Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes      No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes       No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule    Yes      No  

The aggregate market value of the registrant’s ordinary shares, nominal value NIS 0.0175 per share, held by of the registrant on June 30, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $6.1 billion (based on the closing sales price of the registrant’s ordinary shares on that date). Ordinary shares held by each director and executive officer of the registrant, as well as shares held by each holder of more than 10% of the ordinary shares known to the registrant, have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes.

The names of each member of our board of directors (our “”), the year in which each director was first elected to the board, the age of each director as of March 31, 2020 and the principal occupation of each director are as follows:

 

has served as a member of our Board since June 1999 and as chairman of our Board since June 2013. Mr. Federman has served as our lead independent director since March 2010. Mr. Federman was a general partner of U.S. Venture Partners (“”), a venture capital firm, from April 1990 to October 2015. He is now a Senior Advisor to USVP. Mr. Federman was an independent director of ChaSerg Technology Acquisition Corp. from October 2018 to March 2020. Mr. Federman was president and chief executive officer (“”) of Monolithic Memories, Inc., a semiconductor company, from 1978 to 1987. Mr. Federman serves on the board of directors of Check Point Software Technologies Ltd., a security software company, and a number of private companies and charitable trusts. Mr. Federman previously served on the board of directors of Intermolecular, Inc., a materials analysis and discovery company, and SanDisk Corporation. Mr. Federman holds a Bachelor of Science in Economics from Brooklyn College and was awarded an Honorary Doctorate of Engineering from Santa Clara University. Mr. Federman has received Lifetime Achievement awards from the International Business Forum, Silicon Valley Bank and Deloitte and Touche. Mr. Federman is located in the United States.

Mr. Federman’s intimate knowledge of the business, financial and operational aspects of technology companies in all stages of development over the past forty plus years uniquely qualifies him to serve as chairman of our Board and, in that capacity as a director, to serve as our lead independent director.

is a of Mellanox and has served as our president and CEO and as a member of our Board since March 1999. From March 1999 until June 2013, Mr. Waldman served as the chairman of our Board. From March 1993 to February 1999, Mr. Waldman served as vice president of engineering and was a of Galileo Technology, Ltd., a semiconductor company, which was acquired by Marvell Technology Group, Ltd. in January 2001. From August 1989 to March 1993, Mr. Waldman held a number of design and architecture related

positions at Intel Corporation (“”), a manufacturer of computer, networking and communications products. Mr. Waldman also serves and previously served on the boards of directors of a number of private companies. Mr. Waldman holds a Bachelor of Science in Electrical Engineering and a Master of Science in Electrical Engineering from the Technion—Israel Institute of Technology (“”). In June 2016, Mr. Waldman was awarded an Honorary Doctorate by Technion. Mr. Waldman is located in Israel.

Mr. Waldman’s qualifications to serve on our Board include his decades-long experience in the semiconductor industry, his role as a of Mellanox, years of service as our president and CEO, service as chairman of our Board between March 1999 and June 2013, and his design, engineering and architecture expertise. Our Board particularly values Mr. Waldman’s extensive experience in the semiconductor industry and as our CEO, which gives him unique insights into the Company’s challenges, opportunities and operations.

has served as a member of our Board since July 2009 and is a member of our nominating and corporate governance committee. Ms. Dorchak has served as a director of Ansys, Inc., a pervasive engineering simulation software provider, since July 2018, Viavi Solutions, Inc., a network test, measurement and assurance technology company, since November 2019 and Cree, Inc., a semiconductor and LED lighting manufacturer, since January 2020. Ms. Dorchak has also served as a director of Global Foundries, a privately owned semiconductor manufacturer, since June 2019. She previously served as a director of Quantenna Communications, Inc. from June 2018 to June 2019 and Energy Focus, Inc. from July 2015 to February 2019. Ms. Dorchak was executive vice president and general manager of Global Business for Spansion, Inc., a Sunnyvale, California based flash memory provider, from April 2012 to June 2013. From January 2009 until September 2010, when it was acquired by Red Bend Software, Ms. Dorchak was the CEO and vice chairman of VirtualLogix, Inc., a Sunnyvale, California based provider of virtualization software for wireless and embedded devices. Prior to VirtualLogix, Inc., she served as chairman and CEO of Intrinsyc Software International, Inc., a product development company of hardware, software, engineering and production services, from August 2006 to November 2008 where she had also served as an independent director from September 2003 to December 2004. Ms. Dorchak was an executive at Intel from 2001 to 2006, including serving as vice president and chief operating officer of Intel’s Communications Group; vice president and general manager of Intel’s Consumer Electronics Group; and vice president and general manager of the Broadband Products Group. Prior to her tenure at Intel, she served as chairman and CEO of Value America, Inc., an online retailer, from September 1999 to November 2000 and president from September 1998 to August 1999. From 1974 to 1998, Ms. Dorchak worked for IBM Corporation (“”), a global technology and consulting corporation, both in Canada and later in Raleigh, North Carolina, where she held executive positions with the IBM’s Personal Systems Group, including directorships with the Ambra Systems Group and IBM PC North America. Ms. Dorchak is located in the United States.

has served as a member of our Board since October 2006 and is a member of our compensation committee. Ms. Johnson is the former executive chairperson of the board of directors of Software Corporation, a private company that provides a platform for creating, maintaining, and distributing single-sourced technical content. Prior to joining Ms. Johnson served as the chairman of MarketTools, Inc., an Internet-based market research company, from August 2008 through January of 2012, and as its CEO from March 2005 through August 2008. Prior to joining MarketTools, Ms. Johnson was a general partner at ComVentures L.P., an investment fund, from April 2004 to March 2005 and, from March 1999 to March 2004, a general partner at Lightspeed Venture Partners, a venture capital firm, focusing on enterprise software and infrastructure. Ms. Johnson was president of Baan Supply Chain Solutions, an enterprise resource planning software company, from January 1998 to December 1998, president of Baan Affiliates from January 1997 to December 1997, and president of Baan Americas from October 1994 to December 1996. Prior to that, Ms. Johnson served as president of ASK Manufacturing Systems, a defense and space company, from August 1993 to July 1994 and held executive positions at IBM from 1977 to June 1993. Ms. Johnson also serves on the board of directors of Intuitive Surgical Inc., a medical device company, CalAmp, a wireless networking company, and Essex Property Trust, Inc. Ms. Johnson holds a Bachelor of Arts in Mathematics from Montclair State University, and studied computer science at Stevens Institute of Technology graduate school of engineering. Ms. Johnson is located in the United States.

has served as a member of our Board since June 2018 and serves on our compensation committee and our audit committee. He is currently an independent business consultant and has served on the board of directors of Box, Inc. since March 2020, Casper Sleep Inc. since April 2019, where he currently serves as the chair of the compensation committee, Resideo Technologies, Inc. since October 2018, where he currently serves as the chair of the audit committee, and Silicon Laboratories, Inc., where he currently serves as the chair of the audit committee, since April 2013. Mr. Lazar also served on the board of directors of Quantenna Communications, Inc. from July 2016 to June 2019 and TubeMogul, Inc., an enterprise software company for digital branding, from October 2013 to December 2016 when it was acquired by Adobe Systems Incorporated. From January 2014 until March 2016, he served as chief financial officer and principal financial and accounting officer at GoPro, Inc., a provider of wearable and mountable capture devices, where he completed its 2014 IPO. From January 2013 to January 2014, he served as an independent business consultant. From May 2011 to January 2013, Mr. Lazar was senior vice president, corporate development and general manager at Qualcomm Atheros, a developer of communications semiconductor solutions. Mr. Lazar served in a variety of positions at Atheros Communications, Inc. from September 2003 until it was acquired by Qualcomm in May 2011. Most recently, he served as Atheros’ chief financial officer and senior vice president of corporate development. During his tenure at Atheros, the company completed its IPO. Mr. Lazar is a certified public accountant and holds a B.S. in commerce with an emphasis in accounting from Santa Clara University. Mr. Lazar is located in the United States.

has served as a member of our Board since June 2018 and chairs our audit committee. Mr. Olson also served as an advisor to HomeUnion, Inc. (“”), a leading online investment management platform dedicated to the residential real estate market, from August 2016 to December 2019. Mr. Olson previously served as the chief financial officer of Xilinx, Inc., a leading provider of programmable semiconductor platforms (“”), from June 2005 until his retirement in May 2016. While serving as chief financial officer, he also held a variety of other senior management positions at Xilinx, including most recently as executive vice president from May 2014 to July 2016 and prior to that, as senior vice president of finance from August 2006 to May 2014 and vice president of finance from June 2005 to August 2006. Prior to joining Xilinx, Mr. Olson spent more than 25 years at Intel, serving in a variety of positions from 1979 to 2005, including as vice president of finance and enterprise services, and director of finance. Mr. Olson also previously served as a member of the board of directors of InvenSense, Inc., a leading provider of MEMS sensor platforms, from October 2011 until it was acquired by TDK Corporation in May 2017. Mr. Olson holds a B.S. in Accounting from Indiana University Bloomington and an M.B.A. in Finance from Santa Clara University. Mr. Olson is located in the United States.

has served as a member of our Board since February 2018 and chairs our compensation committee. He has also served as a venture partner at Thomvest Ventures since 2016. Previously, Mr. Padval served as a partner at Bessemer Ventures Partners from 2007 to 2016 and as vice president of LSI Corporation from 2001 to 2007. From 1998 to 2001, Mr. Padval served as President and then CEO of Microsystems, Inc. (“”) from 1993 to 1998, Mr. Padval served as vice president and general manager at VLSI Technology, Inc (“”). From 1987 to 1993, Mr. Padval held various management positions at VLSI related to marketing and sales. Prior to joining VLSI, Mr. Padval served in various engineering and product marketing roles at Advanced Micro Devices, Inc. from 1984 to 1987. Mr. Padval previously served on the board of directors of Integrated Device Technology, Inc., Silicon Image, Inc., Monolithic Power Systems, Inc., Elantec Semiconductor, Inc., and Entropic Communications, Inc. Mr. Padval holds Master of Science degrees from Stanford University and Pennsylvania State University and a Bachelors of Technology from Indian Institute of Technology, Bombay. Mr. Padval is located in the United States.

has served as a member of our Board since May 2014 and serves on our audit committee. From March 2016 to June 2018, Mr. Perlmutter served as a managing general partner of Eucalyptus Growth Capital, focusing on investing in Israeli Hi Tech growth Mr. Perlmutter previously served, since 2009 and until February 2014, as an executive vice president, general manager of Intel’s Architecture Group and chief product officer of Intel. During this period, Mr. Perlmutter was responsible for the business and development of Intel’s platform solutions for all computing and communication segments including datacenters, desktops, laptops, handhelds, embedded devices, and computer electronics. Prior to that period, Mr. Perlmutter served at Intel for 29 years, during which he held various management positions and was instrumental in developing several major products at Intel. Since April 2014, Mr. Perlmutter has served as a board member of several private technology companies, including Screenovate Technologies Ltd., a smartphone display duplication company, OptimaPlus Ltd., a security and investigations company, Weebit Nano LTD, a computer memory technology company, and Teramount Ltd., a silicon photonics company. He also currently chairs two nonprofit organizations, The Israel Innovation Institute, and Tsofen, an organization focused on increasing access of Arab Israeli citizens to jobs, and has been a member of the Board of Governors of Technion since January 2005. Mr. Perlmutter holds patents on branch target buffers and multiprocessing cache coherency protocols. In addition, he received an award for innovation in industrial development from the Israeli president in 1987 for the development of the i387 math coprocessor and was elected as a Fellow of the Institute of Electronics and Electrical Engineers in 2008 for his contributions to the mobile computer industry. Mr. Perlmutter received the Technion Alumni Medal from Technion in 2018. Mr. Perlmutter graduated from the Technion, with a B.Sc. in Electrical Engineering. Mr. Perlmutter is located in Israel.

has served as a member of our Board since February 2018 and chairs our nominating and corporate governance committee. He has also served as the President of Microchip Technology Inc. (“”) since August 1990, the CEO of Microchip since October 1991 and the chairman of the board of directors of Microchip since October 1993. Prior to joining Microchip, Mr. Sanghi served as vice president of operations at Waferscale Integration, Inc., a semiconductor company, from 1988 to 1990. Mr. Sanghi served at Intel Corporation from 1978 to 1988, where he held various positions in management and engineering, including serving as general manager of programmable memory operations. Mr. Sanghi previously served on the boards of directors of Myomo, Inc. from 2016 to 2019, Hittite Microwave Corporation from 2013 until its sale in 2014 and Xyratex, Ltd. from 2004 until its sale in 2014. Mr. Sanghi was also a member of the board of directors of FIRST (For Inspiration and Recognition of Science and Technology) Robotics, a company formed to inspire young students in the vital areas of Science, Technology, Engineering and Math from 2007 to 2016. Mr. Sanghi has won numerous industry awards, including “Executive of the Year” by Electronic Engineering Times in 2010 and 2016. He also won the “Arizona Entrepreneur of the Year” award by Ernst and Young in 1994. Mr. Sanghi holds a Master of Science degree in Electrical and Computer Engineering from the University of Massachusetts, and a Bachelor of Science degree in Electronics and Communication from Punjab University, India. Mr. Sanghi is located in the United States.

has served as a member of our Board since June 2018 and serves on our nominating and corporate governance committee. Mr. Waters has served on the board of directors of Sierra Wireless, Inc. since March 2020. Mr. Waters served as the president and CEO and a member of the board of directors of Integrated Device Technology, Inc., a company that designs, manufactures, and markets high-performance analog mixed-signal semiconductor solutions for the advanced communications, computing, and consumer industries, from January 2014 until its sale to Renesas Electronics Corporation in March 2019. Prior to that, he served as executive vice president and general manager of solutions at Skyworks Solutions, Inc., a manufacturer of semiconductors for use in radio frequency and mobile communications systems (“”), from 2003 to December 2012, where he led the company’s wireless businesses to a decisive industry leadership position. Before Skyworks, Mr. Waters served as senior vice president of strategy and business development at Agere Systems Inc., an integrated circuit components company (“”), where his responsibilities included M&A and IP licensing and where he played a key role in the company’s IPO. Mr. Waters joined Agere in 1998, having served in various other capacities, including as vice president of the wireless communications business and vice president of the broadband communications business. Mr. Waters began his career at Texas Instruments Inc., a technology company that designs and manufactures semiconductors and various integrated circuits, and served in a variety of management positions in sales, customer design centers, and product line management. Mr. Waters has a B.S. in Engineering from the University of Vermont and an M.S. in Computer Science from Northeastern University, with a specialization in Artificial Intelligence.

 

is a of Mellanox, and has served as our president and CEO and as a member of our Board since March 1999. From March 1999 until June 2013, Mr. Waldman served as the chairman of our Board. From March 1993 to February 1999, Mr. Waldman served as vice president of engineering and was a of Galileo Technology, Ltd., a semiconductor company, which was acquired by Marvell Technology Group, Ltd. in January 2001. From August 1989 to March 1993, Mr. Waldman held a number of design and architecture related positions at Intel, a manufacturer of computer, networking and communications products. Mr. Waldman also serves and previously served on the boards of directors of a number of private companies. Mr. Waldman holds a Bachelor of Science in Electrical Engineering and a Master of Science in Electrical Engineering from the Technion. In June 2016, Mr. Waldman was awarded an Honorary Doctorate by Technion. Mr. Waldman is located in Israel.

has served as our chief financial officer since January 2019. Mr. Ahrens has over 20 years of operational and strategic finance experience from multinational companies. Previously, from September 2015 to December 2018, Mr. Ahrens served as chief financial officer of GlobalLogic Inc., a private software engineering firm. From October 2013 to September 2015, Mr. Ahrens served as chief financial officer of Applied Micro Circuits Corporation, a then-publicly traded fabless semiconductor manufacturer. Prior to October 2013, Mr. Ahrens held various finance roles at Maxim Integrated Products, Inc. and Intel. Mr. Ahrens holds a Bachelor of Science in Mechanical Engineering from the University of California, San Diego and a Masters of Business Administration from Harvard Business School. Mr. Ahrens is located in the United States.

is a of Mellanox and has served as our chief technology officer since January 2009. Previously, Mr. Kagan served as our vice president of architecture from May 1999 to December 2008. From August 1983 to April 1999, Mr. Kagan held a number of architecture and design positions at Intel. While at Intel, between March 1993 and June 1996, Mr. Kagan managed Pentium MMX design, and from July 1996 to April 1999, he managed the architecture team of the Basic PC product group. Mr. Kagan holds a Bachelor of Science in Electrical Engineering from Technion. Mr. Kagan is located in Israel.

has served as our senior vice president of worldwide sales since December 2012. Previously, Mr. Sultzbaugh served as vice president of worldwide sales from April 2007 until December 2012. Mr. Sultzbaugh joined Mellanox in 2001 as director of high performance computing and director of central area sales and was later promoted to senior director of sales in October 2005. Prior to joining Mellanox, he held various executive sales and marketing positions with Brooktree Semiconductor, a semiconductor company. From 1985 to 1989, Mr. Sultzbaugh was an engineer at AT&T Microelectronics, a microchip and fiber-optic component manufacturing company. He holds a Bachelor of Science degree in Electrical Engineering from The University of Missouri-Rolla and a Masters of Business Administration from The University of California, Irvine. Mr. Sultzbaugh is located in the United States.

has served as our senior vice president of sales and business development since December 2018. Previously, Mr. Prescher served as senior vice president of business development from February 2013 to December 2018 and as vice president of business development from February 2011 to January 2013. Prior to joining Mellanox, Mr. Prescher was a founder of Voltaire Ltd. where he served in various capacities, including executive vice president of business development from 2008 to 2011, vice president of business development from 2001 to 2008, vice president of marketing from 1999 to 2008, and from 1997 to 1999, as vice president of research and development. Prior to Voltaire Ltd., Mr. Prescher served as an officer in Israel’s Defense Forces Technical Intelligence Unit. Mr. Prescher studied at University with a focus in electricity and electronics engineering.

Section 16(a) of the Exchange Act requires directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the SEC and The Nasdaq Stock Market (“”). On April 3, 2019, a Form 4 was filed late for Mr. Ahrens regarding a single transaction that occurred on February 1, 2019.

Our named executive officers for 2019 were: Eyal Waldman, president and CEO; Doug Ahrens, chief financial officer; Amir Prescher, senior vice president, sales and business development; Michael Kagan, chief technology officer; and Marc Sultzbaugh, senior vice president of worldwide sales. Mr. Ahrens was appointed our chief financial officer effective January 2, 2019.

 

 

 

 

 

For 2019, the base salaries of our named executive officers continuing from 2018 were increased between over their 2018 levels based on consideration of a competitive market assessment, any increase in role and responsibilities, and the Company’s overall performance during 2018.

As in prior years, approximately ten percent of the Company’s earnings, measured on the basis of our operating income, funded the Company’s annual bonus pool for all eligible employees, including the named executive officers, in accordance with the criteria set forth in our Compensation Philosophy. For 2019, the total profit sharing pool was $42.7 million, representing approximately 10% of our operating income, which was $427.0 million, excluding our bonus pool. Bonus awards for our named executive officers are generally based on Company performance and/or individual achievement and require the approval of both the compensation committee and the Board. In addition to such approvals, bonus awards for our CEO require the approval of our shareholders. In June 2019, our shareholders approved the terms of our CEO’s 2019 cash incentive award based on the Company’s achievement of revenue and operating income (as a percentage of revenue) targets. In January 2020, the Board and compensation committee determined that our CEO would receive a bonus payout of 64.8% of his annual base salary based on the Company’s achievement of the revenue and operating income goals. The bonuses approved for our other named executive officers ranged between 0% and 73.3% of their base salaries based on the compensation committee’s assessment of corporate and individual performance factors.

In 2019, our compensation committee and Board granted each of our named executive officers awards of restricted share units as long-term incentives. The restricted share units are subject to vesting over four years, which encourages retention of our executives and encourages and rewards the executives for creating shareholder value over the long term. Our CEO’s annual grant of 55,696 restricted share units was made following shareholder approval at our extraordinary general meeting in June 2019.

 

At our 2019 annual general meeting of shareholders, our shareholders voted over 97% (reflecting shares represented in person or by proxy at the meeting and entitled to vote) in favor of the advisory vote to approve the compensation of our named executive officers. Our compensation committee reviewed the result of the shareholders’ advisory vote on executive compensation and determined not to implement significant changes to our executive compensation programs as a result of the shareholders’ advisory vote, although the compensation committee continues to evolve its practices in determining compensation to further align with shareholder interests.

Pursuant to the Companies Law, the compensation of our named executive officers and the compensation of other office holders (who are not directors) who report directly to our CEO must also be approved by our Board following the approval by our compensation committee. In accordance with the Companies Law, our CEO’s compensation must be approved by our compensation committee, Board and shareholders holding a majority of the voting power represented at the general meeting provided that (i) at least of the shares of shareholders or shareholders that do not have a Personal Interest (as defined in the Companies Law) in the approval voted at the meeting are voted in favor (disregarding abstentions) or (ii) the total number of shares of shareholders or shareholders that do not have such Personal Interest voted against the terms of service of the CEO does not exceed two percent of the aggregate voting rights in the Company.

Our executive compensation program is administered by our compensation committee, which is comprised of three independent members. Operating under its charter, our compensation committee reviews, in consultation with the management and the Board, and evaluates the Compensation Philosophy, including the compensation plans, policies and programs of the Company. In addition, our compensation committee reviews and recommends to our Board the approval of our CEO’s compensation (including base salary, cash bonuses, equity awards, and other forms of individual compensation such as a change in control agreement). Our compensation committee also annually evaluates and approves certain elements of our other named executive officers’ compensation, including compensation of other office holders of the Company (as the term “office holder” is defined in the Companies Law and includes our named executive officers). These annual evaluations include, among others: (i) consideration of the current levels and components of compensation paid to our named executive officers and office holders, (ii) consideration of the mix of cash incentives and long-term equity awards, (iii) a review of available survey and/or peer group data for compensation paid to executives in positions comparable to those held by our named executive officers and office holders, (iv) consideration of the ratio between an office holder’s compensation and the salary paid to other employees of the Company, including without limitation, the ratios to the median and average salaries of such employees, and whether such variation has an effect on employment relationships within the Company, and (v) consideration of the education, skills, expertise, professional experience and accomplishments of the office holder, his or her role, responsibilities and previous compensation arrangement of the office holders.

Our 2019 executive compensation program has three primary components: (i) base compensation or salary, (ii) annual cash bonuses and (iii) equity awards consisting of restricted share units. Our program is designed to provide incentives and rewards for our short-term, and long-term performance, and is structured to motivate our named executive officers to meet our strategic objectives, thereby maximizing total return to shareholders. In addition, we provide our named executive officers with benefits that are standard for the local employment market and, therefore, generally made available to all salaried employees in the geographic location where they are based. In Israel, we make contributions on behalf of most of our employees, including our named executive officers, to an education fund and also to a fund known as Managers’ Insurance, which provides a combination of retirement plan, insurance and severance pay benefits to Israeli employees, and we permit employees to participate in the Company’s automobile leasing program, under which we pay for gas, maintenance, insurance and the cost of normal wear and tear of the vehicle over the life of the lease. We make matching 401(k) plan contributions in an amount up to 4% of base salary for all employees based in the United States, including our U.S.-based named executive officers.

Recruitment and retention of our named executive officers and other executive management requires a competitive compensation package. Our compensation committee’s approach emphasizes setting the primary elements of total compensation for executives-base salary, annual cash incentive and long-term incentive approximately the median of the market.

With the assistance of Radford, an independent consultant retained by the compensation committee for purposes of evaluating our executive compensation program, in September 2018 the compensation committee approved the following peer group consisting of 16 publicly traded companies from the semiconductor industry (the “”):

 

For companies within the Peer Group, the median revenues for the preceding four quarters as of September 2018 were approximately $1.08 billion, and the median average market capitalization as of September 28, 2018 was approximately $4.19 billion. The Company’s revenues for the preceding four quarters as of September 2018 were at the 47th percentile of the Peer Group and the Company’s average market capitalization as of September 28, 2018 was at the 47th percentile of the Peer Group.

. Since 2018, our compensation committee has engaged Radford (part of Aon Hewitt, a business unit of Aon PLC), an independent third party compensation consulting firm, to assist in discrete projects and report to the compensation committee, including selecting the Peer Group, gathering general industry compensation data, and conducting a benchmarking review of total compensation of certain named executive officers and members of the Board. In order to determine and confirm independence, before engaging any consultant, each consultant completes an independence questionnaire provided by the Company. In addition, each director and executive officer of the Company completes an annual questionnaire which includes questions which ask about any actual or potential conflicts or relationship between such individual and any relevant consultant.

Our CEO provides our compensation committee with his assessment of the performance levels of the Company and our named executive officers (other than himself) and his recommendations with respect to compensation of our named executive officers (other than himself). Our compensation committee believes it is important to consider and evaluate our CEO’s input on matters concerning compensation of other named executive officers. The compensation committee believes that our CEO’s input regarding our other named executive officers’ individual performances, including the expected contributions and future potential of each of them, is useful because each other named executive officer reports directly to our CEO, and our CEO interacts with our other named executive officers on an ongoing basis throughout the year.

Under our annual cash bonus award program, our employees in good performance standing, including our named executive officers, are eligible to receive an award, in accordance with the criteria set forth in our Compensation Philosophy from a bonus pool in an amount that is targeted by our compensation committee at generally up to 10% of our operating income, excluding bonus expenses. In accordance with our Compensation Philosophy, the maximum annual value of the cash bonus payable for each of our office holders shall not exceed two times such office holder’s annual base salary.

Our compensation committee may adjust the available annual bonus pool based on its assessment of our achievement of our operating plan and company profitability. In January 2020, the Board determined that the total profit sharing pool for the fiscal year ended December 31, 2019 was $42.7 million and represented approximately 10% of our operating income, which was $427.0 million, excluding this bonus expense.

In June 2019, our shareholders approved a performance-based cash incentive award structure for our CEO. For 2019, the incentive award was subject to a formula-based payout based on the Company’s achievement of a target revenue goal of $1.35 billion and a target operating income (as a percentage of revenue) goal of 30% for 2019, each weighted 50%. The award was targeted at 100% of our CEO’s base salary, with a maximum payment of 200%. No amount was payable for achievement below target, and any payout was determined linearly based on the amount of achievement over target. In January 2020, the Board approved the Company’s achievement of revenue and operating income (as a percentage of revenue) for 2019, resulting in a payout to our CEO of 64.8% of his annual base salary, or $421,241. The Company’s achievement of the applicable performance goals and their weighted achievement percentage are set forth in the table below.

In 2019, we were a party to executive severance benefits agreements with each of our named executive officers which provide for certain severance benefits in the event of an executive’s separation of service following a change in control (a “double trigger” requirement).

Pursuant to the terms of the executive severance benefits agreements with each of our named executive officers other than Mr. Waldman, if the executive’s employment with our Company is terminated without cause or if the executive is constructively terminated (as defined below), in each case during the period following a change in control (as defined in the agreements) of our Company (each, a “qualifying termination”), and the executive provides us a general release of all claims, then the executive is entitled to receive the following payments and benefits, in addition to statutory benefits and entitlements of our Israeli named executive officers:

Israeli employee and hourly employee as of September 2012, including each of our Israel-based named executive officers, is entitled to participate in the Managers’ Insurance and/or pension fund. Each employee who participates contributes an amount equal to 6% (as of January 2018) of his or her salary to the Managers’ Insurance and/or pension plan and we contribute up to 6.5% (as of January 2018) to the Managers’ Insurance and/or pension plan, 8.33% for severance payments and up to 2.5% for disability insurance).

In addition, automobile-related expense reimbursement, insurance reimbursement, retirement fund contributions, severance fund contributions and education fund contributions are provided to all of our Israel-based employees on a basis including our named executive officers based in Israel.

In addition to the termination-related benefits provided to our Israeli employees under Israeli law, each Israeli employee, including each of our Israel-based named executive officers, is entitled to participate in an education fund plan, pursuant to which each employee who participates in the plan contributes an amount equal to 2.5% of his or her salary to the education fund and we contribute 7.5% of his or her salary up to the maximum amount exempted from tax (currently a contribution from a monthly salary of NIS 15,712). In addition, the Company pays directly to the employee via his or her salary or as additional contribution to the education fund, per the employee’s choice, 7.5% of the portion of the employee’s salary which exceeds the aforesaid maximum salary exempt from tax.

We maintain a Compensation Philosophy for our office holders that addresses certain items prescribed by the Companies Law. At our 2019 annual general meeting held on July 25, 2019, our shareholders our Compensation Philosophy for our office holders with the implementation of certain clarifications and revisions based on mitigations enacted under the Companies Law and the experience gained in its implementation by the Company since the Compensation Philosophy was previously approved by shareholders. Our compensation committee reviews its Compensation Philosophy annually and reserves the discretion to amend it from time to time. Regardless of whether the compensation committee amends the Compensation Philosophy or not, pursuant to the Companies Law, our Compensation Philosophy must generally be approved by the Board (after considering the recommendations of the compensation committee) and the shareholders every three years.

Effective as of our 2015 annual general meeting of shareholders, each of our executive officers became subject to a policy that he or she hold shares of the Company with an aggregate value of at least three times his or her annual salary by the fifth anniversary that he or she became subject to the policy. Messrs. Waldman, Kagan and Sultzbaugh had until February 24, 2020 to comply with this policy, and Messrs. Ahrens and Prescher have until the fifth anniversary of the date they were appointed executive officers to comply. On January 31, 2017, the compensation committee and Board adopted amendments to the share ownership policy that adopted holding requirements: executive officers and directors who are subject to share ownership requirements and who have not attained the minimum ownership level in the allotted period, shall retain the lesser of (i) percent (25%) of the gross number of shares acquired upon an exercise, vesting or settlement or (ii) fifty percent (50%) of the number of shares remaining after satisfying the exercise price, if any, and tax withholding requirements. Each of our named executive officers either were in compliance with our share ownership policy as of their compliance date or have additional time to comply.

In addition, pursuant to our Compensation Philosophy, our executives are required to repay to us any excess payments, including cash and equity, made to them that were based on the Company’s performance if such payments were paid based on false and restated financial statements of the Company.

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), the Company uses measures of net income which are adjusted from results based on GAAP to exclude share-based compensation expense, amortization expense of acquired intangible assets, settlement costs, acquisition and other charges, restructuring and impairment charges, gain on investments in privately-held companies, foreign exchange gains and losses, and income tax

effects and adjustments. Settlement costs represent the charges related to the settlement of a contingent royalty obligation. Acquisition and other charges include expenses related to acquisitions of other companies, expenses related to the proxy contest, and expenses related to the pending acquisition of the Company by NVIDIA. Restructuring and impairment charges include impairment charges related to our investment in privately-held companies, as well as costs that are the result of restructuring, consisting of employee termination and severance costs, facilities related costs, contract cancellation charges, and impairment of long-lived assets. Gain on investments in privately-held companies represents the realized and unrealized gain related to our private company investees. foreign exchange gains and losses include the gains and losses as a result of remeasuring our balance sheet items denominated in foreign currencies and the gains and losses associated with the related hedging instruments. The purpose of income tax effects and adjustments is to exclude tax consequences associated with the above excluded income and expense items, the impact on the tax provision pertaining to changes in deferred tax assets associated with carryforward losses, and reversals of valuation allowances. Shares used in computing diluted earnings per share represents GAAP basic shares plus total options vested and exercisable. The Company believes the results provide useful information to both management and investors, as these results exclude income and expenses that are not indicative of our core operating results. Management believes it is useful to exclude share-based compensation expense, amortization expense of acquired intangible assets, settlement costs, acquisition and other charges, restructuring and impairment charges, gain on investments in privately-held companies, foreign exchange gains and losses, and income tax effects and adjustments because it enhances investors’ ability to understand our business from the same perspective as management, which believes that such items are not directly attributable to nor reflect the underlying performance of the Company’s business operations. Further, management believes certain charges such as share-based compensation, amortization of acquired intangible assets, impairment charges, changes related to the utilization of deferred taxes and the net impact on the Company’s tax provision for adjustments do not reflect the cash operating results of the business.

Our compensation committee has reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2019 with management. In reliance on the reviews and discussion referred to above, our compensation committee recommended to our Board that the Compensation Discussion and Analysis be included in the Annual Report on Form as amended, for the year ended December 31, 2019.

Umesh Padval, Chair

Amal M. Johnson

Jack R. Lazar

None of our named executive officers participate in or have account balances in qualified or defined benefit plans sponsored by us.

None of our named executives participate in or have account balances in defined contribution plans or other deferred compensation plans maintained by us.

The following table sets forth quantitative estimates of the benefits to be received by each of our named executive officers under the executive severance benefits agreements described under “Compensation Discussion and Analysis—Change in Control Severance Arrangements,” if his employment were terminated without cause or constructively terminated (as these terms are defined in the executive severance benefits agreements) on December 31, 2019, assuming that such termination occurred during the period following a change in control (as such term is defined in the executive severance benefits agreements) of our Company. Such benefits are in addition to any payments or other benefits that our employees, including our named executive officers, who reside in Israel may be entitled to receive under applicable Israeli law. For more information, see “Compensation Discussion and Analysis—Change in Control Severance Arrangements.”

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Waldman, our CEO. For 2019, our last completed fiscal year, the total compensation in 2019 of our CEO was approximately 40.6 times the median total compensation in 2019 of all of our other employees (the “”). The median of the annual total compensation of all employees of our Company (other than our CEO) was $191,413 and the annual total compensation of our CEO was $ 7,780,913. As permitted by SEC rules, the median employee was the same median employee the Company identified for 2017. The Company is using the same median employee as in 2017 because there have been no changes to the Company’s employee population or employee compensation arrangements that the Company reasonably believes would significantly affect the Pay Ratio. In identifying this median employee, the Company chose October 1, 2017 as the date for establishing the employee population used in identifying the median employee and used January 1, 2017 through September 30, 2017 as the measurement period. We identified the median employee using the sum of base salary or wages (based on our payroll records) earned, annual bonus actually paid, and grant date fair value of RSUs approved by the compensation committee during the measurement period for each employee (U.S. and employed as of October 1, 2017. Permanent employees who joined in 2017 and permanent employees who were on leave during 2017 were assumed to have worked for the entire measurement period. We captured all full-time, part-time, seasonal and temporary employees located in the U.S., Israel, China and Denmark as of October 1, 2017, consisting of approximately 2,566 individuals, with approximately 17% of these individuals located in the U.S., approximately 77% located in Israel, and approximately 6% located in China and Denmark. As permitted by SEC rules, under the 5% “de minimis” exemption, we excluded 100  employees, as described in further detail below. Earnings of our employees outside the U.S. were converted to U.S. dollars using the currency exchange rate as of September 30, 2017. No adjustments were made. The annual total compensation of the median employee and the annual total compensation of the CEO were calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation

The  excluded employees and their employee populations were as follows: Japan (9 employees); Netherlands (6 employees); Singapore (6 employees); Switzerland (1 employee); Taiwan (11 employees); U.K. (17 employees); Argentina (1 employee); Australia (5 employees); Czech Republic (2 employees); Greece (2 employees); India (5 employees); Indonesia (1 employee); Malaysia (2 employees); Norway (1 employee); Russia (14 employees); South Korea (3 employees); Thailand (5 employees); Turkey (2 employees); and Canada (7 employees).

Our employees’ base salaries are fixed in amount and thus we do not believe that they encourage excessive risk-taking. While performance-based cash bonuses and sales commissions focus on achievement of short-term and or annual goals, which may encourage the taking of short-term and risks at the expense of long-term results, we believe that our internal controls help mitigate this risk and our performance-based cash bonuses and sales commissions are limited, representing a small portion of the total compensation opportunities available to most employees. We also believe that our performance-based cash bonuses and sales commissions appropriately balance risk and the desire to focus our employees on specific short-term and goals important to our success and do not encourage unnecessary or excessive risk-taking.

A significant proportion of the compensation provided to our employees and directors is in the form of long-term equity-based incentives that are important to help further align our employees’ and directors’ interests with those of our shareholders. We do not believe that these equity-based incentives encourage unnecessary or excessive risk taking because their ultimate value is tied to our share price. In addition, we generally stagger grants of equity-based awards and, in the case of employees, subject them to long-term vesting schedules to help ensure that employees have significant value tied to the long-term performance of our ordinary shares. Certain specified executive officers and our directors are also subject to share ownership guidelines and holding requirements to further align our employees’ and directors’ interests with our shareholders’ interests.

We maintain a compensation program for directors which was last approved by shareholders at our 2019 annual general meeting of shareholders held on July 25, 2019. The annual cash compensation amounts payable to each member of our Board for their annual Board services under our program as of the beginning of 2019 and as amended in July 2019 are set forth in the table below:

Our directors are reimbursed for expenses incurred in connection with attending Board and committee meetings, and are entitled to insurance, exemption and indemnification as customary for officers in the Company.

In addition to cash compensation, under the current director compensation program as amended effective July 25, 2019, each of our directors receives an annual automatic, award of restricted share units based on a value of $250,000. For 2019, the number of restricted share units granted under our program was determined by dividing $250,000 by $98.75, which was the average closing price of the Company’s common stock from February 1, 2019 to February 15, 2019, consistent with the formula for determining restricted share units for our 2019 annual grants to employees, including our named executive officers. The awards vest in equal monthly increments over 12 months, such that they are fully vested on the first anniversary of the grant date provided the director continues to serve as a director, and are further subject to full accelerated vesting in the event of a change in control of the Company. The consummation of the Merger will be deemed a change in control of the Company. Prior to the amendment in July 2019, our directors received an annual grant of 4,200 restricted share units with the same vesting schedule.

In addition, each of our directors is subject to a policy requiring that he or she hold shares of the Company in the value of at least three times his or her annual retainer fees. Our directors have until the fifth anniversary of the later of the date that the policy was first adopted or their election to the Board. This policy is set forth in our Executive Officer and Director Share Ownership Policy and our Corporate Governance Guidelines. In January 2017, the Board also adopted a holding policy whereby, in the case that a director (or specified employee) does not hold the minimum share ownership by his or her fifth anniversary of becoming subject to the ownership policy, he or she will be required to retain the lesser of (i) twenty-five percent (25%) of the gross number of shares acquired upon an exercise, vesting or settlement or (ii) fifty percent (50%) of the number of shares remaining after satisfying the exercise price, if any, and tax withholding requirements.

At our extraordinary general meeting in June 2019, following the approval of our Board and compensation committee, our shareholders also approved the payment of a cash bonus in the amount of $25,000 to Greg Waters in recognition of his services with respect to the Company’s sale process and the Merger, which bonus was paid following the meeting.

The table below sets forth information regarding compensation provided by us to our directors during the year ended December 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

In addition, our audit committee, pursuant to its written charter which is available on our website as described below, is responsible for reviewing and, where required, approving related party transactions on an ongoing basis as required by the rules of the SEC and the Companies Law and the regulations promulgated thereunder. For purposes of compliance with U.S. rules and regulations, the audit committee conducts an appropriate review and oversight of all “,” as required to be disclosed pursuant to Item 404 of Regulation under the Exchange Act, for potential conflict of interest situations on an ongoing basis. The Company follows internal written procedures to review potential related party transactions, bring these potential related party transactions to the attention of the audit committee and review, approve or ratify, as necessary and appropriate, related party transactions. Under the Companies Law, our audit committee must also approve specified actions and transactions with office holders and controlling shareholders or in which an office holder or controlling shareholder has a Personal Interest. The audit committee is also required to determine whether any such action is

material and whether any such transaction is an extraordinary transaction or transaction, for the purpose of approving such action or transaction as required by the Companies Law. Under the Companies Law, a “controlling shareholder” is a shareholder who has the ability to direct the Company’s activity, excluding an ability deriving merely from holding an office of director or another office in the Company, and a person will be presumed to control the Company if he or she holds 50% or more of (i) our voting rights or (ii) the rights to appoint our directors or general managers. For the purpose of “,” the Companies Law definition also includes a shareholder that owns 25% or more of the voting rights in the general meeting of the Company, if there is no other person who holds more than 50% of the voting rights in the Company. Two or more persons holding voting rights in the Company each of which has a Personal Interest in the approval of the transaction being brought for approval of the Company will be considered to be joint holders. The Company is not currently aware of any controlling shareholder, as such term is defined in the Companies Law. A copy of the audit committee charter is available on our website at www.mellanox.com under “Company—Investor Relations—Corporate Governance.”

Subject to shareholder approval of the audit committee’s authority to determine remuneration for their services, the audit committee is directly responsible for the appointment, compensation and oversight of our independent auditors. In addition to its retention of Kost Forer Gabbay & Kasierer, the Israel-based member of Ernst & Young Global (“”) to audit our consolidated financial statements for the fiscal year ended December 31, 2019, the audit committee retained EY Israel to provide other and advisory services in 2019. The audit committee has reviewed all services provided by EY Israel in 2019 and has concluded that the provision of such services was compatible with maintaining EY Israel’s independence and that such independence has not been impaired.

 

The Sarbanes-Oxley Act of 2002 and the auditor independence rules of the SEC require all issuers to obtain from their respective audit committees in order for their independent registered public accounting firms to provide professional services without impairing independence. As such, the audit committee has a policy and has established procedures by which it all audit and other permitted professional services to be provided by the Company’s independent registered public accounting firm. From time to time, the Company may desire additional permitted professional services for which specific is obtained from the audit committee before provision of such services commences. The audit committee has considered and determined that the provision of the services other than audit services referenced above is compatible with maintenance of the auditors’ independence.