlich’s employment agreement as Mr. Ehrlich
terminating his employment with us on written notice of at least
120 days
in advance of the effective date of such termination.
|
(8)
|
“Other
Employee Termination” means a termination by Mr. Ehrlich of his employment
without giving us the advance notice of 120 days needed to make such
a
termination qualify as a “Termination at Will.”
|
(9)
|
Pursuant
to Israeli law and our customary practice, we pay Mr. Ehrlich in
July of
each year the equivalent of ten days’ “recuperation pay” at the statutory
rate of NIS 318 (approximately $75) per day.
|
(10)
|
Payments
to managers’ insurance, a benefit customarily given to senior executives
in Israel, come to a total of 15.83% of base salary, consisting of
8.33%
for payments to a fund to secure payment of statutory severance
obligations, 5% for pension and 2.5% for disability. The managers’
insurance funds reflected in the table do not include the 8.33% payments
to a fund to secure payment of statutory severance obligations with
respect to amounts paid prior to December 29, 2006, which funds are
reflected in the table under the “Statutory severance”
heading.
|
(12)
|
Pursuant
to Israeli law, we must contribute an amount equal to 7.5% of Mr.
Ehrlich’s base salary to a continuing education fund, up to the
permissible tax-exempt salary ceiling according to the income tax
regulations in effect from time to time. At December 29, 2006, the
ceiling
then in effect was NIS 15,712 (approximately $3,720). In Mr. Ehrlich’s
case, we have customarily contributed to his continuing education
fund in
excess of the tax-exempt ceiling, and then reimbursed Mr. Ehrlich
for the
tax. The sums in the table reflect this additional contribution and
the
resultant tax reimbursement.
|
(12)
|
Under
Israeli law, employees terminated other than for cause receive severance
in the amount of one month’s base salary for each year of work, at their
salary rate at the date of termination.
|
(13)
|
Under
the terms of Mr. Ehrlich’s employment agreement, we must under certain
circumstances provide him with the use of the company car that he
was
driving at the time of termination for a period of time after termination
and pay the tax on the benefit thereon. The taxable value of this
use is
reflected in the table.
|
STEVEN
ESSES
|
|||||||||||||||||||||||||||||||||||
Payments
and Benefits
|
Non-
Renewal(1)
|
Death
or
Disability(2)
|
Cause(3)
|
Good
Reason(4)
|
Change
of
Control(5)
|
Change
of
Location(6)
|
Retirement(7)
|
Early
Retirement(8)
|
Other
Employee
Termination(9)
|
||||||||||||||||||||||||||
Accrued
but unpaid(10):
|
|||||||||||||||||||||||||||||||||||
Base
salary
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
$ |
5,000
|
|||||||||||||||||
Vacation
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
39,068
|
||||||||||||||||||||||||||
Sick
leave(11)
|
17,455
|
17,455
|
–
|
17,455
|
17,455
|
17,455
|
17,455
|
17,455
|
–
|
||||||||||||||||||||||||||
Recuperation
pay(12)
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
188
|
||||||||||||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||||||||||||
Manager’s
insurance(13)
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
792
|
||||||||||||||||||||||||||
Continuing
education fund(14)
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
1,335
|
||||||||||||||||||||||||||
Tax
gross-up on automobile
|
1,912
|
1,912
|
–
|
1,912
|
1,912
|
1,912
|
1,912
|
1,912
|
–
|
||||||||||||||||||||||||||
Contractual
severance
|
330,000
|
330,000
|
–
|
330,000
|
660,000
|
330,000
|
330,000
|
330,000
|
–
|
||||||||||||||||||||||||||
Statutory
severance(15)
|
16,198
|
16,198
|
–
|
16,198
|
16,198
|
16,198
|
16,198
|
16,198
|
–
|
||||||||||||||||||||||||||
Benefits:
|
|||||||||||||||||||||||||||||||||||
Manager’s
insurance(13)
|
9,498
|
9,498
|
–
|
9,498
|
9,498
|
9,498
|
9,498
|
9,498
|
–
|
||||||||||||||||||||||||||
Vacation
|
5,455
|
5,455
|
–
|
5,455
|
5,455
|
5,455
|
5,455
|
5,455
|
–
|
||||||||||||||||||||||||||
Continuing
education fund(14)
|
16,020
|
16,020
|
–
|
16,020
|
16,020
|
16,020
|
16,020
|
16,020
|
–
|
||||||||||||||||||||||||||
Automobile(16)
|
10,128
|
10,128
|
–
|
10,128
|
10,128
|
10,128
|
10,128
|
10,128
|
–
|
||||||||||||||||||||||||||
Tax
gross-up(16)
|
12,440
|
12,440
|
–
|
12,440
|
12,440
|
12,440
|
12,440
|
12,440
|
–
|
||||||||||||||||||||||||||
TOTAL:
|
$ |
465,489
|
$ |
465,489
|
$ |
46,383
|
$ |
465,489
|
$ |
795,489
|
$ |
465,489
|
$ |
465,489
|
$ |
465,489
|
$ |
46,383
|
(1)
|
“Non-renewal”
is defined in Mr. Esses’s employment agreement as a decision, made with
written notice of at least 90 days in advance of the effective date
of
such decision, by either us or Mr. Esses not to renew Mr. Esses’s
employment for an additional two-year term. Pursuant to the terms
of Mr.
Esses’s employment agreement, in the absence of such notice, Mr. Esses’s
employment agreement automatically renews.
|
|
(2)
|
“Disability”
is defined in Mr. Esses’s employment agreement as a physical or mental
infirmity which impairs the Mr. Esses’s ability to substantially perform
his duties and which continues for a period of at least 180 consecutive
days.
|
|
(3)
|
“Cause”
is defined in Mr. Esses’s employment agreement as (i) conviction for
fraud, crimes of moral turpitude or other conduct which reflects
on us in
a material and adverse manner; (ii) a willful failure to carry out
a
material directive of our Chief Executive Officer, provided that
such directive concerned matters within the scope of Mr. Esses’s duties,
would not give Mr. Esses “Good Reason” to terminate his agreement (see
footnote 4 below) and was capable of being reasonably and lawfully
performed; (iii) conviction in a court of competent jurisdiction
for
embezzlement of our funds; and (iv) reckless or willful misconduct
that is
materially harmful to us.
|
|
(4)
|
“Good
Reason” is defined in Mr. Esses’s employment agreement as (i) a change in
(a) Mr. Esses’s status, title, position or responsibilities which, in Mr.
Esses’s reasonable judgment, represents a reduction or demotion in his
status, title, position or responsibilities as in effect immediately
prior
thereto, or (b) in the primary location from which Mr. Esses shall
have
conducted his business activities during the 60 days prior to such
change;
or (ii) a reduction in Mr. Esses’s base salary; (iii) the failure by us to
continue in effect any material compensation or benefit plan in which
Mr.
Esses is participating; (iv) the insolvency or the filing (by any
party,
including us) of a petition for the winding-up of us; (v) any material
breach by us of any provision of Mr. Esses’s employment agreement; and
(vi) any purported termination of Mr. Esses’s employment for cause by us
which does not comply with the terms of Mr. Esses’s employment
agreement.
|
|
(5)
|
“Change
of Control” is defined in Mr. Esses’s employment agreement as (i) the
acquisition (other than from us in any public offering or private
placement of equity securities) by any person or entity of beneficial
ownership of 30% or more of the combined voting power of our
then-outstanding voting securities; or (ii) individuals who, as of
January
1, 2000, were members of our Board of Directors (the “Original Board”),
together with individuals approved by a vote of at least ⅔ of the
individuals who were members of the Original Board and are then still
members of our Board, cease for any reason to constitute at least
⅓ of our
Board of us; or (iii) approval by our shareholders of a complete
winding-up or an agreement for the sale or other disposition of all
or
substantially all of our assets.
|
|
(6)
|
“Change
of location” is defined in Mr. Esses’s employment agreement as a change in
the primary location from which Mr. Esses shall have conducted his
business activities during the 60 days prior to such
change.
|
|
(7)
|
“Retirement”
is defined as Mr. Esses terminating his employment with us at age
65 or
older on at least 150 days’ prior notice.
|
|
(8)
|
“Early
Retirement” is defined as Mr. Esses terminating his employment with us at
age 55 or older (up to age 65) on at least 150 days’ prior
notice.
|
|
(9)
|
Any
termination by Mr. Esses of his employment with us that does not
fit into
any of the prior categories, including but not limited to Mr. Esses
terminating his employment with us, with or without notice, other
than at
the end of an employment term or renewal thereof, in circumstances
that do
not fit into any of the prior categories.
|
|
(10)
|
Does
not include a total of $12,800 in accrued but unpaid consulting fees
due
at December 29, 2006 to Sampen Corporation, a New York corporation
owned
by members of Steven Esses’s immediate family, from which Mr. Esses
receives a salary. See “Certain Relationships and Related Transactions –
Consulting Agreement with Sampen Corporation,” below.
|
|
(11)
|
Limited
to an aggregate of 30 days.
|
(12)
|
Pursuant
to Israeli law and our customary practice, we pay Mr. Esses in July
of
each year the equivalent of six days’ “recuperation pay” at the statutory
rate of NIS 318 (approximately $75) per day.
|
(13)
|
Payments
to managers’ insurance, a benefit customarily given to senior executives
in Israel, come to a total of 15.83% of base salary, consisting of
8.33%
for payments to a fund to secure payment of statutory severance
obligations, 5% for pension and 2.5% for disability. The managers’
insurance funds reflected in the table do not include the 8.33% payments
to a fund to secure payment of statutory severance obligations with
respect to amounts paid prior to December 29, 2006, which funds are
reflected in the table under the “Statutory severance”
heading.
|
(14)
|
Pursuant
to Israeli law, we must contribute an amount equal to 7.5% of Mr.
Esses’s
base salary to a continuing education fund, up to the permissible
tax-exempt salary ceiling according to the income tax regulations
in
effect from time to time. At December 29, 2006, the ceiling then
in effect
was NIS 15,712 (approximately $3,720). In Mr. Esses’s case, we have
customarily contributed to his continuing education fund in excess
of the
tax-exempt ceiling, and then reimbursed Mr. Esses for the tax. The
sums in
the table reflect this additional contribution and the resultant
tax
reimbursement.
|
(15)
|
Under
Israeli law, employees terminated other than for cause receive severance
in the amount of one month’s base salary for each year of work, at their
salary rate at the date of termination.
|
(16)
|
Under
the terms of Mr. Esses’s employment agreement, we must under certain
circumstances provide him with the use of the company car that he
was
driving at the time of termination for a period of time after termination
and pay the tax on the benefit thereon. The taxable value of this
use is
reflected in the table.
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
|||||||||||||||||||
AROTECH
|
100.00
|
38.55
|
109.64
|
22.68
|
5.18
|
3.05
|
||||||||||||||||||
PEER
GROUP(1)
|
100.00
|
102.23
|
90.96
|
203.16
|
123.06
|
131.52
|
||||||||||||||||||
BROAD
MARKET
|
100.00
|
68.47
|
102.72
|
111.54
|
103.07
|
123.84
|
(1)
|
The
Peer Group Index is comprised of the following companies: Bio-Key
International, Inc., Command Security Corporation, Firearms Training
Systems, Inc., Guardian International, Inc. and ICTS International
N.V.
The returns of each company have been weighted according to their
respective stock market capitalization for purposes of arriving at
a peer
group average.
|
|
Ø
|
Audit
Fees. Audit fees billed or expected to be billed to us by BDO for
the
audit of the financial statements included in our Annual Report on
Form
10-K, and reviews of the financial statements included in our Quarterly
Reports on Form 10-Q, for the years ended December 31, 2006 and 2005
totaled approximately $456,000 and $0,
respectively.
|
|
Ø
|
Audit-Related
Fees. BDO billed us $15,000 and $0 for the fiscal years
ended December 31, 2006 and 2005, respectively, for assurance and
related
services that are reasonably related to the performance of the audit
or
review of our financial statements.
|
|
Ø
|
Tax
Fees. BDO billed us $9,000 and $0 for the fiscal years
ended December 31, 2006 and 2005, respectively, for tax
services.
|
|
Ø
|
All
Other Fees. The Audit Committee of the Board of Directors has
considered whether the provision of the Audit-Related Fees, Tax Fees
and
all other fees are compatible with maintaining the independence of
our
principal accountant.
|
Name
and Address of Beneficial Owner(1)
|
Shares
Beneficially Owned(2)(3)
|
Percentage
of Total Shares Outstanding(3)
|
||||||
Robert
S. Ehrlich
|
529,466 | (4) | 4.1 | % | ||||
Steven
Esses
|
245,713 | (5) | 1.9 | % | ||||
Thomas
J. Paup
|
88,571 | (6) | * | |||||
Dr.
Jay M. Eastman
|
8,571 | (7) | * | |||||
Jack
E. Rosenfeld
|
8,713 | (8) | * | |||||
Lawrence
M. Miller
|
32,693 | (9) | * | |||||
Edward
J. Borey
|
6,142 | (10) | * | |||||
Prof.
Seymour Jones
|
1,190 | (11) | * | |||||
All
of our directors and executive officers as a group (8
persons)
|
921,060 | (12) | 7.5 | % |
*
|
Less
than one percent.
|
(1)
|
The
address of each named beneficial owner is in care of Arotech Corporation,
1229 Oak Valley Drive, Ann Arbor, Michigan 48108.
|
(2)
|
Unless
otherwise indicated in these footnotes, each of the persons or entities
named in the table has sole voting and sole investment power with
respect
to all shares shown as beneficially owned by that person, subject
to
applicable community property laws.
|
(3)
|
Based
on 12,913,701 shares of common stock outstanding as of August 17,
2007.
For purposes of determining beneficial ownership of our common stock,
owners of options exercisable within sixty days are considered to
be the
beneficial owners of the shares of common stock for which such securities
are exercisable. The percentage ownership of the outstanding common
stock
reported herein is based on the assumption (expressly required by
the
applicable rules of the Securities and Exchange Commission) that
only the
person whose ownership is being reported has exercised his options
for
shares of common stock.
|
(4)
|
Consists
of 44,154 shares held directly by Mr. Ehrlich, 320,000 shares of
unvested
restricted stock (in which shares Mr. Ehrlich disclaims beneficial
ownership), 3,571 shares held by Mr. Ehrlich’s wife (in which shares Mr.
Ehrlich disclaims beneficial ownership), 11,527 shares held in Mr.
Ehrlich’s pension plan, 214 shares held by children sharing the same
household (in which shares Mr. Ehrlich disclaims beneficial ownership),
and 150,000 shares issuable upon exercise of options exercisable
within 60
days of August 17, 2007.
|
(5)
|
Consists
of 11,785 shares held directly by Mr. Esses, 160,000 shares of unvested
restricted stock (in which shares Mr. Esses disclaims beneficial
ownership), and 73,928 shares issuable upon exercise of options
exercisable within 60 days of August 17, 2007.
|
(6)
|
Consists
of 85,000 shares of unvested restricted stock (in which shares Mr.
Paup
disclaims beneficial ownership) and 3,571 shares issuable upon exercise
of
options exercisable within 60 days of August 17, 2007.
|
(7)
|
Consists
of 8,571 shares issuable upon exercise of options exercisable within
60
days of August 17, 2007.
|
(8)
|
Consists
of 142 shares owned directly by Mr. Rosenfeld and 8,571 shares issuable
upon exercise of options exercisable within 60 days of August 17,
2007.
|
(9)
|
Consists
of 23,271 shares held by Mr. Miller as trustee of the Rose Gross
Charitable Foundation, in which shares Mr. Miller disclaims beneficial
ownership, 851 shares held directly by Mr. Miller, and 8,571 shares
issuable upon exercise of options exercisable within 60 days of August
17,
2007.
|
(10)
|
Consists
of 1,142 shares owned directly by Mr. Borey and 5,000 shares issuable
upon
exercise of options exercisable within 60 days of August 17,
2007.
|
(11)
|
Consists
of 1,190 shares issuable upon exercise of options exercisable within
60
days of August 17, 2007.
|
(12)
|
Includes
259,402 shares issuable upon exercise of options exercisable within
60
days of August 17, 2007.
|