UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
Zone 4 Play, Inc.
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(Name of registrant as specified in its charter)
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(Name of person(s) filing proxy statement, if other than the registrant)
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[GRAPHIC OMITTED]
Zone 4 Play, Inc.
Israel R&D Center
Kyriat Atidim, Bldg. 2
Tel Aviv 61580, Israel
April 29, 2005
To Our Stockholders:
You are cordially invited to attend our 2005 Annual Meeting of Stockholders to
be held at 10:00 a.m., local time, on Monday, June 20, 2005, at our offices at
Israel R&D Center, Kyriat Atidim, Bldg. 2, Tel Aviv 61580, Israel.
The Notice of Meeting and Proxy Statement on the following pages describe the
matters to be presented at the meeting.
It is important that your shares be represented at this meeting to assure the
presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by voting as soon as possible, by
signing, dating and returning your proxy card in the enclosed envelope. Your
stock will be voted in accordance with the instructions you have given in your
proxy.
Thank you for your continued support.
Sincerely,
/s/ Shimon Citron
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Shimon Citron
President and Chief Executive Officer
Zone 4 Play, Inc.
Israel R&D Center
Kyriat Atidim, Bldg. 2
Tel Aviv 61580, Israel
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 20, 2005
The Annual Meeting of Stockholders of Zone 4 Play, Inc., a Nevada corporation,
will be held at 10:00 a.m., local time, on Monday, June 20, 2005, at our offices
at Israel R&D Center, Kyriat Atidim, Bldg. 2, Tel Aviv 61580, Israel for the
following purposes:
(1) To elect three (3) directors to serve until the next annual meeting of
stockholders and until their respective successors shall have been
duly elected and qualified;
(2) To approve our 2004 Global Share Option Plan;
(3) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The holders of our common stock, $0.001 par value per share, of record at the
close of business on April 22, 2005, are entitled to notice of and to vote at
our annual meeting or any adjournment or adjournments thereof. The meeting may
be adjourned from time to time without notice other than by announcement at the
meeting; provided, however, that our board of directors must fix a new record
date if the meeting is adjourned to a date more than 60 days later than the date
set for the original meeting. If a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting must be given to each stockholder of
record as of the new record date.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM AND
SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY BE
REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS VOTED.
IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN
DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE SIGNED AND RETURNED TO ENSURE
THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
/s/ Uri Levy
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Uri Levy
Chief Financial Officer and Corporate
Secretary
Tel Aviv, Israel
April 29, 2005
Our 2004 annual report to stockholders accompanies this proxy statement.
Zone 4 Play, Inc.
Israel R&D Center
Kyriat Atidim, Bldg. 2
Tel Aviv 61580, Israel
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
board of directors, or board, of Zone 4 Play, Inc., a Nevada corporation,
referred to herein as Zone4Play, we, us or our, of proxies to be voted at our
annual meeting of stockholders to be held on Monday, June 20, 2005, referred to
herein as the Meeting, at our offices at Israel R&D Center, Kyriat Atidim, Bldg.
2, Tel Aviv 61580, Israel, and at any adjournment or adjournments thereof. The
holders of record of our common stock, $0.001 par value per share, as of the
close of business on April 22, 2005, or the Record Date, will be entitled to
notice of and to vote at the Meeting and any adjournment or adjournments
thereof. As of the Record Date, there were 23,925,010 shares of our common stock
issued and outstanding and entitled to vote. Each share of our common stock is
entitled to one vote on any matter presented at the Meeting.
If proxies in the accompanying form are properly voted and received, the shares
of our common stock represented thereby will be voted in the manner specified
therein. If not otherwise specified, the shares of our common stock represented
by the proxies will be voted: (i) FOR the election of the three (3) nominees
named below as directors; (ii) FOR the approval of the 2004 Global Share Option
Plan, or the Stock Plan; and (iii) in the discretion of the persons named in the
enclosed form of proxy, on any other proposals which may properly come before
the Meeting or any adjournment or adjournments thereof. Any stockholder who has
submitted a proxy may revoke it at any time before it is voted, by written
notice addressed to and received by our Corporate Secretary, by submitting a
duly executed proxy bearing a later date or by electing to vote in person at the
Meeting. The mere presence at the Meeting of the person appointing a proxy does
not, however, revoke the appointment.
The presence, in person or by proxy, of holders of shares of our common stock
having a majority of the votes entitled to be cast at the Meeting shall
constitute a quorum. Abstentions are included in the shares present at the
Meeting for purposes of determining whether a quorum is present. Broker
non-votes, or when shares are represented at the Meeting by a proxy specifically
conferring only limited authority to vote on certain matters and no authority to
vote on other matters, are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved in matters where the proxy does not confer the authority to vote
on such proposal, and thus have no effect on its outcome.
On or about April 29, 2005, this proxy statement, together with the related
proxy card, is being mailed to our stockholders of record as of the Record Date.
Our annual report to our stockholders for the fiscal year ended December 31,
2004, or fiscal 2004, including our financial statements, is being mailed
together with this proxy statement to all of our stockholders of record as of
the Record Date. In addition, we have provided brokers, dealers, banks, voting
trustees and their nominees, at our expense, with additional copies of our
annual report so that our record holders could supply these materials to our
beneficial owners as of the Record Date.
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PROPOSAL 1
ELECTION OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES FOR THE BOARD OF DIRECTORS.
At the Meeting, three (3) directors are to be elected, which number shall
constitute our entire board of directors, to hold office until the next annual
meeting of stockholders and until their successors shall have been duly elected
and qualified. The affirmative vote by the holders of a plurality of the shares
of our common stock represented at the Meeting is required for the election of
directors, provided a quorum is present in person or by proxy. Plurality means
that the three (3) nominees who receive the largest number of votes cast "FOR"
will be elected as directors, even though such nominees may not receive a
majority of the votes cast. Abstentions and broker non-votes will not be counted
in making the determination.
Unless otherwise specified in the proxy, it is the intention of the persons
named in the enclosed form of proxy to vote the stock represented thereby for
the election as directors, each of the nominees whose names and biographies
appear below. All of the nominees whose names and biographies appear below are
presently our directors. In the event any of the nominees should become
unavailable or unable to serve as a director, it is intended that votes will be
cast for a substitute nominee designated by our board of directors. Our board
has no reason to believe that the nominees named will be unable to serve if
elected. Each nominee has consented to being named in this proxy statement and
to serve if elected.
The following are the nominees for election to our board, and all of these
nominees are current members of our board:
Name Age Director Since Position with Zone4Play
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Shimon Citron 49 2001 Chief Executive Officer and Director
Shlomo Rothman 58 2004 Director
Oded Zucker 39 2004 Director
The principal occupations and business experience of each director and nominee
for at least the past five (5) years is as follows:
Shimon Citron, Chief Executive Officer and Director. Mr. Citron founded our
company in 2001 and he has held the positions of Chief Executive Officer and
Director since inception. Mr. Citron is also the Chief Executive Officer and a
Director of each of our wholly owned subsidiaries in Israel and in the United
Kingdom. He has held these positions since 2001. From 1999 to 2001 Mr. Citron
was the founder and President of Gigi Media Ltd., a private company based in
Israel. From 1994 to 1999 he managed his own private investments in a number of
startup companies in Israel.
Shlomo Rothman, Director. Mr. Rothman has been a member of our board of
directors since January 2004. Since February 2002, Mr. Rothman has been the
President and Chief Executive Officer of S.R. Consulting Ltd., a private company
that provides financial services, investment banking, mergers and acquisitions
and project financing. From 1987 until 2002, Mr. Rothman was Senior Deputy
General Manager of the First International Bank in Israel, a safra bank in
Israel. From 1987 to 1999, he was the Head of Marketing, Capital Markets and
Investments Divisions of the First International Bank. From 1999 until 2002, Mr.
Rothman was also the head of the Retail and Commercial Banking Division of the
First International Bank. Mr. Rothman was a Director of the Tel Aviv Stock
Exchange from 1989 until 2000 and a Director of Maalot-Israeli Rating Co. from
1995 until 2000. He is currently a Director of the Menorah-Gaon Investment House
Ltd. and Edmond de Rothschild-Portfolio Management Ltd., both located in Israel.
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Oded Zucker, Director. Mr. Zucker has been a member of our board of directors
since January 2004. Mr. Zucker has been the United Kingdom Senior Vice President
for Prudential Bache Inc. since 1995. He was also a co-founder of the Israeli
operations for Prudential Bache. Mr. Zucker is a registered representative with
the New York Stock Exchange and the NASD. Mr. Zucker is also a Director of Nisko
Projects Electronics and Communication Ltd., which currently trades on the Tel
Aviv Stock Exchange in Israel.
PROPOSAL 2
APPROVAL OF THE ZONE4PLAY 2004 GLOBAL SHARE OPTION PLAN
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
In November 2004, our board of directors adopted the Zone4Play 2004 Global Share
Option Plan, or Stock Plan, and in March 2005 voted to recommend that the Stock
Plan shall be presented to our stockholders for approval. The affirmative vote
of a majority of the votes properly cast at the Meeting is required to approve
the adoption of the Stock Plan, provided a quorum is present in person or by
proxy. You may vote "For," "Against" or "Abstain." Abstentions will have the
same effect of a vote cast "Against" the proposal, but broker non-votes will not
be included in the tabulations.
A total of 5,000,000 shares of common stock have be reserved for issuance to
employees, directors, consultants and service providers under the Stock Plan.
We believe that equity is a key element of our compensation package because
equity awards encourage loyalty to Zone4Play and align an individual's interests
directly with those of our stockholders. The Stock Plan will allow us to provide
employees, directors, consultants and service providers with equity incentives
that are competitive with those of companies with which we compete for talent.
As of December 31, 2004, we had approximately 36 employees, all of whom were
eligible to be considered for option awards under the Stock Plan. As of such
date, an aggregate of 1,460,000 shares of common stock were issuable pursuant to
outstanding stock options granted under the Stock Plan, and an aggregate of
3,540,000 shares of common stock were available for future grants. As of
December 31, 2004, outstanding options to purchase 1,300,000 shares of common
stock were exercisable at a purchase price of $0.55 per share, and options to
purchase 160,000 shares of common stock were exercisable at a purchase price of
$1.00 per share. All such options expire on December 31, 2014.
The closing price of a share of common stock on the Over-the-Counter Bulletin
Board on the Record Date was $1.59. The proceeds received by us upon exercise of
the options by participants in the Stock Plan will be used for the general
corporate purposes of Zone4Play.
The following is a summary of the material terms and conditions of the Stock
Plan. The full text of the Stock Plan is attached as Appendix A to this Proxy
Statement.
Summary of the Stock Plan
Administration.
The Stock Plan is currently administered by the board, however, the board has
the authority to delegate its administrative duties to a committee of the board.
Eligibility.
Under the Stock Plan, our employees, directors, officers, consultants and
advisors are eligible for selection to participate. Each of the board and the
committee has full authority to determine who will receive options and the
provisions of all options to be granted under the Stock Plan.
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Types of Awards.
Awards under the Stock Plan may be in the form of either incentive stock options
or non-qualified options. Stock options represent the right to purchase shares
of common stock within a specified period of time at a specified price. The
exercise price for a stock option shall be determined by the board in its sole
discretion. For incentive stock options, the exercise price will be not less
than 100% (110% for an incentive stock option granted to a 10% or more
stockholder) of the fair market value of common stock on the date of grant. The
aggregate fair market value, determined on the date the option is granted, of
the stock for which any person may be granted incentive stock options which
become exercisable for the first time by such person in any calendar year cannot
exceed the sum of $100,000 (determined on the date such option is granted). No
incentive stock option will be granted to a person who is not an "employee" as
defined in the applicable provisions of the Internal Revenue Code of 1986, as
amended, or the Code, and regulations issued thereunder. An incentive stock
option shall expire in ten years (five years in the case of an incentive stock
option granted to a 10% or more stockholder) after the date of grant.
Transferability.
Under the Stock Plan, awards are generally non-transferable other than by will
or by the laws of descent and distribution; provided, however, that the board
and the committee, as applicable, in its discretion, may allow for
transferability of an option by an option holder. Awards may be exercised by a
person other than the participant only in the circumstances outlined below.
Death; Disability; Retirement; Termination.
Under the Stock Plan, all previously unexercised options terminate and are
forfeited and expire automatically on the date of termination of the option
holder's employment with us, unless the board or the committee expressly allows
the option holder to exercise any or all of such options after termination.
However, if an option holder dies or becomes disabled at a time when he or she
is entitled to exercise an option, then the portion formerly exercisable by the
option holder may be exercised by the option holder's executor or administrator,
or by the person to whom the option is transferred under the applicable laws of
descent or distribution, within twelve months of the death of the option holder
(the "Exercise Period"), subject, in the case of incentive stock options, to the
limitations stated above on their exercise. In addition, if an option holder's
employment is terminated without "Cause" (as defined in the Stock Plan) at a
time when he or she is entitled to exercise an option, then the portion formerly
exercisable may be exercised by the option holder within three months of his or
her termination date. Shares which are not delivered because of termination or
expiration of options may be reused for other options.
Amendment, Suspension or Termination.
The board or the committee may at any time discontinue granting options under
the Stock Plan. The board of directors may amend the Stock Plan, except that no
such amendment may adversely affect the rights of any option holder without his
or her written consent and except that the term of the Stock Plan may not be
extended.
Adjustment in Case of Changes.
In the event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the common stock, the number and kind of
shares of stock or securities of Zone4Play then subject to the Stock Plan and
the options then outstanding or to be granted thereunder, and the option price,
will be appropriately adjusted by the board or the committee, whose
determination will be binding on all persons. Unless otherwise provided, in the
event of a dissolution or liquidation of Zone4Play, a merger or consolidation in
which Zone4Play is not the surviving corporation, the sale of substantially all
of the property or assets of Zone4Play, or the sale of 50% or more of the voting
stock of Zone4Play, every option hereunder will terminate. In the event that the
options are terminated in accordance with the foregoing, all outstanding options
shall be exercisable in full for at least thirty days prior to such termination
date. The existence of the Stock Plan shall not prevent any such change or other
transaction and no option holder thereunder shall have any right except as
herein expressly set forth.
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United States Tax Effects
Incentive Stock Options
In general, neither the grant nor the exercise of an incentive stock option
granted under the Stock Plan will result in taxable income to the option holder
or a deduction to Zone4Play. However, the exercise of an incentive stock option
may result in alternative minimum tax liability for the option holder in the
year of exercise. Therefore, option holders should fully understand the
implications of alternative minimum tax prior to the exercise of an incentive
stock option. If the option holder does not dispose of stock received upon
exercise of an incentive stock option within two years from the date the option
is granted nor within one year after the date of exercise, any later sale of
such stock will result in a long-term capital gain or loss.
If shares received upon exercising an incentive stock option are disposed of
before the holding period requirements described above have been satisfied (a
"disqualifying disposition"), the option holder will generally realize ordinary
income at the time of disposition of the stock. The amount of such ordinary
income will be equal to the lesser of: (a) the difference between the fair
market value of the stock on the date of exercise and the option price, and (b)
the difference between the net proceeds received upon the sale of the stock and
the option price. Subsection (b) above will apply when the option holder sells
stock purchased during the holding period at a sales price less than the fair
market value of the stock on the date of exercise. We will generally be entitled
to a deduction for Federal income tax purposes equal to the amount of ordinary
income realized by the option holder. If the gain realized on the sale exceeds
the amount recognized as ordinary income with respect to the disqualifying
disposition, the excess will be either a long term or short-term capital gain
depending on the option holder's holding period for the stock acquired pursuant
to the exercise of the option.
Other Options
Options granted under the Stock Plan which are not incentive stock options are
"nonstatutory options." No taxable income results upon the grant of a
nonstatutory option.
When an option holder exercises a nonstatutory option the option holder will
realize ordinary income subject to withholding and to the FICA tax. Generally
such income will be realized at the time of exercise and in an amount equal to
the excess, measured at the time of exercise, of the then fair market value of
the stock over the option price. The tax is due regardless of whether the stock
acquired upon exercise of the option is sold. The Company will be entitled to a
deduction for Federal income tax purposes equal to the amount of ordinary income
realized by the option holder.
The tax basis of stock acquired upon exercise of a nonstatutory option is
generally the option price plus any amount included in taxable income by reason
of the exercise. If an option holder pays the exercise price of a nonstatutory
option by surrendering previously owned stock (however acquired), no gain or
loss is recognized on the exchange of the previously owned shares for an
equivalent number of new shares. The option holder's basis and holding period in
the surrendered shares will carry over to the number of shares received upon
exercise that equals the number of shares surrendered. As to any shares received
upon exercise in excess of the number of shares surrendered, the option holder
will realize ordinary income, subject to withholding, equal to the fair market
value of such shares less any cash paid for such shares. The option holder's tax
basis in these additional shares will equal the amount of ordinary income
realized plus the amount of any cash paid for such shares.
Persons Subject to Section 16(b) of the Exchange Act
If an option granted under the Stock Plan to a person subject to Section 16(b)
of the Exchange Act is exercised by such person within six months of the date of
grant, the ordinary income (or, in the case of an incentive option, the
alternative minimum taxable income) associated with exercise will not be
recognized until six months after the date of grant of the option unless, not
later than 30 days from date of exercise, the option holder makes an election
under Section 83(b) of the Code to have such income recognized at the time of
exercise. Any deduction available to us in connection with the exercise of such
an option will be subject to similar deferral rules.
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Israeli Tax Effects
Options granted to participants who are residents of the state of Israel are
governed by Section 102 of the Israeli Income Tax Ordinance of 1961, as amended
(the "Ordinance"). Pursuant to the Ordinance, participants who are (i) employees
of Zone4Play may only be granted options that comply with Section 102 of the
Ordinance and (ii) non-employees and/or "Controlling Shareholders" (as defined
in Section 32(9) of the Ordinance) may only be granted options that comply with
Section 3(i) of Ordinance.
Subject to the approval of the Israeli Tax Authorities upon our filing of an
election under Section 102 of the Ordinance, we may designate employee options
as (i) "approved" options qualified for capital gains tax treatment under
Section 102(b) of the Ordinance or (ii) "unapproved" options qualified for
ordinary income tax treatment under Section 102(b) of the Ordinance. "Approved"
options, and the shares issued upon exercise thereof, must be held by a trustee
appointed by us and approved by the Israeli Tax Authorities for a certain length
of time, as set forth in Section 102 of the Ordinance, in order to qualify for
the favorable capital gains tax treatment. Failure to hold the options and/or
shares for such time may result in the loss of capital gains tax treatment.
"Unapproved" options are not subject to a holding period requirement.
Any and all taxes arising from the grant or exercise of an option shall be borne
solely by the participant. Neither Zone4Play, nor the Trustee, will have any
obligation for any such taxes and the participant shall agree to indemnify us,
our affiliates and the trustee from any and all liability for any such taxes or
penalties therein.
CORPORATE GOVERNANCE GUIDELINES
Because we are not listed on the Nasdaq National Market or SmallCap Market, we
technically are not subject to a number of corporate governance guidelines.
Nevertheless, our board recently has reviewed our governance practices in light
of the Sarbanes-Oxley Act of 2002 and the new rules and regulations of the
Securities and Exchange Commission, or the Commission or the SEC. We have
voluntarily adopted a number of corporate governance guidelines and practices.
There are others, however, that we have not adopted because we feel that they
are impractical for a company of our size.
Our board of directors has adopted the following corporate governance guidelines
to assist it in the exercise of its duties and responsibilities and to serve the
best interests of Zone4Play and its stockholders. These guidelines, which
provide a framework for the conduct of our board's business, include that:
o the principal responsibility of the directors is to oversee the
management of Zone4Play;
o our outside directors will meet regularly in executive session; and
o our directors have full and free access to management and, as
necessary and appropriate, independent advisors.
COMMITTEES AND MEETINGS OF OUR BOARD OF DIRECTORS
Our board of directors held 8 meetings during fiscal 2004. Throughout this
period, each member of our board who was a director in fiscal 2004 attended or
participated in at least 75% of the aggregate of the total number of regularly
scheduled meetings of our board held during the period for which such person has
been a director, and the total number of meetings held by all committees of our
board on which each the director served during the periods the director served.
Our board of directors has two standing committees: the Audit Committee and the
Compensation Committee The Audit Committee operates under a charter that has
been approved by our board. The charter is posted on our website at
www.Zone4Play.com.
Compensation Committee. The members of our Compensation Committee are Messrs.
Oded Zucker and Shimon Citron. Our Compensation Committee will make
recommendations concerning salaries and incentive compensation for our
management and our employees. The primary responsibilities of our Compensation
Committee include:
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o annually reviewing and approving corporate goals and objectives
relevant to CEO compensation;
o reviewing and approving, or recommending for approval by our board,
the salaries and incentive compensation of our executive officers;
o administering our 2004 Global Share Option Plan; and
o reviewing and making recommendations to our board with respect to
director compensation.
Audit Committee. Our Audit Committee was established in April 2004. In March
2005, our board of directors adopted an amended and restated Audit Committee
Charter, attached hereto as Appendix B. The primary responsibilities of our
Audit Committee include:
o appointing, approving the compensation of, and assessing the
independence of our independent registered public accounting firm;
o overseeing the work of our independent registered public accounting
firm, including through the receipt and consideration of certain
reports from our independent registered public accounting firm;
o reviewing and discussing with management and our independent
registered public accounting firm our annual and quarterly financial
statements and related disclosures;
o monitoring our internal control over financial reporting, disclosure
controls and procedures and code of business conduct and ethics;
o overseeing our internal audit function;
o discussing our risk management policies;
o establishing policies regarding hiring employees from our independent
registered public accounting firm and procedures for the receipt and
retention of accounting related complaints and concerns;
o meeting independently with our internal auditing staff, independent
registered public accounting firm and management; and
o preparing the audit committee report required by SEC rules, which is
included on page 6 of this proxy statement.
During fiscal 2004, our Audit Committee was comprised of Mr. Rothman. Our board
of directors has determined that Mr. Rothman satisfies the definition of an
"audit committee financial expert" as set forth in Item 401(e) of Regulation S-B
promulgated by the SEC. Our Audit Committee held three (3) meetings during
fiscal 2004.
Nominating/Corporate Governance Committee; Director Candidates. Zone4Play does
not have a Nominating Committee or Corporate Governance Committee or any
committees of a similar nature, nor any charter governing the nomination
process. Our board does not believe that such committees are needed for a
company our size. However, our outside directors, Messrs. Rothman and Zucker,
will consider stockholder suggestions for additions to our board.
In considering whether to recommend any particular candidate for inclusion in
the board's slate of recommended director nominees, our outside directors will
apply criteria including the candidate's integrity, business acumen, knowledge
of our business and industry, age, experience, diligence, conflicts of interest
and the ability to act in the interests of all stockholders. No particular
criterion will be a prerequisite or will be assigned a specific weight. We
believe that the backgrounds and qualifications of our directors, considered as
a group, should provide a composite mix of experience, knowledge and abilities
that will allow the board to fulfill its responsibilities.
Stockholders may recommend individuals to any one of our outside directors by
submitting their names, together with appropriate biographical information and
background materials and a statement as to whether the stockholder or group of
stockholders making the recommendation has beneficially owned more than 5% of
our common stock for at least one year as of the date such recommendation is
made. Such requests should be addressed to any of our outside directors c/o
Zone4Play at the address on the first page of this proxy statement.
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In fiscal 2004, we did not pay a fee to any third party to identify or evaluate,
or assist in identifying or evaluating, potential nominees for our board. We
have not received any recommendations from stockholders for board nominees.
Code of Business Ethics and Conduct. Pursuant to the requirements of Section 406
of the Sarbanes-Oxley Act of 2002 and related SEC rules, in March 2005, our
board of directors adopted a Code of Business Ethics and Conduct, or Code of
Ethics. Our Code of Ethics can be viewed on our corporate website,
www.zone4play.com. Our Code of Ethics contains written standards designed to
deter wrongdoing and to promote:
o honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o full, fair, accurate, timely, and understandable disclosure in reports
and documents filed with the SEC and in other public announcements;
o compliance with applicable governmental laws, rules and regulations;
o the prompt internal reporting of violations of our Code of Ethics to
an appropriate person or persons identified in our Code of Ethics; and
o accountability for adherence to our Code of Ethics.
Each of our employees, officers and directors completed a signed certification
to document his or her understanding of and compliance with our Code of Ethics.
COMMUNICATING WITH OUR INDEPENDENT DIRECTORS
Our board of directors will give appropriate attention to written communications
that are submitted by stockholders, and will respond if and as appropriate. Mr.
Citron, as CEO and Director, with the assistance of our outside counsel, is
primarily responsible for monitoring communications from our stockholders and
for providing copies or summaries to the other directors as he considers
appropriate. Communications are forwarded to all directors if they relate to
important substantive matters and include suggestions or comments that Mr.
Citron considers to be important for the directors to know. In general,
communications relating to corporate governance and long-term corporate strategy
are more likely to be forwarded than communications relating to ordinary
business affairs, personal grievances and matters as to which we tend to receive
repetitive or duplicative communications.
Stockholders who wish to send communications on any topic to our board should
address such communications to: Board of Directors c/o Zone4Play at the address
on the first page of this proxy statement.
ATTENDANCE AT ANNUAL STOCKHOLDER MEETINGS
We encourage our directors to attend our annual stockholder meetings. We did not
have an annual meeting of stockholders in 2004.
COMPENSATION OF DIRECTORS
We have agreements with each of our non-employee directors, Messrs. Rothman and
Zucker, pursuant to which we have agreed to pay each director a director's fee
of $7,000 per annum, payable in quarterly installments during the director's
tenure on our board. In addition, we have agreed to pay them $750 per board
meeting and to reimburse them for reasonable and necessary expenses incurred in
connection with attendance at meetings of the board of directors and other
Zone4Play business.
-8-
In accordance with a resolution unanimously approved by our board of directors
on March 31, 2005, we granted to each of Messrs. Rothman and Zucker options to
purchase 192,261 shares of our common stock, in each case pursuant to and in
accordance with our Stock Plan, as consideration for their service on our board
of directors. The options granted to Messrs. Rothman and Zucker have an exercise
price equal to $1.00 per share, have a term of ten (10) years, and are
exercisable in three equal annual installments commencing on May 1, 2005.
See "Certain Relationships and Related Transactions."
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has furnished the following report:
March 28, 2005
To the Board of Directors of Zone4Play, Inc.:
The Audit Committee of our board of directors is currently composed of one
member and acts under a written charter. The current member of the Audit
Committee, Mr. Rothman, is not an employee of Zone4Play and possesses the
financial sophistication required by such charter. The Audit Committee held
three (3) meetings during fiscal 2004.
Management is responsible for our financial reporting process, including its
system of internal controls and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. Our
independent registered public accounting firm is responsible for auditing those
financial statements. The Audit Committee's responsibility is to monitor and
review these processes. As appropriate, the Audit Committee reviews and
evaluates, and discusses with our management and our independent registered
public accounting firm, the following:
o the plan for, and the independent registered public accounting firm's
report on, each audit of our financial statements;
o the independent registered public accounting firm's review of our
unaudited interim financial statements;
o our financial disclosure documents, including all financial statements
and reports filed with the Securities and Exchange Commission or sent
to stockholders;
o our management's selection, application and disclosure of critical
accounting policies;
o changes in our accounting practices, principles, controls or
methodologies;
o significant developments or changes in accounting rules applicable to
us; and
o the adequacy of our internal controls and accounting and financial
personnel.
The Audit Committee reviewed and discussed with our management our audited
financial statements for the year ended December 31, 2004. The Audit Committee
also reviewed and discussed the audited financial statements and the matters
required by Statement on Auditing Standards No. 61, 89 and 90, titled
Communication with Audit Committees, with our independent registered public
accounting firm. These standards require our independent registered public
accounting firm to discuss with our Audit Committee, among other things, the
following:
o methods used to account for significant unusual transactions;
o the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus;
o the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and
-9-
o disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
Our independent registered public accounting firm also provided the Audit
Committee with the written disclosures and the letter required by Independence
Standards Board Standard No. 1, titled Independence Discussions with Audit
Committees. Independence Standards Board Standard No. 1 requires auditors
annually to disclose in writing all relationships that, in the auditor's
professional opinion, may reasonably be thought to bear on independence, confirm
their perceived independence and engage in a discussion of independence. In
addition, the Audit Committee discussed with our independent registered public
accounting firm their independence from Zone4Play. The Audit Committee also
considered whether our independent registered public accounting firm's provision
of certain other non-audit related services to Zone4Play is compatible with
maintaining our auditors' independence, and concluded that it was compatible.
Based on our discussions with management and our independent registered public
accounting firm, and our review of the representations and information provided
by our management and our independent registered public accounting firm, the
Audit Committee recommended to our board of directors that the audited financial
statements be included in our annual report on Form 10-KSB for the year ended
December 31, 2004.
By the Audit Committee of the Board of
Directors of Zone 4 Play, Inc.
Shlomo Rothman, Chairman
-10-
EXECUTIVE OFFICERS
The following table identifies our current executive officers:
Name Age Capacities in Which Served In Current Position Since
------------------------- -------- ---------------------------------------------------- ----------------------------
Shimon Citron 49 Chief Executive Officer and Director 2001
Uri Levy 35 Chief Financial Officer and Corporate Secretary December 2003
Haim Tabak 58 Chief Operating Officer January 2003
Shachar Schalka 31 Chief Technology Officer December 2001
Gil Levy 32 Vice President, Research and Development June 2002
Idan Miller 33 Vice President of Marketing and Sales May 2004
Officers are elected annually by the board of directors (subject to the terms of
any employment agreement) at our annual meeting, to hold such office until an
officer's successor has been appointed, unless an officer sooner dies, resigns
or is removed by the board. Some of our directors and executive officers also
serve in various capacities with our subsidiaries. There are no family
relationships among any of our directors and executive officers.
Background of Executive Officers
Shimon Citron, Chief Executive Officer and Director. Mr. Citron founded
Zone4Play in 2001 and he has held the positions of Chief Executive Officer and
director since Zone4Play's inception. Mr. Citron is also the Chief Executive
Officer and a director of each of our wholly owned subsidiaries in Israel and in
the United Kingdom. He has held these positions since 2001. From 1999 to 2001,
Mr. Citron was the founder and President of Gigi Media Ltd., a private company
based in Israel engaged in the business of the development of Internet search
engines. From 1994 to 1999, he managed his own private investments in a number
of startup companies in Israel.
Uri Levy, Chief Financial Officer. Mr. Levy joined us as Chief
Financial Officer in December 2003. Prior to joining us, Mr. Levy was Vice
President, Finance of Loram Ltd., a company engaged in the business of real
estate, from June 2002 until December 2003, and as a controller of EasyRun
Communications Software Systems from 1999 until June 2003. Mr. Levy is a
Certified Public Accountant in Israel and has a LL.M. Degree from the Bar Ilan
University in Ramat Gan, Israel.
Haim Tabak, Chief Operating Officer. Mr. Tabak joined us in January
2003 as Chief Operating Officer. Prior to joining us, Mr. Tabak was General
Manager of Winner.com Ltd., Tel Aviv, Israel, a subsidiary of Winner.com, Inc.,
from 2000 to 2002. Winner.com is engaged in the business of marketing and
advertising for Internet sites. From 1998 to 1999, he held the position of Chief
Operating Officer for Transtech Systems Ltd, an IT logistics solution provider
located in Tel Aviv.
Shachar Schalka, Chief Technology Officer. Mr. Schalka was appointed as
our Chief Technology Officer in December 2001. Prior to joining us, Mr. Schalka
held various technical, programming and managerial positions with Gigi Media
Ltd. from 2000 to 2001.
Gil Levi, Vice President of Research & Development. Mr. Levi was
appointed Vice President of Research and Development on June 2002. Prior to
joining us, Mr. Levi held the position of senior software programmer of Gigi
Media Ltd. from 2000 until 2002.
Idan Miller, Vice President of Marketing and Sales. Mr. Miller joined
us in May 2004 with ten years of experience managing TV and Internet technology
projects. From 1998 to 2001, he was President and CEO of Oraios, a New York
City-based company that developed e-commerce, community and e-gaming enabling
technologies for the Internet. Prior to Oraios (1997 to 1998), Mr. Miller was a
managing director of Zinc Media, a development house for interactive
applications. In such capacity, Mr. Miller worked with some of the largest
e-
-11-
commerce websites around the world. He also served as Vice President, Marketing
of Intech Capital, an investment house for Internet enterprises during 2001
through 2002 and was Head of Business Development - iTV at NDS (a News Corp.
company specializing in TV solutions) from 2002 to 2004.
EXECUTIVE COMPENSATION
Summary of Compensation in Fiscal 2004, 2003 and 2002
The following Summary Compensation Table sets forth information concerning
compensation during fiscal 2004, fiscal 2003 and fiscal 2002 for services in all
capacities awarded to, earned by or paid to Mr. Citron, who served as our Chief
Executive Officer throughout the period. No other executive officers who were
serving as our executive officers at the end of fiscal 2004 received more than
$100,000 in salary and bonus in fiscal 2004, and there were no individuals for
whom disclosure would have been provided but for the fact that the individual
was not serving as an executive officer at the end of fiscal 2004.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the total compensation
that we have paid or that has accrued on behalf of our chief executive officer
during the years ending December 31, 2004, 2003 and 2002.
Long-Term
Compensation
-----------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------
Name and Other Securities
Principal Fiscal Annual Restricted Underlying LTIP All Other
Position Year Salary Bonus Compensation Stock Awards Options/ SARs Payouts Compensation
--------------------------------------------------------------------------------------------------------------------------
Shimon Citron, 2004 $60,000 -0- -0- -0- -0- -0- -0-
Chief Executive
Officer and
Director
--------------------------------------------------------------------------------------------------------------------------
2003 -0- -0- -0- -0- -0- -0- -0-
--------------------------------------------------------------------------------------------------------------------------
2002 -0- -0- -0- -0- -0- -0- -0-
--------------------------------------------------------------------------------------------------------------------------
Option Grants in Fiscal 2004
No stock options were granted to Mr. Citron pursuant to our Stock Plan during
fiscal 2004. As of December 31, 2004, Mr. Citron did not hold any options to
purchase common stock of Zone4Play We have never granted any stock appreciation
rights.
Equity Compensation in Fiscal 2004
The following table provides information about the securities authorized for
issuance under our equity compensation plans as of December 31, 2004. Our only
equity compensation is our Stock Plan.
Number of securities to Weighted-average
be issued upon exercise exercise price of Number of securities remaining
of outstanding options, outstanding options, available for future issuance
warrants and rights warrants and rights under equity compensation plans
------------------------- ----------------------- -------------------------------
Equity compensation plans
approved by security holders -0- -0- -0-
Equity compensation plans not
approved by security holders 1,460,000 $.60 3,540,000
Total 1,460,000 $.60 3,540,000
-12-
Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements
Mr. Shimon Citron does not have an employment contract, severance agreement or
change-in-control arrangement with Zone4Play.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires a company's directors, officers and
stockholders who beneficially own more than 10% of any class of equity
securities of Zone4Play registered pursuant to Section 12 of the Exchange Act,
collectively referred to herein as the Reporting Persons, to file initial
statements of beneficial ownership of securities and statements of changes in
beneficial ownership of securities with respect to the company's equity
securities with the SEC. All Reporting Persons are required by SEC regulation to
furnish us with copies of all reports that such Reporting Persons file with the
SEC pursuant to Section 16(a). Based solely on our review of the copies of such
reports and upon written representations of the Reporting Persons received by
us, we believe that all Section 16(a) filing requirements applicable to such
Reporting Persons have been met.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our common stock is the only class of stock entitled to vote at the Meeting.
Only our stockholders of record as of the close of business on the Record Date
are entitled to receive notice of and to vote at the Meeting. As of the Record
Date, there were 85 holders of record of our common stock, and we had
outstanding 23,925,010 shares of our common stock and each outstanding share is
entitled to one vote at the Meeting. The following table sets forth certain
information, as of the Record Date (or such other date as is set forth in the
footnotes below), with respect to holdings of our common stock by (i) each
person known by us to be the beneficial owner of more than 5% of the total
number of shares of our common stock outstanding as of such date; (ii) each of
our directors, which includes all nominees, and Mr. Citron, as our Chief
Executive Officer; and (iii) all of our directors and our current executive
officers as a group.
Amount and Nature of Percent
Name and Address of Beneficial Owner (1) Beneficial Ownership(2) of Class(3)
-------------------------------------------------------- ------------------------------- -------------------------
5% Beneficial Owners and Chief Executive Officer:
Shimon Citron (4) 3,258,772 13.6%
Pini Gershon 2,706,950 11.3%
Weiss, Peck & Greer Investments,
a division of Robeco USA, LLC (5) 2,905,100 12.1%
First New York Securities L.L.C. (6) 2,090,100 8.7%
Other Directors:
Shlomo Rothman 64,087 *
Oded Zucker 64,087 *
All directors and current executive officers as a
group (8 persons) (7) 4,144,117 17.3%
--------------------
* Less than 1%
(1) Unless otherwise provided, all addresses are c/o Zone 4 Play, Inc. at the
address set forth on the first page of this proxy statement.
-13-
(2) Except as otherwise indicated, all shares are beneficially owned and sole
investment and voting power is held by the persons named.
(3) Applicable percentage of ownership is based on 23,925,010 shares of our
common stock outstanding as of the Record Date, plus any common stock
equivalents and options or warrants held by such holder which are presently or
will become exercisable within sixty (60) days after the Record Date.
(4) Includes 494,449 shares owned by Yariv Citron, son of Shimon Citron.
(5) Includes warrants to acquire 1,100,000 shares. The address of Robeco USA,
LLC is One New York Plaza, New York, NY 10004. The shares are beneficially held
by Robeco USA, LLC for the discretionary accounts of certain clients. Robeco
USA, LLC expressly disclaims beneficial ownership of such shares. The
information is based solely on a Schedule 13G/A filed with the Securities and
Exchange Commission by the beneficial owner on April 8, 2005, describing the
holdings of the beneficial owner as of December 31, 2004.
(6) Includes shares which the following individuals have either sole or shared
power to dispose or direct the disposition of: Judy Finger, Douglas Topiks,
Lloyd Brokaw and Haystack Capital L.P. Ms. Finger, Mr. Topkis and Mr. Brokaw are
employed by and trade our securities for First New York Securities L.L.C.
Haystack Capital L.P. is a hedge fund of which Ms. Finger and Mr. Topiks are the
managing members of its general partnership. The address of First New York
Securities L.L.C., Haystack Capital L.P., Ms. Finger, Mr. Topkis and Mr. Brokaw
is 850 Third Avenue, 17th Floor New York, NY 10022. This information is based on
a Schedule 13G jointly filed with the Securities and Exchange Commission by the
beneficial owners on April 7, 2005, describing the holdings of the beneficial
owners as of March 28, 2005.
(7) See preceding footnotes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 2002, we signed a line of credit loan agreement with Shimon Citron,
our Chief Executive Officer, in an amount of up to $500,000 for a term of two
years. The loan is in U.S. dollars and bears an annual interest rate of 1.5%. As
of December 2004, we drew down upon $1,229 of the credit line. Our management
believes that this loan agreement is on terms at least as favorable as could be
obtained from an unrelated third party.
In February 2005 we entered into an Interactive Fixed Odds Betting Services
Agreement (the "Agreement"). with Winner.Com (UK) Ltd. ("Winner") and Two Way
Media Limited ("TWM"). TWM, which establishes fixed odds betting services on
digital television, the Internet, mobile telecommunications networks and other
digital platforms, engaged us and Winner to provide client-side game
applications, server-side software for the management of such platforms and
project management support and technical services using Winner's trademark and
brand. Each party is entitled to a certain profit share, based on the kind of
platform pursuant to which the profit was generated and the amount of profit
generated.
INFORMATION CONCERNING OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has retained Kost Forer Gabbay & Kasierer, a member of Ernst
& Young Global, as our independent registered public accounting firm for the
fiscal year ending December 31, 2005. That firm has served as our independent
auditors since the fiscal year ended 2003 and currently serves as our
independent registered public accounting firm. Neither the firm nor any of its
directors has any direct or indirect financial interest in or any connection
with us in any capacity other than as auditors.
One or more representatives of Kost Forer Gabbay & Kasierer, a member of Ernst &
Young Global, is expected to attend the Meeting and have an opportunity to make
a statement and/or respond to appropriate questions from our stockholders.
-14-
Fees and Other Matters
The following table summarizes the fees of Kost Forer Gabbay & Kasierer, a
member of Ernst & Young Global, our independent registered public accounting
firm, billed for each of the last two fiscal years for audit services and other
services:
Fee Category 2004 2003
---------------------------------- ----------------- ----------------
Audit Fees (1) $ 34,000 $ 4,000
Audit-Related Fees (2) 52,000 -
Tax Fees (3) 6,522 2,248
All Other Fees - -
----------------- ----------------
Total Fees $ 92,522 $ 6,248
----------------------------------
(1) Consists of fees for professional services rendered in connection with the
audit of our financial statements for the years ended 2003 and 2004,
respectively, and the reviews of the financial statements included in each of
our Quarterly Reports on Form 10-QSB during those years, and fees for
professional services rendered in connection with documents filed with the
Securities and Exchange Commission during those years.
(2) Consists of fees relating to the review of our recently filed registration
statements.
(3) Consists of fees relating to our tax compliance, tax planning and tax return
preparation for the years ended 2003 and 2004.
Pre-Approval Policies and Procedures
None of the audit-related fees billed in fiscal 2004 and 2003 related to
services provided under the de minimis exception to the SEC's audit committee
pre-approval requirements.
The Audit Committee has adopted policies and procedures relating to the approval
of all audit and non-audit services that are to be performed by our independent
registered public accounting firm. This policy generally provides that we will
not engage our independent registered public accounting firm to render audit or
non-audit services unless the service is specifically approved in advance by the
Audit Committee or the engagement is entered into pursuant to one of the
pre-approval procedures described below.
From time to time, the Audit Committee may pre-approve specified types of
services that are expected to be provided to us by our independent registered
public accounting firm during the next 12 months. Any such pre-approval is
detailed as to the particular service or type of services to be provided and is
also generally subject to a maximum dollar amount.
The Audit Committee has also delegated to the chairman of the Audit Committee
the authority to approve any audit or non-audit services to be provided to us by
our independent registered public accounting firm. Any approval of services by a
member of the Audit Committee pursuant to this delegated authority is reported
on at the next meeting of the Audit Committee.
-15-
STOCKHOLDER PROPOSALS
Stockholders who wish to submit proposals for inclusion in our proxy statement
and form of proxy relating to our 2006 annual meeting of stockholders must
advise our Secretary of such proposals in writing by February 21, 2006.
Stockholders who wish to present a proposal at our 2006 annual meeting of
stockholders without inclusion of such proposal in our proxy materials must
advise our Secretary of such proposals in writing by May 6, 2006.
If we do not receive notice of a stockholder proposal within this timeframe, our
management will use its discretionary authority to vote the shares they
represent, as our board of directors may recommend. We reserve the right to
reject, rule out of order, or take other appropriate action with respect to any
proposal that does not comply with these requirements.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the
practice of "householding" proxy statements and annual reports. This means that
only one copy of our proxy statement or annual report may have been sent to
multiple stockholders in your household. We will promptly deliver a separate
copy of either document to you if you call or write us at the address shown on
the first page of this proxy statement. If you want to receive separate copies
of the annual report and proxy statement in the future or if you are receiving
multiple copies and would like to receive only one copy for your household, you
should contact your bank, broker, or other nominee record holders, or you may
contact us at the address shown on the first page of this proxy statement or by
phone at (302) 691-6177.
OTHER MATTERS
Our board of directors is not aware of any matter to be presented for action at
the Meeting other than the matters referred to above and does not intend to
bring any other matters before the Meeting. However, if other matters should
come before the Meeting, it is intended that holders of the proxies will vote
thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of our board of directors,
whose notice of meeting is attached to this proxy statement, and the entire cost
of such solicitation will be borne by us.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by our directors, officers and other employees
who will not be specially compensated for these services. We will also request
that brokers, nominees, custodians and other fiduciaries forward soliciting
materials to the beneficial owners of shares held of record by such brokers,
nominees, custodians and other fiduciaries. We will reimburse such persons for
their reasonable expenses in connection therewith.
Certain information contained in this proxy statement relating to the
occupations and security holdings of our directors and officers is based upon
information received from the individual directors and officers.
WE WILL FURNISH, WITHOUT CHARGE, A COPY OF OUR REPORT ON FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2004, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, BUT NOT INCLUDING EXHIBITS, TO EACH OF OUR STOCKHOLDERS OF RECORD ON
APRIL 21, 2005 AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE UPON WRITTEN
REQUEST MADE TO OUR CORPORATE SECRETARY AT THE ADDRESS SET FORTH ON THE FIRST
PAGE OF THIS PROXY STATEMENT, OR BY CALLING (302) 691-6177. A REASONABLE FEE
WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
-16-
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED
AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
/s/ Uri Levy
-------------------------
Uri Levy
Chief Financial Officer and Corporate
Secretary
Tel Aviv, Israel
April 29, 2005
-17-
Appendix A
ZONE 4 PLAY, INC.
2004 Global Share Option Plan
This plan, as amended from time to time, shall be known as the Zone 4 Play, Inc.
2004 Global Share Option Plan (the "Plan").
1. PURPOSE OF THE PLAN
The Plan is intended to provide an incentive to retain, in the employ of the
Company (as defined below) and its affiliates, persons of training, experience
and ability; to attract new employees, directors, consultants and service
providers; to encourage the sense of proprietorship of such persons; and to
stimulate the active interest of such persons in the development and financial
success of the Company by providing them with opportunities to purchase shares
in the Company.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including the
Option Agreement and its appendixes), the following definitions shall apply:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Cause" means (i) conviction for any felony involving moral turpitude
or affecting the Company or its affiliates; (ii) any refusal to carry
out a reasonable directive of the Company's Chief Executive Officer,
Board or the Optionee's direct supervisor, which involves the business
of the Company or its affiliates and was capable of being lawfully
performed; (iii) embezzlement of funds of the Company or its
affiliates; (iv) any breach of the Optionee's fiduciary duties or
duties of care of the Company or its affiliates; including without
limitation disclosure of confidential information of the Company or its
affiliates; and (v) any conduct (other than conduct in good faith)
reasonably determined by the Board to be materially detrimental to the
Company or its affiliates.
2.3 "Chairman" means the Chairman of the Committee.
2.4 "Committee" means a share option compensation committee of the Board,
designated from time to time by the resolution of the Board, which
shall consist of no fewer than two members of the Board, each of whom
is a "non-employee director" as defined in Rule 16b-3 and an "outside
director" within the meaning of Section 162(m).
2.5 "Company" means Zone4Play Inc., a Nevada company.
2.6 "Date of Grant" means the date determined by the Board as set forth in
the Option Agreement.
2.7 "Employee" means a person who is employed by the Company or any
affiliate.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.8 "Expiration Date" means the date upon which an Option shall expire, as
set forth in Section 8.2 of the Plan.
2.9 "Fair Market Value" means as of any date, the value of a Share
determined as follows:
-A1-
(i) If the Shares are listed on any established stock exchange or
a national market system, including without limitation the Tel
Aviv Stock Exchange, the NASDAQ National Market System or the
NASDAQ SmallCap Market, the Fair Market Value shall be the
last reported sale price for such Shares (or the highest
closing bid, if no sales were reported), as quoted on such
exchange or system for the last market trading day prior to
time of determination, as reported in The Wall Street Journal,
or such other source as the Board deems reliable;
(ii) If the Shares are regularly quoted by one or more recognized
securities dealers, but selling prices are not reported, the
Fair Market Value shall be the mean between the highest bid
and lowest asked prices for the Shares on the last market
trading day prior to the day of determination; or
(iii) In the absence of an established market for the Shares, the
Fair Market Value thereof shall be determined in good faith by
the Board.
(iv) Notwithstanding the foregoing, the Fair Market Value of a
Share shall never be less than par value of such Share.
2.10 "IPO" means the initial public offering of the Company's shares.
2.11 "Option" means an option to purchase one or more Shares pursuant to the
Plan.
2.12 "Optionee" means a person who receives or holds an Option under the
Plan.
2.13 "Option Agreement" means the share option agreement between the Company
and an Optionee that evidences and sets out the terms and conditions of
an Option.
2.14 "Plan" means the Company's 2004 Global Share Option Plan.
2.15 "Purchase Price" means the price for each Share subject to an Option.
2.16 "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act and any
successor rule.
2.17 "Section 162(m)" means Section 162(m) of the Internal Revenue Code of
1986, as amended from time to time, or any successor thereto, and the
regulations thereunder.
2.16 "Service Provider" means a director, consultant or adviser of the
Company or any affiliate, or any other person who is not an Employee.
2.17 "Share" means the common stock, 0.001 par value, of the Company.
2.18 "Successor Company" means any entity into which the Company is merged
to or by which the Company is acquired.
2.19 "Vested Option" means any Option, which has already vested upon one or
more of the Vesting Dates of such Option.
2.20 "Vesting Date" means, with respect to any Option, the date determined
by the Board as of which the Optionee shall be entitled to exercise
such Option, in whole or in part , as set forth in Section 9 of the
Plan.
3. ADMINISTRATION OF THE PLAN
3.1 The Board shall have the power to administer the Plan. To the extent
permitted under applicable law, the Board may delegate its powers under
the Plan, or any part thereof, to the Committee, in which case, any
reference to the Board in the Plan with respect to the rights so
delegated shall be construed as reference to the Committee.
Notwithstanding the foregoing, the Board shall automatically have
residual authority (i) if
-A2-
no Committee shall be constituted, (ii) with respect to rights not
delegated by the Board to the Committee, or (iii) if such Committee
shall cease to operate for any reason whatsoever.
3.2 The Committee, if appointed, shall select one of its members as its
Chairman and shall hold its meetings at such times and places as the
Chairman shall determine. The Committee shall keep records of its
meetings and shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
3.3 The Board shall have full power and authority to the extent required
under applicable law (and subject further to applicable laws): (i) to
designate Optionees; (ii) to determine the terms and provisions of
respective Option Agreements (which need not be identical) including,
but not limited to, the number of Shares to be covered by each Option,
provisions concerning the time or times when and the extent to which
the Options may be exercised and the nature and duration of
restrictions as to transferability or restrictions constituting
substantial risk of forfeiture; (iii) to accelerate the right of an
Optionee to exercise, in whole or in part, any previously granted
Option; (iv) to interpret the provisions and supervise the
administration of the Plan; (v) to determine the Fair Market Value of
the Shares; (vi) to designate the type of Options to be granted to an
Optionee; (vii) to determine any other matter which is necessary or
desirable for, or incidental to, the administration of the Plan.
3.4 The Board shall have the authority to grant, in its discretion, to an
Optionee, in exchange for the surrender and cancellation of an Option,
a new Option having a purchase price equal to, lower than or higher
than the Purchase Price of the original Option so surrendered and
canceled, and containing such other terms and conditions as the Board
may prescribe in accordance with the provisions of the Plan.
3.5 Subject to the Company's incorporation documents, all decisions and
selections made by the Board or, if appointed, the Committee pursuant
to the provisions of the Plan shall be made by a majority of its
members except that no member of the Board or the Committee shall vote
on, or be counted for quorum purposes, with respect to any proposed
action of the Board or the Committee relating to any Option to be
granted to that member. Any decision reduced to writing shall be
executed in accordance with the provisions of the Company's
incorporation documents, as the same may be in effect from time to
time.
3.6 The interpretation and construction by the Board of any provision of
the Plan or of any Option Agreement thereunder shall be final and
conclusive.
3.7 Subject to the Company's incorporation documents and the Company's
discretion, and conditioned upon receipt of all approvals legally
required, each member of the Board or, if appointed, the Committee
shall be indemnified and held harmless by the Company against any cost
or expense (including counsel fees) reasonably incurred by him, or any
liability (including any sum paid in settlement of a claim with the
approval of the Company) arising out of any act or omission to act in
connection with the Plan unless arising out of such member's own fraud
or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification
the member may have as a director or otherwise under the Company's
incorporation documents, any agreement, any vote of shareholders or
disinterested directors, insurance policy or otherwise.
4. DESIGNATION OF PARTICIPANTS
4.1 The persons eligible for participation in the Plan shall include
Employees and/or Service Providers. The grant of an Option hereunder
shall neither entitle the Optionee to nor disqualify him or her from,
receipt of any other grant of Options pursuant to the Plan or any other
option or share plan of the Company or any of its affiliates.
4.2 The Board's grant of an Option to an Optionee hereunder in any year
shall not require the Board to grant such Optionee an Options in any
other year. The Board shall consider such factors as it deems pertinent
in selecting an Optionee and in determining the type and amount of
Options to be granted. An Optionee may hold more than one Option
granted under the Plan.
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5. SHARES RESERVED FOR THE PLAN; OPTION AGREEMENT
5.1 The Company has reserved 5,000,000 authorized but unissued Shares for
the purposes of the Plan and for the purpose of the Company's other
share option plans when applicable, subject to adjustment as set forth
in Section 7 below. Any Shares which remain unissued and which are not
subject to outstanding Options at the termination of the Plan shall
cease to be reserved for the purpose of the Plan, but until termination
of the Plan the Company shall at all times reserve a sufficient number
of Shares to meet the requirements of the Plan. Should any Option for
any reason expire or be canceled prior to its exercise or
relinquishment in full, the Shares subject to such Option may again be
subject to new Options under the Plan or under future plans.
5.2 Each Option granted pursuant to the Plan, shall be evidenced by a
written Option Agreement between the Company and the Optionee, in such
form as the Board shall from time to time approve. Each Option
Agreement shall state, inter alia, the number of Shares to which the
Option relates, the type of Option granted, the Vesting Date or Dates,
the Purchase Price per Share and the Expiration Date.
6. PURCHASE PRICE
6.1 The Purchase Price of each Share subject to an Option shall be
determined by the Board in its sole and absolute discretion in
accordance with applicable law. Each Option Agreement will contain the
Purchase Price determined for each Optionee.
6.2 The Purchase Price shall be payable upon the exercise of an Option by
cash, check or wire transfer or in such form as the Board may accept.
7. ADJUSTMENTS
Upon the occurrence of any of the following described events, Optionee's rights
to purchase Shares under the Plan shall be adjusted as hereafter provided:
7.1 Recapitalization. The number and kind of shares subject to outstanding
Options, the purchase price or exercise price of such Options, and the
number and kind of shares available for Options subsequently granted
under the Plan shall be appropriately and equitably adjusted so as to
maintain the proportionate number of Shares without changing the
aggregate Purchase Price so to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other
change in capitalization with a similar substantive effect upon the
Plan or the Options granted under the Plan. The Board shall have the
power and sole and absolute discretion to determine the nature and
amount of the adjustment to be made in each case.
7.2 Upon the dissolution or liquidation of the Company, upon a
reorganization, merger, or consolidation in which the Company is not
the surviving corporation, upon the sale of substantially all of the
property or assets of the Company to another corporation, or if at
least 50% or more of the voting stock of the Company is sold either
through a tender offer or otherwise to a party or an affiliated group
of parties, then the Plan and the Options issued thereunder shall
terminate, unless provisions are made in connection with such
transaction for the assumption of Options theretofore granted, or for
the substitution for such Options of new options of the successor
corporation or a parent or subsidiary thereof, with appropriate
adjustment as to the number and kinds of shares and the per share
exercise prices. In the event such Options shall be terminated, all
outstanding Options shall be exercisable in full for at least 30 days
prior to such termination date.
7.3 The Optionee acknowledges that Optionee's rights to sell the Shares may
be subject to certain limitations (including a lock-up period), as will
be requested by the Company or its underwriters, and the Optionee
unconditionally agrees and accepts any such limitations.
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8. TERM AND EXERCISE OF OPTIONS
8.1 Options shall be exercised by the Optionee's by giving written notice
of to the Company or to any third party designated by the Company (the
"Representative"), in such form and method as may be determined by the
Company, which exercise shall be effective upon receipt of such notice
by the Company and/or the Representative and the payment of the
Purchase Price for the number of Shares with respect to which the
Option is being exercised, at the Company's or the Representative's
principal office. The notice shall specify the number of Shares with
respect to which the Option is being exercised. No Shares shall be
issued on exercise of an Option until payment, as provided herein,
therefor has been made.
8.2 Options, to the extent not previously exercised, shall terminate upon
the earlier of: (i) the date set forth in the Option Agreement; (ii)
the expiration of ten (10) years from the Date of Grant; or (iii) the
expiration of any extended period in any of the events set forth in
Section 8.5 below.
8.3 The Options may be exercised by the Optionee in whole at any time or in
part from time to time, to the extent that the Options have become
vested and exercisable, prior to the Expiration Date, and provided
that, subject to the provisions of Section 8.5 below, the Optionee is
an Employee or a Service Provider at all times during the period
beginning with the granting of the Option and ending upon the date of
exercise.
8.4 Subject to the provisions of Section 8.5 below, in the event of
termination of Optionee's employment or service, all Options granted to
such Optionee shall immediately expire. Unless otherwise approved by
the Committee, a notice of termination of employment or services shall
be deemed to constitute termination of employment or services.
8.5 Notwithstanding anything to the contrary hereinabove and unless
otherwise determined in the Optionee's Option Agreement, an Option may
be exercised after the date of termination of Optionee's employment or
service during an additional period of time beyond the date of such
termination, but only with respect to the number of Vested Options at
the time of such termination according to the Vesting Dates, if:
8.5.1 termination is without Cause, in which event the Vested
Options still in force and unexpired may be exercised within a
period of three (3) months after the date of such termination;
or
8.5.2 termination is the result of death or disability of the
Optionee, in which event the Vested Options still in force and
unexpired may be exercised within a period of twelve (12)
months after such date of termination; or-
8.5.3 prior to the date of such termination, the Board shall
authorize an extension of the term of all or part of the
Vested Options beyond the date of such termination for a
period not to exceed the period during which the Options by
their terms would otherwise have been exercisable.
For avoidance of any doubt, if termination of employment or service is
for Cause, any outstanding unexercised Option will immediately expire
and terminate, and the Optionee shall not have any right in respect of
such outstanding Options.
8.6 To avoid doubt, Optionees shall not have any of the rights or
privileges of shareholders of the Company, in respect of any Shares
purchasable upon the exercise of an Option, nor shall they be deemed to
be a class of shareholders or creditors of the Company for the purpose
of all applicable law, until registration of the Optionee as holder of
such Shares in the Company's register of shareholders upon exercise of
the Option in accordance with the provisions of the Plan.
9. VESTING OF OPTIONS
9.1 Subject to the provisions of the Plan, Options shall vest at the
Vesting Dates set forth in the relevant Option Agreement. However no
Option shall be exercised after the Expiration Date of such Option.
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9.2 An Option may be subject to such other terms and conditions, not
inconsistent with the Plan, on the time or times when it may be
exercised as the Committee may deem appropriate. The vesting provisions
of individual Options may vary.
10. PURCHASE FOR INVESTMENT
The Company's obligation to issue or allocate Shares upon exercise of an Option
granted under the Plan is expressly conditioned upon: (a) the Company's
completion of any registration or other qualifications of such Shares under all
applicable laws, rules and regulations or (b) representations and undertakings
by the Optionee (or his legal representative, heir or legatee, in the event of
the Optionee's death) to assure that the sale of the Shares complies with any
registration exemption requirements which the Company in its sole discretion
shall deem necessary or advisable. Such required representations and
undertakings may include representations and agreements that such Optionee (or
his legal representative, heir, or legatee): (a) is purchasing such Shares for
investment and not with any present intention of selling or otherwise disposing
thereof; and (b) agrees to have placed upon the face and reverse of any
certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the Company or
a reference thereto and (ii) that, prior to effecting any sale or other
disposition of any such Shares, the Optionee must furnish to the Company an
opinion of counsel, satisfactory to the Company, that such sale or disposition
will not violate the applicable laws, rules and regulations of the United States
or any other state having jurisdiction over the Company and the Optionee.
11. DIVIDENDS
With respect to all Shares (but excluding, for avoidance of any doubt, any
unexercised Options) allocated or issued upon the exercise of Options purchased
by the Optionee and held by the Optionee or by a trustee, as the case may be,
the Optionee shall be entitled to receive dividends in accordance with the
quantity of such Shares, subject to the provisions of the Company's
incorporation documents, as amended from time to time and subject to any
applicable taxation on distribution of dividends.
12. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS
No Option or any right with respect thereto, purchasable hereunder, whether
fully paid or not, shall be assignable, transferable, or given as collateral nor
any right with respect thereto may be given to any third party whatsoever, other
than by will or by the laws of descent and distribution or as specifically
otherwise allowed under the Plan and during the lifetime of the Optionee, each
and all of such Optionee's rights to purchase Shares hereunder shall be
exercisable only by the Optionee. Any action made in contradiction to the
aforementioned shall be null and void.
13. EFFECTIVE DATE AND DURATION OF THE PLAN
13.1 The Plan shall be effective as of the day it was adopted by the Board
and shall terminate at the end of ten (10) years from such day of
adoption.
13.2 The Company shall obtain the approval of the Company's shareholders for
the adoption of this Plan or for any amendment to this Plan, if
shareholders' approval is necessary or desirable to comply with any
applicable law including without limitation the U.S. securities law or
the securities laws of other jurisdiction applicable to Options granted
to Optionees under this Plan, or if shareholders' approval is required
by any authority or by any governmental agencies or national securities
exchanges including without limitation the US Securities and Exchange
Commission.
14. AMENDMENTS OR TERMINATION
14.1 The Board may at any time, subject to the provisions of Section 14.2
below and all applicable law, amend, alter, suspend or terminate the
Plan, provided, however, that (i) the Board may not extend the term of
the Plan specified in Section 13 and (ii) no amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise by the Optionee and the
Company, which agreement must be in writing and signed by the Optionee
and the Company. Earlier termination of
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the Plan prior to the Termination Date shall not affect the Board's
ability to exercise the powers granted to it hereunder with respect to
Options granted under the Plan prior to the date of such earlier
termination.
14.2 The Company shall obtain the approval of the Company's shareholders for
any amendment to this Plan and/or the Appendixes thereto if
shareholders' approval is required under any applicable law including
without limitation the U.S. securities law or the securities laws of
other jurisdiction applicable to Options granted to Optionees under
this Plan and/or the Appendixes thereto, or if shareholders' approval
is required by any authority or by any governmental agencies or
national securities exchanges including without limitation the U.S.
Securities and Exchange Commission.
15. GOVERNMENT REGULATIONS
15.1 The Plan, the granting and exercise of Options hereunder and the
obligation of the Company to sell and deliver Shares under such Options
shall be subject to all applicable laws, rules, regulations, approvals
and consents whether of the United States, the State of Israel, or any
other state having jurisdiction over the Company or the Optionee,
including the registration of the Shares under the United States
Securities Act 1933 or under the securities act of any applicable
jurisdiction, and to such approvals by any governmental agencies or
national securities exchanges as may be required. Nothing herein shall
be deemed to require the Company to register the Shares under the
securities law of any jurisdiction.
15.2 It is intended that the Plan be applied and administered in compliance
with Rule 16b-3 and with Section 162(m). If any provision of the Plan
would be in violation of Section 162(m) if applied as written, such
provision shall not have effect as written and shall be given effect so
as to comply with Section 162(m) as determined by the Board in its sole
and absolute discretion. The Board is authorized to amend the Plan and
the Board is authorized to make any such modifications to Option
Agreements to comply with Rule 16b-3 and Section 162(m), as they may be
amended from time to time, and to make any other such amendments or
modifications deemed necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3 and
Section 162(m). Notwithstanding the foregoing, the Board may amend the
Plan so that it (or certain of its provisions) no longer comply with
either or both of Rule 16b-3 or Section 162(m) if the Board
specifically determines that such compliance is no longer desired and
the Board may grant Options that do not comply with Rule 16b-3 and/or
Section 162(m) if the Board determines, in its sole and absolute
discretion, that it is in the interest of the Company to do so.
16. CONTINUANCE OF EMPLOYMENT
Neither the Plan nor any Option Agreement shall impose any obligation on the
Company or an affiliate to continue any Optionee in its employ or service, and
nothing in the Plan or in any Option granted pursuant hereto shall confer upon
any Optionee any right to continue in the employ or service of the Company or an
affiliate thereof or restrict the right of the Company or an affiliate thereof
to terminate such employment or service at any time.
17. GOVERNING LAW AND JURISDICTION
The Plan shall be governed by and construed and enforced in accordance with the
laws of the State of Israel as applicable to contracts made and to be performed
therein, without giving effect to the principles of conflict of laws. The
competent courts of the State of Israel shall have sole jurisdiction in any
matters pertaining to the Plan.
18. TAX CONSEQUENCES
18.1 Any tax consequences to any Optionee arising from the grant or exercise
of any Option, from the payment for Shares covered thereby or from any
other event or act (of the Company and/or its affiliates, or the
Optionee) hereunder shall be borne solely by the Optionee. The Company
and/or its affiliates shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations,
including withholding taxes at source. Furthermore, the Optionee shall
agree to indemnify the Company and/or its affiliates and hold them
harmless against and from any and all liability for any such tax or
interest or
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penalty thereon, including without limitation, liabilities relating to
the necessity to withhold, or to have withheld, any such tax from any
payment made to the Optionee.
18.2 The Company shall not be required to release any Share certificate to
an Optionee until all required payments have been fully made.
19. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangements or as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of Options otherwise then under the Plan, and such arrangements may be
either applicable generally or only in specific cases. For the avoidance of
doubt, prior grant of options to Optionees of the Company under their employment
agreements, and not in the framework of any previous option plan, shall not be
deemed an approved incentive arrangement for the purpose of this section.
20. MULTIPLE AGREEMENTS
The terms of each Option may differ from other Options granted under the Plan at
the same time, or at any other time. The Board may also grant more than one
Option to a given Optionee during the term of the Plan, either in addition to,
or in substitution for, one or more Options previously granted to that Optionee.
Except as required by Rule 16b-3 with respect to Options granted to persons
subject to Section 16 of the Exchange Act, no amendment of an Option shall be
deemed to be the grant of a new Option.
21. RULES PARTICULAR TO SPECIFIC COUNTRIES
Notwithstanding anything herein to the contrary, the terms and conditions of the
Plan may be adjusted with respect to a particular country by means of an
addendum to the Plan in the form of an appendix (the "Appendix"), and to the
extent that the terms and conditions set forth in the Appendix conflict with any
provisions of the Plan, the provisions of the Appendix shall govern. Terms and
conditions set forth in the Appendix shall apply only to Options issued to
Optionees under the jurisdiction of the specific country that is subject of the
Appendix and shall not apply to Options issued to any other Optionee. The
adoption of any such Appendix shall be subject to the approval of the Board and
if required the approval of the shareholders of the Company.
* * *
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ZONE4PLAY INC.
APPENDIX A - ISRAEL
TO THE 2004 GLOBAL SHARE OPTION PLAN
1. GENERAL
1.1. This appendix (the "Appendix") shall apply only to participants who are
residents of the state of Israel or those who are deemed to be
residents of the state of Israel for the payment of tax. The provisions
specified hereunder shall form an integral part of the 2004 Global
Share Option Plan of Zone4Play Inc. (hereinafter: the "Plan"), which
applies to the issuance of options to purchase Shares of Zone4Play Inc.
(hereinafter: the "Company"). According to the Plan, options to
purchase the Company's Shares may be issued to employees, directors,
consultants and service providers of the Company or its affiliates.
1.2 This Appendix shall comply with Amendment no. 132 of the Israeli Tax
Ordinance.
1.3. This Appendix is to be read as a continuation of the Plan and only
modifies options granted to Israeli Optionees so that they comply with
the requirements set by the Israeli law in general, and in particular
with the provisions of Section 102 (as specified herein), as may be
amended or replaced from time to time. For the avoidance of doubt, this
Appendix does not add to or modify the Plan in respect of any other
category of Optionees.
1.5. The Plan and this Appendix are complementary to each other and shall be
deemed as one. In any case of contradiction, whether explicit or
implied, between the provisions of this Appendix and the Plan, the
provisions set out in the Appendix shall prevail.
1.6. Any capitalized terms not specifically defined in this Appendix shall
be construed according to the interpretation given to it in the Plan.
2. DEFINITIONS
2.1 "Affiliate" means any "employing company" within the meaning of Section
102(a) of the Ordinance.
2.2 "Approved 102 Option" means an Option granted pursuant to Section
102(b) of the Ordinance and held in trust by a Trustee for the benefit
of the Optionee.
2.3 "Capital Gain Option (CGO)" means an Approved 102 Option elected and
designated by the Company to qualify for capital gain tax treatment in
accordance with the provisions of Section 102(b)(2) of the Ordinance.
2.4 "Controlling Shareholder" shall have the meaning ascribed to it in
Section 32(9) of the Ordinance.
2.5 "Employee" means a person who is employed by the Company or its
Affiliates, including an individual who is serving as a director or an
office holder, but excluding any Controlling Shareholder, all as
determined under Section 102 of the Ordinance.
2.6 "ITA" means the Israeli Tax Authorities.
2.7 "Non-Employee" means a consultant, adviser, service provider,
Controlling Shareholder or any other person who is not an Employee.
2.8 "Ordinary Income Option (OIO)" means an Approved 102 Option elected and
designated by the Company to qualify under the ordinary income tax
treatment in accordance with the provisions of Section 102(b)(1) of the
Ordinance.
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2.9 "102 Option" means any Option granted to Employees pursuant to Section
102 of the Ordinance.
2.10 "3(i) Option" means an Option granted pursuant to Section 3(i) of the
Ordinance to any person who is a Non- Employee.
2.11 "Ordinance" means the Israeli Income Tax Ordinance [New Version] 1961
as now in effect or as hereafter amended.
2.12 "Section 102" means section 102 of the Ordinance and any regulations,
rules, orders or procedures promulgated thereunder as now in effect or
as hereafter amended.
2.13 "Trustee" means any individual appointed by the Company to serve as a
trustee and approved by the ITA, all in accordance with the provisions
of Section 102(a) of the Ordinance.
2.14 "Unapproved 102 Option" means an Option granted pursuant to Section
102(c) of the Ordinance and not held in trust by a Trustee.
3. ISSUANCE OF OPTIONS
3.1 The persons eligible for participation in the Plan as Optionees shall
include any Employees and/or Non-Employees of the Company or of any
Affiliate; provided, however, that (i) Employees may only be granted
102 Options; and (ii) Non-Employees and/or Controlling Shareholders may
only be granted 3(i) Options.
3.2 The Company may designate Options granted to Employees pursuant to
Section 102 as Unapproved 102 Options or Approved 102 Options.
3.3 The grant of Approved 102 Options shall be made under this Appendix
adopted by the Board, and shall be conditioned upon the approval of
this Appendix by the ITA.
3.4 Approved 102 Options may either be classified as Capital Gain Options
("CGOs") or Ordinary Income Options ("OIOs").
3.5 No Approved 102 Options may be granted under this Appendix to any
eligible Employee, unless and until the Company's election of the type
of Approved 102 Options as CGO or OIO granted to Employees (the
"Election") is appropriately filed with the ITA. Such Election shall
become effective beginning the first date of grant of an Approved 102
Option under this Appendix and shall remain in effect at least until
the end of the year following the year during which the Company first
granted Approved 102 Options. The Election shall obligate the Company
to grant only the type of Approved 102 Option it has elected, and shall
apply to all Optionees who were granted Approved 102 Options during the
period indicated herein, all in accordance with the provisions of
Section 102(g) of the Ordinance. For the avoidance of doubt, such
Election shall not prevent the Company from granting Unapproved 102
Options simultaneously.
3.6 All Approved 102 Options must be held in trust by a Trustee, as
described in Section 4 below.
3.7 For the avoidance of doubt, the designation of Unapproved 102 Options
and Approved 102 Options shall be subject to the terms and conditions
set forth in Section 102.
4. TRUSTEE
4.1 Approved 102 Options which shall be granted under this Appendix and/or
any Shares allocated or issued upon exercise of such Approved 102
Options and/or other shares received subsequently following any
realization of rights, including without limitation bonus shares, shall
be allocated or issued to the Trustee and held for the benefit of the
Optionees for such period of time as required by Section 102 or any
regulations, rules or orders or procedures promulgated thereunder (the
"Holding Period"). In case the
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requirements for Approved 102 Options are not met, then the Approved
102 Options may be regarded as Unapproved 102 Options, all in
accordance with the provisions of Section 102.
4.2 Notwithstanding anything to the contrary, the Trustee shall not release
any Shares allocated or issued upon exercise of Approved 102 Options
prior to the full payment of the Optionee's tax liabilities arising
from Approved 102 Options which were granted to him and/or any Shares
allocated or issued upon exercise of such Options.
4.3 With respect to any Approved 102 Option, subject to the provisions of
Section 102 and any rules or regulation or orders or procedures
promulgated thereunder, an Optionee shall not sell or release from
trust any Share received upon the exercise of an Approved 102 Option
and/or any share received subsequently following any realization of
rights, including without limitation, bonus shares, until the lapse of
the Holding Period required under Section 102 of the Ordinance.
Notwithstanding the above, if any such sale or release occurs during
the Holding Period, the sanctions under Section 102 of the Ordinance
and under any rules or regulation or orders or procedures promulgated
thereunder shall apply to and shall be borne by such Optionee.
4.4 Upon receipt of Approved 102 Option, the Optionee will sign an
undertaking to release the Trustee from any liability in respect of any
action or decision duly taken and bona fide executed in relation with
this Appendix, or any Approved 102 Option or Share granted to him
thereunder.
5. THE OPTIONS
The terms and conditions upon which the Options shall be issued and exercised,
shall be as specified in the Option Agreement to be executed pursuant to the
Plan and to this Appendix. Each Option Agreement shall state, inter alia, the
number of Shares to which the Option relates, the type of Option granted
thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the
vesting provisions and the exercise price.
6. FAIR MARKET VALUE
Without derogating from Section 2.9 of the Plan and solely for the purpose of
determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if
at the date of grant the Company's shares are listed on any established stock
exchange or a national market system or if the Company's shares will be
registered for trading within ninety (90) days following the date of grant of
the CGOs, the fair market value of the Shares at the date of grant shall be
determined in accordance with the average value of the Company's shares on the
thirty (30) trading days preceding the date of grant or on the thirty (30)
trading days following the date of registration for trading, as the case may be.
7. EXERCISE OF OPTIONS
Options shall be exercised by the Optionee by giving a written notice to the
Company and/or to any third party designated by the Company (the
"Representative"), in such form and method as may be determined by the Company
and, when applicable, by the Trustee, in accordance with the requirements of
Section 102, which exercise shall be effective upon receipt of such notice by
the Company and/or the Representative and the payment of the exercise price for
the number of Shares with respect to which the option is being exercised, at the
Company's or the Representative's principal office. The notice shall specify the
number of Shares with respect to which the option is being exercised.
8. ASSIGNABILITY AND SALE OF OPTIONS
8.1. Notwithstanding any other provision of the Plan, no Option or any right
with respect thereto, purchasable hereunder, whether fully paid or not,
shall be assignable, transferable or given as collateral or any right
with respect to them given to any third party whatsoever, and during
the lifetime of the Optionee each and all of such Optionee's rights to
purchase Shares hereunder shall be exercisable only by the Optionee.
Any such action made directly or indirectly, for an immediate
validation or for a future one, shall be void.
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8.2 As long as Options or Shares purchased pursuant to thereto are held by
the Trustee on behalf of the Optionee, all rights of the Optionee over
the shares are personal, can not be transferred, assigned, pledged or
mortgaged, other than by will or laws of descent and distribution.
9. INTEGRATION OF SECTION 102 AND TAX ASSESSING OFFICER'S PERMIT
9.1. With regards to Approved 102 Options, the provisions of the Plan and/or
the Appendix and/or the Option Agreement shall be subject to the
provisions of Section 102 and the Tax Assessing Officer's permit, and
the said provisions and permit shall be deemed an integral part of the
Plan and of the Appendix and of the Option Agreement.
9.2. Any provision of Section 102 and/or the said permit which is necessary
in order to receive and/or to keep any tax benefit pursuant to Section
102, which is not expressly specified in the Plan or the Appendix or
the Option Agreement, shall be considered binding upon the Company and
the Optionees.
10. DIVIDEND
Subject to the Company's incorporation documents, with respect to all Shares
(but excluding, for avoidance of any doubt, any unexercised options) allocated
or issued upon the exercise of Options and held by the Optionee or by the
Trustee as the case may be, the Optionee shall be entitled to receive dividends
in accordance with the quantity of such shares, and subject to any applicable
taxation on distribution of dividends, and when applicable subject to the
provisions of Section 102 and the rules, regulations or orders promulgated
thereunder.
11. TAX CONSEQUENCES
11.1 Any tax consequences arising from the grant or exercise of any Option,
from the payment for Shares covered thereby or from any other event or
act (of the Company, and/or its Affiliates, and the Trustee or the
Optionee), hereunder, shall be borne solely by the Optionee. The
Company and/or its Affiliates, and/or the Trustee shall withhold taxes
according to the requirements under the applicable laws, rules, and
regulations, including withholding taxes at source. Furthermore, the
Optionee shall agree to indemnify the Company and/or its Affiliates
and/or the Trustee and hold them harmless against and from any and all
liability for any such tax or interest or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold,
or to have withheld, any such tax from any payment made to the
Optionee.
11.2 The Company and/or, when applicable, the Trustee shall not be required
to release any share certificate to an Optionee until all required
payments have been fully made.
11.3 With respect to an Unapproved 102 Option, if the Optionee ceases to be
employed by the Company or any Affiliate, the Optionee shall extend to
the Company and/or its Affiliate a security or guarantee for the
payment of tax due at the time of sale of Shares, all in accordance
with the provisions of Section 102 and the rules, regulation or orders
promulgated thereunder.
12. GOVERNING LAW & JURISDICTION
This Appendix shall be governed by and construed and enforced in accordance with
the laws of the State of Israel applicable to contracts made and to be performed
therein, without giving effect to the principles of conflict of laws. The
competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters
pertaining to this Appendix.
-A12-
Appendix B
ZONE 4 PLAY, INC.
AUDIT COMMITTEE CHARTER
(as amended and restated as of March 28, 2005)
A. Purpose
The purpose of the Audit Committee is to assist the Board of Directors (the
"Board") oversight of:
o the quality and integrity of the Company's financial
statements, financial reporting process and internal operating
controls;
o the Company's compliance with legal and regulatory
requirements;
o the independent auditor's qualifications and independence; and
o the performance of the Company's internal audit function and
independent auditors.
B. Structure and Membership
1. Number. The Audit Committee shall consist of at least two members of the
Board.
2. Independence. Except as otherwise permitted by the applicable rules of any
national securities exchange or any association of securities dealers on which
the Company lists any class of its capital stock (the "Listing Exchange") and
Section 301 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") (and
the applicable rules thereunder), each member of the Audit Committee shall be
"independent" as defined by such rules and Act, but such requirement shall only
apply if the Company is subject to such rules.
3. Financial Literacy. Each member of the Audit Committee shall be able to read
and understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement, at the time of his or her
appointment to the Audit Committee.
4. Chair. Unless the Board elects a Chair of the Audit Committee, the Audit
Committee shall elect a Chair by majority vote.
5. Compensation. The compensation of Audit Committee members shall be as
determined by the Board. No member of the Audit Committee may receive any
compensation from the Company other than director's fees.
6. Selection and Removal. The Board shall appoint members of the Audit Committee
and the Board may remove members of the Audit Committee from such committee,
with or without cause.
C. Authority and Responsibilities
GENERAL
The Audit Committee shall discharge its responsibilities, and shall assess the
information provided by the Company's management and the independent auditor, in
accordance with its business judgment. Management is responsible for the
preparation, presentation, and integrity of the Company's financial statements
and for the appropriateness of the accounting principles and reporting policies
that are used by the Company. The independent auditors are responsible for
auditing the Company's financial statements, for reviewing the Company's
unaudited interim financial statements, and for such other audit functions as
outlined in the independent auditor's letter of engagement.
OVERSIGHT OF INDEPENDENT AUDITORS
-B1-
1. Selection. The Audit Committee shall be solely and directly responsible for
annually appointing the independent auditors to be proposed for stockholder
approval. The Audit Committee is solely responsible for evaluating the
independent auditor and, when necessary, terminating the independent auditor.
The Audit committee may authorize the CEO to sign the engagement letter but only
after the engagement has been reviewed and approved by the Audit Committee.
2. Independence. The Audit Committee shall directly take, or recommend that the
full Board take, appropriate action to oversee the independence of the
independent auditor. In connection with this responsibility, the Audit Committee
shall annually obtain and review a formal written statement from the independent
auditor describing all relationships between the independent auditor and the
Company, including the disclosures required by Independence Standards Board
Standard No. 1. The Audit Committee shall actively engage in dialogue with the
independent auditor concerning any disclosed relationships or services that
might influence the objectivity and independence of the auditor. In addition,
the Audit Committee shall:
a. confirm the regular rotation of the lead audit partner and reviewing
partner as required by Section 203 of the Sarbanes-Oxley Act;
b. confirm that the Chief Executive Officer ("CEO"), Chief Financial
Officer ("CFO"), Controller and Chief Accounting Officer (or other
persons serving in similar capacities) were not employed by the
independent auditor, or if employed, did not participate in any
capacity in the audit of the Company, in each case, during the one-year
period preceding the date of initiation of the audit, as required by
Section 206 of the Sarbanes-Oxley Act; and
c. annually consider whether, in order to assure continuing auditor
independence, there should be regular rotation of the independent audit
firm.
3. Compensation. The Audit Committee shall have sole and direct responsibility
for setting the compensation of the independent auditor. The Audit Committee
shall inform the Board of any significant auditor fees to be incurred beyond the
fees from the ordinary audit and tax services. The Audit Committee is empowered,
without further action by the Board, to cause the Company to pay the
compensation of the independent auditor established by the Audit Committee.
4. Engagement and Pre-approval of Services. The Audit Committee is responsible
for the independent auditor engagement and shall pre-approve all audit services
(which may entail providing comfort letters in connection with securities
underwritings), and non-audit services (other than de minimus non-audit services
as defined by the Sarbanes-Oxley Act and the applicable rules thereunder) to be
provided to the Company by the independent auditor. The Audit Committee shall
cause the Company to disclose in its SEC periodic reports the approval by the
Audit Committee of any non-audit services performed by the independent auditor.
5. Prohibited Services. The Audit Committee shall oversee the Company's
compliance with Section 201 of the Sarbanes-Oxley Act and shall not permit the
engagement of the independent auditor for prohibited non-audit services,
thereunder, including the following:
a. bookkeeping or other services related to the accounting records or
financial statements of the audit client;
b. financial information systems design and implementation;
c. appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
d. actuarial services;
e. internal audit outsourcing services;
f. functions or human resources;
g. broker or dealer, investment adviser or investment banking services;
h. legal services and expert services unrelated to the audit; and
i. any other service that the Board determines, by regulation, is
impermissible.
-B2-
6. Direct Report. The independent auditor shall report directly to the Audit
Committee and the Audit Committee shall have sole and direct responsibility for
overseeing the independent auditor, including resolution of disagreements
between Company management and the independent auditor regarding financial
reporting. In connection with its oversight role:
a. The Audit Committee shall, from time to time, as appropriate, obtain
and review the reports required to be made by the independent auditor pursuant
to paragraph (k) of Section 10A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), regarding: (i) critical accounting policies and
practices; (ii) alternative treatments of financial information within generally
accepted accounting principles that have been discussed with Company management,
ramifications of the use of such alternative disclosures and treatments, and the
treatment preferred by the independent auditor; and (iii) other material written
communications between the independent auditor and Company management.
b. The Audit Committee shall also review with the independent auditor:
(i) planning and staffing of the audit; (ii) the letter of management
representations given to the outside auditor and inquire of the auditor whether
any difficulties were encountered in obtaining the letter; (iii) audit problems
or difficulties the independent auditor encountered in the course of the audit
work and management's response, including any restrictions on the scope of the
independent auditor's activities or on access to requested information and any
significant disagreements with management; (iv) major issues as to the adequacy
of the Company's internal controls and any special audit steps adopted in light
of material control deficiencies; (v) analyses prepared by management and/or the
independent auditor setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial statements,
including analyses of the effects of alternative GAAP methods on the financial
statements; and (vi) the effect of regulatory and accounting initiatives on the
financial statements of the Company.
c. The Audit Committee will review with the independent auditors, from
time to time, as and when appropriate: (i) significant risks and/or
uncertainties with respect to the quality, accuracy or fairness of presentation
of the Company's financial statements; (ii) recently disclosed problems with
respect to the quality, accuracy or fairness of presentation of the financial
statements of companies similarly situated to the Company and recommended
actions which might be taken to prevent or mitigate the risk of problems at the
Company arising from such matters; (iii) any accounting adjustments that were
noted or proposed by the auditor but were "passed" (as immaterial or otherwise);
(iv) any communications between the audit team and the audit firm's national
office respecting auditing or accounting issues presented by the engagement; (v)
accounting for unusual transactions; (vi) adjustments arising from audits that
could have a significant impact on the Company's financial reporting process;
and (vii) any recent SEC comments on the Company's SEC reports, including, in
particular, any unresolved or future-compliance comments.
d. The Audit Committee shall inquire of the independent auditor
concerning the quality, not just the acceptability, of the Company's accounting
determinations, particularly with respect to revenue, earnings, significant
items subject to estimate, and other judgmental areas. The Audit Committee shall
also ask the independent auditor whether management's choices of accounting
principles and policies are, as a whole, in accordance with GAAP and whether
there are other acceptable alternatives to the principles and policies applied
by management.
e. The Audit Committee shall promptly notify the Board of any
significant issues brought to the attention of the Audit Committee by the
independent auditor.
f. The Audit Committee shall inform the independent auditor, Company
management (including the CFO, and Controller) and the head of internal auditing
that they should promptly contact the Audit Committee or its Chair about any
significant issue or disagreement concerning the Company's accounting practices
or financial statements that is not resolved to their satisfaction. If the Audit
Committee Chairperson is contacted about such an issue, he or she shall; (i)
confer with the independent auditor about the issue; (ii) notify the other
members of the Audit Committee; and (iii) decide whether it is necessary for the
Audit Committee to meet before its next scheduled meeting.
-B3-
g. The Audit Committee shall obtain and review a copy of the most
recent independent auditor inspection report as issued by the Public Company
Accounting Oversight Board pursuant to Section 104 of the Sarbanes-Oxley Act.
h. The Audit Committee shall obtain from the independent auditor
assurance that, if the independent auditor detects or becomes aware of any
illegal act, the independent auditor will immediately and adequately inform the
Audit Committee directly and provide the Audit Committee with a written report
detailing the such illegal acts detected and any specific conclusions or
recommendations for change with respect to such illegal acts.
i. The Audit Committee shall discuss with management and the
independent auditor any correspondence with regulators or governmental agencies
and any published reports that raise material issues regarding the Company's
financial statements or accounting policies.
REVIEW OF AUDITED FINANCIAL STATEMENTS
7. Discussion of Audited Financial Statements. The Audit Committee shall review
and discuss with the Company's management and independent auditor the Company's
audited financial statements, including the matters about which Statement on
Auditing Standards No. 61, "Communications with Audit Committees" requires
discussion.
8. Recommendation to Board Regarding Financial Statements. The Audit Committee
shall consider whether it will recommend to the Board that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K or
Form 10-KSB, as applicable.
9. Audit Committee Report. The Audit Committee shall prepare for inclusion where
necessary in a proxy or information statement of the Company relating to an
annual meeting of security holders at which directors are to be elected (or
special meeting or written consents in lieu of such meeting), the report
described in Item 306 of Regulation S-B or S-K, as applicable. The Audit
Committee shall therein report to the stockholders, in such proxy or information
statement, whether it has: (i) reviewed and discussed the audited financial
statements with management; (ii) discussed with the independent auditors the
matters required to be discussed under Statement on Auditing Standards No. 61,
as may be modified or supplemented; (iii) received written disclosures from the
outside auditor regarding independence as required by Independence Standards
Board Standard No. 1, as may be modified and supplemented, and has discussed
with the independent auditors the auditor's independence; and (iv) based on the
discussions referred to in Section 9(i)-(iii) above, recommended to the Board
that the audited financial statements be included in the Company's Annual Report
on Form 10-K or Form 10-KSB, as applicable, for the last fiscal year for filing
with the Securities and Exchange Commission.
REVIEW OF OTHER FINANCIAL DISCLOSURES
10. Independent Auditor Review of Interim Financial Statements. The Audit
Committee shall direct the independent auditor to perform all reviews of interim
financial information prior to disclosure by the Company of such information and
to discuss promptly with the Audit Committee and the CFO any matters identified
in connection with the auditor's review of interim financial information which
are required to be discussed by Statement on Auditing Standards Nos. 61, 71 and
90. The Audit Committee shall direct management to seek Audit Committee consent
in the event that the Company proposes to disclose interim financial information
before completion of the independent auditor's review of interim financial
information.
11. Earnings Release and Other Financial Information. The Audit Committee shall
review and discuss generally Company policy as to the type of information to be
disclosed in the Company's earnings press releases and other presentations
(including any use of "pro forma" or "adjusted" non-GAAP, information), as well
as in financial information and earnings guidance provided to analysts, rating
agencies and others to facilitate fair accurate and transparent financial
disclosure and compliance with applicable statutory and regulatory requirements.
In addition, the Audit Committee shall review earnings releases before their
issuance.
12. Quarterly Financial Statements. The Audit Committee shall discuss the
results of the SAS 71 "Interim Financial Information" review performed by the
independent auditor. The Audit Committee shall also discuss with
-B4-
the Company's management and independent auditor the Company's quarterly
financial statements, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations". This
discussion and review shall take place before the filing of the Form 10-Q or
10-QSB, as applicable.
13. Tax Reporting. The Audit Committee shall inquire as to: (i) the status of
the Company's tax returns; (ii) whether there are any significant items that
have been or might be disputed by the respective jurisdictional taxing
authorities; and (iii) inquire about the status of related tax reserves.
CONTROLS AND PROCEDURES
14. Oversight. The Audit Committee shall coordinate the Board of Director's
oversight of the Company's internal accounting controls, the Company's
disclosure controls and procedures and the Company's code of conduct. The Audit
Committee shall therefore:
a. Receive and review the reports of the CEO and CFO required by
Section 302 of the Sarbanes-Oxley Act (and the applicable rules there
under) and Rule 13a-14 of the Exchange Act. Section 302 of the
Sarbanes-Oxley Act requires, among other things, that the CEO and CFO
to certify that they have disclosed to the Audit Committee: (i) all
significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and (ii) any fraud, whether material or not material, that involves
management or other employees who have a significant role in the
Company's internal controls.
b. Receive and review the reports on internal accounting controls
contemplated by Sections 103 and 404 of the Sarbanes-Oxley Act.
c. Obtain reports from management and the Company's senior internal
auditing executive, that the Company is in conformity with applicable
legal requirements and the Company's code of conduct. To the extent
applicable, inquiries shall be made of the independent auditor
regarding the independent auditor's awareness, if any, of violations of
applicable legal requirements or violations of the Company's code of
conduct.
d. Review reports and disclosures of insider and affiliated party
transactions.
e. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations
and with the Company's code of conduct.
f. Discuss with the Company's General Counsel, if applicable, and,
where appropriate, outside counsel, legal matters, regulatory
proceedings, and current and pending litigation that may have a
material impact on the Company's financial statements, compliance
policies, or corporate governance.
g. Review in-house policies and procedures for regular review of
officers' expenses and perquisites, including use of corporate assets.
h. Review any unusual accounting issues that the Company intends to
discuss with the SEC's accounting staff prior to when management
contacts the SEC so as to provide the SEC with the Audit Committee's
position on the Company's proposed accounting treatment as directed in
the SEC's "Guidance for Consulting with the Office of the Chief
Accountant".
15. Procedures for Complaints. The Audit Committee shall establish procedures
for:
a. the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters;
b. the confidential, anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing matters; and
c. periodically reviewing the complaint procedures to confirm that they
can operate effectively.
-B5-
16. Related-Party Transactions. The Audit Committee shall review all related
party transactions on an ongoing basis and all such transactions must be
approved by the Audit Committee.
17. Quality-Control Report. At least annually, the Audit Committee shall obtain
and review a report by the independent auditor describing:
a. the firm's internal quality control procedures; and
b. any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues.
18. Risk Management. The Audit Committee shall discuss the Company's policies
with respect to risk assessment and risk management, including guidelines and
policies to govern the process by which the Company's exposure to risk is
handled, the Company's major financial risk exposures and the steps management
has taken to monitor and control such exposures.
19. Additional Powers. The Audit Committee shall have the authority to utilize
additional outside accountants, attorneys, or other advisors to assist the Audit
Committee in special circumstances. The Audit Committee shall have such other
duties as may be delegated from time to time by the Board.
D. Procedures and Administration
1. Meetings. The Audit Committee shall meet as necessary to discharge its
responsibilities but it shall meet at least quarterly, prior to the filing of
the interim quarterly reports and annual report. The Audit Committee shall meet
quarterly, in private sessions with the independent auditors to discuss
pertinent matters, including the quality of management and financial personnel,
and any management restrictions on the scope of the audit examination, or other
matters that should be discussed with the Audit Committee. The Audit Committee,
at least annually, shall meet separately with (i) Company management and (ii) as
applicable, the Company personnel comprising the internal audit. The Audit
Committee shall keep minutes of its meetings as it shall deem appropriate to
accurately describe the issues considered by the Audit Committee and the Audit
Committee's final due care determination of how to proceed.
2 Subcommittees. The Audit Committee may form and delegate authority to one or
more subcommittees (including a subcommittee consisting of a single member), as
it deems appropriate from time to time under the circumstances. Any decision of
a subcommittee to pre-approve audit or non-audit services shall be presented to
the full Audit Committee at its next scheduled meeting.
3. Reports to Board. The Audit Committee shall report regularly to the Board and
review with the Board any issues that arise with respect to the quality or
integrity of the Company's financial statements, the Company's compliance with
legal or regulatory requirements, the performance and independence of the
Company's independent auditors or the performance of the internal audit
function.
4. Independent Advisors. The Audit Committee shall have the authority to engage
and determine funding for such independent legal, accounting, and other advisors
as it deems necessary or appropriate to carry out its responsibilities. Such
independent advisors may be the regular advisors to the Company. The Audit
Committee is empowered, without further action by the Board, to cause the
Company to pay the compensation of such advisors as established by the Audit
Committee.
5. Investigations. The Audit Committee shall have the authority to conduct or
authorize investigations into any matters within the scope of its
responsibilities as it shall deem appropriate, including the authority to
request any officer, employee or advisor of the Company to meet with the Audit
Committee or any advisors engaged by the Audit Committee.
-B6-
6. Funding. The Audit Committee is empowered, without further action by the
Board, to cause the Company to pay the ordinary administrative expenses of the
Audit Committee that are necessary or appropriate in carrying out its duties.
7. Annual Self-Evaluation. At least annually, the Audit Committee shall evaluate
its own performance and composition.
8. Charter. The Audit Committee shall provide to management and the outside
auditors a copy of the Audit Committee charter to communicate the intended
responsibilities and relationships between the Company's outside auditors,
management, the Audit Committee and the Board as representatives of the
stockholders. At least annually, the Audit Committee shall review and reassess
the adequacy of this Charter and recommend any proposed changes to the Board for
approval.
-B7-
ZONE 4 PLAY, INC.
PROXY CARD
THE FOLLOWING PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF ZONE 4 PLAY, INC.
The undersigned stockholder of Zone 4 Play, Inc. (the "Company") hereby
appoints Shimon Citron and Uriel Levy as proxies and attorneys of the
undersigned, for and in the name(s) of the undersigned, to attend the annual
meeting of stockholders of the Company (the "Stockholders Meeting") to be held
at the Company's offices at Israel R&D Center, Kyriat Atidim, Bldg. 2, Tel Aviv
61580, Israel on Monday, June 20, 2005 at 10:00 a.m., and any adjournment
thereof, to cast on behalf of the undersigned all the votes that the undersigned
is entitled to cast at such meeting and otherwise to represent the undersigned
at the Stockholders Meeting with all powers possessed by the undersigned if
personally present at the Stockholders Meeting, including, without limitation,
to vote and act in accordance with the instructions set forth below. The
undersigned hereby acknowledges receipt of the Notice of the Stockholders
Meeting and revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed below. If this Proxy Card is executed but no instruction is given,
the votes entitled to be cast by the undersigned will be cast "FOR" each
proposal.
PLEASE VOTE, DATE, AND SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED BELOW.
1. Proposal 1 - Election of Directors: To elect the following nominees to
the Board to serve as directors of the Company until the next annual
meeting of the stockholders and until his successor is elected and
qualified or his earlier resignation or removal:
Shimon Citron
Shlomo Rothman
Oded Zucker
For |_| Withhold |_|
|_| For all nominees except the following:_____________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
2. Proposal 2 - To approve the Zone 4 Play 2004 Global Share Option Plan.
For |_| Against |_| Abstain |_|
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING |_|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT |_| __________________________
__________________________
__________________________
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
Note: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by an authorized officer or if a partnership, please sign in full
partnership name by an authorized person.
Signature: ____________________________________________ Date: _________________
Print Name of Stockholder: ____________________________
Print Name of Signer: ________________________________
Print Title of Signer: _______________________________
Number Common Shares: ________________________________
Signature: ____________________________________________ Date: _________________
Print Name of Stockholder: ____________________________
Print Name of Signer: ________________________________
Print Title of Signer: _______________________________
Number Common Shares: ________________________________