PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED APRIL 14, 2000
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
ESC MEDICAL SYSTEMS LTD.
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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) Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED APRIL 14, 2000
[ESC LETTERHEAD]
April __, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 AnnualGeneral Meeting of
Shareholders of ESC MEDICAL SYSTEMS LTD.(the "Company") on May 30, 2000,
beginning at 10:00 a.m., local time, at the Intercontinental Hotel,
__________________. We look forward to greeting as many of you as can
attend the Annual General Meeting.
Holders of the Company's Ordinary Shares are being asked to vote on the
matters listed in the enclosed Notice of Annual General Meeting of
Shareholders. Your Board of Directors recommends a vote "FOR" all of the
matters set forth in the notice.
Whether or not you plan to attend the Annual General Meeting, it is
important that your Ordinary Shares be represented and voted at the Annual
General Meeting. Accordingly, after reading the enclosed Notice of Annual
General Meeting and accompanying Proxy Statement, please sign, date and
mail the enclosed proxy card in the envelope provided.
Very truly yours,
Prof. Jacob A. Frenkel
Chairman of the Board of Directors
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED APRIL 14, 2000
ESC MEDICAL SYSTEMS LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders
of ESC Medical Systems Ltd.:
The Annual General Meeting of Shareholders of ESC Medical Systems Ltd. (the
"Company") will be held at the Intercontinental Hotel,_________________, on
May 30, 2000 at 10:00 a.m., local time, for the following purposes:
1. To elect the directors of the Company to serve until the next Annual
General Meeting ("Proposal 1").
2. To approve the exemption, insurance and indemnification arrangements
of the Company's directors ("Proposal 2").
3. To approve the reimbursement of costs and expenses of certain
Shareholders in connection with the proxy contest held at the Company's
June 23, 1999 combined Extraordinary and Annual General Meeting of
Shareholders ("Proposal 3").
4. To approve the indemnification of current and former directors of the
Company with respect to certain complaints filed with the United States
District Court and in connection with the filing of Schedule 13D by
certain Shareholders prior to the Company's June 23, 1999 combined
Extraordinary and Annual General Meeting of Shareholders ("Proposal
4").
5. To approve the adoption of the 1999 Share Option Plan and the grant of
share options thereunder ("Proposal 5").
6. To appoint the firm of Brightman, Almagor & Co., a member firm of Deloitte,
Touche, Tohmatsu, as the Company's independent accountants for fiscal
year 2000 ("Proposal 6").
7. To approve an amendment to the Company's Memorandum of Association that
will change the voting required for adoption of amendments to the
Company's Memorandum of Association from the affirmative vote of the
holders of 75% of the Ordinary Shares present and voting at a general
meeting of shareholders to the affirmative vote of the holders of a
majority of the Ordinary Shares present and voting at a general meeting
of shareholders ("Proposal 7").
8. To amend the Company's Articles of Association by adopting the Amended
and Restated Articles of Association ("Proposal 8").
9. To approve the compensation of the Company's directors for (i) services
rendered to the Board of Directors during the term which commenced
following the Company's June 23, 1999 combined Extraordinary and Annual
General Meeting of Shareholders and (ii) serving on the Board of
Directors during the new term, which shall commence with the first duly
convened meeting of the Board of Directors elected at the Annual
Meeting. ("Proposal 9").
10. To act upon such other matters as may properly come before the meeting or
any adjournment or adjournments thereof.
Only Shareholders of record at the close of business on May 9, 2000 are
entitled to notice of, and to vote at, the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL GENERAL MEETING AND REGARDLESS
OF THE NUMBER OF ORDINARY SHARES YOU OWN, YOU ARE REQUESTED TO FILL IN,
DATE AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY, AND TO MAIL IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
If you are present at the Annual General Meeting and desire to vote in
person, your proxy will not be used if you revoke your appointment of proxy
so that you may vote your shares personally.
By Order of the Board of Directors,
Hadar Solomon, Adv.
Secretary, Vice President and General Counsel
Yokneam, Israel
April ___ , 2000
ESC MEDICAL SYSTEMS LTD.
YOKNEAM INDUSTRIAL PARK
YOKNEAM, ISRAEL 20692
PROXY STATEMENT
TABLE OF CONTENTS
PAGE NO.
o Summary of Information Required in the Proxy Statement
o Preliminary Materials
o Notice of Annual Meeting of Shareholders
o Proxy Statement - Annual General Meeting of Shareholders
o The Proxy
o Shareholders Entitled to Vote
o Quorum: Required Vote
o Proxy Solicitation
o Shareholders Duties
o Proposal 1 - Election of Directors
----------
o Nominees
o Proposal 2 - Ratification and Approval of Insurance and Indemnification
---------- Arrangements to Directors
o Background
o Directors' and Officers' Insurance
o Indemnification of Directors and Officers under the Companies Law
o Exemption Provisions under the Companies Law
o Indemnification Agreement
o Proposal 3 - Approval of Reimbursement of Costs and Expenses of certain
---------- Shareholders
o Proposal 4 - Indemnification of Certain Persons Regarding Litigation
----------
o Background
o Proposal 5 - Approval of the 1999 Share Option Plan
----------
o Background
o General Terms and Conditions of the Plan
o Terms of the Options
o Certain Israeli tax Consequences
o Certain U.S. Federal Tax Consequences
o Incentive Stock Options
o Non Qualified Options
o Proposal 6 - Appointment of Auditors
----------
o Proposal 7 - Amendment of the Company's Memorandum of Association
----------
o Background
o Required Vote
o Proposal 8 - Adoption of Amended Restated Articles of Association
----------
o Background
o General Amendments
o Amendments of Articles
o Company's Purpose
o Repurchase of Shares
o Record Date for Notices of General Meeting and Other Action
o Annual General Meeting
o Notice of General Meetings; Omission to Give Notice
o Quorum of an adjourned General Meetings
o Adoption of Resolutions at General Meetings
o Voting Power
o Alternate Directors
o Meetings of the Board of Directors
o Chairman of the Board of Directors
o Chief Executive Officers
o Distribution of Dividend
o Exemption, Indemnity and Insurance
o Mergers
o Proposal 9 - Approval of Directors' Compensation for 2000
----------
o Information Concerning the Board of Directors and Board Committees
o The Board of Directors
o Committees of the Board of Directors
o Executive Committee
o Audit Committee
o Internal Auditor
o Compensation Committee
o Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
o Approval of Specified Related Transactions Under Israeli Law
o Fiduciary Duties of Office Holders
o Disclosure of Personal Interests of an Office Holder
o Disclosure of Personal Interests of Controlling Shareholders
o Executive Officers of the Registrant
o Security Ownership of Certain Beneficial Owners and Management
o Section 16(a) Beneficial Ownership Reporting Compliance
o Executive Compensation
o Option/SAR Grants in Last Fiscal Year
o Fiscal Year-End Option Holdings
o Employment Agreements, Termination Provisions and Change in
Control Arrangements
o Compensation Committee Report
o General Compensation Policy
o Factors
o Base Salary
o Incentive Compensation
o Stock Options
o Performance Graph
o Certain Relationship and Related Transactions
o Option Grants
o Proposals of Shareholders
o Other Business
o Additional Information
o Annex A: Form of Indemnification Agreement
o Annex B: 1999 Share Option Plan
o Annex C: Restated Articles of Association
ESC MEDICAL SYSTEMS LTD.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to holders of Ordinary Shares, par
value NIS 0.10 ("Ordinary Shares"), of ESC Medical Systems Ltd., an Israeli
corporation ("ESC" or the "Company"), in connection with the solicitation
of proxies by the Board of Directors of the Company for use at the Annual
General Meeting of Shareholders of the Company to be held on May 30, 2000,
at 10:00 a.m., local time, at the Intercontinental Hotel,
_________________, and at any adjournment or adjournments thereof (the
"Annual Meeting"). This Proxy Statement and the accompanying form of proxy
are first being mailed to Shareholders on or about April __, 2000. On April
__, 2000, there were Ordinary Shares outstanding, with each share entitled
to one vote per share on each matter submitted to Shareholders for
consideration at the Annual Meeting.
The Proxy
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Yacha Sutton, Chief Executive Officer of the Company, and Hadar Solomon,
Vice President, General Counsel and Secretary of the Company, have been
nominated as proxies by the Board of Directors of the Company with respect
to the matters to be voted upon at the Annual Meeting.
All Ordinary Shares represented by properly executed proxies received prior
to or at the Annual Meeting and not revoked prior to the Annual Meeting in
accordance with the procedure therefor will be voted and will be voted as
specified in the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted in accordance with the
recommendations of the Board of Directors contained in this Proxy Statement
and, in the discretion of the persons named in the proxy, on such other
matters as may properly come before the Annual Meeting.
A shareholder may revoke his, her or its proxy by delivering to the
Company, subsequent to receipt of the Company of his, her, or its proxy a
written notice canceling the proxy or appointing a different proxy or by
attending the Annual Meeting, and upon receipt by the Chairman of the
Annual Meeting of written notice from such shareholder of the revocation of
his, her or its proxy and by voting in person at the Annual Meeting.
Shareholders Entitled to Vote
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On February 1, 2000, the Israeli Companies Law, 1999-5759 (the "Companies
Law") became effective and superseded most of the provisions of the Israeli
Companies Ordinance (New Version), 5743-1983 (the "Ordinance"), except for
certain provisions which relate to bankruptcy, dissolution and liquidation
of companies. Pursuant to the Companies Law, each shareholder of record in
an Israeli public company, including a company whose shares are traded at
an exchange located outside of Israel, is entitled to receive prior notice
of a General Meeting which notice must be mailed at least twenty one days
before the date of the meeting unless the company's articles of association
provide that such notice need not be sent. Since the Company's Articles of
Association provide for a prior notice of General Meetings of Shareholders,
Shareholders of record owning Ordinary Shares at the close of business on
May 9, 2000 (the "Record Date") are entitled to notice of, and to vote at,
the Annual Meeting.
Quorum; Required Vote
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The Company's Articles of Association provide that the presence in person
or by proxy of two or more persons holding at least thirty three and
one-third percent (33 1/3%) of the issued and outstanding Ordinary Shares
of the Company is necessary to constitute a quorum and is necessary to hold
the Annual Meeting. A meeting adjourned for lack of a quorum generally is
adjourned to the same day in the following week at the same time and place
or any time and place as the Chairman of the meeting may determine with the
consent of the holders of a majority of the voting power represented at the
meeting and voting on the question of adjournment. At such reconvened
meeting, the required quorum consists of any two or more Shareholders
present in person or by proxy.
The affirmative vote of a majority of the Ordinary Shares present at the
Annual Meeting is required to elect the nominees for directors with respect
to the election of directors (Proposal 1), to approve the exemption,
indemnification and insurance arrangements of the Company's directors
(Proposal 2), to approve the reimbursement of costs and expenses of certain
Shareholders (Proposal 3), to approve the indemnification of current and
former directors of the Company (Proposal 4), to approve the adoption of
the 1999 Share Option Plan (Proposal 5), to approve the appointment of
Brightman Almagor & Co., a member firm of Deloitte, Touche, Tohmatsu
("Brightman"), as the Company's independent auditors for fiscal year 2000
(Proposal 6) and to approve the compensation of the Company's directors
(Proposal 9). The affirmative vote of at least 75% of the Ordinary Shares
present and voting at the Annual Meeting is required to approve the
amendment of the Company's Memorandum of Association (Proposal 7) and to
approve the adoption of the Company's Amended and Restated Articles of
Association (Proposal 8).
On each matter submitted to Shareholders for consideration at the Annual
Meeting, only Ordinary Shares that are voted in favor of such matter will
be counted towards approval of such matter. Ordinary Shares present at the
Annual Meeting that are not voted for a particular matter or Ordinary
Shares present by proxy where the shareholder properly withheld authority
to vote for such matter (including broker non-votes) will not be counted
toward approval of such matter. Shareholders will not be allowed to
cumulate their votes in the election of directors.
A broker non-vote occurs when a nominee holding Ordinary Shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that proposal and
has not received instructions from the beneficial owner. On all matters
considered at the Annual Meeting, abstentions and broker non-votes will be
treated as neither a vote "for" nor "against" the matter, although they
will be counted as present in determining if a quorum is present.
The Shareholders of the Company are not entitled to rights of appraisal or
similar dissenters rights with respect to any matter to be acted upon at
the Annual meeting.
Proxy Solicitation
- ------------------
The Company will bear the costs of solicitation of proxies for the Annual
Meeting. In addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies from Shareholders by
telephone, telegram, personal interview or otherwise. Such directors,
officers and employees, will not receive additional compensation, but may
be reimbursed for out-of-pocket expenses in connection with such
solicitation. Brokers, nominees, fiduciaries and other custodians have been
requested to forward soliciting material to the beneficial owners of
Ordinary Shares held of record by them, and such custodians will be
reimbursed for their reasonable expenses. The Company has retained
MacKenzie Partners, Inc., a proxy solicitation firm, to assist in the
solicitation of proxies for a fee of approximately $_______, plus
reimbursement of certain out-of-pocket expenses.
Shareholders Duties
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Under the Companies Law, a shareholder of a company has a general duty to
act in good faith towards a company and towards the company's other
shareholders and to refrain from abusing his power in the company. This
duty extends also to voting in the general meeting of Shareholders on the
following matters: any amendment to the articles of association; an
increase of the company's authorized share capital; a merger; and approval
of some of the acts and transactions which require shareholder approval
under the Companies Law. In addition, a shareholder has the general duty to
refrain from depriving other Shareholders of their rights. Furthermore, any
controlling shareholder, any shareholder who knows that it possesses the
power to determine the outcome of a shareholder vote and any shareholder
that, under the provisions of the articles of association, has the power to
appoint an office holder in the company, is under a duty to act in fairness
towards the company. The Companies Law does not describe the substance of
these duties.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members. Each Director
serves until the Annual General Meeting next following the Annual General
Meeting or General Meeting at which such Director was elected, or until
his/her earlier removal pursuant to a resolution of the holders of a
majority of the voting power represented at a General Meeting in person or
by proxy. The aforesaid majority shall be entitled to elect Directors in
place of Directors so removed or to fill any vacancy, however created, on
the Board.
The Board of Directors of the Company may at any time and from time to time
appoint any other person as a Director, whether to fill a vacancy on the
Board or as an additional member to serve along with the existing
Directors. Any Director so appointed shall hold office until the first
Annual General Meeting convened after such appointment and may be
re-elected by the Shareholders.
The Board of Directors has nominated for election as directors the
following persons: Prof. Jacob A. Frenkel, Mr. Aharon Dovrat, Mr. Philip
Friedman, Mr. Thomas G. Hardy, Prof. Darrell S. Rigel, M.D., Mr. S.A.
Spencer, Mr. Mark H. Tabak and Prof. Zehev Tadmor, to serve as directors of
the Company until the next Annual General Meeting of Shareholders. All the
above-named nominees are currently members of the Board of Directors.
Each of the above-named nominees has consented to being named in this Proxy
Statement and will serve as a director if elected. If at the time of the
Annual Meeting, however, any of the above-named nominees should be unable
or decline to serve, the persons named as proxies herein will vote for such
substitute nominee or nominees as the Board of Directors recommends, or
will vote to allow the vacancy created thereby to remain open until filled
by the Board of Directors, as the Board of Directors recommends.
The following table lists the name, age and positions with the Company of
each of the nominees and the month and year in which each director was
first elected.
Nominee Business Experience
- ------- -------------------
Professor Jacob A. Frenkel Professor Jacob A. Frenkel, age 56, joined the
Board of Directors of the Company on January
25, 2000, and was elected Chairman of the
Board. Professor Frenkel serves at Merrill
Lynch in the dual capacity of Chairman of the
Sovereign Advisory Group and Chairman of the
Global Financial Institutions Group.
Previously, Prof. Frenkel served as Governor
of the Bank of Israel from 1991 through 2000.
During his tenure as Governor, he led the
liberalization of the Israeli financial
system, removed foreign exchange controls, and
reduced Israel's inflation rate to a level
prevailing in the major industrial countries.
Prior to becoming the Governor of the Bank of
Israel, he served from 1987 through 1991 as
the Economic Counselor and Director of
Research at the International Monetary Fund.
Prof. Frenkel also held the David Rockefeller
Chair of International Economics at the
University of Chicago where he served on the
faculty from 1973 to 1987.
Aharon Dovrat Mr. Dovrat, age 68, joined the board of
directors of the Company on June 23, 1999. Mr.
Dovrat is the founder and chairman of Dovrat &
Company, Ltd., a privately-held investment
company, and chairman of Isal, Ltd., a
publicly-traded investment company. Between
1991 and December 1998, Mr. Dovrat served as
chairman of Dovrat, Shrem & Company, Ltd., a
company publicly traded on the Tel Aviv Stock
Exchange that divides its operations into the
areas of investment banking and direct
investment, fund management, underwriting,
securities and brokerage services, real estate
and industry. Between 1965 and 1991, Mr.
Dovrat served as president and chief executive
officer of Clal (Israel) Ltd., a holding
company which by 1991, had become Israel's
largest independent conglomerate, with capital
of over $400 million and aggregate annual
sales in excess of $2.5 billion. Mr. Dovrat
serves as a member of the board of directors
of Technomatix Technologies Ltd., a software
company and Delta Galil Ltd., a textile
company.
Philip Friedman Mr. Friedman, age 50, joined the board of
directors of the Company on June 23, 1999. Mr.
Friedman is the founder, president and chief
executive officer of Computer Generated
Solutions, Inc., a privately- held company
founded by Mr. Friedman in 1984, that
specializes in providing comprehensive
computer technology and business solutions to
companies across the globe in a wide variety
of industries.
Thomas. G. Hardy Mr. Hardy, age 54, has been a director of the
Company since February 1998. Since December
1993, Mr. Hardy has served as President and
Chief Operating Officer of Trans-Resources,
Inc. Mr. Hardy was Executive Vice President of
Trans- Resources, Inc. from 1987 to 1993 and a
director and member of its Financial Advisory
Committee since October 1992. Mr. Hardy was a
director of Laser Industries Ltd. from January
1990 until February 1998, when it merged with
the Company. Mr. Hardy has also been a
director of Haifa Chemicals Ltd., a wholly-
owned subsidiary of Trans-Resources, Inc.,
since 1986.
Professor Darrell S. Rigel Professor Rigel, age 49, joined the board of
directors of the Company on June 23, 1999. He
has been a faculty member at New York
University Medical School ("NYU") since 1979,
and is currently a physician and Clinical
Professor of Dermatology at NYU, and is also
an Adjunct Professor of Dermatology at Mt.
Sinai School of Medicine in New York City. Dr.
Rigel is the immediate past-president of the
American Academy of Dermatology. In 1996, Dr.
Rigel founded Interactive Horizons, Inc., a
privately-held company in the industry of
interactive computer systems for which Dr.
Rigel serves as its president. Dr. Rigel
graduated from Massachusetts Institute of
Technology with an SB and an SM in Management
Information Sciences.
Sash A. Spencer Mr. Spencer, age 68, joined the board of
directors of the Company on June 23, 1999. He
is the founder, chief executive officer and
principal investor of Holding Capital Group,
LLC, a private LBO, MBO, venture capital and
investment firm founded by Mr. Spencer in
1976. Mr. Spencer serves as a member of the
board of directors of Trans- Resources, Inc.
Mark H. Tabak Mr. Tabak, age 49, joined the board of
directors of the Company on June 23, 1999. Mr.
Tabak is the founder, president and chief
executive officer of International Managed
Care Advisors, LLC, a company he founded in
1996 that invests in and develops managed
care-type delivery systems addressing mainly
primary care needs in Latin America, Western
and Central Europe and Asia, among other
regions. Mr. Tabak is also managing Partner of
Healthcare Capital Partners presently
affiliated with Capital Z Partners, a $3
billion fund focusing on investing in
healthcare, insurance and financial services.
Between 1993 and July 1996, Mr. Tabak served
as president of AIG Managed Care, Inc., a
subsidiary of American International Group.
Between 1990 and 1993, Mr. Tabak served as
president and chief executive officer of Group
Health Plan. Between 1986 and 1990, he was
president and chief executive officer of
Clinical Pharmaceuticals, Inc., a pharmacy
benefit management company founded by Mr.
Tabak in 1986. From 1982 to 1986 he served as
president and chief executive officer of
Health America Development Corporation. Mr.
Tabak is a director and member of the audit
committee of Ceres Group, a company that
specializes in the health insurance industry.
He also serves as director on the board of
Brookdale Assisted Living Community Inc., an
assisted living firm.
Professor Zehev Tadmor Professor Tadmor, age 62, joined the board of
directors of the Company on June 23, 1999. He
currently serves as a Distinguished Institute
Professor at the Department of Chemical
Engineering at the Technion Israel Institute
of Technology, Israel's major technological
scientific research university (the
"Technion"), which he joined in 1968, and has
served as the chairman of the board of the
S.Neaman Institute for Advanced Studies in
Science & Technology at the Technion since
October 1998. Between October 1990 and
September 1998, Professor Tadmor served as
president of the Technion. Professor Tadmor
serves as a member of the board of directors
of Haifa Chemicals Ltd., a chemical and
fertilizer company and a wholly-owned
subsidiary of Trans- Resources, Inc. Professor
Tadmor also serves as a member of the
Technological Advisory Council of Publicard,
the board of governors of Technion, the
USA-Israel Science & Technology Commission,
the Israeli Academy of Science and Humanities
and the USA National Academy of Engineering.
The affirmative vote of the holders of a majority of the voting power
represented at the Meeting in person or by proxy is necessary to elect each
of above-named nominees as directors.
The Board of Directors recommends a vote FOR the proposal to elect each of
above-named nominees as directors.
PROPOSAL 2 - RATIFICATION AND APPROVAL OF EXEMPTION, INSURANCE AND
INDEMNIFICATION ARRANGEMENTS TO DIRECTORS
Under the Companies Law, exemption of a Director from liability to a
company and indemnification of, and procurement of insurance coverage for,
the Company's directors must be approved by the Company's Audit Committee
and Board of Directors and by the Shareholders. Accordingly, the
Shareholders are being asked at the Annual Meeting to approve proposed
agreements (the "Indemnification Agreements") to be entered between the
Company and its directors and officers, in substantially the form attached
hereto as "Annex A," and the Directors' and Officers' insurance
arrangements described below.
Background
- ----------
The Board of Directors believes that the Indemnification Agreements are a
response to: (i) the increasing hazard and related expense of unfounded
litigation brought against directors and executive officers; (ii) the
general unavailability of directors' and officers' liability insurance or
significant limitations in amounts and breadth of coverage; (iii) dramatic
increases in premiums for such coverage; and (iv) the potential inability
of the Company to continue to attract and retain qualified directors and
executive officers in light of these circumstances.
The Board of Directors believes that the Indemnification Agreements will
serve the best interests of the Company and its Shareholders by
strengthening the Company's ability to attract and retain the services of
knowledgeable and experienced persons as directors and officers who,
through their efforts and expertise, can make a significant contribution to
the success of the Company. The Indemnification Agreements are intended to
complement the indemnity and protection available under the Companies Law
and the Company's Articles of Association (the "Articles of Association")
and any policies of insurance which may hereafter be maintained by the
Company and to provide for indemnification of certain of its agents to the
fullest extent permitted by applicable law. The following discussion
summarizes certain aspects of the proposed officers' and directors'
insurance, exemption and indemnification arrangements.
Directors' and Officers' Insurance
- ----------------------------------
Article 68B of the Articles of Association provides that the Company may
insure its past or present office holders to the maximum extent permitted
by law. Under the Companies Law, a company may enter into a contract for
the insurance of the liability of any of its office holders for: (i) a
breach of his duty of care to the company or to another person; (ii) a
breach of his duty of loyalty to the company, provided that the office
holder acted in good faith and had reasonable cause to assume that his act
would not prejudice the company's interests; or (iii) a financial liability
imposed upon him in favor of another person concerning an act performed by
him in his capacity as an office holder
Subject to Shareholder approval with respect to the Company's directors,
the Company has obtained directors' and officers' liability insurance with
a $20,000,000 (twenty million dollar) limit of liability. The current
policy period expires on July 1, 2000. The Company intends to renew such
policy or obtain comparable coverage after the expiration of such policy.
Shareholder approval of this Proposal 2 will extend to any renewal or
substitution thereof (from time to time) under comparable coverage.
Indemnification of Directors and Officers under the Companies Law
- -----------------------------------------------------------------
The Companies Law provides that a company may indemnify an office holder
against: (i) a financial liability imposed on him in favor of another
person by any judgment concerning an act performed in his capacity as an
office holder; and (ii) reasonable litigation expenses, including
attorneys' fees, expended by the office holder or charged to him by a court
relating to an act performed in his capacity as an office holder, in
connection with: (a) proceedings the company institutes against him or
instituted on its behalf or by another person; (b) a criminal charge from
which he was acquitted; or (c) a criminal charge in which he was convicted
for a criminal offense that does not require proof of criminal thought.
Article 68A of the Articles of Association authorizes the Company to
indemnify its office holders to the fullest extent permitted under the law.
The Articles of Association also authorizes the Company to undertake in
advance to indemnify an office holder, provided that the undertaking is:
(a) limited to categories of events which the board of directors determines
that can be anticipated; and (b) limited in amount determined by the board
of directors to be reasonable for the circumstances.
Both the Companies Law and Article 68C of the Articles of Association
provide that a company may not exempt or indemnify an office holder nor
enter into an insurance contract which would provide coverage for any
liability incurred as a result of any of the following: (a) a breach by the
office holder of his duty of loyalty unless the office holder acted in good
faith and had a reasonable basis to believe that the act would not
prejudice the company; (b) a breach by the office holder of his duty of
care if the breach was done intentionally or recklessly; (c) any act or
omission done with the intent to derive an illegal personal benefit; or (d)
any fine levied against the office holder.
Exemption provisions under the Companies Law
- --------------------------------------------
Under the Companies Law, an Israeli company may not exempt an office holder
from liability for a breach of his duty of loyalty, but may exempt in
advance an office holder from his liability to the company, in whole or in
part, for a breach of his duty of care. Article 68 of the Articles of
Association authorizes the Company to exempt any office holder from
liability to the Company to the extent permitted by law.
The Proposed Indemnification Agreements
- ---------------------------------------
A description of the proposed Indemnification Agreements is set forth
below. The description is intended to be a summary of the material
provisions of the Indemnification Agreements, is not purported to be
complete and is qualified in its entirety by reference to the form of
Indemnification Agreement which is attached hereto as "Annex A."
The Indemnification Agreements will provide the office holders (each, an
"Indemnitee") with the maximum indemnification allowed under applicable
law. The Indemnification Agreements provide that the Company shall
indemnify an Indemnitee who, by reason of the fact that he was a director,
officer, key employee, fiduciary or agent of the Company or any subsidiary
of the Company, is or was a party or becomes a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding
whether civil, criminal (unless convicted of committing an offense which
requires proof of criminal thought), administrative or investigative,
arising out of or relating to Indemnifiable Event. The Indemnification
Agreement sets forth a list of categories of Indemnifiable Events, among
which are claims made under securities laws, claims in connection with the
business of the Company, claims in connection with transactions of the
Company not in the ordinary course, claims by employees, intellectual
property claims, claims by lenders and creditors of the Company, tort
claims and claims relating to the products of the Company, tax matters,
environmental matters and regulatory matters.
The Company undertakes to indemnify the Indemnitee against all expenses
which are defined under the Indemnification Agreements to include, among
other things, expenses, judgments and amounts paid in settlement (including
taxes imposed on the Indemnitee on account of receipt of such payouts)
incurred by the Indemnitee with respect to any specific Indemnifiable Event
up to the limit amount. The Indemnification Agreements set forth limit
amounts applicable to each Indemnifiable Event. The terms of the
Indemnification Agreements would authorize the Company's Board of Directors
and Audit Committee to increase the limit amount if they determine that the
foreseeable expenses in connection with a specific Indemnifiable Event may
be more than the limit amount.
The Indemnification Agreements also provide for the Company to advance all
expenses in connection with the investigation, defense, settlement or
appeal of any civil or criminal action or proceeding as described above.
The Indemnitee shall repay such amounts advanced if it shall be ultimately
determined that he or she is not entitled to be indemnified by the Company.
The advances paid to the Indemnitee by the Company shall be delivered
within five days following a written request by the Indemnitee.
The Indemnification Agreements set forth a number of procedural and
substantive matters including the following:
o First, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an Indemnitee
is not entitled to full indemnification under the terms of the
Indemnification Agreement.
o Second, in the event the Company shall be obligated to pay the expenses
of any proceeding against the Indemnitee, the Company shall be entitled
to assume the defense of such proceeding, with counsel approved by the
Indemnitee, which approval shall not be unreasonably withheld, upon the
delivery to the Indemnitee of written notice of its election to do so.
The Company shall have the right to conduct such defense as it sees fit
in its sole discretion, including the right to settle any claim against
Indemnitee without the consent of the Indemnitee.
o Third, indemnification provided by the Indemnification Agreements is
not exclusive of any rights to which the Indemnitee may be entitled
under the Company's Memorandum or Articles of Association, any
agreement, any vote of Shareholders or disinterested directors, the
laws of the Company's state of incorporation, or otherwise. The
indemnification provided under the Indemnification Agreements continues
for any action taken or not taken while serving in an indemnified
capacity even though the Indemnitee may have ceased to serve in such
capacity at the time of the action, suit or other covered proceeding.
o Fourth, the Indemnification Agreements provide for certain exceptions
to the Company's obligation to provide indemnification, which include
the following: (a) indemnification for liabilities where the law
prohibits indemnification; (b) indemnification or advancement of
expenses with respect to proceedings or claims initiated or brought
voluntarily by an Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under the Indemnification Agreements, insurance
policies, the Company's Memorandum or Articles of Association or any
statute or law or otherwise as required under the laws of the Company's
state of incorporation; and (c) indemnification for expenses in the
payment of profits arising from the purchase and sale by the Indemnitee
of securities in violation of Section 16(b) of the Securities and
Exchange Act of 1934, as amended, or any similar or successor statute.
In addition, the Indemnification Agreements provide that as along as the
Indemnitee continues to serve as a director, officer, employee, agent or
fiduciary of the Company and thereafter as long as the Indemnitee may be
subject to any possible proceedings, the Company shall procure directors'
and officers' liability insurance to the fullest extent permitted by law in
such amount as the Company shall deem appropriate, unless the Company
determines that such insurance is not reasonably available.
Finally, in accordance with the Companies Law, under the Indemnification
Agreements, the Company exempts and releases the Indemnitee from any and
all liability to the Company related to any breach by the Indemnitee of his
or her duty of care to the Company.
The proposed Indemnification Agreements, together with the proposed
insurance arrangements and the limitations on the directors' liability
provided by the Company's Memorandum and Articles of Association, reduce
the number of instances in which directors might be held liable to make
payments of money to discharge personal liability arising from breach of
their fiduciary duties or duties of care. Therefore, it should be noted
that the current directors of the Company have a direct personal interest
in the approval of the Indemnification Agreements. At present, there is no
pending litigation or proceeding involving an Indemnitee where
indemnification would be required or permitted under the Indemnification
Agreements.
Approval of the Indemnification Agreements and the insurance arrangements
as described above, with respect to each of the Directors of the Company,
requires the affirmative vote of a majority of the votes present or
represented and entitled to vote on this subject matter at the Annual
Meeting.
The Board of Directors recommends a vote FOR this Proposal 2.
PROPOSAL 3 - APPROVAL OF REIMBURSEMENT OF COSTS AND EXPENSES OF CERTAIN
SHAREHOLDERS
Background
- ----------
The majority of the Company's existing board members were elected to the
Board of Directors following an election contest (the "Election Contest")
at the Company's Combined Annual and Extraordinary General Meeting of
Shareholders that took place on June 23, 1999 (the "1999 Meeting"). Messrs.
Arie Genger and Barnard J. Gottstein and certain of their respective
affiliates (the "Contesting Shareholders") represented the Contesting
Shareholders and solicited proxies which challenged the proxies solicited
by the Company's management. Following the 1999 Meeting, on June 23, 1999,
the Company's management and the Contesting Shareholders reached a
comprehensive compromise settlement with respect to the various issues
surrounding the Election Contest, among which was the restructuring of the
Board of Directors. As a condition to such compromise settlement, which is
reflected in a written letter to the Board dated June 23, 1999 (the
"Settlement Agreement"), the Company's Board of Directors and Audit
Committee resolved on June 23, 1999 that:
"all costs and expenses of Messrs. Arie Genger and Barnard J. Gottstein
and their affiliates in connection with the election contest shall be
reimbursed by the Company promptly on submission of invoices therefor,
subject to refund when such reimbursement is submitted to Shareholders
and not approved by such shareholders at a meeting noticed for such
purpose".
Accordingly, and subject to Shareholder approval, the Contesting
Shareholders have submitted to the Company invoices for their Election
Contest expenses for the sum of approximately $1,510,000, consisting of
legal, litigation, proxy solicitation and other expenses, which expenses
were reimbursed to them. Pursuant to the Board's and the Audit Committee's
resolutions, if Shareholder approval of the Board's and the Audit
Committee's resolution of June 23, 1999 is not obtained, the Contesting
Shareholders will refund to the Company the amounts that were previously
reimbursed to them. Trans-Resources, Inc. ("TRI"), a company controlled by
Mr. Arie Genger, was among the Contesting Shareholders and accordingly
received reimbursement for its expenses in connection with the Election
Contest. S.A. Spencer, a Director of the Company, is also a director of TRI
and Thomas G. Hardy, a Director of the Company, is the President and Chief
Operating Director of TRI. Therefore, it should be noted that by virtue of
the office each of them hold with TRI, Messrs. Spencer and Hardy each have
an indirect interest in the approval of Proposal 3. However, the foregoing
resolution of the Board of Directors of June 23, 1999 was adopted in Mr.
Hardy's absence and prior to Mr. Spencer's appointment as a Director of the
Company.
The affirmative vote of the holders of a majority of the voting power
represented at the meeting in person or by proxy is necessary for
ratification and approval of the reimbursement of the Election Contest
expenses of the Contesting Shareholders.
Pursuant to the aforesaid approval by the Audit Committee and Board of
Directors on June 23, 1999, the Board of Directors recommends a vote "FOR"
the ratification and approval of the reimbursement of expenses of the
Contesting Shareholders as set forth above.
PROPOSAL 4 - INDEMNIFICATION OF CERTAIN PERSONS REGARDING LITIGATION
Background
- ----------
As part of the comprehensive compromise settlement reached between the
Contesting Shareholders and the Company's management in connection with the
Election Contest and as reflected in the June 23, 1999 Settlement Agreement
(See Background for Proposal 3 above), the Contesting Shareholders agreed
to vote all shares controlled by them in favor of a shareholder resolution
for indemnification of certain persons who were then the directors of the
Company for certain litigation as described below. This undertaking was
expressly conditioned on the resignation of Shimon Eckhouse as President
and Chief Executive Officer of the Company and Karen Sarid and Hillel
Bachrach as directors pursuant to executed resignation letters by such
individuals, and was intended by the Contesting Shareholders to resolve
fully and finally all outstanding matters with respect to the resignations
of such individuals. On March 30, 2000, pursuant to such understanding, the
Contesting Shareholders requested that the Board of Directors, in
accordance with the Companies Law, include in the agenda for the Annual
Meeting the following resolutions:
"RESOLVED to indemnify each of Shimon Eckhouse, Karen Sarid, Kenneth
Rind, Hillel Bachrach, Marshall Butler, Halley S. Faust, Dan Suesskind,
Thomas Hardy and Benjamin Givli (all together the "Former Directors"
and each separately the "Former Director") in respect of the actions
consolidated under the caption In Re ESC Medical Systems Ltd.
Securities Litigation, Case No. 98 Civ. 7530 (MBM) filed in the United
States District Court, Southern District of New York, including the
events described in the complaints relating thereto and any amendments
thereof (the "Complaint") and any other claims relating thereto for (a)
any monetary obligation imposed upon any of them for the benefit of a
third party by a judgment, including a settlement agreed to in writing
by the Company, or an arbitration decision certified by the court, as a
result of an act or omission of any of the Former Directors in his/her
capacity as a director or an office holder of the Company, and (b)
reasonable litigation expenses, including legal fees, incurred by any
of the Directors, as approved in advance by independent counsel for the
Company if requested by the Audit Committee, or which he/she is
obligated to pay by a court order, in a proceeding brought against
him/her by or on behalf of the Company or by others, in case relating
to acts or omissions of any of the Former Directors in his/her capacity
as a director or as office holder of the Company relating to the events
described in the Complaint and any claims relating thereto. Said
indemnification shall be limited to any amounts not covered by the
officers' and directors' liability insurance policy for him/her which
is currently in effect."
"RESOLVED that in the event that any of the Former Directors becomes
involved, in their capacity as an officer or a director, in any claim,
suit, action, proceeding, investigation or inquiry with respect to the
filing with the U.S. Securities and Exchange Commission of Schedule
13D, and any amendment thereto by Messrs. Arie Genger and/or Mr.
Barnard Gottstein, the Company shall indemnify and reimburse any such
Former Director for his/her legal and other expenses, to the fullest
extent permitted by the Companies Ordinance (New Version), 1983-5743
and/or the Companies Law, 1999-5759, as the case may be, as such
expenses [may be] incurred by such director in connection therewith.
Said indemnification shall be limited to any amounts not covered by the
officers' and directors' liability insurance policy for him/her which
is currently in effect."
The first resolution relates to a claim which was filed naming the Company,
Salomon Smith Barney Inc., and several additional current and former
directors and officers as defendants. The consolidated amended complaint
seeks damages and attorneys fees under the United States securities laws
for alleged irregularities in the way in which the Company reported its
financial results and disclosed certain facts throughout 1997 and 1998 and
for alleged "tipping" of non-public information to Salomon Smith Barney
Inc. in September 1998. This claim is still pending.
The second indemnification resolution relates to the Schedule 13D that was
filed by the Contesting Shareholders as part of the Election Contest. In an
attempt to challenge that the Schedule 13D, the Company initiated
litigation against the Contesting Shareholders regarding Schedule 13D
violations. However, as part of the compromise Settlement Agreement between
the management of the Company and the Contesting Shareholders, on June 23,
1999, the Board of Directors of the Company resolved to dismiss said
litigation with prejudice and the Contesting Shareholders agreed to waive
any claims they may have against any of the directors with respect to the
Election Contest.
The Board of Directors believes that the compromise of the Election Contest
was necessary to rapidly resolve the Election Contest and to bring about a
long awaited change in the management of the Company and, as such, is in
the interest of the Company. Therefore, the Board of Directors agreed to
submit the proposed resolutions to Shareholder vote substantially in the
form requested by Messrs. Genger and Gottstein and recommend a vote "FOR"
such resolutions, in order to conclude the implementation of the said
compromise. Given the Board's understanding that the Settlement Agreement
served to resolve fully and finally all outstanding matters with respect to
the resignations of certain individuals, if, and to the extent that, an
indemnified person seeks, in any way, to challenge, by bringing any claim,
suit, action or proceeding against the Company and/or any of the Contesting
Shareholders, the finality of the Settlement Agreement or any amount that
the Company shall have determined such person is entitled to receive upon
separation from the Company, the Company reserves the right in such event,
notwithstanding shareholder approval of the foregoing indemnification
resolutions, to avail itself of any legal defenses available to it
concerning its obligation to provide indemnification to such person, and
further reserves the right to avail itself of any legal remedies available
to it, including but not limited to ceasing to provide indemnification to
such person, and seeking recovery, recoupment and/or offset from such
person of any amounts paid, advanced or otherwise promised to such person
in connection with the foregoing indemnification resolutions.
It should be noted that Thomas G. Hardy and Kenneth Rind, both of whom are
Directors of the Company, have a direct interest in the approval of this
proposal as they each are named among the Directors who the Company may
indemnify pursuant to the foregoing resolutions. Accordingly, Mr. Hardy and
Mr. Rind was not present at the meeting when this proposal was considered
and approved by the Board of Directors.
The affirmative vote of the holders of a majority of the voting power
represented at the Annual Meeting in person or by proxy is necessary for
the approval of the indemnification resolutions described above.
The Board of Directors recommends a vote "FOR" the approval of both
indemnification resolutions as set forth above.
PROPOSAL 5 - APPROVAL OF THE 1999 SHARE OPTION PLAN
The Board of Directors is proposing for Shareholder approval, in accordance
with the Nasdaq Stock Market rules, the Company's 1999 Share Option Plan
(the "Plan"). A Shareholders approval of the Plan is also required by
Section 422 of the U.S. Internal Revenue Code of 1954, as amended (the
"Code") as the Company may issue options which may qualify as incentive
stock options within the meaning of Section 422 of the Code.
Background
- ----------
The Plan was introduced in the Company in 1999 and is intended to provide
incentive compensation to and to encourage share ownership by, the
directors, officers employees and certain consultants and dealers of the
Company and its subsidiaries in order to align their interests with those
of the Company's Shareholders. A description of the Plan is set forth
below. The description is intended to be a summary of the material
provisions of the Plan, is not purported to be complete and is qualified in
its entirety by reference to the Plan, a copy of which is attached hereto
as "Annex B."
General Terms and Conditions of the Plan
- ----------------------------------------
The Plan is administered by the Option Committee or Compensation Committee
(in each case, the "Committee"), which has the absolute discretion on
different issues relating to the administration of the Plan, including,
among other things, the right to determine whom among the Company's
employees, directors, dealers and consultants of the Company may be granted
options, to determine the times when options may be granted, to determine
the exercise price of each option and the time upon which the options may
be exercised.
The shares optioned under the Plan are Ordinary Shares which the Company
may acquire and deposit with a trustee and will not exceed, in the
aggregate, 5,000,000 Ordinary Shares. The option price in the case of each
option granted under the Plan, may be not less than 85% of the last
reported sales price of the Ordinary Shares in the Nasdaq Stock Market on
the date of the grant. No option will be transferable, except by will or by
laws of descent and distribution.
The Board of Directors or the Committee may, without the consent of the
Company's Shareholders, at any time, terminate the Plan entirely, and at
any time or from time to time amend or modify the Plan, provided that such
amendment will not adversely affect options already granted prior to such
amendment or termination. The Plan and all related instruments will be
governed by and interpreted in accordance with the laws of the State of
Israel.
Terms of the Options
- --------------------
Under the Plan, the Committee will determine the dates after which options
may be exercised, in whole or in part. No option may be exercised after the
tenth anniversary of the date that the option was granted, and no option
granted to an employee of the Company will be exercisable before such
employee accumulates at least one year of service with the Company.
The Plan provides that with respect to the Company's directors, the Chief
Executive Officer ("CEO") of the Company and the officers reporting
directly to the CEO, the options held by such persons will become
exercisable immediately upon a change in control of the Company. A change
in control will occur upon one of the following events: (i) acquisition of
any voting securities by any person immediately after which such person
becomes a beneficial owner of 20% or more of the voting power of the
Company, unless such Person has filed a Schedule 13D at any time during the
12 month period prior to the Plan being first approved by the Board of
Directors (except for non-control acquisitions), (ii) change in the
majority of members of the board of the directors of the Company in any two
year period unless such change was approved by at least two- thirds of the
incumbent board and (iii) approval of certain transactions by the Company's
Shareholders (such as a merger, liquidation, or sale of assets).
To the extent that the aggregate fair market value of the Company's
Ordinary Shares with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year
under the Plan and any other stock option plan of the Company exceed
$100,000, such options will be treated as nonqualified stock options
("NSOs"). Such fair market value will be determined as of the date on which
each such incentive stock option is granted.
No incentive stock option may be granted to an individual if, at the time
of the proposed grant, such individual owns (or is deemed to own under the
Code) stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company unless (A) the exercise price
of such incentive stock option is at least 110 percent of the fair market
value of a share of Company stock at the time such incentive stock option
is granted and (B) such incentive stock option is not exercisable after the
expiration of five years from the date such incentive stock option is
granted.
Certain Israeli Tax Consequences
- --------------------------------
Options granted under the Plan to Israeli optionees who are subject to
Israeli taxation may or may not contain such terms as will qualify the
option grant for special tax treatment under Sections 102 or 3(1) of the
Israeli Income Tax Ordinance.
Certain Federal Income Tax Effects
- ----------------------------------
The following discussion of certain relevant United States federal income
tax effects applicable to options granted under the Plan is a summary only,
and reference is made to the Code for a complete statement of all relevant
federal tax provisions. It is recommended that holders of NSOs or incentive
stock options ("ISOs") consult their tax advisers before exercise of any
such option and before disposing of any of the Ordinary Shares acquired
upon the exercise thereof. Different rules may apply in the case of a Plan
participant who is subject to the requirements of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Nonqualified Stock Options
--------------------------
An optionee generally will not be taxed upon the grant of an NSO. Rather,
at the time of exercise of such NSO (and in the case of an untimely
exercise of an ISO), the optionee will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair
market value of the shares purchased over the option price. The Company
will generally be entitled to a tax deduction at such time and in the same
amount that the optionee recognizes ordinary income.
If shares acquired upon exercise of an NSO (or upon untimely exercise of an
ISO) are later sold or exchanged, then the difference between the sales
price and the fair market value of such stock on the date that ordinary
income was recognized with respect thereto will generally be taxable as
long-term or short-term capital gain or loss (if the stock is a capital
asset of the optionee) depending upon the length of time such shares were
held by the optionee.
Incentive Stock Options
-----------------------
An optionee will not be in receipt of taxable income upon the grant of an
ISO. Exercise of an ISO will be timely if made during its term and if the
optionee remains an employee of the Company or a subsidiary at all times
during the period beginning on the date of grant of the ISO and ending on
the date three months before the date of exercise (or one year before the
date of exercise in the case of a disabled optionee). Exercise of an ISO
will also be timely if made by the legal representative of an optionee who
dies (i) while in the employ of the Company or a subsidiary or (ii) within
three months after termination of employment. The tax consequences of an
untimely exercise of an ISO will be determined in accordance with the rules
applicable to NSOs. (See "Certain Federal Income Tax Effects - Nonqualified
Stock Options.")
If stock acquired pursuant to the timely exercise of an ISO is later
disposed of, the optionee will, except as noted below, recognize long-term
capital gain or loss (if the stock is a capital asset of the optionee)
equal to the difference between the amount realized upon such sale and the
option price. The Company, under these circumstances, will not be entitled
to any federal income tax deduction in connection with either the exercise
of the ISO or the sale of such stock by the optionee.
If, however, stock acquired pursuant to the exercise of an ISO is disposed
of by the optionee prior to the expiration of two years from the date of
grant of the ISO or within one year from the date such stock is transferred
to him upon exercise (a "disqualifying disposition"), any gain realized by
the optionee generally will be taxable at the time of such disqualifying
disposition as follows: (i) at ordinary income rates to the extent of the
difference between the option price and the lesser of the fair market value
of the stock on the date the ISO is exercised or the amount realized on
such disqualifying disposition and (ii) if the stock is a capital asset of
the optionee, as short-term or long-term capital gain to the extent of any
excess of the amount realized on such disqualifying disposition over the
fair market value of the stock on the date which governs the determination
of the optionee's ordinary income. In such case, the Company may claim a
federal income tax deduction at the time of such disqualifying disposition
for the amount taxable to the optionee as ordinary income. Any capital gain
recognized by the optionee will be long-term or short-term capital gain,
depending on the length of time such shares were held by the optionee.
The amount by which the fair market value of the stock on the exercise date
of an ISO exceeds the option price will be an item of adjustment for
purposes of the "alternative minimum tax" imposed by Section 55 of the
Code.
Exercise with Shares
--------------------
According to a published ruling of the Internal Revenue Service (the
"IRS"), an optionee who pays the option price upon exercise of an NSO, in
whole or in part, by delivering Ordinary Shares of the Company already
owned by him will recognize no gain or loss for federal income tax purposes
on the shares surrendered, but otherwise will be taxed according to the
rules described above for NSOs. (See "Certain Federal Income Tax
Effects--Nonqualified Stock Options.") With respect to shares acquired upon
exercise which are equal in number to the shares surrendered, the basis of
such shares will be equal to the basis of the shares surrendered, and the
holding period of shares acquired will include the holding period of the
shares surrendered. The basis of additional shares received upon exercise
will be equal to the fair market value of such shares on the date which
governs the determination of the optionee's ordinary income, and the
holding period for such additional shares will commence on such date.
The Treasury Department has issued proposed regulations that, if adopted in
their current form, would appear to provide for the following rules with
respect to the exercise of an ISO by surrender of previously owned shares
of corporation stock. If the shares surrendered in payment of the exercise
price of an ISO are "statutory option stock" (including stock acquired
pursuant to the exercise of an ISO) and if, at the date of surrender, the
applicable holding period for such shares had not been met, such surrender
will constitute a "disqualifying disposition" and any gain realized on such
transfer will be taxable to the optionee, as discussed above. Otherwise,
when shares of the Company's stock are surrendered upon exercise of an ISO,
in general, (i) no gain or loss will be recognized as a result of the
exchange, (ii) the number of shares received that is equal in number to the
shares surrendered will have a basis equal to the shares surrendered and
(except for purposes of determining whether a disposition will be a
disqualifying disposition) will have a holding period that includes the
holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins
on the date of the exchange. If any of the shares received are disposed of
within two years of the date of grant of the ISO or within one year after
exercise, the shares with the lowest basis will be deemed to be disposed of
first, and such disposition will be a disqualifying disposition giving rise
to ordinary income as discussed above.
Transferred Options: Estate and Gift Taxes
------------------------------------------
If ISOs or NSOs are held until death, federal and, if applicable, state
estate and inheritance taxes would be imposed on the fair market value of
the options at the time of death. Certain individuals, however, may realize
estate and gift tax savings by making lifetime gifts of NSOs to permitted
family members, trusts for their benefit, or other entities. Federal and,
if applicable, state gift taxes would be imposed on the fair market value
of the NSOs at the time of the completed gift, subject to applicable
federal and state gift tax credits and exclusions. The IRS has taken the
position that a gift of an option is not complete until the donee's right
to exercise the option is no longer conditioned on the performance of
services by the optionee. Generally, federal and state gift and estate tax
savings may be realized if the value of the NSOs at the time of the
completed gift is less than the value of the NSOs (or the proceeds from the
disposition thereof) at such later time as the optionee might make a gift
of the NSOs or, if no gift is made, at the time of the optionee's death.
The fair market value of options for gift or estate tax purposes may be
determined using any one of a number of standard valuation methods, such as
the Black-Scholes or binomial models. Valuation models should consider,
among other things, such factors as strike price, the current value and
volatility of the underlying stock, the expected dividends on the
underlying stock, the risk-free rate over the option term and the option's
remaining life. In Revenue Procedure 98-34, 1998-17 IRB 1, the IRS sets
forth a "safe harbor" method of valuation which, if followed, will be
accepted by the IRS in valuing options for estate and gift tax purposes.
This IRS model is relevant only where the underlying stock is
publicly-traded and imposes certain other restrictions, such as the
disallowance of certain market discounts permitted by other valuation
models.
The optionee (or if the optionee is deceased, the optionee's estate),
rather than the donee, will recognize ordinary income for federal income
tax purposes upon the exercise of the transferred option (just as if there
had been no transfer). (See "Certain Federal Income Tax
Effects--Nonqualified Stock Options.")
The affirmative vote of the holders of a majority of the voting power
represented at the Annual Meeting in person or by proxy is necessary for
approval of the Company's 1999 Share Option Plan.
The Board of Directors recommends a vote FOR the approval of the 1999 Share
Option Plan.
PROPOSAL 6 - APPOINTMENT OF AUDITORS
On January 17, 2000, pursuant to the Ordinance, then in effect, the Board
of Directors has decided to appoint Brightman as its independent
accountants replacing Luboshitz Kasierer ("LK"), to audit the consolidated
financial statements of the Company and its subsidiaries for fiscal year
1999. The Board of directors recommends that the Shareholders appoint
Brightman, as independent accountants to audit the accounts of the Company
and its subsidiaries for fiscal year 2000, and to authorize the Board of
Directors of the Company to determine the level of compensation of the
independent accountants.
On February 10, 2000, the client/auditor relationship between the Company
and LK, the Company's independent accountants ceased. During the years
ended December 31, 1997 and 1998, and the subsequent interim period through
February 10, 2000 (the date LK ceased to be the Company's independent
accountants) (i) there were no disagreements with LK on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of LK, would have caused LK to make a reference to the subject
matter of the disagreements in connection with its reports in the financial
statements for such years and (ii) there were no "reportable events" as
described in Items 304(a)(1)(iv) of Regulation S-K of the Exchange Act. The
independent accountant's report of LK on the Company's consolidated
financial statements for the years ended December 31, 1997 and 1998
contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principles.
Representatives of Brightman and LK will not be present at the Annual
Meeting.
An affirmative vote of a majority of the shares present or represented and
voting at the Annual Meeting is required for the appointment of Brightman
as the Company's independent accountants for fiscal year 2000.
The Board of Directors recommends a vote FOR this Proposal.
PROPOSAL 7 - AMENDMENT OF THE COMPANY'S MEMORANDUM OF ASSOCIATION
Background
- ----------
The Ordinance mandated that an amendment to a company's Memorandum of
Association may only be adopted by the affirmative vote of 75% of the
Ordinary Shares present and voting at a general meeting of Shareholders.
The Companies Law no longer requires a newly incorporated Company to
include in its incorporation documents a Memorandum of Association. For
companies that were incorporated prior to the effective date of the
Companies Law, the Companies Law provides that such companies may either
revoke their Memorandum of Association or amend it. The Companies Law
provides that a company may include in its Memorandum of Association a
provision which authorizes it to amend its Memorandum of Association by any
required voting. Therefore, the Company's Board of Directors propose that
the Shareholders adopt a resolution to add to the Company's Memorandum of
Association a provision that will authorize the Company to amend the
Memorandum of Association by the affirmative vote of a majority of the
Ordinary Shares present and voting at a general meeting of Shareholders.
Required Vote
- -------------
Under the Companies Law, such a resolution must be adopted by the higher of
(i) 75% of the Ordinary Shares present and voting at a general meeting of
Shareholders or (ii) by the proposed required voting under the amendment.
Since the proposed amendment contained in the resolution only requires a
majority of the Ordinary Shares present and voting, the required vote of
the Shareholders needed to adopt such resolution is 75% of the Ordinary
Shares present and voting at the Annual Meeting.
The Board of Directors recommends a vote FOR the following resolution:
RESOLVED, to amend the Company's Memorandum of Association so as to
include the following provision: "Amendments. This Memorandum of
Association may be amended at any time and from time to time by a
majority of the voting power represented at the meeting in person, by
voting card or by proxy and voting thereon."
PROPOSAL 8 - ADOPTION OF AMENDED AND RESTATED ARTICLES OF ASSOCIATION
Background
- ----------
As described above, on February 1, 2000 the Companies Law became effective
and superseded most of the existing provisions of the Ordinance except for
those relating to bankruptcy, liquidation and dissolution of companies.
Consequently, companies incorporated in Israel may alter and modify their
Articles of Association, to adjust them to the new provisions of the
Companies Law.
A description of the proposed Amended and Restated Articles of Association
(the "Amended Articles") is set forth below. The description includes a
comparison of the Amended Articles and the current Articles of Association
of the Company (the "Old Articles"). The description is intended to be a
summary of the material provisions of the Amended Articles as compared to
the provisions of the Old Articles, is not purported to be complete and is
qualified in its entirety by reference to the Amended Articles which are
attached hereto as "Annex C".
General Amendments and Change in Terminology
- --------------------------------------------
The Companies Law uses certain terminology which is different than the
terminology used by the Ordinance. Accordingly, there are changes to some
of the terminology used throughout the Old Articles, including the
following: (i) while the Old Articles referred to "Members" in the context
of Shareholders of the Company, the Amended Articles pursuant to the
Companies Law refers to "Shareholders"; (ii) all references to the
Ordinance in the Old Articles are replaced by references to the Companies
Law; (iii) the Companies Law no longer requires a "Special Resolution" (75%
of shares voting and present) in connection with certain corporate actions,
such as, an increase in the authorized share capital, a modification of
share rights, a cancellation of share capital, or the conversion of share
capital into stock, thus all references in the Old Articles to "Special
Resolutions" will be replaced with "Ordinary Resolution" which requires
just a majority of the shares voting and present in a general meeting of
Shareholders of the Company; and (iv) the Companies Law substituted the
term "Extraordinary General Meeting of Shareholders" with the term "Special
General Meeting", thus all references in the Old Articles the term
"Extraordinary General Meeting" were replaced with references to "Special
General Meeting."
Amendments of the Articles
- --------------------------
The Ordinance mandated that any amendment of a company's articles of
association shall be adopted by a Special Resolution (which required the
vote of 75% of the shares represented at the meeting and voted). Under the
Companies Law, a company may amend its articles of association by the
affirmative vote of a majority of the shares voting and present at the
general meeting of shareholders or by a different voting if so determined
by the company's articles of association. Articles 3 of the Amended
Articles provides that the Amended Articles may be amended by an Ordinary
Resolution, if the amendment is recommended by the Board of Directors, but
in any other case by a resolution approved by the holders of at least 75%
of the shares represented at the General Meeting and voted thereon.
Company's Purpose
- -----------------
Under the Companies Law, a company may broaden the scope of its purposes to
the grant of reasonable donations for any proper charitable cause, even if
such donations are not related to the Company's business. In light of this,
Article 3A of the Amended Articles provides that the Company's purpose is
to engage in any business permitted by law, and that the Company can also
extend reasonable donations for any proper cause.
Quorum at Class Meetings
- ------------------------
To achieve consistency with the quorum required for any general meeting of
Shareholders of the Company, Article 6(b)(ii) of the Amended Articles
amends the required quorum for any class meeting to two or more
Shareholders present in person or by proxy and holding at least thirty
three and one-third percent (331/3%) of the issued shares of such class.
Repurchase of Shares
- --------------------
Prior to the Companies Law, a company incorporated in Israel was generally
prohibited from repurchasing its own shares, whether directly or indirectly
by providing financial assistance to a third party for the purchase of the
company's shares, subject to certain exceptions. In contrast, the Companies
Law, subject to certain limitations, authorizes companies to repurchase
their own shares. Article 10(b) of the Amended Articles thus provides, that
the Company may at any time, and from time to time, subject to the
Companies Law, purchase back or finance the purchase of any shares or other
securities issued by the Company, in such manner and under such terms as
the Board of Directors shall determine, whether from any one or more
Shareholders. Such purchase shall not be deemed as payment of dividends and
no Shareholder will have the right to require the Company to purchase its
shares or offer to purchase shares from any other Shareholders.
Record Date for Notices of General Meeting and Other Action
- -----------------------------------------------------------
Under the Old Articles, the Board of Directors could fix a record date for
the purpose of a Shareholder vote or other actions between ten to sixty
days before the date of the meeting or other actions. Under the Companies
Law, for the purpose of a Shareholder vote, the record date can be set at a
date which is between four and twenty one days before the date of the
meeting. Article 20 of the Amended Articles therefore provides that the
Board of Directors may fix in advance, a record date, which shall not be
more than twenty- one nor less than four days before the date of such
meeting (or any longer or shorter period permitted by law), and for the
purpose of any other action, not more than sixty days prior to such action.
Annual General Meeting
- ----------------------
Under the Ordinance several issues had to be discussed at the Annual
General Meetings, including, among other things, the presentation for
discussion of the annual audited financial statements of a company. The
Companies Law no longer requires such discussion. Accordingly, Article
23(b) of the Amended Articles no longer requires that the annual financial
statements be discussed in the annual general meetings.
As described under the caption "Distribution of Dividend" below, under the
Amended Articles the power to declare both interim and final dividend will
vest with the Board of Directors. Accordingly, reference in the Amended
Articles to declaration of dividends at Annual General Meetings is omitted.
Notice of General Meetings; Omission to Give Notice
- ---------------------------------------------------
The Companies Law provides that a company whose shares are traded on an
exchange must send a notice to its shareholders of a general meeting at
least twenty-one days prior to the meeting, unless the company's articles
provide that a notice need not be sent. Under the Old Articles, notice of
general meetings was generally to give at least seven days except for
general meetings where "Special Resolution" where proposed, where notice of
twenty-one days was required. Accordingly, Article 25(a) of the Amended
Articles is amended to provide that not less than twenty-one days' prior
notice shall be given to shareholders of record of every general meeting.
It further provides that notice of a general meeting shall be given in
accordance with any law, and otherwise as the Board of Directors may
determine. In addition, Article 25(c) of the Amended Articles provides that
no Shareholder present, in person or by proxy, at the commencement of a
General Meeting shall be entitled to seek the abolishment of any
proceedings or resolutions adopted at such General Meeting on account of
any defect in the notice of such meeting relating to the time or the place
thereof, or any item to be acted upon at such meeting is such that is
usually acted upon at Annual General Meetings of the Company.
Quorum of an adjourned General Meeting
- --------------------------------------
Article 26(c) of the Amended Articles changed the quorum for an adjourned
Special General Meeting which was called at the request of Shareholders
pursuant to the Companies Law, to the presence of the holders of the number
of shares necessary to make the request. It provides that one or more
Shareholders, present in person or by proxy, and holding the number of
shares required for making such request under the Companies Law shall
constitute a quorum.
Adoption of Resolutions at General Meetings
- -------------------------------------------
The Old Articles provided that questions submitted to a General Meeting
shall be decided by show of hands, but if a written ballot is requested by
a Shareholder, then the votes will be counted by a written ballot.
Consistent with the provisions of the Companies Law applicable to public
companies, Article 28(b) of the Amended Articles cancels the option of
voting by show of hands and provides for a written ballot only. In
addition, Article 28(c) provides that the declaration of the Chairman of
the meeting as to the results of a vote are not considered to be
conclusive, but rather as prima facie evidence of the fact in accordance
with the Companies Law.
Voting Power
- ------------
The definition of "Shareholder" under the Companies Law includes, in
addition to record Shareholders, beneficial Shareholders whose shares are
held through an "exchange member" and held of record by a "nominees
company", as such terms are defined under the Companies Law. Article 31 of
the Amended Articles conforms to the new definition in the Companies Law by
recognizing such beneficial shareholders. However, as defined in the
Companies Law, "nominees company" and "exchange member" are defined in
connection with a stock exchange licensed under the Israeli Securities Law,
1968, therefore beneficial holders of the Company's shares will not be
recognized as "Shareholders" so long as the shares of the Company are
listed only on the Nasdaq Stock Market.
Alternate Directors
- -------------------
Under the Companies Law an existing member of the board (either as an
alternate director or as a director) cannot be appointed as an alternate
director. Accordingly, Article 45 of the Amended Articles omits all
references to the appointment of an alternate director who already serves
on the Board of Directors.
Meetings of the Board of Directors
- ----------------------------------
Consistent with the Companies Law, Article 46(b) of the Amended Articles is
amended to provide that no director present at the commencement of a
meeting of the Board of Directors shall be entitled to seek the abolishment
of any proceedings or resolutions adopted at such meeting on account of any
defect in the notice of such meeting relating to the time or the place
thereof.
Chairman of the Board of Directors
- ----------------------------------
The Companies Law provides that the Chairman of the Board of a company
shall have a casting vote in the event of a tied vote, unless the company's
Articles of Association provides otherwise. Article 48 of the Amended
Articles provides that neither the Chairman nor the Co-Chairman of the
Board shall have a casting or additional vote.
Powers of Chief Executive Officer
- ---------------------------------
The Companies Law provides that transactions between a company and its
"office holders" (i.e., directors, chief executive officer and officers
reporting directly to the chief executive officer), which are not
"extraordinary transactions" (i.e., a transaction which is not in the
company's ordinary course of business, or not at market terms or that may
materially affect the company's profitability, assets or liabilities),
requires the approval of the Board of Directors, unless another manner of
approval is provided by the articles of association. Accordingly, to
provide the Company's Chief Executive Officer flexibility in hiring
officers, Article 50(b) of the Amended Articles authorizes the Company's
Chief Executive Officer to appoint the officers and employees of the
Company and to determine their remuneration as long as the Board of
Directors does not and provided further that the remuneration of the four
highest salaried personnel of the Company shall be approved by either the
Board of Directors, the Audit Committee or the Compensation Committee.
Distribution of Dividend
- ------------------------
Under the Companies Law, dividends may be paid only out of accumulated
earnings or out of net earnings for the two years preceding the
distribution of the dividends as calculated under the Companies Law. In any
distribution of dividends, the Board of Directors is required to determine
that there is no reasonable concern that the distribution of dividend will
prevent the Company from meeting its existing and foreseeable obligations
as they become due.
Generally, pursuant to the Companies Law, the decision to distribute
dividends and the amount to be distributed, whether interim or final, is
made by the Board of Directors. While the Old Articles provided that the
Board of Directors has the authority to determine the amount and time for
payment of interim dividends and the General Meeting of Shareholders had
the authority to approve final dividends, Article 52 of the Amended
Articles provides that the Board of Directors will have such authority as
to both interim and final dividends.
Exemption, Indemnity and Insurance
- ----------------------------------
Article 68 of the Old Articles was replaced in its entirety by Articles
68-68C of the Amended Articles to adjust to the changes in the provisions
governing limitations on directors' and officers' liability under the
Companies Law. The new provisions are described in detail above under
"PROPOSAL 2- RATIFICATION AND APPROVAL OF EXEMPTION, INSURANCE AND
INDEMNIFICATION ARRANGEMENTS TO DIRECTORS."
Mergers
- -------
The Companies Law provides for mergers between Israeli companies, if each
party to the transaction obtains the approval of its board of directors and
shareholders. For purposes of the shareholder vote of each party, unless a
court rules otherwise, the merger will not be deemed approved if a majority
of the shares not held by the other party (or by any person who holds 25%
or more of the shares or the right to appoint 25% or more of the directors
of the other party) have voted against the merger. However, companies that
were incorporated prior to the effective date of the Companies Law, such as
the Company, are deemed to have their articles of association provide for
required voting of 75% of the present and voting shareholders, for approval
of the merger. To adjust to the new standards of regular majority vote,
Article 69A of the Amended Articles provides that Shareholder approval of
mergers will be by an Ordinary Resolution.
PROPOSAL 9 - APPROVAL OF DIRECTORS' COMPENSATION
Under the Companies Law, Shareholders must approve the compensation terms
of the Company's directors that have been approved by the Company's Audit
Committee and Board of Directors. Subject to Shareholder approval, the
Company's Audit Committee and Board of Directors, based upon the
recommendation of the Company's Compensation Committee, approve the
following compensation to the directors of the Company who serve on any one
or more sub-committee of the board and to the Board's Chairman, Prof. Jacob
A. Frenkel:
1. To each of the Directors of the Company who serves on any one or more
of the sub-committees of the Board (other than the Chairman), a cash
retainer fee for participation in meetings of the Board of Directors or
any sub-committee at $2,500 per calendar quarter. Directors (other than
the Chairman) are not entitled to receive any additional per-meeting
fee but they will be reimbursed for their reasonable travel and
accommodation expenses; and
2. To each of the Directors of the Company who serves on any one or more
of the sub-committees of the Board (other than the Chairman), options
to purchase 50,000 Ordinary Shares, exercisable for five years at a
per-share purchase price of $5.0625, which is not less than 85% of the
last reported sales price of the Company's Ordinary Shares on the
Nasdaq Stock Market on the grant date. 60% of the amount of options
granted to each Director will vest immediately, and additional 20% will
vest on each of the first and second anniversaries of the grant date;
and
3. To the Chairman of the Board of Directors, Prof. Frenkel, meeting and
advisory fees of up to $120,000 per year (in the aggregate), and
options to purchase 500,000 Ordinary Shares, with the same exercise
price and proportionate vesting schedule applicable to grants to the
other Directors. Prof. Frenkel may designate that his meeting and
advisory fee be paid to an entity that is beneficially owned by him or
his family.
All options granted to the Directors will be granted under the Company's
1999 Option Plan subject to approval of the Plan by the Shareholders
pursuant to PROPOSAL 5 - APPROVAL OF THE 1999 SHARE OPTION PLAN, above. The
compensation arrangement described above shall apply (i) retroactively to
services rendered to the Board of Directors by Directors elected to the
Board for the term which commenced following the Company's June 23, 1999
combined Extraordinary and Annual General Meeting of Shareholders and (ii)
to service on the Board of Directors for the term which shall commence with
the first duly convened meeting of the Board of Directors elected at the
Annual Meeting.
The affirmative vote of the holders of a majority of the voting power
represented at the meeting in person or by proxy is necessary for approval
of the Directors' compensation for fiscal year 2000.
The Board of Directors recommends a vote FOR the approval of the Directors'
compensation as set forth above.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors
- ----------------------
The management of the business of the Company is vested in the Board of
Directors, which may exercise all such powers and do all such acts and
things as the Company is authorized to exercise and do, and are not
required by law or otherwise to be exercised by the Shareholders. The Board
of Directors may, subject to the provisions of the Companies Law, delegate
any or all of its powers to committees, each consisting of one or more
Directors, and it may, from time to time, revoke such delegation or alter
the composition of any such committees. Unless otherwise expressly provided
by the Board, such committees shall not be empowered to further delegate
such powers.
Under the Companies Law, a board of directors of a public company must hold
at least one meeting every three months. During Fiscal 1999 and since the
last combined Extraordinary and Annual Meeting of the Company's
Shareholders held in June 1999, the Board of Directors held six meetings.
Each of the incumbent directors, attended (including through the means of
the appointment of an alternate director or through a proxy as permitted
under the Company's Articles of Association) at least 75% of the aggregate
of (i) the total number of meetings of the Board of Directors (held during
the period that such Director was in office) and (ii) the total number of
meetings of all committees of the Board of which such Director was a member
(held during the period that such Director was in office).
Committees of the Board of Directors
- ------------------------------------
The Board of Directors of the Company has an Executive Committee, Audit
Committee and a Compensation Committee.
Executive Committee
- -------------------
On June 29, 1999, the Board of Directors of the Company resolved to
establish an Executive Committee. It further resolved to empower and
authorize the committee to exercise any and all of the powers and
authorities vested with the Board of Directors relating to the management
of the business of the Company, unless limited at any time by action by the
Board of Directors, provided that no such action by the Board of Directors
shall invalidate any action by the Executive Committee taken prior thereto,
and provided further, that no action shall be taken by the Executive
Committee which shall materially alter the nature of the business of the
Company, dispose of any substantial assets of the Company, acquire any
substantial new business or approve the Company's budget. The authorities
of the Executive Committee is subject to the provisions of the Companies
Law, including the provisions prohibiting delegation by a board of
directors to committees of certain issues. The Executive Committee consists
of the following four Directors: Jacob A. Frenkel (Chairman); Thomas G.
Hardy; Ahron Dovrat; S.A. Spencer; and Prof. Zev Tadmor. During Fiscal 1999
and since the last combined Extraordinary And annual Meeting of the
Company's Shareholders held in June 1999, the Executive Committee held four
meetings.
Audit Committee
- ---------------
Under the Companies Law, the board of directors of a public company,
including a company whose shares are traded in a stock exchange abroad,
must appoint an audit committee, comprised of at least three directors
including all of the company's independent directors, but excluding: the
chairman of the board of directors; the general manager; the chief
executive officer; and any controlling shareholder and any Director
employed by the Company or who provides services to the Company on a
regular basis. The role of the audit committee is to review and make
recommendations with respect to flaws in the business management of the
company, in consultation with the internal auditor and the company's
independent accountants, and suggest an appropriate course of action.
The approval of the Audit Committee is required to effect specified actions
and transactions with office holders and interested parties. An interested
party is defined in the Companies Law as a 5% or greater shareholder, any
person or entity who has the right to designate one director or more or the
general manager of the company or any person who serves as a director or as
a general manager. Under the Nasdaq Stock Market rules, the Company is
required to form an audit committee consisting of at least three independent
directors. The responsibilities of the audit committee under the Nasdaq
Stock Market rules include, among other things, evaluating the independence
of a company's outside auditors.
The Company's Audit Committee currently consists of the following three
Directors, each of whom qualify as an independent Director in compliance
with the Nasdaq Stock Market rules: S.A. Spencer (Chairman); Prof. Zehev
Tadmor; and Mark Tabak. During Fiscal 1999 since the last combined
extraordinary and annual meeting of the Company's Shareholders held in June
1999, the Audit Committee held five meetings.
Internal Auditor
- ----------------
Under the Companies Law, the board of directors must appoint an internal
auditor proposed by the audit committee. The role of the internal auditor
is to examine, whether the company's actions comply with the law, integrity
and orderly business procedure. Under the Companies Law, the internal
auditor may not be an interested party, an office holder, or an affiliate,
or a relative of an interested party, an office holder or affiliate, nor
may the internal auditor be the Company's independent accountant or its
representative. Pursuant to the recommendation of the Audit Committee on
March 30, 2000, the Board of Directors approved the appointment of
Rosenbaum-Holtzman as the Company's internal auditor.
Compensation Committee
- ----------------------
The Compensation Committee, which consists of three directors, administers
the Company's stock option plans and the Company's overall compensation
practices. During Fiscal 1999 since the last combined extraordinary and
annual meeting of the Company's Shareholders held in June 1999, the
Compensation Committee held three meetings.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
- ---------------------------------------------------------------------------
The members of the Company's Compensation Committee as of December 31, 1999
were Aharon Dovrat (Chairman), Thomas Hardy and Mark Tabak (the "1999
Compensation Committee"). No member of the 1999 Compensation Committee is
currently or was at any time during the fiscal year ended December 31, 1999
an officer or employee of the Company. No executive officer of the
Company's served on the board of directors or compensation committee of any
entity which has one or more executive officers serving as members of the
Company's Board of Directors or Compensation Committee.
Directors' Compensation
- -----------------------
Each of the Directors of the Company who serves on any one or more of the
sub-committees of the Board (other than the Chairman), are entitled to a
cash retainer fee for participation in meetings of the Board of Directors
or any sub-committee at $2,500 per calendar quarter. Directors (other than
the Chairman) are not entitled to receive any additional per-meeting fee
but they will be reimbursed for their reasonable travel and accommodation
expenses. In addition to the cash retainer, each of the Directors of the
Company who serves on any one or more of the sub-committees of the Board
(other than the Chairman) will be granted options to purchase 50,000
Ordinary Shares, exercisable for five years at a per-share purchase price
of $5.0625, which is not less than 85% of the last reported sales price of
the Company's Ordinary Shares on the Nasdaq Stock Market on the grant date.
60% of the amount of options granted to each Director will vest
immediately, and additional 20% will vest on each of the first and second
anniversaries of the grant date.
Pursuant to the Company's 1999 Share Option Plan, during the 1999 fiscal
year and since the last combined extraordinary and annual shareholders
meeting held in June 1999, the Board of Directors approved the grant of
options to the Chairman of the Board, Jacob A. Frenkel, to purchase up to
500,000 Ordinary Shares, and options to purchase up to 50,000 Ordinary
Shares to each of the other members of the Board of Directors who is also a
member of any Board sub-committee. The Company granted options to purchase
up to [_____] Ordinary Shares to each member of the Board of Directors.
APPROVAL OF SPECIFIED RELATED PARTY TRANSACTIONS UNDER ISRAELI LAW
Fiduciary Duties of Office Holders
- ----------------------------------
The Companies Law imposes a duty of care and a duty of loyalty on all
office holders of a company, including directors and executive officers.
The duty of care requires an office holder to act with the level of care
which a reasonable office holder in the same position would have acted
under the same circumstances. The duty of care includes a duty to use
reasonable means to obtain: information on the appropriateness of a given
action brought for his approval or performed by him by virtue of his
position; and all other important information pertaining to such actions.
The duty of loyalty of an office holder includes a duty to: refrain from
any conflict of interest between the performance of his duties in the
company and his personal affairs; refrain from any activity that is
competitive with the company; - refrain from exploiting any business
opportunity of the company to receive a personal gain for himself or
others; and disclose to the company any information or documents relating
to a company's affairs which the office holder has received due to his
position as an office holder. Each of the directors of the Company and each
of the persons listed in the table under "-- Executive Officers" below is
an office holder.
Disclosure of Personal Interests of an Office Holder
- ----------------------------------------------------
The Companies Law requires that an office holder of a company promptly
disclose to the company any personal interest that he may have and all
related material information known to him, in connection with any existing
or proposed transaction by the company. If the transaction is an
extraordinary transaction, the office holder must also disclose any
personal interest held by: the office holder's spouse, siblings, parents,
grandparents, descendants, spouse's descendants and the spouses of any of
these people; or any corporation in which the office holder is a 5% or
greater shareholder, director or general manager or in which he has the
right to appoint at least one director or the general manager. Under the
Companies Law, an extraordinary transaction is a transaction: other than in
the ordinary course of business; otherwise than on market terms; or that is
likely to have a material impact of the company's profitability, assets or
liabilities. Under the Companies Law, once an office holder complies with
the above disclosure requirement, the board of directors may approve a
transaction between the company and an office holder, or a third party in
which an office holder has a personal interest, unless the articles of
association provide otherwise. A transaction that is adverse to the
company's interest may not be approved. If the transaction is an
extraordinary transaction, both the audit committee and the board of
directors must approve the transaction. Under specific circumstances,
shareholder approval may also be required. An office holder who has a
personal interest in a matter, which is considered at a meeting of the
board of directors or the audit committee, may not be present when this
matter is considered or vote on this matter.
Disclosure of Personal Interests of Controlling Shareholders
- ------------------------------------------------------------
Under the Companies Law, the disclosure requirements which apply to an
office holder also apply to a controlling shareholder of a public company.
The Companies Law defines "control" as the ability to direct the activity
of a corporation, except for ability that is solely derived from an
officer's or director's position in such company. The Companies Law
includes a presumption under which a person which holds a majority of the
voting power of a company or the power to elect more than half of such
company's directors controls such company. In addition, for purposes of
approving certain transactions the definition of a controlling shareholder
includes a shareholder, or two or more shareholders who have the same
interest in the transaction, that holds 25% or more of the voting rights in
a public company if no other shareholder owns more than 50% of the voting
rights in the company. Extraordinary transactions with a controlling
shareholder or in which a controlling shareholder has a personal interest,
and the terms of compensation of a controlling shareholder who is an office
holder, require the approval of the audit committee, the board of directors
and the shareholders of the company. The shareholder approval may include
either: at least one-third of the shareholders who have no personal
interest in the transaction and are present and voting, in person, by proxy
or by written ballot, at the meeting; or a majority of the voting power
present and voting, provided that the shareholders who have no personal
interest in the transaction who vote against the transaction do not
represent more than one percent of the voting rights in the company.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals are the executive officers and key management of
the Company:
Name Position and Business Experience
- ---- --------------------------------
Yacha Sutton Mr. Yacha Sutton, age 56, has served as the President
and the Chief Executive Officer of the Company since
June 1999. Between July 1998 and April 1999, Mr.
Sutton served as the Chief Executive Officer of
Scanvec Amiable Ltd. Between March 1995 and February
1998, Mr. Sutton served as the President and Chief
Executive Officer of Laser Industries Ltd. Prior to
such time, he served as an Executive Vice President
and Chief Financial Officer of Laser Industries Ltd.
Sagi Genger Mr. Sagi Genger, age __, was appointed Chief
Financial Officer of the Company in November 1999.
Mr. Genger was formerly with the mergers and
acquisitions department of Donaldson, Lufkin, and
Jenrette, a leading Wall Street investment bank.
Prior to that, he worked at Holding Capital Group, a
boutique investment house. Mr. Genger has an MBA and
BS in Finance, International Management and Legal
Studies from the Wharton School of Business.
Dr. Michael Slatkine Dr. Michael Slatkine, age __, was appointed Vice
President new business development in September 1999
after having served as Vice President Marketing since
March 1998, and prior to that as Senior Vice
President-New Business Development of Laser
Industries Ltd. since 1995. He managed the marketing
and development activities of Sharplan Lasers Inc., a
subsidiary of Laser Industries, from 1992 to 1995.
Dr. Slatkine holds a Ph.D. in Applied Physics from
the Weizmann Institute of Science and completed post
doctoral research at Los-Alamos National
Laboratories, New Mexico, USA.
Dr. Zvi Ladin Dr. Zvi Ladin, age 48, joined the Company in 1995 as
Vice President for Regulatory and Clinical Affairs.
Mr. Ladin received a doctorate in Medical Engineering
from the Joint MIT/Harvard Medical School Program in
Health Sciences and Technology in 1985. He served as
an Associate Professor on the faculty of the
Biomedical Engineering Department at Boston
University from 1985 to 1995 and as a Science Advisor
to the Food and Drug Administration from 1990 to
1995.
Hadar Solomon Mr. Hadar Solomon, age __, was appointed Vice
President, General Counsel and Secretary in March
1998, after having served as Vice President,
Corporate Affairs, General Counsel and Secretary of
Laser Industries, Ltd. since May 1998. From July 1994
to May 1998, he served as Assistant General Counsel
of Laser Industries. Mr. Solomon is a Graduate of the
Faculty of Law of the Hebrew University of Jerusalem
and is a member of the Israeli Bar.
Raffi Werner Mr. Raffi Werner, age 42, was appointed Vice
President Operations of the Company in September
1999. Has served as Acting General Manager of Laser
Industries Ltd. since February 1998 and as Vice
President of International Operations of Laser
Industries since May 1997. From July 1995 to May
1997, he served as Laser's Vice President,
Operations. He served as Laser Industries' Director
of Operations from April 1993 to June 1995. Mr.
Werner holds a B.S. in Industrial Engineering from
Tel Aviv University.
Louis Scafuri Mr. Louis Scafuri, age 48, joined the Company in May
1999 as the Chief Executive Officer of North America
Operations. He presently serves as the Company's
Chief Operating Officer. Prior to this, Mr. Scafuri
was the President and Chief Operations Officer for
Marquette Medical Systems, which was acquired by GE
Medical Systems. During his fourteen years with
Marquette Medical Systems, he held a number of
management and leadership positions, including
President of Marquette Cardiology Group, Executive
Vice President of Europe, Middle Eastern and African
Operations and President of Marquette's Corometrics
Medical System Subsidiary.
Hans Edel Mr. Hans Edel, age 46, joined the Company as Managing
Director of Medizintechnik Vertriebs GmbH, a
subsidiary of the Company, in October 1995 and
continues to serve in such capacity. Between April
1988 and December 1991 Mr. Edel served as the Export
Manager of the Aesthetic and Medical line of Dr. K.
Honle GmbH and from 1991 to 1995 as Managing
Directors of the aesthetic/medical sister company,
Dr. K. Honle Medizintechnik GmbH. Between July 1991
and March 1995, Mr. Edel served as the Export Manager
of IWIS Ketten Joh. Winklhofer & Soehne. Between July
1980 and June 1981, Mr. Edel served as the Customer
Service Manager at EG&G Instruments GmbH. Mr. Edel
graduated studies of Marketing and Business
Administration in Munich.
Dan Winterstein Mr. Dan Winterstein, age __, joined Laser Industries
(Sharplan) in 1984 as Manager of European Operations
and progressed gradually into his current position,
as General Manager of International Sales. In his
previous position Mr. Winterstein served as Vice
President of Sales and Marketing at COM Medical
Systems, a medical start up (and briefly managed the
company). Other employment included a 3 year period
of sales appointment in Germany with Mennen Medical
and, prior to that, engaged in research and
development activities for Elbit Computers in Haifa,
Israel. Mr. Winterstein obtained his B.Sc. in
Electric Engineering from the Israeli Institute of
Technology, the Technion in 1969 and completed a one
year course of International Business Administration
at the Warton Business School in Pennsylvania in
1981.
Peter D'Errico Mr. Peter D'Errico, age 42, joined the Company in
January 2000 as Vice President, Corporate Marketing.
Previously, Mr. D'Erico was Vice President, Worldwide
Marketing for Chiron Diagnostics. During his sixteen
years with Chiron Diagnostics and CIBA Corning
Diagnostics, he held a number of management and
leadership position including Vice President,
International Group, Managing Director, CIBA Corning
Diagnostics Ltd., Halstead England and Executive
Director, New Business Development. Mr. D'Errico
received a Masters in Business Administration from
Harvard University in 1983.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth information regarding beneficial ownership
of the Company's Ordinary Shares as of April __, 2000 (except as otherwise
specified in the footnotes) by (i) each person who is the beneficial owner
of more than 5% of the outstanding Ordinary Shares, (ii) all directors of
the Company, (iii) the Company's Chief Executive Officer and four most
highly compensated executive officers, and (iv) all directors and executive
officers as a group. The Company had approximately ______ Ordinary Shares
outstanding as of April __, 2000.
<TABLE>
<CAPTION>
OPTIONS TOTAL
EXERCISABLE BENEFICIAL PERCENTAGE
BENEFICIAL OWNER SHARES OWNED WITHIN 60 DAYS OWNERSHIP OWNERSHIP
- --------------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
FMR Corp. (1) 2,445,350 0 2,445,350
Arie Genger (2) 2,279,757 0 2,279,757
Bernard Gottstein (3) 1,939,634 0 1,939,634
Aharon Dovrat
Jacob A. Frenkel
Phillip Friedman
Thomas Hardy
Darrell S. Rigel
Sash A. Spencer
Yacha Sutton
Mark H. Tabak
Zehev Tadmor
Louis Scafuri
Alon Maor
Dan Winterstein
All Directors and
executive officers as
a group (__ persons)
</TABLE>
(1) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109.
(2) The address of Mr. Arie Genger is 375 Park Avenue, New York, New York
10152. The 2,279,757 shares include (a) 59,210 shares held directly by
Mr. Genger, (b) 2,176,547 shares held by corporations directly or
indirectly controlled by Mr. Genger, which controlled corporations
might be deemed to share voting and investment power with Mr. Genger as
to these shares, (c) 40,000 shares owned by a trust for the benefit of
a minor child of a third party of which Mr. Genger is sole trustee, as
to which Mr. Genger disclaims beneficial ownership and (d) 4,000 shares
beneficially owned by Mr. Genger's spouse, as to which Mr. Genger
disclaims beneficial ownership.
(3) The address of Mr. Gottstein is 550 West 7th Avenue, Suite 1540,
Anchorage, Alaska 99501.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In 1999, the Company ceased to qualify as a "foreign private issuer" (as
defined in the Exchange Act) and became subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) requires that the Company's directors and executive officers,
and holders of more than 10% of the Company's Ordinary Shares outstanding,
file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Ordinary Shares. The
Company believes that during the fiscal year ended December 31, 1999, its
directors and executive officers, and holders of more than 10% of its
Ordinary Shares complied with the filing requirements of Section 16(a),
except for Prof. Rigel (who filed one late report). In making this
statement, the Company has relied solely on a review of copies of reports
filed under Section 16(a) furnished to the Company and on the written
representations of its directors and executive officers.
EXECUTIVE COMPENSATION
The following table sets forth information concerning total compensation
earned by or paid to the Chief Executive Officer and the four other
highest-paid executive officers of the Company employed as of December 31,
1999 (the "Named Officers") during the fiscal years indicated for services
rendered to the Company and its subsidiary.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ---------------------------
SECURITIES
VARIABLE OTHER UNDERLYING
COMPENSATION ANNUAL OPTIONS/SARS ALL OTHER
NAME AND SALARY BONUS COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------- ------ -------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Yacha Sutton 1999 $ 87,298 0 $28,977 (7) 223,005 $318,750 (2)
President and Chief ---- ---- ---- 660,284 (2)
Executive Officer
Shimon Eckhouse 1999 145,687 ---- 36,103* 57,500 150,911 (3)
Former Chief 1998 201,574 50,273 314,610
Executive Officer 1997 183,640 93,993 57,500
Louis Scafuri 1999 163,461 275,519 16,190 (8) 445,000 (9)
Chief Executive
Officer, North America 1998
Operation 1997
Alon Maor 1999 282,153 ---- 442,453 (4) 100,000
{to come} 1998
1997
Dan Winterstein 1999 145,000 50,000 48,041 (5) 60,000
{to come} 1998 48,000 49,333
1997
Hans Edel 1999 86,354 61,893 20,379 (6) 120,000
Managing Director of 1998 89,445 67,402 68,754
Medizintechnik
Vertriebs 1997 93,750 117,101 44,584
</TABLE>
- -------------------
(1) Does not include perquisites or other personal benefits, securities
or property, the aggregate value of which is less than $50,000 or
10% of the Named Executive's salary and bonus.
(2) Payments made pursuant to non-compete agreement between Yacha
Sutton and the Company in connection with the acquisition of Laser
Industries Ltd. by the Company.
(3) Payments made as part of post-retirement benefits following Mr.
Eckhouse's resignation as the CEO.
(4) Payment include $102,252 for reimbursement relating to flat rental;
$312, 223 for sales commission.
(5) Payments include $14,870 constituting social lost and $17,080 for
cost of Company provided vehicle.
(6) Payment include $9,941 in vacation pay and 7,914 for cost of
Company provided vehicle.
(7) Payment include $9,000 for flat rent; $6,000 contributed by the
Company to an Advance Fund Study.
(8) To Come
(9) Options became exercisable on ___________________.
Option/SAR Grants in Last Fiscal Year
- -------------------------------------
Stock options exercisable for Ordinary Shares are granted to certain
employees of the Company pursuant to the above-described Company's share
option plans in order to secure and retain the services of highly qualified
persons by rewarding key employees for their contribution toward increasing
the value of the Company's Ordinary Shares. The following table provides
information on options granted to the Named Officers during the last fiscal
year pursuant to the Company's option plans.
The table also shows, among other data, hypothetical potential gains from
options granted in fiscal 1999. These hypothetical gains are based entirely
on assumed annual growth rates of 5% and 10% in the value of the price of
Ordinary Share over the life of the options granted in Fiscal 1999. The
assumed rates of growth were selected by the Securities and Exchange
Commission (the "Commission") for illustrative purposes only, and are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------
The following table sets forth information regarding SARs granted
to the Named Executive Officers during fiscal 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL OPTION GRANTS FOR OPTION TERM
------------------------------------------------ ------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE EXPIR-
OPTIONS IN FISCAL PRICE ATION
NAME GRANTED (#)(1) YEAR ($/SH) DATE 5%($) 10%($)
- ------------- ------------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Yacha Sutton................ 100,000 4.31% 6.000 06/09 377,324 956,245
100,000 5.063 12/09 318,399 806,911
Shimon Eckhouse............. _____ % _____ -- --
Louis Scafuri............... 450,000 9.7% 5.94 06/09 1,680,982 4,260,074
Alon Maor................... 100,000 2.5% 5.063 06/09 318,399 806,911
Dan Winterstein............. 35,000 .3% 5.94 12/09 130,743 331,339
25,000 5.063 06/09 79,600 201,727
Hans Edel................... 50,000 2.6% 5.94 11/08 186,775 473,342
25,000 7.94 12/09 124,832 316,358
45,000 5.063 143,280 363,110
</TABLE>
(1) All options have a term of ten years from respective grant dates.
Fiscal Year-End Option Holdings
The following table summarizes for each of the Named Officers option
exercises during fiscal 1999, including the aggregate value of gains on the
date of exercise, the total number of unexercised options for Ordinary
Shares, if any, held at December 31, 1999 and the aggregate dollar value of
unexercised in-the- money options for Ordinary Shares, if any, held at
December 31, 1999. Value of unexercised in-the-money options at fiscal
year-end is the difference between the exercise or base price of such
options and the fair market value of the underlying Ordinary Shares on
December 31, 1998, which was $(_____) per share. These values have not
been, and may never be, realized, as these options have not been, and may
never be, exercised. Actual gains, if any, upon exercise will depend on the
value of Ordinary Shares on the date of any exercise of options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information on the number of Options
held by the Named Executive Officers at fiscal year-end 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
--------------------------- --------------------------
SHARES
ACQUIRED ON
EXERCISE VALUE
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ------------- ----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Yacha Sutton......... 0 -- 73,005 150,000 178,150 628,150
Shimon Eckhouse...... 257,110 1,533,018 43,125 14,375 0 0
Louis Scafuri........ 0 -- 445,000 0 1,612,235 0
Alon Maor............ 0 -- 0 100,000 0 450,000
Dan Winterstein...... 0 -- 0 60,000 0 240,130
Hans Edel............ 29,751 125,326.00 5,000 115,000 8,115 416,110
</TABLE>
- -------------------
The closing price of the Common Stock on December 31, 1999 was $9.563 per
share.
Employment Agreements, Termination Provisions and Change in Control Arrangements
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT WITH YACHA SUTTON
Effective January 1, 2000, the Company entered into an employment
agreement with Yacha Sutton (the "Sutton Agreement") pursuant to which Mr.
Sutton will be employed by the Company in the position of Chief Executive
Officer. The Sutton Agreement will terminate automatically on December 31,
2002, unless otherwise agreed between Mr. Sutton and the Company in writing
and with the approval of the Board or unless earlier terminated under
specified circumstances.
The Sutton Agreement provides for monthly base salary of U.S.
$20,000. In addition to the base salary, the Company will procure for Mr.
Sutton a "Managers' Insurance Policy" (for life insurance and pension) and
contribute to such policy an amount equal 5% of Mr. Sutton's base salary
and 8.33% on account of the Company's severance payment obligations, and
the Company will withhold 5% from the Executive's base salary and
contribute such amount to the policy; the Company will pay an amount of up
to 2.5% of Mr. Sutton's base salary as premium for a disability insurance
policy, and an additional 7.5% of the base salary to an "Advanced Study
Fund" (in which Mr. Sutton will participate in an amount of 2.5% of his
base salary by way of withholding from his pay); Mr. Sutton will be
entitled to use a Company vehicle in accordance with the Company's existing
policies; and the Company may provide Mr. Sutton with such additional
benefits as generally provided by the Company to its senior executives. The
Sutton Agreement provides for non- competition and non-solicitation
covenants for a period of two years following the date of termination of
the Sutton Agreement.
Mr. Sutton will be granted options to purchase up to 400,000 of the
Company's Ordinary Shares under the terms and conditions of the Company's
1999 Option Plan (the "Plan") (subject to shareholder approval thereof).
The exercise price per share for the shares covered by the said options
will be $8.875 (the closing price of the Ordinary Shares on the Nasdaq
Stock Market on January 3, 2000). The options will vest in three annual
installments, the first installment occurring on December 31, 2000, with
respect to 66,666 shares, and the second and third installments occurring
on December 31 of 2001 and 2002, respectively, with respect to 166,667
shares each. Upon any termination of Mr. Sutton's employment any unvested
options will generally expire, provided that if terminated by the Company
other than for cause, a number of options out of the then pending
installment will become vested upon such termination, proportionately to
the time elapsed since the immediately preceding installment and until such
termination. Unless the Sutton Agreement and Mr. Sutton's employment with
the Company is terminated by Mr. Sutton for any reason or by the Company
for cause, all vested options will be exercisable at any time thereafter
until December 31, 2009, and will otherwise be subject to the provisions of
the Plan. Any unvested options will become vested immediately prior to the
occurrence of a "Change of Control" (as defined in the Plan).
In the event of any termination of the Sutton Agreement and Mr.
Sutton's employment, the Company will only be obligated to pay (i) base
salary and benefits until the effective date of termination, provided that
Mr. Sutton continues his employment obligations through such period (if so
required by the Company), (ii) any severance payment to which Mr. Sutton
will be entitled pursuant to applicable Israeli law ("Severance Payment")
less any amounts received by Mr. Sutton from his Managers' Insurance on
account of severance payment and (iii) earned but unpaid benefits under
Company plans.
In addition to the payments specified above, if Mr. Sutton's
employment is terminated by the Company at any time other than for cause
(as defined in the Sutton Agreement), then the unpaid balance of the
amounts payable by the Company to Mr. Sutton pursuant to the
Non-Competition Agreement, dated February 22, 1998, between the Company and
Mr. Sutton will be paid to Mr. Sutton in a lump sum, in lieu of in monthly
installments.
EMPLOYMENT AGREEMENT WITH LOUIS SCAFURI
The Company and ESCD Inc., a wholly owned subsidiary of the
Company, are parties to an employment agreement with Louis Scafuri (the "
Scafuri Agreement")pursuant to which Mr. Scafuri serves as CEO North
American Operations. The Scafuri Agreement is effective as of April 1,
1999, and will continue in effect (unless previously terminated) until
March 31, 2002, except that on each March 31 (commencing March 31, 2000),
the Scafuri Agreement will be extended for an additional period of one year
unless either party delivers a notice of intent not to renew not later than
January 1 of any year. The Scafuri Agreement may be terminated by either
party by giving a six-months prior written notice of the intent to
terminate the agreement; provided that in the event of a Change in Control
(as defined in the Scafuri Agreement), the Company may exercise its right
to terminate Mr. Scafuri's employment only upon at least one year's prior
notice.
The Scafuri Agreement provides for a monthly base salary of $20,833
and a signing bonus of $125,000. Mr. Scafuri is also eligible for an annual
bonus in an amount of up to 80% of the base salary provided that the
Company achieves certain performance goals. Mr. Scafuri is also subject to
a two year non- compete covenant and a one-year non-solicitation covenant
following the date he ceases to be employed by the Company.
EMPLOYMENT AGREEMENT WITH ALON MAOR
ESC Japan Company Ltd . ("ESC Japan"), a wholly owned subsidiary of
the Company, is party to an employment agreement with Alon Maor ( the "Maor
Agreement") pursuant to which Mr. Maor serves as President and
Representative Director of ESC Japan. The Maor Agreement provides for a
two-year term ending January 14, 2001. The Maor Agreement may be terminated
by either party upon the expiration of the term by giving six-months prior
notice.
Pursuant to the Maor Agreement, Mr. Maor will receive an annual
base salary of (Y)22,000,000 (twenty- two million yen), an annual housing
allowance of approximately (Y)12,000,000, an annual allowance of
(Y)5,000,000 for the education of his children (subject to a tax gross up)
and a company car and reimbursement for club membership dues. In addition,
ESC Japan will provide Mr. Maor with a retirement benefit after his first
year of service, which amount will equal the gross monthly salary at the
time of retirement and which will be increased in subsequent years by one
month's gross salary for each full year of employment by Mr. Maor. ESC
Japan will also pay 50% of the cost of Mr. Maor's Japanese National Health
Insurance Premiums.
The Maor Agreement also provides for granting of options to
purchase an aggregate of 20,000 of Company Ordinary Shares. The options
will be granted ratably over a period of five years commencing on the first
anniversary of Mr. Maor's service. The Maor Agreement also provides for Mr.
Maor to enter into a confidentiality and non-competition agreement in
accordance with standard Company policy.
EMPLOYMENT AGREEMENT WITH HANS EDEL
ESC Medizintechnik Vertbriebs GmbH Munich, a wholly owned
subsidiary of the Company, is party to an employment agreement with Hans
Edel ( the "Edel Agreement") pursuant to which Mr. Edel serves as the Chief
Executive Officer for the Company's business unit in the Europe/ Africa /
Near and Middle East region. The term of the Edel Agreement expires
December 31, 2001. As of January 1, 2000, Mr. Edel will receive an annual
base salary of DM 350,000 (350,000 Deutsche Marks), will be eligible to
earn up to DM 175,000 in bonus, depending on success and performance, and
is eligible to receive certain commissions. In addition to the base salary,
Mr. Edel will also be entitled to a company car.
The Edel Agreement also provides for the granting to Mr. Edel of
options to purchase an aggregate of 30,000 Company Ordinary Shares in each
of the years 2000 and 2001 based on the fair market value at the time of
the grant. The option granted in 2000 will become exercisable as of
November 30, 2000, and the option granted in 2001 will become exercisable
as of November 30, 2001. In addition, Mr. Edel will be granted options to
purchase an aggregate of 15,000 Company Ordinary Shares in each of the
years 2000 and in 2001, also based on the fair market value at the time of
the grant. These options will only be exercisable if certain financial
goals are achieved. The Edel Agreement also provides that the option for
19,834 Company Ordinary Shares previously granted to Mr. Edel would become
immediately exercisable. Pursuant to the Edel Agreement, in the event of a
termination of Mr. Edel's as a result of death or disability, or for
reasons which are beyond Mr. Edel's control, Mr. Edel will be entitled to
six-months salary which will be reduced by any payments received by Mr.
Edel from any insurance plan maintained or sponsored by the Company.
Compensation Committee Report
- -----------------------------
The Compensation Committee administers the stock option plans of the
Company and its subsidiaries, determines the base compensation and
bonus/incentive compensation of the Named Officers of the Company and
reviews the recommendations of the Chief Executive Officer of the Company.
General Compensation Policy
- ---------------------------
The Committee's fundamental compensation policy is to make a substantial
portion of executive officers' compensation contingent on the Company's
growth, financial performance and meeting certain specific targeted events.
Accordingly, in addition to base salary, we offer bonuses/incentive
compensation (which are tied to the Company's and the executive's
performance goals) and stock option awards. The Committee believes that
providing incentives to the executive officers through both cash bonus and
equity based incentives (stock options in the Company) benefits
shareholders by aligning the long-term interests of Shareholders and
employees.
Each executive officers compensation package consists of: (i) salary, (ii)
benefits, which include medical, dental, life insurance and participation
in a 401(k) plan for United States employees and comparable benefits for
employees in other locations and (iii) may include either or both stock
options under the relevant stock option plan of the Company and/or its
subsidiaries; and/or eligibility for incentive compensation.
Factors
- -------
The principal factors considered in establishing the components of each
executive officer's compensation package for the 1999 fiscal year are
summarized below. The Committee may, in its discretion, apply entirely
different factors, particularly different measures of financial
performance, in setting executive officers' compensation for future fiscal
years. However, all compensation decisions will be designed to further the
general compensation policy indicated above.
Base Salaries. Base salaries for executive officers are determined
based upon the Compensation Committee's evaluation of the responsibilities
of the position held and the experience of the individual, and by reference
to historical levels of salary paid by the Company and its predecessors.
Salary adjustments are based on a periodic evaluation of the
performance of the Company and each executive officer, and also take into
account new responsibilities. In the case of executive officers with
responsibility for a particular business unit, such unit's financial
results are also considered. The Compensation Committee takes into account
the effect of corporate transactions that have been consummated during the
relevant year and, where appropriate, also considers non-financial
performance measures. These include increases in market share,
manufacturing efficiency gains, improvements in product quality and
improvements in relations with customers, suppliers and employees.
Annual Incentive Compensation Awards. The variable compensation
payable annually to executive officers (including the Chief Executive
Officer) generally consists principally of annual incentive compensation
awards. Annual incentive compensation provides for bonuses determined in
accordance with a formula relating to achievement of Company performance
goals. Such performance goals are set annually by the Compensation
Committee.
Other Incentive Compensation Awards. The other principal component
of executives' compensation is stock options, which are intended as a tool
to attract, provide incentive to and to retain those executives who make
the greatest contribution to the business, and who can have the greatest
effect on the long term profitability of the Company. The exercise price of
stock options is set at a price equal to the market price of the Ordinary
Share at the time of the grant. The options therefore do not have any value
to the executive unless the market price of the Ordinary Shares rises. The
Compensation Committee believes that these stock options more closely align
the executives' interests with those of its stockholders, and focus
management on building profitability and long-term stockholder value.
Certain Agreements. The Compensation Committee recognizes that
there are circumstances which may result in departure or distraction of the
executive officers and other key personnel. Because the Compensation
Committee considered it essential to the best interests of its shareholders
to foster the continuous employment of the executive officers, it
determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of the executive officers
to their assigned duties without distraction in the face of the prevailing
circumstances. Accordingly, the Company entered into employment agreements
with Messrs. Sutton, Scafuri, Maor, Edel and certain other senior
executives of the Company (See Employment Contracts, Termination of
Employment and Change-in-Control Arrangements, above) to ensure retention
and motivation of these executives. By entering into these retention
agreements with the current management, the Company's intention was to
provide these senior executives with adequate incentive to remain with the
business. In determining the executive compensation levels (in the
agreements described above and otherwise), consideration was given to,
among other things, the individual executive's experience and historical
and anticipated contribution to the Company. Consideration was also given
to the amount and forms of compensation paid to like executives by other
companies in the Company's industry, to the extent that such information
was available. No specific weight is given to any of these considerations.
Deductibility of Compensation. The Compensation Committee will, in
general, seek to ensure that compensation paid to its executive officers
will not fail to be deductible to the Company by reason of application of
Section 162(m) of the Code, The Compensation Committee believes, however,
that it is appropriate to retain flexibility to authorize payments of
compensation that do not qualify for deductibility if, in the Committee's
judgment, it is in the Company's best interest to do so.
The Compensation Committee
of the Board of Directors
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return to the Nasdaq Stock Market Index and the S&P ___ Index over the
three year period beginning on December 31, 1996 (the last trading day of
the first fiscal year in which the Company's Ordinary Shares were publicly
traded), and ending on December 31, 1999. The total shareholder return
assumes $100 invested at the beginning of the period in the Company's
Ordinary Shares, Nasdaq Stock Market Index and the S&P ___ Index. It also
assumes reinvestment of all dividends. Past financial performance should
not be considered to be a reliable indicator of future performance, and
investors should not use historical trends to anticipate results or trends
in future periods.
[PERFORMANCE GRAPH]
1996 1997 1998 1999
ESC Medical Systems $100
Nasdaq Stock Market Index $100
S&P ____ Index $100
PROPOSALS OF SHAREHOLDERS
Under Rule 14a-8 of the Exchange Act, any Shareholder of the Company who
intends to present a proposal at the 2001 Annual General Meeting of
Shareholders and who wishes the proposal to be included in the proxy
statement for such meeting must submit the proposal in writing to the
Secretary of the Company, at the principal executive offices of the
Company. The proposal must be received no later than ______, 2000.
Shareholders who do not desire to comply with the requirements of Rule
14a-8, must satisfy the requirements of the Companies Law in order to have
a proposal presented at the 2001 Annual General Meeting. Under the
Companies Law, only Shareholders who hold at least one percent (1%) of the
outstanding voting rights are entitled to request that the Board of
Directors of the Company include a proposal, in a future shareholders
meeting, provided that such proposal is appropriate to be discussed in such
meeting.
Rule 14a-4(c)(1) of the Exchange Act governs the Company's use of its
discretionary proxy voting authority with respect to a shareholder proposal
that is not addressed in the Company's proxy statement. Rule 14a- 4(c)(1)
provides that if a proponent of a proposal fails to notify the Company at
least 45 days prior to the first anniversary date of the date of mailing of
the prior year's proxy statement, then the Company will be allowed to use
its discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement.
With respect to the Company's Annual General Meeting of Shareholders to be
held in 2001, if the Company is not provided with notice of a shareholder
proposal, which proposal has not been submitted for inclusion in the
Company's proxy statement, by ___________, 2001, the Company will be
permitted to use its voting authority as described above.
OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters
that may be presented at the Annual Meeting other than those mentioned in
the attached Company's Notice of Annual Meeting of Shareholders. If any
other matters do properly come before the Annual Meeting, it is intended
that the persons named as proxies will vote, pursuant to their
discretionary authority, according to their best judgment in the interest
of the Company.
ADDITIONAL INFORMATION
Copies of the Company's 1999 Annual Report to Shareholders are being mailed
to the shareholders simultaneously with this Proxy Statement. The financial
statements and financial information appearing in such Annual Report are
incorporated by reference herein.
By Order of the Board of Directors,
Hadar Solomon, Adv.
Secretary, Vice President and General Counsel
Yokneam, Israel
April ___, 2000
ANNEX A
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of the __ day
of ______, 2000 by and between ESC Medical Systems Ltd., a company
incorporated under the laws of the State of Israel, with it principal
offices at New Industrial Park, P.O. Box 240 Yoqneam, 20692 (the
"Company"), and ________________ ("Indemnitee"), residing at the address
set forth beneath Indemnitee's signature to this Agreement.
WHEREAS, the Company and Indemnitee recognize the difficulty in obtaining
full and adequate liability insurance for directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors,
officers, employees, agents and fiduciaries to expensive litigation risks
at the same time as the availability and coverage of liability insurance
have been severely limited;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to continue to provide services to the
Company, wishes to provide for the indemnification and advancement of
expense to Indemnitee, to exempt Indemnitee from liability to the Company,
and agree to procure reasonable insurance coverage, all of the foregoing to
the maximum extent permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and exempted by the Company, and enjoy
appropriate insurance coverage, all as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
a. INDEMNIFICATION OF EXPENSES. The Company shall indemnify
Indemnitee to the fullest extent permitted by law and subject to
the limitations set forth in paragraph 1(b) if Indemnitee was or
is or becomes a party to or witness or other participant in, any
threatended, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether
civil, criminal (unless convicted of committing an offense which
requires proof of criminal thought), administrative,
investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any Indemnfiable Event (as defined below)
against any and all expenses (including attorneys' fees and all
other costs, expenses and obligations reasonably incurred in
connection with investigating, defending, being a witness or in
participating in (including on appeal), or preparing to defend,
be a witness in or participate in, any such action, suit,
proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgements, and amounts paid in
settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed
on the Indemnitee as a result of the actual or deemed receipt of
any payments under this Agreement (collectively, hereinafter
"Expenses"), including all interest, assessments and other
charges paid or payable in connection with or in respect of such
Expenses, provided that in respect of any specific Indemnifiable
Event, the Expenses for which Indemnitee may be indemnified
hereunder will not exceed, individually or in the aggregate, the
Limit Amount (as defined below) applicable to such Indemnifiable
Event. Such payments of Expenses shall be made by the Company as
soon as practicable but in any event no later than five (5) days
after written demand by Indemnitee therefor is presented to the
Company.
b. INDEMNIFIABLE EVENT; LIMIT AMOUNTS. For the purpose of this
section, an Indemnifiable Event shall mean any event or
occurrence falling all or in part within any one or more of the
categories set forth in Exhibit A to this Agreement and related
to the fact that Indemnitee is or was a director, officer,
employee, agent or fiduciary of the Company, or any subsidiary
of the Company (regardless of whether it was a subsidiary of the
Company at the time of the event giving rise to Claim), or is or
was serving at the request of the Company as a director,
officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, or by
reason of any action or inaction on the part of Indemnitee while
serving in such capacity. The Limit Amount with respect to each
such category of events described in Exhibit A is specified
following its description. Each such Limit Amount shall be
subject to continuing review and consideration by the Company,
and may be increased, but never decreased, if the Board of
Directors, with the prior approval of the Audit Committee of the
Company, determines that such Limit Amount is less then the
Expenses which can be expected to be incurred by Indemnitee in
connection with the corresponding Indemnifiable Event. The
Indemnification provided herein shall not be subject to the
foregoing limits, if and to the extent such limits are no longer
required by Israeli law.
c. REVIEWING PARTY. Notwithstanding the foregoing: (i) the
obligations of the Company under Section 1(a) shall be subject to
the condition that the Reviewing Party (as described in Section
9(e) hereof) shall not have determined (in a written opinion, in
any case in which the Independent Legal Counsel referred to in
Section 1(d) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the
obligation of the Company to make an advance payment of Expenses
to Indemnitee pursuant to Section 2(a) (an "Expense Advance")
shall be subject to the condition that, if, when and to the
extent that the Reviewing Party determines that Indemnitee should
not be permitted to be so indemnified under applicable law, the
Company shall be entitled to be reimbursed by Indemnitee (who
hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings to secure a
determination that Indemnitee should be indemnified under
applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any Expense Advance until a
final judicial determination is made with respect thereto as to
which all rights of appeal therefrom have been exhausted or
lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be
charged thereon. If there has not been a Change in Control (as
defined in Section 9(c) hereof), the Reviewing Party shall be
selected by the Board of Directors, and if there has been such a
Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who
were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel referred
to in Section 9(d) hereof. If there has been no determination by
the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified
in whole or in part under applicable law, Indemnitee shall have
the right to commence litigation seeking an initial determination
by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, including the legal or
factual basis therefor, and the Company hereby consents to
service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
d. CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control
which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in
Control) then with respect to all matters thereafter arising
concerning the rights of Indemnitee to payments of Expense and
Expense Advances under this Agreement or any other agreement or
under the Company's Memorandum or Articles of Associationas now
or hereafter in effect, the Company shall seek legal advice only
from Independent Legal Counsel (as defined in Section 9(d)
hereof) selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld). Such
counsel, mong other things, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemified under applicable
law and the Company agrees to abide by such opinion. The Company
agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel
against any and all expenses (including attorney's fees),
claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
e. MANDATORY PAYMENT OF EXPENSES. Notwithstand ing any other
provision of this Agreement other than Section 8 hereof, to the
extent that Indemnitee has been successful on the merits or
otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit,
proceeding, inquiry or investigation referred to in Section
(1)(a) hereof or in the defense of any claim, issue or matter
therein, Indemnitee shall be indemnified against all Expenses
incurred by Indemnitee in connection therewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
a. ADVANCEMENT OF EXPENSES. The Company shall advance all
expenses incurred by Indemnitee. The advances to be made
hereunder shall be paid by the Company to Indemnitee as soon as
practicable, but in any event no later than five (5) days after
written demand by Indemnitee therefor to the Company.
b. NOTICE; COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified
under this Agreement, give the Company notice in writing as soon
as practicable of any Claim made against Indemnitee for which
Indemnification will or could be sought under this Agreement,
provided, however, that any failure to provide such notice shall
not affect Indemnitee's rights to indemnification hereunder
unless and to the extent such failure to provide notice
materially and adversely prejudices the Company's right to
defend against such action. Notice to the Company shall be
directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such
other address as the Company shall designate in writing to
Indemnitee), or if the Indemnitee is then the Chief Executive
Officer of the Company, such notice shall be directed to the
Chairman of the Company's Board of Directors, at the same
address. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
c. NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judge ment, order,
settlement (whether with or without court ap proval) or
conviction, or upon a plea of guilty, shall not create a
presumption that Indemnitee did not meet any particular standard
of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by appli cable
law. In addition, neither the failure of the Reviewing Party to
have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor
an actual determination by the Reviewing Party that Indemnitee
has not met such standard of conduct or did not have such
belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law, shall be a defense
against Indemnitee's claim or create a presumption that
Indemnitee has not met any particular stan dard of conduct or
did not have any particular belief. In con nection with any
determination by the Reviewing Party or otherwise as to whether
the Indemnitee is entitled to be indem nified hereunder, the
burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
d. NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a claim pursuant to Section 2(b) hereof,
the Company has liability insurance in effect which may cover
such Claim, the Company shall give prompt notice of the
commencement of such Claim to the insurers in accordance with
the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts
payable as a result of such action, suit, proceeding, inquiry or
investigation in accordance with the terms of such policies.
e. SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, and the
Company shall have confirmed to Indemnitee in writing that the
maximum amount of Expenses that Indemnitee may incur in
connection with the Claim in question will not exceed the Limit
Amount in respect of such Claim, the Com pany shall be entitled
to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld,
upon the delivery to Indemnitee of written notice of its
election so to do. After delivery of such written confirmation
and such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not
be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the
same Claim; provided, that: (i) Indemnitee shall have the right
to employ Indemnitee's counsel in any such Claim at Indemnitee's
expense, and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee
shall have reasonably concluded that a potential conflict of
interest between the Company and Indemnitee may arise in the
conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the
fees and expenses of Indemnitee counsel shall be at the expense
of the Company. The Company shall have the right to conduct such
defense as it sees fit in its sole discretion, including the
right to settle any claim against Indemnitee without the consent
of the Indemnitee provided, the amount of such settlement does
not exceed the Limit Amount and any such settlement includes (i)
a complete release discharge of indemnity, and (ii) does not
contain any addmitance of wrong doing by Indemnitee, and (iii)
is monetary only.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
a. SCOPE. In the event of any change after the date of this
agreement of any applicable law, statute or rule which expands
the right of a corporation of the Company's state of incorpora
tion to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which nar rows the
right of a corporation of the Company's country or state of
incorporation to indemnify a member of its board of directors or
an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder
except as set forth in Section 8(a) hereof.
b. NONEXCLUSIVITY. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee
may be entitled under the Company's Memoran dum and Articles of
Association, as may from time to time be amended or replaced,
any agreement, any vote of shareholders or disinterested
directors, the laws of the Company's state of incorporation, or
otherwise. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action Indemnitee took
or did not take while serving in an indemnified capacity even
though Indemnitee may have cease to serve in such capacity.
4. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with any
Claim made against Indemnitee to the extent Indemnitee has
otherwise actually received payment (under any insurance policy,
the Articles or Memorandum of Association or otherwise) of the
amounts otherwise indemnfiable hereunder, except for the
difference, if any, between the amounts received by the
Indemnitee as aforesaid and the total Expenses incurred by
Indemnitee in connection with such Claim. For the removal of any
doubt, any amount received from D&O insurance shall not count
against any Limit Amount hereunder.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for
some or a portion of Expenses incurred in connection with any
Claim, but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion
of such Expenses to which Indemnitee is entitled.
6. LIABILITY INSURANCE. As long as the Indemnitee continues to
serve as a director, officer, employee, agent or fiduciary of the
Company and thereafter as long as the Indemnitee may be subject
to any possible proceedings, the Company shall procure directors'
and officers' liability insurance to the fullest extent permitted
by law ("D&O Insurance"), in such amount (per claim and per
period) as the Company shall deem appropriate; provided, that,
the Company shall have no obligation to obtain or maintain D&O
Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage
provided, the coverage provided by such insurance is so limited
by exclusions that it provides an insufficient benefit, or the
Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company; provided, however, that the Company
shall not terminate any existing insurance coverage without
notifying the Indemnitee of its intention to do so at least
ninety (90) days prior to the effective date of such termination
(for this purpose the non-renewal of such coverage shall be
deemed as termination thereof and the effective date of such
termination shall then be the expiration date of the existing
coverage).
7. EXEMPTION. To the maximum extent permitted by law, the Company
hereby exempts and releases Indemnitee from any and all liability
to the Company related to any breach by Indemnitee of his or her
duty of care to the Company.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to
the terms of this Agreement:
a. EXCLUDED ACTS AND OMISSIONS. To indemnify, insure or exempt
Indemnitee from or against any liability arising out of (i)
Indemnitee's breach of fiduciary duty to the Company, unless
Indemnitee has acted or omitted to act in good faith and had
reason able ground to believe such action will not harm the
Company's interests, (ii) intentional or reckless breach by
Indemnitee of his or her duty of care to the Company, or (iii)
an action taken with the intention to unduly profit therefrom
and (iv) any fine or penalty payment to propitiate an offense.
b. CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or
brought voluntarily by Indemnitee and not by way of defense,
except: (i) with respect to proceedings brought to establish or
enforce a right to indemnification under this Agreement or any
other agreement or insurance policy or under the Company's
Memorandum or Articles of Association now or hereafter in effect
relating to Claims for Indemnifiable Events, (ii) in specific
cases if the Board of Directors has approved the initiation or
bringing of such suit, or (iii) as otherwise required under the
laws of the Company's state of incorporation, regardless of
whether Indemnitee ultimately is determined to be entitled to
such indemnification, advance expense payment or insurance
recover, as the case may be; or
c. CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase
and sale by Indemnitee of securities in violation of Section
16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any similar successor statute.
9. CONSTRUCTION OF CERTAIN PHRASES.
a. For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees,
agents or fiduciaries, so that if Indemnitee is or was serving
at the request of such constituent corporation as a direc tor,
officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or
other enterprise, Indemnitee shall stand in the same position
under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate
existence had continued.
b. For purposes of this Agreement, references to "other enter
prises" shall include employee benefit plans; and references to
"serving at the request of the Company" shall include any
service as a director, officer, employee, agent or fiduciary of
the Company which imposes duties on, or involves services by,
such director, officer, employee, agent or fiduciary with
respect to an employee benefit plan, its participants or its
beneficiaries; and if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan,
Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in
this Agreement.
c. For purposes of this Agreement, a "Change in Control" shall
be deemed to have occurred if: (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than
a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the stockholdersas a result of a transaction not
otherwise constituting a Change of Control, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than 20% of the total voting power represented
by the Company's then outstanding voting securities, unless the
person has filed a Schedule 13D twenty-four months preceding the
date of this Agreement, (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose
election by the Board of Directors or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office (other
than directors whose election was approved in connection with the
settlement of a proxy contest or consent solicitation), cease for
any reason to constitute a majority thereof, or (iii) the Company
consummates a merger or consolidation of the Company with any
other corporation other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 51% of the total
voting power represented by the voting securities of the Company
of the surviving entity outstanding immediately after such merger
or consolidation, or (iv) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of (in one transaction or
a series of transactions) all or substantially all of the
Company's assets.
d. For purposes of this Agreement, "Independent Legal Counsel"
shall mean an attorney or firm of attorneys, selected in
accordance with the provision of Section 1(d) hereof, who shall
not have otherwise performed services for the company or
Indemnitee within the last three years (other than with respect
to matters concerning the rights of Indemnitee under this
Agreement, or of other Indemnitees under similar indemnity
agreements).
e. For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or
members of the Company's Board of Directors or any other person
or body appointed by the Board of Directors who is not party to
the particular Claim for which Indemnitee is seeking
indemnification, or Independent Legal Counsel.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
11. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by
the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the
business and/or assets of the Company, spouses, heirs, and
personal and legal representative. The Company shall require and
cause any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all, substantially all, or
a substantial part, of the business and/or assets of the Company,
by written agreement in form and substance satisfactory to
Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had
taken place. This Agreement shall continue in effect with respect
to Claims relating to Indemnfiable Events regardless of whether
Indemnitee continues to serve as a director, officer, employee,
agent or fiduciary of the Company or any other enterprise at the
Company's request.
12. ATTORNEY'S FEES. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance
policies maintained by the Company to enforce or interpret any of
the terms hereof or thereof, Indemnitee shall be entitled to be
paid all reasonable expenses incurred by Indemnitee with respect
to such action, regardless of whether Indemnitee is ultimately
successful in such action, and shall be entitled to the
advancement of Expenses with respect to such action, unless as a
part of such action, a court of competent jurisdiction over such
action determines that each of the materials assertions made by
Indemnitee as a basis for such action were not made in good faith
or were frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all Expenses incurred by Indemnitee in
defense of such action (including costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made
in such action), and shall be entitled to the advancement of
Expenses with respect to such action, unless, as a part of such
action, the court having jurisdiction over such action determines
that each of Indemnitee's material defenses to such action were
made in bad faith or were frivolous.
13. NOTICE. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when
given and shall in any event be deemed to be given: (a) five (5)
business days after deposit with the applicable postal service,
if delivered by first class mail, postage prepaid, (b) upon
delivery, if delivered by hand, (c) one business day after the
business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day
of delivery by facsimile transmission, if delivered by facsimile
transmission, with copy by first class mail, postage prepaid, and
shall be addressed if to Indemnitee, at the Indemnitee's address
as set forth beneath Indemnitee's signature to this Agreement and
if to the Company at the address of its principal corporate
offices or at such other address as such party may designate by
ten days' advance written notice to the other party hereto.
14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the
State of Israel for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and
agree that any action instituted under this Agreement shall be
commenced, prosecuted and continued only in the competent Courts
of the Tel-Aviv District, which shall be the exclusive and only
proper forum for adjudicating such a claim.
15. SEVERABLILTY. The provisions of this Agreement shall be
severable in the event that any of the provision hereof
(including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable, to the fullest extent
permitted by law. Furthermore, to the fullest extent possible,
the provisions of this Agreement (including, without limitations,
each portion of this Agreement containing any provision held to
be invalid, void or otherwise unenforceable that is not itself
invalid, void or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of
the State of Israel, as applied to contracts between Israeli
residents, entered into and to be performed entirely within the
State of Israel, without regard to the conflict of laws
principles thereof or of any other jurisdiction.
17. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee, who shall execute all
documents required and shall do all acts that may be necessary to
secure such rights and to enable the Company effectively to bring
suit to enforce such rights.
18. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective
unless it is in writing signed by both the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a
continuing waiver.
19. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes
and merges all previous written and oral negotiations,
commitments, understandings and agreements relating to the
subject matter hereof between the parties hereto.
20. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right
to be retained in the employ or otherwise in the service of the
Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
ESC ______________ LTD.
By: ____________________
Address: New Industrial Park
P.O. Box 240
Yokneam, 20692
Telecopier No.: 04-9599050
AGREED TO AND ACCEPTED AS OF
THE DATE FIRST WRITTEN ABOVE:
____________________________
[Name of Indemnitee]
Address: ________________
________________
________________
Telecopier No. ____________
EXHIBIT A
INDEMNIFIABLE EVENTS AND LIMIT AMOUNTS
Indemnifiable Event Limitation Amount (In US$ Million)
1. Any claim or demand made by customers, suppliers, [100]
contractors or other third parties transacting any form
of business with the Company, its subsidiaries or
affiliates, in the ordinary course of their respective
businesses, relating to the negotiations or performance
of such transactions, representations or inducements
provided in connection thereto or otherwise;
2. Any claim or demand made in connection with any [100]
transaction not in the ordinary course of business of
either the Company, its subsidiaries or affiliates or
the party making such claim, including the sale, lease
or purchase of any assets or business;
3. Any claim or demand made by employees, consultants, [100]
agents or other individuals or entities employed by or
providing services to the Company relating to
compensation owed to them or damages or liabilities
suffered by them in connection with such employment or
service;
4. Any claim or demand made under any securities laws The higher of (i)
or by reference thereto, or related to the failure to 250; and (ii) 50
disclose any information in the manner or time such percent (50%) of
information is required to be disclosed pursuant to outstanding
such laws, or related to inadequate or improper shares multiplied
disclosure of information to stockholders, or in the last
prospective stockholders, or related to the purchasing, reported share
holding or disposition of securities of the Company or price at its
any other investment activity involving or affected by principle
such securities; exchange prior to
the occurrence
giving rise to
the indemnifiable
event.
5. Any claim or demand made for actual or alleged [100]
infringement, misappropriation or misuse of any third
party's intellectual property rights by the Company,
its subsidiaries or affiliates;
6. Any claim or demand made by any lenders or other [100]
creditors or for moneys borrowed by, or other
indebtedness of, the Company, its subsidiaries or
affiliates;
7. Any claim or demand made by any third party [100]
suffering any personal injury or damage to business or
personal property through any act or omission
attributed to the Company, its subsidiaries or
affiliates, or their respective employees, agents or
other persons acting or allegedly acting on their
behalf;
8. Any claim or demand made directly or indirectly in [100]
connection with complete or partial failure, by the
Company or any subsidiary or affiliate thereof, or
their respective directors, officers and employees, to
pay, report, keep applicable records or otherwise, of
any foreign, federal, state, county, local, municipal
or city taxes or other compulsory payments of any
nature whatsoever, including, without limitation,
income, sales, use, transfer, excise, value added,
registration, severance, stamp, occupation, customs,
duties, real property, personal property, capital
stock, social security, unemployment, disability,
payroll or employee withholding or other withholding,
including any interest, penalty or addition thereto,
whether disputed or not.
9. Any claim or demand made by purchasers, holders, [100]
lessors or other users of products of the Company, or
individuals treated with such products, for damages or
losses related to such use or treatment;
10. Any administrative, regulatory or judicial actions, [100]
orders, decrees, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings
or notices of noncompliance or violation by any
governmental entity or other person alleging potential
responsibility or liability (including potential
responsibility or liability for costs of enforcement,
investigation, cleanup, governmental response, removal
or remediation, for natural resources damages, property
damage, personal injuries or penalties or for
contribution, indemnification, cost recovery,
compensation or injunctive relief) arising out of,
based on or related to (x) the presence of, release,
spill, emission, leaking, dumping, pouring, deposit,
disposal, discharge, leaching or migration into the
environment (each a "Release") or threatened Release
of, or exposure to, any hazardous, toxic, explosive or
radioactive substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos
or asbestos-containing material, polychlorinated
biphenyls ("PCBs") or PCB-containing materials or
equipment, radon gas, infectious or medical wastes and
all other substances or wastes of any nature regulated
pursuant to any environmental law, at any location,
whether or not owned, operated, leased or managed by
the ESC Medical Systems Ltd. or any of its
subsidiaries, or (y) circumstances forming the basis of
any violation of any environmental law or environmental
permit, license, registration or other authorization
required under applicable environmental law.
11. Any administrative, regulatory or judicial actions, [100]
orders, decrees, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings
or notices of noncompliance or violation by any
governmental entity or other person alleging the
failure to comply with any statute, law, ordinance,
rule, regulation, order or decree of any governmental
entity applicable to ESC Medical Systems Ltd. or any of
its subsidiaries, or any of their respective businesses
or operations, including, without limitation, the rules
and regulations imposed or enforced by the United
States Food and Drug Administration, or any similar
governmental entity, or the terms and conditions of any
operating certificate or licensing agreement.
12. Any claim or demand, not covered by any of the [100]
categories of events described above, which, pursuant
to any applicable law, a director or officer of the
Company may be held liable to any government or agency
thereof, or any person or entity, in connection with
actions taken by such director or officer in such
capacity.
ANNEX B
ESC MEDICAL SYSTEMS LTD.
1999 SHARE OPTION PLAN
ARTICLE I
PURPOSE
This 1999 Share Option Plan (The "Plan") is intended to provide incentive
compensation to, and to encourage share ownership by, the directors,
officers, employees and certain consultants and dealers of ESC Medical
Systems Ltd. and its subsidiaries (collectively, the "Company") in order to
align their interests with those of the Company's shareholders, and to
encourage such parties to remain in their respective capacities with the
Company.
The word "subsidiary", when used in the Plan, shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning
with the Company if, at the time of the granting of the option, each of the
corporations (other than the last corporation in the chain) owns stock
possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
It is intended that certain options granted under this Plan will qualify as
"incentive stock options" under Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code"); provided, however, that
incentive stock options shall only be granted to employees of the Company.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Option Committee or, in the absence
thereof, the Compensation Committee of the Board of Directors (in each case
the "Committee"). Subject to the provisions of the Plan and any applicable
law or NASDAQ rule, the Committee shall have sole authority, in its
absolute discretion: (a) to determine which of the eligible employees,
directors, dealers and consultants of the Company and its subsidiaries
shall be granted options; (b) to authorize the granting of both incentive
stock options and non-qualified options; (c) to determine the times when
options shall be granted and the number of shares to be issued or
transferred upon the exercise of each option; (d) subject to the
limitations of ARTICLE V, to determine the exercise price of each option;
(e) to determine the time or times at which each option becomes
exercisable, the duration of the exercise period and any other restrictions
on the exercise of options issued hereunder; (f) to prescribe the form or
forms of the option agreements under the Plan (which forms shall be
consistent with the terms of the Plan but need not be identical); (g) to
adopt, amend and rescind such rules and regulations as, in its opinion, may
be advisable in connection with the administration of the Plan. All
decisions, determinations and interpretations of the Committee shall be
final and binding on all optionees.
ARTICLE III
SHARES
The shares to be optioned under the Plan shall either be (i) authorized but
unissued Ordinary Shares, par value NIS 0.1 per share, of the Company, or
(ii) Ordinary Shares which the Company may acquire and deposit with General
Investec Trust Company, Ltd., or any substitute thereof as Trustee under
the Plan (the "Trustee") and under the terms of a Trust Agreement as shall
be approved and amended from time to time by the Board or the Executive
Committee thereof (together, the "Ordinary Shares"). Under the Plan, the
total number of Ordinary Shares which may be purchased pursuant to options
granted hereunder shall not exceed, in the aggregate, five million
(5,000,000) Ordinary Shares, except as such number of shares shall be
adjusted or increased in accordance with the provisions of ARTICLE X and
Article XIX hereof.
The number of Ordinary Shares available for grant of options under the Plan
shall be decreased by the sum of the number of shares with respect to which
options have been issued and that are then outstanding and the number of
shares issued upon exercise of options. In the event that any outstanding
option under the Plan for any reason expires, is terminated, or is canceled
prior to the end of the period during which options may be granted, the
Ordinary Shares underlying such option, may again be subject to an option
under the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS
Subject to ARTICLE VII, officers and other employees of the Company or of
its subsidiaries and directors of the Company or its subsidiaries shall be
eligible to participate in the Plan and receive incentive stock options or
non-qualifying options.
Directors who are not employees, future employees, dealers, or consultants
of the Company shall also be eligible to participate in the Plan.
ARTICLE V
OPTION PRICE
In the case of each option granted under the Plan, the option exercise
price shall be not less than eighty-five percent (85%) of the last reported
sales price (as expressed in either dollars or shekels adjusted to increase
in Israeli CPI) of the Ordinary Shares on the Nasdaq Stock Market
("NASDAQ") (the "Fair Market Price"), on the date of grant.
ARTICLE VI
TERMS OF OPTIONS
The Committee shall determine the dates after which options may be
exercised, in whole or in part. An option is exercisable in installments,
and may be exercisable in whole or in part, with the unexercised portion of
the option remaining exercisable.
Any other provision of the Plan notwithstanding and subject to ARTICLE VII,
no option shall be exercised after tenth anniversary of the date that the
option was granted (the "Termination Date"), and no option granted to an
employee of the Company shall be exercisable before such employee
accumulates at least one year of service with the Company.
With respect to the directors, Chief Executive Officer ("CEO") and the
officers reporting directly to the CEO of the Company, the options granted
hereunder shall become exercisable with respect to the entire amount of the
Ordinary Shares underlying such options immediately upon a change in
control of the Company, unless the Board or the Committee determined
otherwise with respect to any specific director or officer upon approval of
the options granted. A "Change in Control" means the first to occur of any
of the following dates:
(i) An acquisition (other than directly from the Company) of any voting
securities of the Company by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the combined voting power of the Company's
then outstanding Voting Securities, unless such Person has filed a
Schedule 13D within the 12 month period prior to the Plan being
first approved by the Board of Directors; provided, however, in
determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a
part thereof or a trustee thereof acting solely in its capacity as
trustee) maintained by (X) the Company or (Y) any corporation or
other Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (B) the Company or its Subsidiaries, or (C) any
Person who files in connection with such acquisition a Schedule 13D
which expressly disclaims any intention to seek control of the
Company and does not expressly reserve the right to seek such
control; provided, however, that any amendment to such statement of
intent which either indicates an intention or reserves the right to
seek control shall be deemed an "acquisition" of the securities of
the Company reported in such filing as beneficially owned by such
Person for purposes of this paragraph (i);
(ii) The individuals who, as of the beginning of any two year period, are
members of the Board (the "Incumbent Board"), ceasing for any
reason, during such two year period, to constitute at least a
majority of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common
stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of the Agreement, be considered a member of the Incumbent
Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is
a "Non-Control Transaction" i.e., meets any of the requirements
described in (a) or (b) below:
(i) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger,
consolidation or reorganization, at least eighty percent
(80%) of the com bined voting power of the outstanding
voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before such merger, consolidation or reorga nization;
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the surviving
corporation immediately following the consumma tion of
such merger, consolidation or reorganization; and
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such, a Beneficial Owner acquires
additional Voting Securities which increase the percentage of the then
outstanding Voting Securities beneficially owned by the Subject Person,
then a Change in Control shall occur.
Share options granted hereunder to employees may provide that if,
prior to the Termination Date, an optionee shall cease to be employed by
the Company or a subsidiary thereof (otherwise than by reason of death or
disability), the option will remain exercisable for a period not extending
beyond three months after the date of cessation of employment (unless
specifically stated otherwise in the specific option grant letter) to the
extent it was exercisable at the time of cessation of employment. If,
prior to the Termination Date, an optionee shall cease to be employed by
the Company or any subsidiary thereof by reason of a disability within the
meaning of Section 22(e)(3) of the Code, options granted hereunder may
provide that they will remain exercisable for a period not extending beyond
one year after the date of cessation of employment to the extent
exercisable at the time of cessation of employment. In no event, however,
shall an option be exercisable after the Termination Date. The option
shall expire with respect to all Ordinary Share covered thereby into which
at the time of termination of the option, the option was not exercisable.
In the event of the death of an optionee prior to the Termination Date and
while employed by the Company or a subsidiary thereof or while entitled to
exercise an option pursuant to the preceding sentences of this paragraph,
options granted hereunder may provide that they will remain exercisable
until the earlier of (i) to the Termination Date, and (ii) one year from
the date of death, by the person or persons to whom the optionee's rights
under the option pass by will or by applicable laws of descent and
distribution and to the extent that the optionee was entitled to exercise
it on the date of death.
Notwithstanding the above, if prior to the Termination date, an optionee
shall cease to be employed by the Company for reasons which, as determined
by the Company in its discretion, amount to bad faith, gross negligence or
fraud, or as a result of the termination of such optionee for cause, any
option or portion of an option not exercised as of the date of cessation of
employment will expire and terminate on such date, unless specifically
stated otherwise in the specific option grant letter.
ARTICLE VII
SPECIAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS ONLY
The aggregate fair market value (determined at the time the option is
granted) of the Ordinary Shares with respect to which any incentive stock
option is granted that is exercisable for the first time by the optionee
during any calendar year, (under this Plan or any other share option plan
of the Company or any parent or subsidiary thereof) shall not exceed
$100,000.
No incentive stock option may be granted to an individual who, at the time
the option is granted, owns directly, or indirectly within the meaning of
Section 422(b)(6) of the Code, Ordinary Shares possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary thereof, unless (i) such option has
an option price of at least 110 percent of the fair market value of the
Ordinary Shares on the date of the grant of such option and (ii) such
option cannot be exercised more than five years after the date it is
granted.
ARTICLE VIII
EXERCISE OF OPTIONS
An optionee may exercise any exercisable option by signing and returning to
the Company at its principal office, a "Notice of Exercise" in the form
prescribed from time to time by the Company together with payment of the
exercise price. Such payment will be made in dollars or Shekels in
accordance with the terms of the related option grant letter. Each Notice
of Exercise shall include an acknowledgment by the optionee, if applicable,
that the Company has not registered the shares issuable upon exercise of
the option under the United States Securities Act of 1933, as amended (the
"Securities Act"), or any similar law, and a representation by the optionee
that he is acquiring such shares for investment and not with a view to
their distribution or resale as such terms are defined in Rule 144 under
the Securities Act ("Rule 144"). The optionee shall sign and deliver to the
Company, upon its request, a separate investment representation,
certificate or such other document as may be required by the Company's
counsel, to such effect; provided, however, that such representation,
certificate or other document may provide, if applicable, that the said
investment restriction shall not be operative as to the shares subject to
the option which may in the future be registered pursuant to the Securities
Act. Furthermore, the Company may place an appropriate legend on any share
certificate delivered to an optionee to the effect that, among other things
deemed to be necessary to be stated in such legend, such shares were
acquired pursuant to such an investment representation without registration
of the shares.
Payment for Ordinary Shares purchased upon the exercise of an option
granted hereunder shall be made in full upon exercise of the option, by
wire transfer or certified or bank cashier's check payable to the order of
the Company, or by other means acceptable to the Company. The Ordinary
Shares purchased shall thereupon be promptly delivered; provided, however,
that the Company may, in its discretion, require that an optionee pay to
the Company or the Trustee, at the time of exercise, such amount as the
Company deems necessary to satisfy its obligation to withhold Israeli or
United States Federal, state, or local income or other taxes incurred by
reason of the exercise or the transfer of shares thereupon.
ARTICLE IX
NON-TRANSFERABILITY OF OPTION RIGHTS
No option shall be transferable, except by will or the laws of descent and
distribution. During the lifetime of the optionee, the option shall be
exercisable only by optionee, or by such optionee's legal representative.
ARTICLE X
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate number of Ordinary Shares which may be purchased upon
exercise of the options granted hereunder, the number of Ordinary Shares
covered by each outstanding option and the price per share of each such
option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of the Company resulting from a stock split or
other subdivision or consolidation of shares or payments of stock dividends
or distributions or other increases or decreases in the number of
outstanding Ordinary Shares effected without receipt of consideration by
the Company or in the event of any other extraordinary transaction.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share
which might otherwise become issuable upon exercise of an option.
ARTICLE XI
NO OBLIGATION TO EXERCISE OPTION
The grant of an option pursuant to the plan shall impose no obligation on
the optionee to exercise such option.
ARTICLE XII
USE OF PROCEEDS
The proceeds received from the issuance of Ordinary Shares upon exercise of
options, pursuant to the Plan shall be used for such purposes as the
Company shall determine to be appropriate.
ARTICLE XIII
RIGHTS AS A SHAREHOLDER
The Company shall not be required to recognize and optionee a shareholder
with respect to any share issuable or transferred, as the case may be, upon
the exercise of such option by the optionee until such optionee shall have
become the holder of record of such share, and such optionee shall not be
entitled to vote or to any dividends or distributions or other rights in
respect of such share for which the record date is prior to the date on
which he shall have become the holder of record thereof.
ARTICLE XIV
EMPLOYMENT RIGHTS
Nothing in the Plan or in any option granted hereunder shall confer on any
optionee who is a director, officer or employee of the Company or any of
its subsidiaries any right to interfere in any way with the right of the
Company or any of its subsidiaries to terminate the optionee's employment
at any time.
ARTICLE XV
COMPLIANCE WITH THE LAW
The Company shall not be liable for the non-issuance or non-transfer or any
delay in issuance or transfer of any Ordinary Shares issuable or
transferred, as the case may be, upon the exercise of any options granted
under the Plan which results from the inability of the Company to obtain,
or from any delay in obtaining, from any regulatory body having
jurisdiction, all requisite authority to issue or transfer Ordinary Shares
of the Company upon exercise of the options under the Plan or upon the
transfer of Ordinary Shares issued upon such exercise, if counsel for the
Company deems such authority necessary for lawful issuance or transfer of
any such shares. Appropriate legends may be placed on the stock
certificates evidencing shares issued upon exercise of options to reflect
such transfer restrictions.
ARTICLE XVI
VOTING OF ORDINARY SHARES
Shares held by the Trustee under the Plan shall be voted in accordance with
the instructions of the Board.
ARTICLE XVII
CANCELLATION OF OPTIONS
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
In the event that the average of the Fair Market Price (as calculated in
ARTICLE V) of the Company's Ordinary Shares for a continuous period of
three months is less than seventy-five (75%) of the exercise price of any
option, the Committee may, with the consent of the optionee, cancel such
option and grant a new option (which may require extended vesting period)
under the Plan to the optionee.
ARTICLE XVIII
TRANSFER OF SHARES
By exercise of an option granted hereunder, the optionee agrees that any
sale, transfer or other disposition of any of the Ordinary Shares issued
upon such exercise shall be made in accordance with the applicable
requirements of Rule 144, including, if applicable, the volume limitations
applicable to "affiliates" of the Company.
ARTICLE XIX
AMENDMENT OR DISCONTINUANCE OF PLAN
Subject to any applicable law and NASDAQ Rule, the Board or the Committee
may, without the consent of the Company's shareholders or any optionee
under the Plan, at any time terminate the Plan entirely and at any time or
from time to time amend or modify the Plan, provided that no such action
shall adversely affect options granted hereunder prior to such amendment or
modification without consent of any optionee adversely effected and, with
respect to incentive stock options, the Board shall not, without approval
of the stockholders, : (a) increase the total number of Ordinary Shares
which may be purchased pursuant to incentive stock options granted under
the Plan, except as contemplated in ARTICLE X, and (b) expand the persons
eligible to receive options under the Plan.
ARTICLE XX
TAXES
Each optionee shall be solely liable for all taxes and other fees resulting
from the grant and/or exercise of options granted under the Plan and
disposition of shares acquired pursuant to the exercise of an option.
Each optionee should consult with his/her individual tax advisers to
determine the possible tax consequences of the grant and/or exercise of
options granted under the Plan and the disposition of shares acquired
pursuant to the exercise of the an option in his/her personal tax
circumstances.
ARTICLE XXI
EFFECTIVENESS AND TERM OF PLAN
The Plan was adopted on November __, 1999. The plan will expire and
terminate on November __, 2009. No option may be granted pursuant to the
Plan after the termination of the Plan, however, options outstanding on
that date may still be exercised in accordance with the terms of their
grant.
ARTICLE XXII
GOVERNING LAW
The Plan and all instruments issued hereunder shall be governed by and
interpreted in accordance with the laws of the State of Israel, subject to
the provisions of the Code with respect to "incentive stock options" and
subject to the provisions of applicable United States securities laws with
respect to certain terms used herein.
ANNEX C
THE COMPANIES LAW
A COMPANY LIMITED BY SHARES
---------------------------------------
ARTICLES OF ASSOCIATION
OF
ESC MEDICAL SYSTEMS L T D.
---------------------------------------
AS AMENDED AND RESTATED ON [ ], 2000
PRELIMINARY
1. Table "A" Excluded. The regulations contained in the second
schedule to the Companies Ordinance (New Version), 5743-1983 (the
"Companies Ordinance") shall not apply to the Company.
2. Interpretation. [In these Articles the words standing in the first
column of the table next hereinafter contained shall bear the meaning set
opposite to them respectively in the second column thereof, if not
inconsistent with the subject or context.
"The Company" - ESC Sharplan Ltd.
"The Statutes" - The Companies Ordinance, the Companies Law, 1999
(the "Companies Law") and every other Israeli law in force concerning
companies limited by shares and affecting the Company.
"These Articles" - These Articles of Association as originally
drafted or as altered from time to time by Ordinary Resolution.
"The Office" - The current registered office of the Company.
"Outside Director" - Shall have the meaning as set forth in Section 1
of the Companies Law.
"Office Holder" - Shall have the meaning set forth in Section 1 of
the Companies Law.
"Ordinary Resolution" - Shall have the meaning set forth in Article
28(a).
"Year" and "Month" - A Gregorian month or year.
(b) Unless otherwise defined in these Articles or required by
the context, terms used herein shall have the meaning provided therefor
under the Companies Law.
3. Amendments. These Articles may be amended or replaced at any time
and from time to time, if such amendment or replacement is recommended by
the Board of Directors, by an Ordinary Resolution, but in any other case by
a resolution approved by the holders of at least seventy-five percent (75%)
of the shares represented at a General Meeting and voted thereon.
3A. Purpose. The purpose of the Company is to engage in any legal
business. The Company may extend reasonable donations for any proper cause.
SHARE CAPITAL
4. Share Capital. (a) The authorized share capital of the Company is
NIS 5,000,000 divided into 50,000,000 (twenty million) Ordinary Shares, par
value NIS 0.1 per share.
(b) The Ordinary Shares all rank pari passu in all respects.
5. Increase of Authorized Share Capital. (a) The Company may, from
time to time, by Ordinary Resolution, whether or not all the shares then
authorized have been issued, and whether or not all the shares theretofore
issued have been called up for payment, increase its authorized share
capital. Any such increase shall be in such amount and shall be divided
into shares of such nominal amounts, and such shares shall confer such
rights and preferences, and shall be subject to such restrictions, as such
Ordinary Resolution shall provide.
(b) Except to the extent otherwise provided in such Ordinary
Resolution, any new shares included in the authorized share capital
increased as aforesaid shall be subject to all the provisions of these
Articles which are applicable to shares of such class included in the
existing share capital without regard to class (and, if such new shares are
of the same class as a class of shares included in the existing share
capital, to all of the provisions which are applicable to shares of such
class included in the existing share capital).
6. Special Rights; Modification of Rights. (a) Without prejudice to
any special rights previously conferred upon the holders of existing shares
in the Company, the Company may, from time to time, by Ordinary Resolution,
provide for shares with such preferred or deferred rights or rights of
redemption or other special rights and/or such restrictions, whether in
regard to dividends, voting, repayment of share capital or otherwise, as
may be stipulated in such Ordinary Resolution.
(b) (i) If at any time the share capital is divided into
different classes of shares, the rights attached to any class, unless
otherwise provided by these Articles, may be modified or abrogated by
the Company, by Ordinary Resolution or the sanction of a Ordinary
Resolution passed at a separate General Meeting of the holders of the
shares of such class.
(ii) The provisions of these Articles relating to General
Meetings shall, mutatis mutandis, apply to any separate General
Meeting of the holders of the shares of a particular class, provided,
however, that the requisite quorum at any such separate General
Meeting shall be two or more shareholders present in person or by
proxy and holding not less than one third (1/3) of the issued shares
of such class.
(iii) Unless otherwise provided by these Articles, the
enlargement of an authorized class of shares, or shares, or the
issuance of additional shares thereof out of the authorized and
unissued share capital, shall not be deemed, for purposes of this
Article 6(b), to modify or abrogate the rights attached to previously
issued shares of such class or of any other class.
7. Consolidation, Subdivision, Cancellation and Reduction of Share
Capital. (a) The Company may, from time to time, by Ordinary Resolution
(subject, however, to the provisions of Article 6(b) hereof and to
applicable law):
(i) consolidate and divide all or any part of its issued or
unissued authorized share capital into shares of a per share nominal
value which is larger than the per share nominal value of its
existing shares;
(ii) subdivide its shares (issued or unissued) or any of them,
into shares of smaller nominal value than is fixed by the Memorandum
of Association;
(iii) cancel any shares which, at the date of the adoption of
such Ordinary, Resolution, have not been taken or agreed to be taken
by any person, and diminish the amount of its share capital by the
amount of its share capital by the amount of the shares so canceled;
or
(iv) reduce its share capital in any manner, and with and
subject to any incident authorized, and consent required, by law.
(b) With respect to any consolidation of issued shares into
shares of a larger nominal value per share, and with respect to any other
action which may result in fractional shares, the Board of Directors may
settle any difficulty which may arise with regard thereto, as it deems fit,
and, in connection with any such consolidation or other action which could
result in fractional shares, may, without limiting its aforesaid power:
(i) Determine, as to the holder of shares so consolidated,
which issued shares shall be consolidated into a share of a larger
nominal value per share.
(ii) Allot, in contemplation of or subsequent to such
consolidation or other action, shares or fractional shares sufficient
to preclude or remove fractional share holdings;
(iii) Redeem, in the case of redeemable preference shares, and
subject to applicable law, such shares or fractional shares
sufficient to preclude or remove fractional share holdings;
(iv) Cause the transfer of fractional shares by certain
shareholders of the Company to other shareholders thereof so as to
most expediently preclude or remove any fractional shareholdings, and
cause the transferees of such fractional shares to pay the
transferors thereof the fair value thereof, and the Board of
Directors is hereby authorized to act in connection with such
transfer, as agent for the transferors and transferors and
transferees of any such fractional shares, with full power of
substitution, for the purposes of implementing the provisions of this
sub-Article 7(b)(iv).
8. Issuance of Share Certificates, Replacement of Lost Certificates.
(a) Share certificates shall be issued under the corporate seal of the
Company and shall bear the signature of one Director, or of any person or
persons authorized therefor the Board of Director.
(b) Each shareholder shall be entitled to one numbered
certificate for all the shares of any class registered in his name, and if
the Board of Directors so approves, to several certificates, each for one
or more of such shares. Each certificate shall specify the serial numbers
of the shares represented thereby and may also specify the amount paid up
thereon.
(c) A share certificate registered in the names of two or more
persons shall be delivered to the person first named in the Register of
Shareholders in respect of such co- ownership.
(d) A share certificate which has been defaced, lost or
destroyed, may be replaced, and the Company shall issue a new certificate
to replace such defaced, lost or destroyed certificate upon payment of such
fee, and upon the furnishing of such evidence of ownership and such
indemnity, as the Board of Directors in its discretion deems fit.
9. Registered Holder.Except as otherwise provided in these Articles
or the Statutes, the Company shall be entitled to treat the registered
holder of each share as the absolute owner thereof, and accordingly, shall
not, except as ordered by a court of competent jurisdiction, or as required
by statute, be obligated to recognize any equitable or other claim to, or
interest in, such share on the part of any other person.
10. Allotment and Repurchase of Shares. (a) The unissued shares from
time to time shall be under the control of the Board of Directors, who
shall have the power to allot, issue or otherwise dispose of shares to such
persons, on such terms and conditions (including inter alia terms relating
to calls set forth in Article 12(f) hereof), and either at par or at a
premium, or subject to the provisions of the CompaniesLaw, at a discount
and/or with payment of commission, and at such times, as the Board of
Directors deems fit, and the power to give to any person the option to
acquire from the Company any shares, either at par or at a premium, or,
subject as aforesaid, at a discount and/or with payment of commission,
during such time and for such consideration as the Board of Directors deems
fit.
(b) The Company may at any time and from time to time, subject
to the Companies Law, purchase back or finance the purchase of any shares
or other securities issued by the Company, in such manner and under such
terms as the Board of Directors shall determine, whether from any one or
more shareholders. Such purchase shall not be deemed as payment of
dividends and no shareholder will have the right to require the Company to
purchase his shares or offer to purchase shares from any other
shareholders.
11. Payment in Installment. If pursuant to the terms of allotment or
issue of any share, all or any portion of the price thereof shall be
payable in installments, every such installment shall be paid to the
Company on the due date thereof by the then registered holder(s) of the
share or the person(s) then entitled thereto.
12. Calls on Shares. (a) The Board of Directors may, from time to
time, as it, in its discretion, deems fit, make calls for payment upon
shareholders in respect of any sum which has not been paid up in respect of
shares held by such shareholders and which is not, pursuant to the terms of
allotment or issue of such shares or otherwise, payable at a fixed time,
and each shareholder shall pay the amount of every call so made upon him
(and of each installment thereof if the same is payable in installments),
to the person(s) and at the time(s) and place(s) designated by the Board of
Directors, as any such times) may be thereafter extended and/or such
person(s) or place(s) changed. Unless otherwise stipulated in the
resolution of the Board of Directors (and in the notice hereafter referred
to), each payment in response to a call shall be deemed to constitute a pro
rata payment on account of all the shares in respect of which such call was
made.
(b) Notice of any call for payment by a shareholder shall be
given in writing to such shareholder not less than fourteen (14) days prior
to the time of payment fixed in such notice, and shall specify the time and
place of payment, and the person to whom such payment is to be made. Prior
to the time for any such payment fixed in a notice of a call given to a
shareholder, the Board of Directors may in its absolute discretion, by
notice in writing to such shareholder, revoke such call in whole or in
part, extend the time fixed for payment thereof, or designate a different
place of payment or person to whom payment is to be made. In the event of a
call payable in installments, only one notice thereof need be given
(c) If pursuant to the terms of allotment or issue of a share
or otherwise, an amount is made payable at a fixed time (whether on account
of such share or by way of premium), such amount shall be payable at such
time as if it were payable by virtue of a call made by the Board of
Directors and for which notice was given in accordance with paragraphs (a)
and (b) of this Article 12, and the provision of these Articles with regard
to calls (and the non-payment thereof) shall be applicable to such amount
(and the non-payment thereof).
(d) Joint holders of a share shall be jointly and severally
liable to pay all calls for payment in respect of such share and all
interest payable thereon.
(e) Any amount called for payment which is not paid when due
shall bear interest from the date fixed for payment until actual payment
thereof, at such rate (not exceeding the then prevailing debitory rate
charged by leading commercial banks in Israel), and payable at such time(s)
as the Board of Directors may prescribe.
(f) Upon the allotment of shares, the Board of Directors may
provide for differences among the allottees of such shares as to the
amounts and times for payment of calls for payment in respect of such
shares.
13. Prepayment. With the approval of the Board of Directors, any
shareholder may pay to the Company any amount not yet payable in respect of
his shares, and the Board of Directors may approve the payment by the
Company of interest on any such amount until the same would be payable if
it had not been paid in advance, at such rate and time(s) as may be
approved by the Board of Directors. The Board of Directors may at any time
cause the Company to repay all or any part of the money so advanced,
without premium or penalty. Nothing in this Article 13 shall derogate from
the right of the Board of Directors to make any call for payment before or
after receipt by the Company of any such advance.
14. Forfeiture and Surrender. (a) If any shareholder fails to pay an
amount payable by virtue of a call, or interest thereon as provided for in
accordance herewith, on or before the day fixed for payment of the same,
the Board of Directors, may at any time after the day fixed for such
payment, so long as such amount (or any portion thereof) or interest
thereon (or any portion thereof) or interest thereon (or any portion
thereof) remains unpaid, forfeit all or any of the shares in respect of
which such payment was called for. All expenses incurred by the Company in
attempting to collect any such amount or interest thereon, including,
without limitation, attorneys' fees and costs of legal proceedings, shall
be added to, and shall, for all purposes (including the accrual of interest
thereon); constitute a part of, the amount payable to the Company in
respect of such call.
(b) Upon the adoption of a resolution as to the forfeiture of a
shareholder's share, the Board of Directors shall cause notice thereof to
be given to such shareholder, which notice shall state that, in the event
of the failure to pay the entire amount so payable by a date specified in
the notice (which date shall be not less than fourteen (14) days after the
date such notice is given and which may be extended by the Board of
Directors), such shares shall be ipso facto forfeited, provided, however,
that, prior to such date, the Board of Directors from adopting a further
resolution of forfeiture in respect of the non-payment of the same amount.
(c) Without derogating from Articles 54 and 59 hereof, whenever
shares are forfeited as herein provided, all dividends, if any, theretofore
declared in respect thereof and not actually paid shall be deemed to have
been forfeited at the same time.
(d) The Company, by resolution of the Board of Directors, may
accept the voluntary surrender of any share.
(e) Any share forfeited or surrendered as provided herein,
shall become the property of the Company, and the same, subject to the
provisions of these Articles, may be sold, re-allotted or otherwise
disposed of as the Board of Directors deems fit.
(f) Any shareholder whose shares have been forfeited or
surrendered shall cease to be a shareholder in respect of the forfeited or
surrendered shares, but shall, notwithstanding, be liable to pay, and shall
forthwith pay, to the Company, all calls, interest and expenses owing upon
or in respect of such shares at the time of forfeiture or surrender,
together with interest thereon from the time of forfeiture or surrender
until actual payment, at the rate prescribed in Article 12(e) above, and
the Board of Directors, in its discretion, may, but shall not be obligated
to, enforce the payment of such moneys, or any part thereof. In the event
of such forfeiture or surrender, the Company, by resolution of the Board of
Directors, may accelerate the date(s) of payment of any or all amounts then
owing to the Company by the shareholder in question (but not yet due) in
respect of all shares owned by such shareholder, solely or jointly with
another.
(g) The Board of Directors may at any time, before any share so
forfeited or surrendered shall have been sold, re-allotted or otherwise
disposed of, nullify the forfeiture or surrenders on such conditions as it
deems fit, but no such nullification shall stop the Board of Directors form
re-exercising its powers of forfeiture pursuant to this Article 14.
15. Lien. (a) Except to the extent the same may be waived or
subordinated in writing, the Company shall have a first and paramount lien
upon all the shares registered in the name of each shareholder (without
regard to any equitable or other claim or interest in such shares on the
part of any other person), and upon the proceeds of the sale thereof, for
his debts, liabilities and engagements to the Company arising from any
amount payable by such shareholder in respect of any unpaid or partly paid
share, whether or not such debt, liability or engagement has matured. Such
lien shall extend to all dividends from time to time declared or paid in
respect of such share. Unless otherwise provided, the registration by the
Company of a transfer of shares shall be deemed to be a waiver on the part
of the Company of the lien (if any) existing on such shares immediately
prior to such transfer.
(b) The Board of Directors may cause the Company to sell a
share subject to such a lien when the debt, liability or engagement giving
rise to such lien has matured, in such manner as the Board of Directors
deems fit, but no such sale shall be made unless such debt, liability or
engagement has not been satisfied within fourteen (14) days after written
notice of the intention to sell shall have been served on such shareholder,
his executors or administrators.
(c) The net proceeds of any such sale, after payment of the
costs thereof, shall be applied in or toward satisfaction of the debts,
liabilities or engagements of such shareholder in respect of such share
(whether or not the same have matured), and the residue (if any) shall be
paid to the shareholder, his executors, administrators or assigns.
16. Sale After Forfeiture of Surrender or in Enforcement of Lien.
Upon any sale of a share after forfeiture or surrender or for enforcing a
lien, the Board of Directors may appoint any person to execute an
instrument of transfer of the share so sold and cause the purchaser's name
to be entered in the Register of Shareholders in respect of such share. The
purchaser shall be registered as the shareholder and shall not be bound to
see to the regularity of the sale proceedings, or to the application of the
proceeds of such sale, and after his name has been entered in the Register
of Shareholders in respect of such share, the validity of the sale shall
not be impeached by any person, and person, and the remedy of any person
aggrieved by the sale shall be in damages only and against the Company
exclusively.
17. Redeemable Shares.The Company may, subject to applicable law,
issue redeemable shares and redeem the same.
18. Conversion of Shares into Stock. (a) The Board of Directors may,
with the sanction of the shareholders previously given by Ordinary
Resolution, convert any paid-up shares into stock, and may, with like
sanction, reconvert any stock into paid-up shares of any denomination.
(b) The holders of stock may transfer the same, or any part
thereof, in the same manner and subject to the same regulations, as the
shares from which the stock arose might have been transferred prior to
conversion, or as near thereto as circumstances admit, provided, however,
that the Board of Directors may from time to time fix the minimum amount of
stock so transferable, and restrict or forbid the transfer of fractions of
such minimum, but the minimum shall not exceed the nominal value of each of
the shares from which such stock arose.
(c) The holders of stock shall, in accordance with the amount
of stock held by them, have the same rights and privileges as regards
minimum amount of stock so transferable, and restrict or forbid the
transfer of fractions of such minimum, but the minimum shall not exceed the
nominal value of each of the shares form which such stock arose.
(d) The holders of stock shall, in accordance with the amount
of stock held by them, have the same rights and privileges as regards
minimum amount of stock so transferable, and restrict of forbid the
transfer of fractions of such minimum, but the minimum shall not exceed the
nominal value of each of the shares from which such stock arose.
(e) Such of the Articles of the Company as are applicable to
paid-up shares shall apply to stock, and the words "share" and
"shareholder" (or "shareholder") therein shall include "stock" and
"stockholder".
TRANSFER OF SHARES
19. Registration of Transfer. (a) No transfer of shares shall be
registered unless a proper writing or instrument of transfer (in any
customary form or any other from satisfactory to the Board of Directors)
has been submitted to the Company (or its transfer agent), together with
the share certificate(s) and such other evidence of title as the Board of
Directors may reasonably require. Until the transferee has been registered
in the Register of Shareholders in respect of the shares so transferred,
the Company may continue to regard the transferor as the owner thereof.
(b) The Board of Directors may, in its discretion to the extent
it deems necessary, close the Register of Shareholders of registration of
transfers of shares during any year for a period determined by the Board of
Directors, and no registrations of transfers of shares shall be made by the
Company during any such period during which the Register of Shareholders is
so closed.
20. Record Date for Notices of General Meeting and Other Action.
Notwithstanding any other contrary provision of these Articles, in order
that the Company may determine the shareholders entitled to notice of or to
vote at any Annual or Special General Meeting or any adjournment thereof,
or to express consent to or dissent from any corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of or to take or be the subject of any other action, the Board
of Directors may fix in advance, a record date, which shall not be more
than twenty-one nor less than four days before the date of such meeting (or
any longer or shorter period permitted by law), nor more than sixty days
prior to any other action. A determination of shareholders of record
entitled to notice of or to vote at a meeting shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
TRANSMISSION OF SHARES
21. Decedents' Shares. (a) In case of a share registered in the names
of two or more holders, the Company may recognize the survivor(s) as the
sole owner(s) thereof unless and until the provisions of Article 21 (b)
have been effectively invoked.
(b) Any person becoming entitled to a share in consequence of
the death of any person, upon producing evidence of the grant of probate or
letters of administration or declaration of succession (or such other
evidence as the Board of Directors may reasonability deem sufficient),
shall be registered as a shareholder in respect of such share, or may,
subject to the regulations as to transfer herein contained, transfer such
share.
22. Receivers and Liquidators. (a) The Company may recognize any
receiver, liquidator or similar official appointed to wind-up, dissolve or
otherwise liquidate a corporate shareholder, and a trustee, manager,
receiver, liquidator or similar official appointed in bankruptcy or in
connection with the reorganization of, or similar proceeding with respect
to a shareholder or its properties, as being entitled to the shares
registered in the name of such shareholder.
(b) Such receiver, liquidator or similar official appointed to
wind-up, dissolve or otherwise liquidate a corporate shareholder and such
trustee, manager, receiver, liquidator or similar official appointed in
bankruptcy or in connection with the reorganization of, or similar
proceedings with respect to a shareholder or its properties, upon producing
such evidence as the Board of Directors may deem sufficient as to his
authority to act in such capacity or under this Article, shall with the
consent of the Board of Directors (which the Board of Directors may grant
or refuse in its absolute discretion), be registered as a shareholder in
respect of such shares, or may, subject to the regulations as to transfer
herein contained, transfer such shares.
GENERAL MEETINGS
23. Annual General Meeting. (a) An Annual General Meeting shall be
held once in every calendar year at such time (within a period of not more
than fifteen (15) months after the last preceding Annual General Meeting)
and at such place, either within or without the State of Israel, as may be
determined by the Board of Directors.
(b) Subject to the provisions of these Articles, the function
of the Annual General Meeting shall be to elect the members of the Board of
Directors; to appoint auditors and to fix or authorize the directors to fix
their salaries and to transact any other business which under these
Articles or the Statutes are to be transacted at a General Meeting.
24. Special General Meetings. All General Meetings other than Annual
General Meetings shall be called "Special General Meeting". The Board of
Directors may, whenever it thinks fit, convene an Special General Meeting,
at such time and place, within or out of the State of Israel, as may be
determined by the Board of Directors, and shall be obliged to do so upon a
requisition in writing in accordance with Section 63 of the CompaniesLaw.
25. Notice of General Meetings; Omission to Give Notice. (a) Not less
than twenty- one (21) days' prior notice shall be given of every General
Meeting. Each such notice shall specify the place and the day and hour of
the meeting and the general nature of each item to be acted upon thereat,
said notice to be given to all shareholders who would be entitled to attend
and vote at such meeting. Notice of a General Meeting shall be given in
accordance with the Statutes and any other applicable law, and otherwise as
the Board of Directors may determine. Anything therein to the contrary
notwithstanding, with the consent of all shareholders entitled to vote
thereon, a resolution may be proposed and passed at such meeting although a
lesser notice than given.
(b) The accidental omission to give notice of a meeting to any
shareholder, or the non-receipt of notice sent to such shareholder, shall
not invalidate the proceedings at such meeting.
(c) No shareholder present, in person or by proxy, at the
commencement of a General Meeting shall be entitled to seek the abolishment
of any proceedings or resolutions adopted at such General Meeting on
account of any defect in the notice of such meeting relating to the time or
the place thereof, or any item to be acted upon at such meeting which is
such that is usually acted upon at Annual General Meetings of the Company.
PROCEEDINGS AT GENERAL MEETINGS
26. Quorum. (a) No business shall be transacted at a General Meeting,
or at any adjournment thereof, unless the quorum required under these
Articles for such General Meeting or such adjourned meeting, as the case
may be, is present when the meeting proceeds to business.
(b) In the absence of contrary provisions in these Articles,
two or more shareholders (not in default in payment of any sum referred to
in Article 32(a) hereof), present in person or by proxy and holding shares
conferring in the aggregate at least thirty three and a third percent
(331/3%) of the voting power of the Company, shall constitute a quorum of
General Meetings.
(c) If within half an hour from the time appointed for the
meeting a quorum is not present, the meeting shall be adjourned to the same
day in the next week, at the same time and place, or to such day and at
such time and place as the Chairman may determine with the consent of the
holders of majority of the voting power represented at the meeting in
person or by proxy and voting on the question of adjournment. No business
shall be transacted at any adjourned meeting except business which might
lawfully have been transacted at the meeting as originally called. At such
adjourned meeting (other than an adjourned separate meeting of a particular
class of shares as referred to in Article 6 of these Articles), if the
original meeting was convened upon requisition under Section 63 of the
Companies Law, one or more shareholder, present in person or by proxy, and
holding the number of shares required for making such requisition, shall
constitute a quorum, but in any other case any two (2) shareholders (not in
default as aforesaid) present in person or by proxy, shall constitute a
quorum.
27. Chairman. The Chairman, if any, of the Board of Directors, shall
preside as Chairman at every General Meeting of the Company. If at any
meeting the Chairman is not present within fifteen (15) minutes after the
time fixed for holding the meeting or its unwilling to act as Chairman, the
Co-Chairman shall preside at the meeting. If at any such meeting both the
Chairman and the Co-Chairman are not present of are unwilling to act as
Chairman, shareholders present shall choose someone of their number to be
Chairman. The office of Chairman shall not, by itself, entitle the holder
thereof to vote at any General Meeting nor shall it entitle such holder to
a second or casting vote (without derogating, however, from the rights of
such Chairman to vote as a shareholder or proxy of a shareholder if, in
fact, he is also a shareholder or such proxy).
28. Adoption of Resolutions at General Meetings. (a) (i) An Ordinary
Resolution shall be deemed adopted if approved by the holders of majority
of the voting power represented at the meeting in person or by proxy and
voting thereon.
(ii) Any matter required under the Companies Ordinance to be
approved by a Special or Extraordinary Resolution shall be deemed
adopted if approved by an Ordinary Resolution, except as otherwise
mandated by any provision of the Companies Ordinance then still in
effect.
(b) Every question submitted to a General Meeting shall be
decided by a written ballot
(c) A declaration by the Chairman of the meeting that a
resolution has been carried unanimously, or carried by a particular
majority, or lost, and an entry to that effect in the minute book of the
Company, shall be prima facie evidence of the fact without proof of the
number or proportion of the votes recorded in favor of or against such
resolution.
29. Resolutions in Writing. A resolution in writing signed by all
shareholders of the Company then entitled to attend and vote at General
Meetings or to which all such shareholders have given their written consent
(by letter, telegram, telex, facsimile or otherwise) shall be deemed to
have been unanimously adopted by a General Meeting duly convened and held.
30. Power to Adjourn. The Chairman of a General Meeting at which a
quorum is present may, with the consent of the holders of a majority of the
voting power represented in person or by proxy and voting on the question
of adjournment (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting except business which might lawfully
have been transacted at the meeting as originally called.
31. Voting Power. Subject to the provisions of Article 32(a) and
subject to any provision hereof conferring special rights as to voting, or
restricting the right to vote, every shareholder shall have one vote for
each share held by him of record or in his name with an "exchange member"
and held of record by a "nominees company" (as such terms are defined under
Section 1 of the Companies Law), on every resolution, without regard to
whether the vote thereon is conducted by a show of hands, by written ballot
or by any other means.
32. Voting Rights. (a) No shareholder shall be entitled to vote at
any General Meeting (or be counted as a part of the quorum thereat), unless
all calls then payable by him in respect of his shares in the Company have
been paid, but this Article 32(a) shall not apply to separate General
Meetings of the holders of a particular class of shares pursuant to Article
6(b).
(b) A company or other corporate body being a shareholder of
the Company may duly authorize any person to be its representative at any
meeting of the Company or to execute or deliver a proxy on its behalf. Any
person so authorized shall be entitled to exercise on behalf of such
shareholder all the power which the latter could have exercised if it were
an individual shareholder. Upon the request of the Chairman of the meeting,
written evidence of such authorization (in form acceptable to the Chairman)
shall be delivered to him.
(c) Any shareholder entitled to vote may vote either in person
or by proxy (who need not be shareholder of the Company), or, if the
shareholder is a company or other corporate body, by representative
authorized pursuant to Article 32(b).
(d) If two or more persons are registered as joint holders of
any share, the vote of the senior who tenders a vote, in person or by
proxy, shall be accepted to the exclusion of the vote(s) of the other joint
holder(s). For the purpose of this Article 32(d), seniority shall be
determined by the order of registration of the joint holders in the
Register of Shareholder.
PROXIES
33. Instrument of Appointment. (a) An instrument appointing a proxy
shall be in writing and shall be substantially in the following form:
"I, ________________________, of ______________________________
(Name of Shareholder) (Address of Shareholder)
being a shareholder of ESC Sharplan Ltd. hereby appoint
__________________________, of _______________________________,
(Name of Proxy) (Address of Proxy)
as my proxy to vote for me and on my behalf at the General
Meeting of the Company to be held on the ____ day of ___________,
______ and at any adjournment(s) thereof. Signed this _________
day of ______________, ________.
________________________"
(Signature of Appointor)
or in any usual or common form or in such other form as may be approved by
the Board of Directors. Such proxy shall be duly signed by the appointer of
such person's duly authorized attorney, or, if such appointer is company or
other corporate body, under its common seal or stamp or the hand of its
duly authorized agent(s) or attorney(s).
(b) The instrument appointing a proxy (and the power of
attorney of other authority, if any, under which such instrument has been
signed) shall either be presented to the Chairmen at the meeting at which
the person named in the instrument proposes to vote or be delivered to the
Company (at its Registered Office, at its principal place of business, or
at the offices of its registrar or transfer agent, or at such place as the
Board of Directors may specify) not less than two (2) hours before the time
fixed for such meeting, except that the instrument shall be delivered (i)
twenty-four (24) hours before the time fixed for the meeting where the
meeting is to be held outside of Israel and the instrument is delivered to
the Company at it Registered Office or principal place of business, or (ii)
forty-eight (48) hours before the time fixed for the meeting where the
meeting is to be held outside of the United States of America and the
instrument is delivered to the Company's registrar or transfer agent.
34. Effect of Death of Appointor of Transfer of Share and or
Revocation of Appointment. (a) A vote cast in accordance with an instrument
appointing a proxy shall be valid notwithstanding the prior death or
bankruptcy of the appointing shareholder (or of his attorney-in- fact, if
any, who signed such instrument), or the transfer of the share in respect
of which the vote is cast, unless written notice of such matters shall have
been received by the Company or by the Chairman of such meeting prior to
such vote being cast.
(b) An instrument appointing a proxy shall be deemed revoked
(i) upon receipt by the Company or the Chairman, subsequent to receipt by
the Company of such instrument, of written notice signed by the person
signing such instrument or by the shareholder appointing such proxy
canceling the appointment thereunder (or the authority pursuant to which
such instrument was signed) or of an instrument appointing a different
proxy (and such other documents, if any, required under Article 33(b) for
such new appointment), provided such notice of cancellation or instrument
appointing a different proxy were so received at the place and within the
time for delivery of the instrument revoked thereby as referred to in
Article 33(b) hereof, or (ii) if the appointing shareholder is present in
person at the meeting for which such instrument of proxy was delivered,
upon receipt by the Chairman of such meeting of written notice from such
shareholder of the revocation of such appointment, or if and when such
shareholder votes at such meeting. A vote cast in accordance with an
instrument appointing a proxy shall be valid notwithstanding the revocation
or purported cancellation of the appointment, or the presence in person or
vote of the appointing shareholder at a meeting for which it was rendered,
unless such instrument of appointment was deemed revoked in accordance with
the foregoing provisions of this Article 34(b) at or prior to the time such
vote was cast.
BOARD OF DIRECTORS
35. Powers of Board of Directors. (a) In general. The management of
the business of the Company shall be vested in the Board of Directors,
which may exercise all such powers and do all such acts and things as the
Company is authorized to exercise and do, and are not hereby or by law
required to the exercised or done by the Company by action of its
shareholders as a General Meeting. The authority conferred on the Board of
Directors by this Article 35 shall be subject to the provisions of the
Statutes, these Articles and any regulation or resolution consistent with
these Articles adopted from time to time by the Company by action of its
shareholders at a General Meeting, provided, however, that no such
regulation or resolution shall invalidate any prior act done by or pursuant
to a decision of the Board of Directors which would have been valid if such
regulation or resolution and not been adopted.
(b) Borrowing Power. The Board of Directors may from time to
time, at its discretion, cause the Company to borrow or secure the payment
of any sum or sums of money for the purposes of the company, and may secure
or provide for the repayment of such sum or sums in such manner, at such
times and upon such terms and conditions as it deems fit, and, in
particular, by the issuance of bonds, perpetual or redeemable debentures,
debenture stock, or any mortgages, charges, or other securities on the
undertaking or the whole or any part of the property of the Company, both
present and future, including its uncalled or called but unpaid capital for
the time being.
(c) Reserves. The Board of Directors may, from time to time,
set aside any amount(s) out of the profits of the Company as a reserve or
reserves for any purpose(s) which the Board of Directors, in its absolute
discretion, shall deem fit, including without limitation, capitalization
and distribution of bonus shares, and may invest any sum so set aside in
any manner and from time to time deal with and vary such investments and
dispose of all or any part thereof, and employ and such reserve or any part
thereof in the business of the Company without being bound to keep the same
separate from other assets of the Company, and may subdivide or redesignate
any reserve or cancel the same or apply the funds therein for another
purpose, all as the Board of Directors may from time to time thing fit.
36. Exercise of Powers of Board of Directors. (a) A meeting of the
Board of Directors at which a quorum is present shall be competent to
exercise all the authorities, powers and discretion vested in or
exercisable by the Board of Directors.
(b) A resolution proposed at any meeting of the Board of
Directors shall be deemed adopted if approved by a majority of the
Directors present when such resolution is put to a vote and voting therein.
(c) A resolution in writing signed by all of the Directors then
in office and lawfully entitled to vote thereon or to which all of the
Directors have given their written consent (by letter, telegram, telex,
facsimile, electronic mail or otherwise) shall be deemed to have been
unanimously adopted by a meeting of the Board of Directors duly convened
and held.
37. Delegation of Powers. (a) The Board of Directors may, subject to
the provisions of theStatutes, delegate any or all of its powers to
committees, each consisting of one or more persons (who are Directors), and
it may from time to time revoke such delegation or alter the composition of
any such committee. Any Committee so formed (in these Articles referred to
as a "Committee of the Board of Directors"), shall, in the exercise of the
powers so delegated, conform to any regulation imposed on it by the Board
of Directors. The meeting and proceedings of any such Committee of the
Board of Directors shall, mutatis mutandis, be governed by the provisions
herein contained for regulating the meetings of the Board of Directors, so
far as not superseded by any regulations adopted by the Board of Directors
under this Article. Unless otherwise expressly provided by the Board of
Directors in delegating powers to a Committee of the Board of Directors,
such Committee shall not be empowered to further delegate such powers.
(b) Without derogating from the provisions of Article 50, the
Board of Directors may from time to time appoint a Secretary to the
Company, as well as officers, agents, employees and independent
contractors, as the Board of Directors deems fit, and may terminate the
service of any such person. The Board of Directors may, subject to the
provisions of the Companies Ordinance, determine the powers and duties, as
well as the salaries and emoluments, of all such persons, and may require
security in such cases and in such amounts as it deems fit.
(c) The Board of Directors may from time to time, by power of
attorney or otherwise, appoint any person, company, firm or body of persons
to be the attorney or attorneys of the Company at law or in fact for such
purposes(s) and with such powers, authorities and discretions, and for such
period and subject to such conditions, as it deems fit, and any such power
of attorney or other appointment may contain such provisions for the
protection and convenience of persons dealing with any such attorney as the
Board of Directors deems fit, and may also authorize any such attorney to
delegate all or any of the powers, authorities and discretions vested in
him.
38. Number of Directors. The Board of Director of the Company shall
consist of such number of Directors (not less than two nor more than
fourteen, including the Outside Directors) as may be fixed, from time to
time, by Ordinary resolution of the Company.
39. Election and Removal of Directors. (a) Directors shall be elected
at the Annual General Meeting by the vote of the holders of a majority of
the voting power represented at such meeting in person or by proxy and
voting on the election of directors, and each Director shall serve, subject
to Article 42 hereof, and, with respect to a Director appointed pursuant to
Article 41 hereof, subject to such Article, until the Annual General
Meeting next following the Annual General Meeting or General Meeting at
which such Director was elected pursuant to this Article or Article 41
hereof, or his earlier removal pursuant to this Article 39. The holders of
a majority of the voting power represented at a General Meeting in person
or by proxy and voting thereon at such Meeting shall be entitled to remove
any Director(s) from office, to elect Directors instead of Directors so
removed or to fill any vacancy, however created, in the Board of Directors.
(b) The Directors may at any time and from time to time appoint
any other person as a Director, whether to fill a vacancy or whether in
addition to those of their body. Any Director so appointed shall hold
office until the first General Meeting convened after such appointment and
may be re-elected.
(c) The election, qualification and removal of Outside
Directors shall be regulated by the applicable provisions set forth in the
Companies Law.
40. Qualification of Directors. No person shall be disqualified to
serve as a Director by reason of his not holding shares in the Company or
by reason of his having served as a Director in the past.
41. Continuing Directors in the Event of Vacancies. In the event of
one or more vacancies in the Board of Directors, the continuing Directors
may continue to act in every matter, and, pending the filling of any
vacancy pursuant to the provisions of Article 39, may appoint Directors to
temporarily fill any such vacancy, provided, however, that if they number
less than a majority of the number provided of pursuant to Article 38
hereof, they may only act in an emergency or to fill the office of director
which has become vacant up to the minimum number or in order to call a
General Meeting of the Company for the purpose of electing Directors to
fill any or all vacancies, so that at least a majority of the number of
Directors provided for pursuant to Article 38 hereof are in office as a
result of said meeting.
42. Vacation of Office. (a) The office of a Director shall be
vacated, ipso facto, upon his dealt, or if he be found lunatic or become of
unsound mind, or if he becomes bankrupt, or if the Director is a company,
upon its winding-up.
(b) The office of a Director shall be vacated by his written
resignation. Such resignation shall become effective on the date fixed
therein, or upon the delivery thereof to the Company, whichever is later.
43. Remuneration of Directors. A director shall be paid remuneration
by the Company for his services as Director to the extent such remuneration
shall have been approved by a General Meeting of the Company.
44. Conflict of Interests. Subject to the provisions of the
CompaniesLaw, no Director shall be disqualified by virtue of his office
from holding any office or place of profit in the Company or in any company
in which the Company shall be a shareholder or otherwise interested, or
from contracting with the Company as vendor, purchaser or otherwise, nor
shall any such contract, or any contract or arrangement entered into by or
on behalf of the Company in which any Director shall be in any way
interested, be avoided, nor, other than as required under the Companies
Ordinance, shall any Director be liable to account to the Company for any
profit arising from any such office or place of profit or realized by any
such contract or arrangement by reason only of such Director's holding that
office or of the fiduciary relations thereby established, but the nature of
his interest, as well as any material fact or document, must be disclosed
by him at the meeting of the board of Directors at which the contract or
arrangement is first considered, if his interest then exists, or, in any
other case, at no later than he first meeting of the Board of Directors
after the acquisition of his interest.
45. Alternate Directors. (a) A director may, by written notice to the
Company given in the manner set forth in article 45(b) below, appoint any
individual as an alternate for himself (in these Articles referred to as
"Alternate Director"), remove such Alternate Director and appoint another
Alternate Director in place of any Alternate Director appointed by him
whose office has been vacated for any reason whatsoever. The appointment of
an Alternate Director shall be subject to the consent of the Board of
Directors. Unless the appointing Director, by the instrument appointing an
Alternate Director or by written notice to the Company, limits such
appointment to a specified period of time or restricts it to a specified
meeting or action of the Board of Directors, or otherwise restricts its
scope, the appointment shall be for all purposes, and for a period of time
concurrent with the term of the appointing Director.
(b) Any notice to the Company pursuant to Article 45(a) shall
be given in person to, or by sending the same by mail to the attention of
the General Manager of the Company at the principal office of the Company
or to such other person or place as the Board of Directors shall have
determined for such purpose, and shall become effective on the date fixed
therein, or upon the receipt thereof by the Company (at the place as
aforesaid), whichever is later, subject to the consent of the Board of
Directors if the appointee is not then a member of the Board of Directors,
in which case the notice will be effective as of the date of such consent.
(c) An Alternate Director shall have all the rights and
obligations of the Director who appointed him, provided however, that (i)
he may not in turn appoint an alternate for himself (unless the instrument
appointing him otherwise expressly provides), and (ii) that an Alternate
Director shall have no standing at any meeting of the Board of Directors or
any committee thereof while the Director who appointed him is present, and
(iii) that the Alternate Director is not entitled to remuneration.
(d) Any individual, who qualifies to be a member of the Board
of Directors, may act as an Alternate Director.
(e) An Alternate Director shall alone be responsible for his
own acts and defaults, and he shall not be deemed the agent of the
Director(s) who appointed him.
(f) The office of an Alternate Director shall be vacated under
the circumstances, mutatis mutandis, set forth in Article 42, and such
office shall ipso facto be vacated if the Director who appointed such
Alternate Director ceases to be a Director.
PROCEEDINGS OF THE BOARD OF DIRECTORS
46. Meetings. (a) The Board of Directors may meet and adjourn its
meetings and otherwise regulate such meetings and proceedings as the
Directors think fit.
(b) Any Director may at any time, and the Secretary, upon the
request of such Director, shall, convene a meeting of the Board of
Directors, but not less than seven (7) days' notice shall be given of any
meeting so convened. Notice of any such meeting may be given orally, by
telephone, in writing or by mail, telex, cablegram or facsimile.
Notwithstanding anything to the contrary herein, failure to deliver notice
to a director of any such meeting in the manner required hereby may be
waived by such Director, and a meeting shall be deemed to have been duly
convened notwithstanding such defective notice if such failure or defect is
waived prior to action being taken at such meeting, by all Directors
entitled to participate at such meeting to whom notice was not duly given
as aforesaid. Without derogating from the foregoing, no director present at
the commencement of a meeting of the Board of Directors shall be entitled
to seek the abolishment of any proceedings or resolutions adopted at such
meeting on account of any defect in the notice of such meeting relating to
the time or the place thereof.
47. Quorum. Until otherwise unanimously decided by the Board of
Directors, a quorum at a meeting of the Board of Directors shall be
constituted by the presence in person or by telephone conference of a
majority of the Directors then in office who are lawfully entitled to
participate in the meeting. No business shall be transacted at a meeting of
the Board of Directors unless the requisite quorum is present (in person or
by telephone conference) when the meeting proceeds to business.
48. Chairman of the Board of Directors. The Board of Directors may
from time to time, elect one of its members to be the Chairman of the Board
of Directors, and another of its members as Co-Chairman, remove such
Chairman and Co-Chairman from office and appoint others in their place. The
Chairman of the Board of Directors shall preside at every meeting of the
Board of Directors, but if there is no such Chairman, or if at any meeting
he is not present within fifteen (15) minutes of the time fixed for the
meeting or if he is unwilling to take the chair, the Co- Chairman shall
preside. If both the Chairman and the Co-Chairman are not present or are
unwilling to take the chair the Directors present shall chosse one of their
number to be the Chairman of such meeting. Neither the Chairman nor the
Co-Chairman shall have a casting or additional vote.
49. Validity of Acts Despite Defects. All acts done bona fide at any
meeting of the Board of Directors, or of a Committee of the Board of
Directors, or by any person(s) acting as Director(s), shall,
notwithstanding that it may afterwards be discovered that there was some
defect in the appointment of the participants in such meeting or any of
them or any person(s) acting as aforesaid, or that they or any of them were
disqualified, be as valid as if there were no such defect or
disqualification.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
50. Chief Executive Officer and President. (a) The Board of Directors
may from time to time appoint one or more persons, whether or not
Directors, as Chief Executive Officer or Officers, General Manager or
Managers, or President of the Company and may confer upon such person(s),
and from time to time modify or revoke, such titles and such duties and
authorities of the Board of Directors as the Board of Directors may deem
fit, subject to such limitations and restrictions as the Board of Directors
may from time to time prescribe. Unless otherwise determined by the Board
of Directors, the Chief Executive Officer shall have authority with respect
of the management of the Company in the Ordinary course of business. Such
appointment(s) may be either for a fixed term or without any limitation of
time, and the Board of Directors may from time to time (subject to the
provisions of the Companies Ordinance and of any contract between any such
person and the Company) fix his or their salaries and emoluments, remove or
dismiss him or them from office and appoint another or others in his or
their place or places.
(b) Unless otherwise determined by the Board of Directors, the
Chief Executive Officer of the Company shall have the power to appoint
other officers, executives and employees of the Company and determine their
remuneration, provided that the remuneration of the four highest salaried
personnel of the Company shall also be approved by either the Board of
Directors or any of the Audit Committee or the Compensation Committee.
MINUTES
51. Minutes. (a) Minutes of each General Meeting and of each meeting
of the Board of Directors shall be recorded and duly entered in books
provided for that purpose, and shall be held by the Company at its
principal office or its Registered Office or such other place as shall have
been determined by the Board of Directors. Such minutes shall, in all
events, set forth the names of the persons present at the meeting and all
resolutions adopted thereat.
(b) Any minutes as aforesaid, if purporting to be signed by the
chairman of the meeting or by the chairman of the next succeeding meeting,
shall constitute prima facie evidence of the matters recorded therein.
DIVIDENDS
52. Declaration of Dividends. The board of Directors may from time
declare, and cause the Company to pay, such interim or final dividend as
may appear to the Board of Directors to be justified by the profits of the
Company and as permitted by the Statutes. The Board of Directors shall
determine the time for payment of such dividends, both interim and final,
and the record date for determining the shareholders entitled thereto.
53. Funds Available for Payment of Dividends. No dividend shall be
paid otherwise than out of the profits of the Company.
54. Amount Payable by Way of Dividends. (a) subject to the rights of
the holders of shares as to dividends, any dividend paid by the Company
shall be allocated among the shareholders entitled thereto in proportion to
the sums paid up or credited as paid up on account of the nominal value of
their respective holdings of the shares in respect of which such dividends
is being paid without taking into account the premium paid up for the
shares. The amount paid up on account of a share which has not yet been
called for payment or fallen due for payment and upon which the Company
pays interest to the shareholder shall not be deemed, for the purposes of
this Article, to be a sum paid on account of the share.
(b) Whenever the rights attached to any shares or the terms of
issue of the shares do not provide otherwise, shares which are fully paid
up or which are credited as fully or partly paid within any period which in
respect thereof dividends are paid shall entitle the holders thereof to a
dividend in proportion to the amount paid up or credited as paid up in
respect of the nominal value of such shares and to the date of payment
thereof (pro rata temporis).
55. Interest. No dividend shall carry interest as against the
Company.
56. Payment in Specie. Upon the recommendation of the Board of
Directors approved by Ordinary Resolution of the Company, the Company (i)
may cause any moneys, investments, or other assets forming part of the
undivided profits of the Company, standing to the credit of a reserve fund,
or to the credit of a reserve fund for the redemption of capital, or in the
hands of the Company and available for dividends, or representing premiums
received on the issuance of shares and standing to the credit of the share
premium account, to be capitalized and distributed among such of the
shareholders as would be entitled to receive the same if distributed by way
of dividend and in the same proportion, on the footing that they become
entitled thereto as capital, or may cause any part of such capitalized fund
to be applied on behalf of such shareholders in paying up in full, either
at par or at such premium as the resolution may provide, any unissued
shares or debentures or debentures stock of the Company which shall be
distributed accordingly, in payment, in full or in part, of the uncalled
liability on any issued shares or debentures or debenture stock; and (ii)
may cause such distribution or payment to be accepted by such shareholders
in full satisfaction of their interest in the said capitalized sum.
57. Implementation of Powers under Article 56. For the purpose of
giving full effect to any resolution under Article 56, and without
derogating from the provisions of Article 7(b) hereof, the Board of
Directors may settle any difficulty which may arise in regard to the
distribution as it thinks expedient, and, in particular, may issue
fractional certificates, and may fix the value for distribution of any
specific assets, and may determine that cash payments shall be made to any
shareholders upon the footing of the value so fixed, or that fractions of
less value than the nominal value of one share may be disregarded in order
to adjust the rights of all parties, and may vest any such cash, shares,
debentures, debenture stock or specific assets in trustees upon such trusts
for the persons entitled to the dividend or capitalized fund as may seem
expedient to the Board of Directors. Where requisite, a proper contract
shall be filed in accordance with Section 291 of the CompaniesLaw, and the
Board of Directors may appoint any person to sign such contract on behalf
of the persons entitled to the dividend or capitalized fund.
58. Dividends on Unpaid Shares. Without derogating from Article 54
hereof, the Board of Directors may give an instruction which shall prevent
the distribution of a dividend to the holders of shares the full nominal
amount of which has not been paid up.
59. Retention of Dividends. (a) The board of Directors may retain any
dividend or other moneys payable or property distributable in respect of a
share on which the Company has a lien, and may apply the same in or toward
satisfaction of the debts, liabilities, or engagements in respect of which
the lien exists.
(b) The Board of Directors may retain any dividend or other
moneys payable or property distributable in respect of a share in respect
of which any person is, under Articles 21 or 22, entitled to become a
shareholder, or which any person is, under said Articles, entitled to
transfer, until such person shall become a shareholder in respect of such
share or shall transfer the same.
60. Unclaimed Dividends. All unclaimed dividends or other moneys
payable in respect of a share may be invested or otherwise made use by the
Board of Directors for the benefit of the Company until claimed. The
payment by the Directors of any unclaimed dividend or such other moneys
into a separate account shall not constitute the Company a trustee in
respect thereof. The principal (and only the principal) of any unclaimed
dividend of such other moneys shall be if claimed, paid to a person
entitled thereto.
61. Mechanics of Payment. Any dividend or other moneys payable in
cash in respect of a share may be paid be check or warrant sent through the
post to, or left at, the registered address of the person entitled thereto
or by transfer to a bank account specified by such person (or, if two or
more persons are registered as joint holders of such share or are entitled
jointly thereto in consequence of the death or bankruptcy of the holder or
otherwise, to the joint holder whose name is registered first in the
Register of Shareholders or his bank account or the person who the Company
may then recognize as the owner thereof or entitled thereto under Article
21 or 22 hereof, as applicable, or such person's bank account), or to such
person and at such other address as the person entitled thereto may be
writing direct. Every such check or warrant shall be made payable to the
order of the person to whom it is sent, or to such person as the person
entitled thereto as aforesaid may direct, and payment of the check or
warrant by the banker upon whom it is drawn shall be a good discharge to
the Company.
62. Receipt from a Joint Holder. If two or more persons are
registered as joint holders of any share, or are entitled jointly thereto
in consequence of the death or bankruptcy of the holder or otherwise, any
one of them may give effectual receipts for any dividend or other moneys
payable or property distributable in respect of such share.
ACCOUNTS
63. Books of Account. The Board of Directors shall cause accurate
books of account to be kept in accordance with the provisions of the
Companies Ordinance and of any other applicable law. Such books of account
shall be kept at the Registered Office of the Company, or at such other
place or places as the Board of Directors may think fit, and they shall
always be open to inspection by all Directors. No shareholder, not being a
Director, shall have any right to inspect any account or book or other
similar document of the Company, except as conferred by law or authorized
by the Board of Directors or by Ordinary resolution of the Company.
64. Audit. At least once in every fiscal year the accounts of the
Company shall be audited and the correctness of the profit and loss account
and balance sheet certified by one or more duly qualified auditors.
65. Auditors. The appointment, authorities, rights and duties of the
auditor(s) of the Company, shall be regulated by applicable law, provided,
however, that in exercising its authority to fix the remuneration of the
auditor(s), the shareholders in General Meeting may, by Ordinary
Resolution, act (and in the absence of any action in connection therewith
shall be deemed to have so acted) to authorize the Board of Directors to
fix such remuneration subject to such criteria or standards are so provided
such remuneration shall be fixed in an amount commensurate with the volume
and nature of the services rendered by such auditor(s).
SUPPLEMENTARY REGISTERS
66. Supplementary Registers. Subject to and in accordance with the
provisions of Sections 138 to 139, inclusive, of the Companies Law and to
all orders and regulations issued thereunder, the Company may cause
supplementary registers to be kept in any place outside Israel as the Board
of Directors may think fit, and, subject to all applicable requirements of
law, the Board of Directors may from time to time adopt such rules and
procedures as it may think fit in connection with the keeping of such
branch registers.
67. [Reserved]
EXEMPTION, IDEMNITY AND INSURANCE
68. Exemption. [ARTICLE 68 REPLACED IN ITS ENTIRETY] The Company
may exempt any Office Holder from his or her liability to the Company for
breach of duty of care, to the maximum extent permitted by law, before or
after the occurrence giving rise to such liability.
68A. Indemnification. (a) The Company may undertake with any Office
Holder to indemnify such Office Holder, to the maximum extent permitted by
law, against any liabilities he or she may incur in such capacity, provided
that such undertaking is limited (i) with respect to categories of events
that can be expected as determined by the Board of Directors when
authorizing such undertaking, and (ii) with respect to such amounts
determined by the Board of Directors as reasonable in the circumstances.
(b) The Company may indemnify any past or present Office
Holder, to the maximum extent permitted by law, with respect to any past
occurrence, whether or not the Company is obligated under any agreement to
indemnify such Office Holder in respect of such occurrence.
68B. Insurance. The Company may procure, and/or undertake to procure,
insurance covering any past or present Office Holder against any liability
which he or she may incur in such capacity, including the Company for
indemnifying such Office Holder, to the maximum extent permitted by law.
68C. Limitations on Exemption, Indemnity and Insurance. Articles 68,
68A and 68B above notwithstanding, the Company shall not procure insurance,
indemnify or exempt any Office Holder with respect to the events described
in Subsections 263(1) through 263(4) of the Companies Law or any successor
or amendment thereof, as may from time to time be in effect.
WINDING UP
69. Winding Up. If the Company is wound up, then, subject to
applicable law and to the rights of the holders of shares with special
rights upon winding up. The assets of the company available for
distribution among the shareholders shall be distributed to them in
proportion to the nominal value of their respective holdings of the shares
in respect of which such distribution is being made.
MERGERS
69A. Approval of Merger. Notwithstanding Section 327 of the Companies
Law, the Company may approve any merger under Part Eight, Chapter One of
the Companies Law by an Ordinary Resolution.
RIGHTS OF SIGNATURE, STAMP AND SEAL
70. Rights of Signature, Stamp and Seal. (a) The Board of Directors
shall be entitled to authorize any person or persons (who need not be
Directors) to act and sign on behalf of the Company, and the acts and
signature of such person(s) on behalf of the Company shall bind the Company
insofar as such person(s) acted and signed within the scope of his or their
authority.
(b) The board of Directors may provide for a seal. If the Board
of Directors so provides, it shall also provide for the safe custody
thereof. Such seal shall not be used except by the authority of the Board
of Directors and in the presence of the person(s) authorized to sign on
behalf of the Company, who shall sign every instrument to which such seal
is affixed.
(c) The Company may exercise the powers conferred by Section
102 of the Companies Ordinance regarding a seal for use abroad, and such
posers shall be vested in the Board of Directors.
NOTICES
71. Notices. (a) Any written notice or other document may be served
by the Company upon any shareholder either personally or be sending it by
prepaid mail (airmail if sent internationally) addressed to such
shareholder at his address as described in the Register of Shareholders or
such other address as he may have designated in writing for the receipt of
notices and other documents. Any written notice or other document may be
served by any shareholder upon the Company be tendering the same in person
to the Secretary or the General Manager of the Company at the principal
office of the Company or by sending it by prepaid registered mail (airmail
if posted outside Israel) to the Company at its served forty-eight (48)
hours after it has been posted (seven (7) business days if sent
internationally), or when actually received by the addressee if sooner than
forty-eight hours or seven days, as the case may be, after it has been
posted, or when actually tendered in person, to such shareholder (or to the
Secretary or the General Manager). Notice sent by cablegram, telex, or
facsimile shall be deemed to have been served two business days after the
notice is so sent to such shareholder (or by the Company). If a notice is,
in fact, received by the addressee, it shall be deemed to have been duly
served, when received, notwithstanding that it was defectively addressed or
failed, in some other respect, to comply with the provisions of this
Article 71(a).
(b) All notices to be given to the shareholders shall, with
respect to any share to which persons are jointly entitled, be given to
whichever of such persons is named first in the Register of Shareholders,
and any notice to given shall be sufficient notice to the Holders of such
share.
(c) Any shareholder whose address is not described in the
Register of Shareholders, and who shall not have designated in writing an
address for the receipt of notices, shall not be entitled to receive any
notice from the Company.
(d) Notwithstanding anything to the contrary contend herein,
notice by the Company of a General Meeting which is published in at least
two daily newspapers in the State of Israel within the time otherwise
required for giving notice of such meeting under Article 25 hereof and
containing the information required to be set forth in such notice under
such Article, shall be deemed to be notice of such meeting duly given, for
purposes of these Articles, to any shareholder whose address as register of
Shareholders is located in the State of Israel.
* * * *
PROXY
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ______________, 2000
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
ESC MEDICAL SYSTEMS LTD.
The undersigned hereby appoints Yacha Sutton and Hadar Solomon and each or
any of them, proxies of the undersigned, with full power of substitution to
vote all of the shares of ESC Medical Systems Ltd., an Israeli corporation
(the "Company"), which the undersigned may be entitled to vote at the
Annual General Meeting of Shareholders of the Company to be held at
[_________] on [_________] at 10:00 a.m. (local time) or at any adjournment
or postponement thereof, as shown on the voting side of this card.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
- ------------------------------------------------------------------------------
[Reverse Side]
ANNUAL MEETING OF SHAREHOLDERS
ESC MEDICAL SYSTEMS LTD.
________, 2000
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes as in this example.
This proxy will be voted as specified. IF A CHOICE IS NOT SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEE DIRECTORS, FOR PROPOSALS 2,3,4,5,6,7,8
AND 9 AND IN THE DISCRETION OF THE PROXIES, WITH RESPECT TO ALL OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY AND ALL
ADJOURNMENTS THEREOF.
1. To elect the following nominees to serve as directors of the
Company until the next Annual General Meeting of Shareholders:
Prof. Jacob A. Frenkel, Mr. Aharon Dovrat, Mr. Philip Friedman, Mr.
Thomas G. Hardy, Prof. Darrell S. Rigel, M.D., Mr. S.A. Spencer,
Mr. Mark H. Tabak and Prof. Zehev Tadmor. You may withhold
authority to vote for any one or more of the nominees by writing
their name in the space provided below.
FOR all nominees listed above WITHHOLD AUTHORITY to vote
(except as indicated to the contrary below) for all nominees listed above
[ ] [ ]
===============================================================================
(Instructions: Write the name of each nominee in the space above for whom
authority to vote is withheld)
2. To approve the exemption, insurance and indemnification
arrangements of the Company's directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the reimbursement of costs and expenses of certain
Shareholders in connection with the proxy contest held at the
Company's June 23, 1999 combined Extraordinary and Annual General
Meeting of Shareholders.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve the indemnification of current and former directors of
the Company with respect to certain complaints filed with the
United States District Court and in connection with the filing of
Schedule 13D by certain Shareholders prior to the Company's June
23, 1999 combined Extraordinary and Annual General Meeting of
Shareholders.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To approve the adoption of the 1999 Share Option Plan and the grant
of share options thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To appoint the firm of Brightman Almagor & Co., a member firm of
Deloitte, Touche, Tohmatsu, as the Company's independent
accountants for fiscal year 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To approve the amendment to the Company's Memorandum of Association.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. To amend the Company's Articles of Association by adopting the
Amended and Restated Articles of Association.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
9. To approve the compensation of the Company's directors for (i)
services rendered to the Board of Directors during the term which
commenced following the Company's June 23, 1999 combined
Extraordinary and Annual General Meeting of Shareholders and (ii)
serving on the Board of Directors during the new term, which shall
commence with the first duly convened meeting of the Board of
Directors elected at the Annual Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
-----------------------
(SIGNATURE)
-----------------------
(SIGNATURE IF HELD JOINTLY)
Dated: _____________, 2000
NOTE: This proxy should be dated and signed by the shareholder exactly as
the shareholder's name appears hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.
Please sign exactly as name(s) appear hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
