<PAGE>
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:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
ESC MEDICAL SYSTEMS LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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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<PAGE>
ESC MEDICAL SYSTEMS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
May 3, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual General 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 of New
York, 111 East 48th Street, New York, New York. 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
<PAGE>
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 of New York, 111 East
48th Street, New York, New York, 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 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
May 3, 2000
<PAGE>
ESC MEDICAL SYSTEMS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
General Information.................................................. 1
The Proxy.......................................................... 1
Shareholders Entitled to Vote...................................... 1
Quorum; Required Vote.............................................. 1
Proxy Solicitation................................................. 2
Shareholders Duties................................................ 2
Proposal 1--Election of Directors.................................... 3
Nominees........................................................... 3
Proposal 2--Ratification and Approval of Exemption, Insurance and
Indemnification Arrangements to Directors........................... 5
Background......................................................... 5
Directors' and Officers' Insurance................................. 5
Indemnification of Directors and Officers under the Companies Law.. 6
Exemption Provisions under the Companies Law....................... 6
The Proposed Indemnification Agreements............................ 6
Proposal 3--Approval of Reimbursement of Costs and Expenses of
certain Shareholders................................................ 8
Proposal 4--Indemnification of Certain Persons Regarding Litigation.. 9
Proposal 5--Approval of the 1999 Share Option Plan................... 10
Background......................................................... 10
General Terms and Conditions of the Plan........................... 11
Terms of the Options............................................... 11
Certain Israeli Tax Effects........................................ 11
Certain U.S. Federal Income Tax Effects............................ 12
Non Qualified Options............................................ 12
Incentive Stock Options.......................................... 12
Exercise by Delivery of Shares................................... 13
Transferred Options; Estate and Gift Taxes....................... 13
Proposal 6--Appointment of Auditors.................................. 14
Proposal 7--Amendment of the Company's Memorandum of Association..... 14
Background......................................................... 14
Required Vote...................................................... 15
Proposal 8--Adoption of Amended Restated Articles of Association..... 15
Background......................................................... 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page No.
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<S> <C>
General Amendments and Change in Terminology........................ 15
Amendments of the Articles.......................................... 15
Company's Purpose................................................... 16
Quorum at Class Meeting............................................. 16
Repurchase of Shares................................................ 16
Record Date for Notices of General Meeting and Other Action......... 16
Annual General Meeting.............................................. 16
Notice of General Meetings; Omission to Give Notice................. 16
Quorum of an Adjourned General Meeting.............................. 17
Adoption of Resolutions at General Meetings......................... 17
Voting Power........................................................ 17
Alternate Directors................................................. 17
Meetings of the Board of Directors.................................. 17
Chairman of the Board of Directors.................................. 17
Powers of Chief Executive Officer................................... 18
Distribution of Dividend............................................ 18
Exemption, Indemnity and Insurance.................................. 18
Mergers............................................................. 18
Proposal 9--Approval of Directors' Compensation....................... 18
Information Concerning the Board of Directors and Board Committees.... 19
The Board of Directors.............................................. 19
Committees of the Board of Directors................................ 19
Executive Committee............................................... 20
Audit Committee................................................... 20
Internal Auditor.................................................. 20
Compensation Committee............................................ 20
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions........................................... 21
Directors' Compensation............................................. 21
Approval of Specified Related Transactions Under Israeli Law.......... 21
Fiduciary Duties of Office Holders.................................. 21
Disclosure of Personal Interests of an Office Holder................ 21
Disclosure of Personal Interests of Controlling Shareholders........ 22
Executive Officers of the Company..................................... 23
Security Ownership of Certain Beneficial Owners and Management........ 25
Section 16(a) Beneficial Ownership Reporting Compliance............... 25
Executive Compensation................................................ 26
Option/SAR Grants in Last Fiscal Year............................... 27
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values...................................................... 27
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Employment Agreements, Termination Provisions and Change in Control
Arrangements....................................................... 28
Compensation Committee Report....................................... 30
General Compensation Policy......................................... 30
Factors........................................................... 30
Base Salaries..................................................... 30
Annual Incentive Compensation Awards.............................. 31
Other Incentive Compensation Awards............................... 31
Certain Agreements................................................ 31
Chief Executive Officer Compensation.............................. 31
Deductibility of Compensation..................................... 31
Performance Graph..................................................... 32
Proposals of Shareholders............................................. 33
Other Business........................................................ 33
Additional Information................................................ 33
</TABLE>
Annexes
Annex A:Form of Indemnification Agreement
Annex B:1999 Share Option Plan
Annex C:Amended and Restated Articles of Association
3
<PAGE>
ESC MEDICAL SYSTEMS LTD.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
General Information
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 of New York, 111 East 48th
Street, New York, New York, 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 May 3, 2000. There
were approximately 27,629,017 Ordinary Shares outstanding on April 24, 2000,
with each share entitled to one vote per share on each matter submitted to
shareholders for consideration at the Annual Meeting.
The Proxy
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 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
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 on an
exchange located outside of Israel, is entitled to receive prior notice of a
General Meeting 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
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.
1
<PAGE>
The affirmative vote of a majority of the Ordinary Shares present and voting
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 on such matter will be counted
towards determining whether such matter is approved by shareholders. Ordinary
Shares present at the Annual Meeting that are not voted on a particular matter
or Ordinary Shares present by proxy where the shareholder properly withheld
authority to vote on such matter (including broker non-votes) will not be
counted in determining whether such matter is approved by shareholders.
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 $12,500,
plus reimbursement of certain out-of-pocket expenses.
Shareholders Duties
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.
2
<PAGE>
Proposal 1--Election Of Directors
The Board of Directors currently consists of nine members. Each Director
serves until the next Annual General Meeting 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 reelected by the shareholders.
The Board of Directors has nominated for election the following persons 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. All the above named nominees are currently
members of the Board of Directors. Mr. Kenneth Rind, who is currently a
Director, will not be standing for reelection.
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.
<TABLE>
<CAPTION>
Nominee Business Experience
------- ---------------------------------------------------
<C> <S>
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 during
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 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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Nominee Business Experience
------- -------------------
<C> <S>
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 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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Nominee Business Experience
------- -------------------
<C> <S>
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.
</TABLE>
The affirmative vote of the holders of a majority of the voting power
represented and voting 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 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) potential 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, as now in effect and as proposed to be amended upon shareholder
approval of "Proposal 8--Adoption of Amended and Restated Articles of
Association" below (the "Amended Articles"), 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 Amended Articles 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
5
<PAGE>
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 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 Amended Articles
authorizes the Company to indemnify its office holders to the fullest extent
permitted under the law.
The Amended Articles 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 Amended Articles 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 Amended Articles 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
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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 an Indemnifiable Event. The Indemnification Agreements
set 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:
. 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 Agreements.
. 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.
. 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.
. 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
(the "Exchange Act"), or any similar or successor statute.
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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
and is subject to shareholder approval of Proposal 8.
The Board of Directors recommends a vote FOR this Proposal 2.
Proposal 3--Approval of Reimbursement of Costs and Expenses of Certain
Shareholders
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 holds 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.
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The affirmative vote of the holders of a majority of the voting power
represented and voting 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
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 resolutions in substantially the
following form:
"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
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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 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 were 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 and voting 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"). Shareholder 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."
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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 Effects
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(IX) of the Israeli
Income Tax Ordinance.
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Certain U.S. 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 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.
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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 by Delivery of Shares
According to a published ruling of the United States 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 United States 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.
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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 and voting 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.
Neither Brightman nor LK will have a representative present at the Annual
Meeting.
An affirmative vote of a majority of the shares represented and voting at
the Annual Meeting in person or by proxy 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.
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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 Amended Articles proposed to be approved by
shareholders 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. Article 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
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<PAGE>
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 define its purposes as to engage in
any lawful business and may broaden the scope of its purposes to the grant of
reasonable donations for any proper charitable cause, even if the basis for
any such donation is not dependent upon business considerations. 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
(33 1/3%) 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 give notice of a general meeting to its shareholders of record
at least twenty-one days prior to the meeting, unless the
16
<PAGE>
company's articles provide that a notice need not be sent. Under the Old
Articles, notice of general meetings was generally given at least seven days
except for general meetings where "Special Resolutions" were proposed, then
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 requisition of shareholders
pursuant to the Companies Law, to the presence of the holders of the number of
shares necessary to make the requisition. It provides that one or more
shareholders, present in person or by proxy, and holding the number of shares
required for making such requisition 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
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<PAGE>
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.
The affirmative vote of at least 75% of the Ordinary Shares present or
represented and voting at the Annual Meeting is required to approve the
adoption of the Amended Articles.
The Board of Directors recommends a vote FOR the approval of the Amended
Articles.
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
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Company's Compensation Committee, approved the following compensation to the
directors of the Company:
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. A cash retainer fee for participation in meetings of the Board of
Directors or any sub-committee at $2,500 per calendar quarter. Such
Directors are not entitled to receive any additional per-meeting fee
but they will be reimbursed for their reasonable travel and
accommodation expenses; and
b. 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 an additional 20% will vest on each of the first and second
anniversaries of the grant date; and
2. To the Chairman of the Board of Directors, Prof. Frenkel, meeting
attendance 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.
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 such Directors during the term
which commenced following the 1999 Meeting and (ii) to service on the Board of
Directors for the term commencing at the Annual Meeting.
The affirmative vote of the holders of a majority of the voting power
represented and voting 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 the 1999 fiscal year and since
the 1999 Meeting, 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.
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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 five Directors:
Jacob A. Frenkel (Chairman); Thomas G. Hardy; Ahron Dovrat; S.A. Spencer; and
Prof. Zehev Tadmor. During the 1999 fiscal year and since the 1999 Meeting,
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 the 1999 fiscal year and since the 1999 Meeting, 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 the 1999 fiscal year and since the 1999 Meeting, the
Compensation Committee held three meetings.
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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 G. 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
Subject to shareholder approval, 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 and the Chairman will be granted an option to purchase 500,000 Ordinary
Shares, all of which shall be 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 an 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 1999 Meeting, 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, subject in each case
to shareholder approval.
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
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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 should
include the affirmative vote of 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.
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EXECUTIVE OFFICERS OF THE COMPANY
The following individuals are the executive officers and key management of
the Company:
<TABLE>
<CAPTION>
Name Position and Business Experience
---- --------------------------------
<C> <S>
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.
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.
Sagi Genger Mr. Sagi Genger, age 28, was appointed Chief Financial
Officer of the Company in November 1999. Prior to joining
the Company, Mr. Genger was employed in the mergers and
acquisitions department of Donaldson, Lufkin, and
Jenrette, a leading Wall Street investment bank, during
the period from 1997 through 1999. Prior to that, Mr.
Genger worked from 1997 through 1996 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. Mr. Genger
is the son of Arie Genger, a shareholder who owns more
than 5% of the Company's issued and outstanding Ordinary
Shares.
Dr. Michael Slatkine Dr. Michael Slatkine, age 54, 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
Ltd., 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.
Peter D'Errico Mr. Peter D'Errico, age 42, joined the Company in January
2000 as Vice President, Corporate Marketing. Previously,
Mr. D'Errico 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 positions 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.
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 Ltd. since May 1997. From
July 1995 to May 1997, he served as Laser Industries
Ltd.'s Vice President, Operations. He served as Laser
Industries Ltd.'s Director of Operations from April 1993
to June 1995. Mr. Werner holds a B.S. in Industrial
Engineering from Tel Aviv University.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Name Position and Business Experience
---- --------------------------------
<C> <S>
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.
Alon Maor Mr. Alon Maor, age 38, joined the Company in January 1999
as the President and Representative Director of ESC
Japan. Since January 2000, Mr. Maor serves as CEO of Asia
Pacific Operations. Prior to joining the Company, Mr.
Maor was the President and Representative Director of
Direx Japan, a subsidiary of Direx Medical Systems.
During his eleven years with Direx Medical Systems, he
formed Direx Japan and was responsible for capturing
major market share in Japan and Asia.
Hadar Solomon Mr. Hadar Solomon, age 43, 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 1988, he served as Assistant
General Counsel of Laser Industries Ltd. Mr. Solomon is a
Graduate of the Faculty of Law of the Hebrew University
of Jerusalem and is a member of the Israeli Bar.
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.
Dan Winterstein Mr. Winterstein, age 55, has served as the General
Manager of OpusDent Ltd., the Company's dental business
subsidiary, since the beginning of 1999. Prior to
becoming General Manager of OpusDent Ltd., Mr.
Winterstein was employed by Laser Industries Ltd. since
1984, starting out as Manager of European Operations and
subsequently becoming General Manager of International
Sales. 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 in
International Business Administration at the Wharton
Business School in Pennsylvania in 1981.
Israel Ohana, Ph. D. Dr. Ohana, age 46, joined the Company in February, 2000
as the Vice President, Research and Development. Prior to
joining the Company, Dr. Ohana served as Vice President
and head of the Nuclear Medicine Division during 1997
through 1999 at Elscint Ltd. From 1995 through 1997, Dr.
Ohana served as Nuclear Medicine research and development
manager at Elscint Ltd. Dr. Ohana led the development of
several revolutionary products in the area of tumor
localization and cardiac malfunction and is the author or
co-author of a number patents and scientific
publications. Dr. Ohana received a BA in physics and
mathematics from the Hebrew University of Jerusalem,
Israel and an MA and Ph.D. in Physics from the Hebrew
University of Jerusalem, Israel.
</TABLE>
24
<PAGE>
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 24, 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 27,629,017 Ordinary Shares
outstanding as of April 24, 2000.
<TABLE>
<CAPTION>
Options Total
Shares Exercisable Beneficial Percentage
Beneficial Owner Owned within 60 days Ownership Ownership
- ---------------- --------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
FMR Corp.(1)................... 2,445,350 0 2,445,350 8.85%
Arie Genger(2)................. 2,279,757 0 2,279,757 8.25%
Bernard Gottstein(3)........... 1,939,634 0 1,939,634 7.02%
Aharon Dovrat.................. 20,500 30,000 50,500 *
Jacob A. Frenkel............... 0 300,000 300,000 *
Phillip Friedman............... 25,000 30,000 55,000 *
Thomas Hardy................... 205,765 30,000 235,765 *
Darrell S. Rigel............... 6,000 30,000 36,000 *
Sash A. Spencer................ 11,000 30,000 41,000 *
Yacha Sutton................... 0 73,005 73,005 *
Mark H. Tabak.................. 0 30,000 30,000 *
Zehev Tadmor................... 1,300 30,000 31,300 *
Louis Scafuri.................. 5,000 445,000 450,000 *
Alon Maor...................... 0 0 0 *
Dan Winterstein................ 0 12,000 12,000 *
Hans Edel...................... 20,000 5,000 25,000 *
All Directors and executive
officers as a group
(20 persons).................. 304,165 1,087,203 1,391,368 5.04%
</TABLE>
- --------
* Less than 1%.
(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 Exchange Act. 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.
25
<PAGE>
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 subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- -------------------------
Securities
Variable Other Annual Underlying All Other
Name and Principal Salary Compensation Compensation Options/SARs Compensation
Position Year ($) Bonus ($) ($)(1) Granted (#) ($)
- ------------------ ---- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Yacha Sutton............ 1999 $87,298 0 $28,977(2) 200,000 $318,750(3)
President and Chief 1998 N/A* N/A* N/A* N/A* 660,284(3)
Executive Officer 1997 N/A* N/A* N/A* N/A* N/A*
Shimon Eckhouse......... 1999 145,687 0 36,103(4) 0 150,911(5)
Former Chief 1998 201,574 50,273 126,751(4) 0 0
Executive Officer 1997 183,640 93,993 46,374(4) 0 0
Louis Scafuri........... 1999 163,461 275,519 0 450,000 0
Chief Executive Officer, 1998 N/A* N/A* N/A* N/A* N/A*
North America Operation 1997 N/A* N/A* N/A* N/A* N/A*
Alon Maor............... 1999 282,153 0 442,453(6) 100,000 0
Chief Executive Officer 1998 N/A* N/A* N/A* N/A* N/A*
of Asia Pacific
Operation** 1997 N/A* N/A* N/A* N/A* N/A*
Dan Winterstein......... 1999 145,000 50,000 48,041(7) 60,000 0
Manager of OpusDent 1998 148,000 49,333 52,368(7) 0 0
Ltd. 1997 N/A* N/A* N/A* N/A* N/A*
Hans Edel............... 1999 86,354 61,893 20,379(8) 70,000 0
Managing Director of 1998 89,445 67,402 21,387(8) 50,000 0
Medizintechnik Vertriebs 1997 93,750 117,101 36,534(8) 0 0
</TABLE>
- --------
* The Named Officers were not actively employed by the Company as of such
time.
** Prior to January 2000, Mr. Maor served as the President and Representative
Director of ESC Japan.
(1) Does not include perquisites or other personal benefits, securities or
property, the aggregate value of which does not exceed the lesser of
$50,000 or 10% of the Named Officer's salary and bonus.
(2) Payment include $9,000 for flat rent.
(3) Payments made pursuant to a non-compete agreement between Yacha Sutton and
the Company in connection with the acquisition of Laser Industries Ltd. by
the Company.
(4) The Company made payment to an Advance Study Fund for $10,874, $15,118
and $13,773 for 1999, 1998 and 1997, respectively.
(5) Payments made as part of post-retirement benefits following Mr. Eckhouse's
resignation as the Chief Executive Officer on June 23, 1999.
(6) Payment includes $102,252 for reimbursements relating to flat rental and
$312,223 in sales commissions.
(7) Payments include $14,870 and $16,823 in social costs and $17,080 and
$17,922 for the cost of a Company provided vehicle for 1999 and 1998,
respectively.
(8) Payments include $7,914, $7,829 and $12,047 in 1999, 1998 and 1997,
respectively, in cost for a Company provided vehicle.
26
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table provides information on options granted to the Named
Officers during the last fiscal year pursuant to the Company's option plans.
The table also shows, among other data, hypothetical potential gains from
options granted in fiscal year 1999. These hypothetical gains are based
entirely on assumed annual growth rates of 5% and 10% in the value of the
price of Ordinary Share over the life of the options granted in fiscal year
1999. The assumed rates of growth were selected by the Securities and Exchange
Commission for illustrative purposes only, and are not intended to predict
future stock prices, which will depend upon market conditions and the
Company's future performance and prospects. No SAR's were granted during the
last fiscal year and no SAR's are currently outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Option Grants for Option Term
------------------------------------------------ -------------------
Percent of
Number of Total Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted (#)(1) Year ($/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......... 0 -- -- -- -- --
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. Options
vest per Employment Agreements discussed on page 28, below, except that
445,000 of Mr. Scafuri's options became fully vested on June 23, 1999, as
a result of the Election Contest.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table summarizes for each of the Named Officers option
exercises during the 1999 fiscal year, 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 number and dollar
value of unexercised in-the-money options for Ordinary Shares, if any, held at
December 31, 1999. The 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,
1999, which was $9.563 per share. Actual gains, if any, upon exercise will
depend on the value of Ordinary Shares on the date of any exercise of options.
27
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value Fiscal Year End (#) Fiscal Year End ($)(1)
Exercise Realized ------------------------- -------------------------
Name (#) ($) 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 40,250 17,250 0 0
Louis Scafuri........... 0 -- 450,000 0 1,612,235 0
Alon Maor............... 0 -- 0 100,000 0 450,000
Dan Winterstein......... 0 -- 0 60,000 48,206 192,104
Hans Edel............... 29,751 125,326.00 5,000 115,000 8,115 416,110
</TABLE>
- --------
(1) 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 a monthly base salary of $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 Mr. Sutton'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 also 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).
28
<PAGE>
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 less any amounts received by Mr. Sutton
from his Managers' Insurance on account of a 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 monthly installments.
Employment Agreement with Louis Scafuri
The Company and ESC Medical Systems 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 Chief Executive
Officer, North America 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 (Yen)22,000,000 (twenty-two million yen), an annual housing allowance of
approximately (Yen)12,000,000, an annual allowance of (Yen)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 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
29
<PAGE>
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 a bonus of up to DM
175,000, 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 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 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 employment as a result of his 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, the Company offers 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
30
<PAGE>
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 shareholders, and focus management
on building profitability and long-term shareholder 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.
Chief Executive Officer Compensation. In order to secure and continue to
retain the services of Mr. Sutton following Mr. Eckhouse's departure from the
Company, which the Compensation Committee considered essential in order to
ensure efficient management of the Company's business and the successful
execution of the Company's strategy of maximizing shareholder value, the
Company entered into an employment agreement with Mr. Sutton, the terms of
which are described above under the caption "Employment Contracts, Termination
of Employment and Change-in-Control Arrangements". In setting Mr. Sutton's
compensation, the Compensation Committee considered factors such as individual
and corporate performance (without reference to any specific performance
related targets) and individual experience and expertise. In addition, the
Compensation Committee considered Mr. Sutton's overall compensation relative
to compensation levels of Chief Executive Officers of other comparable
companies when possible. No particular weight was given by the Compensation
Committee to any of the foregoing factors.
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
31
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return to the Nasdaq Stock Market Index and the S&P SmallCap 600 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, the
Nasdaq Stock Market Index and the S&P SmallCap 600 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.
[GRAPH]
<TABLE>
<CAPTION>
1996 1997 1998 1999
------------------------------------------------------
<S> <C> <C> <C> <C>
ESC Medical Systems $100 151.96 41.18 37.50
------------------------------------------------------
Nasdaq Stock Market Index $100 121.64 169.84 315.20
------------------------------------------------------
S&P SmallCap 600 Index $100 124.53 121.91 135.96
</TABLE>
32
<PAGE>
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 January 1, 2001.
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 March 17, 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 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
May 3, 2000
33
<PAGE>
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 Yokneam, 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 threatened, 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 Indemnifiable 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
<PAGE>
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 Association as
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, among 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 indemnified 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
A-2
<PAGE>
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. Notwithstanding 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 judgement, order, settlement (whether with or
without court approval) 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 applicable 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 standard of conduct
or did not have any particular belief. In connection with any determination
by the Reviewing Party or otherwise as to whether the Indemnitee is
entitled to be indemnified 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 Company 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
A-3
<PAGE>
Indemnitee of written notice of its election to do so. 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 admittance 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 incorporation 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 narrows 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 Memorandum 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
ceased 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 Indemnifiable 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 (as defined below) 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
A-4
<PAGE>
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 reasonable 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 recovery, 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 director, 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 enterprises" 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.
A-5
<PAGE>
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 stockholders as 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
Indemnifiable 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
A-6
<PAGE>
jurisdiction over such action determines that each of the material 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. Severability. 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.
A-7
<PAGE>
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. ______________________
A-8
<PAGE>
Exhibit A
INDEMNIFIABLE EVENTS AND LIMIT AMOUNTS
<TABLE>
<CAPTION>
Limitation Amount
Indemnifiable Event (In US$ Million)
------------------- --------------------------------
<S> <C>
1. Any claim or demand made by customers, 100
suppliers, 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 100
with any 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, 100
consultants, 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 The higher of (i) 250;
securities laws or by reference thereto, or and (ii) 50 percent (50%)
related to the failure to disclose any of outstanding shares
information in the manner or time such multiplied in the last
information is required to be disclosed reported share price at its
pursuant to such laws, or related to principle exchange prior
inadequate or improper disclosure of to the occurrence giving
information to stockholders, or prospective rise to the indemnifiable event.
stockholders, or related to the purchasing,
holding or disposition of securities of the
Company or any other investment activity
involving or affected by such securities.
5. Any claim or demand made for actual or 100
alleged 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 100
other 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 100
party 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 100
indirectly in 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.
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
Limitation Amount
Indemnifiable Event (In US$ Million)
------------------- -----------------
<S> <C>
9. Any claim or demand made by purchasers, holders, lessors 100
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 categories 100
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.
</TABLE>
A-10
<PAGE>
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
B-1
<PAGE>
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 the 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, the 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
B-2
<PAGE>
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:
(a) 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 combined 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 reorganization;
(b) 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 consummation 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
B-3
<PAGE>
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) 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
B-4
<PAGE>
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.
B-5
<PAGE>
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 an optionee as a shareholder
with respect to any share issuable or transferrable, 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.
B-6
<PAGE>
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, or (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 11, 1999. The plan will expire and
terminate on November 11, 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.
B-7
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ANNEX C
THE COMPANIES LAW
A COMPANY LIMITED BY SHARES
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ARTICLES OF ASSOCIATION
OF
ESC MEDICAL SYSTEMS LTD.
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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 Medical Systems 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.
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(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 (fifty 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.
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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 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 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 by the Board of Directors.
(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.
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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 Companies Law, 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.
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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) 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 may nullify such resolution of forfeiture, but no
such nullification shall stop 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 surrender 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
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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 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.
(d) The holders of stock shall, in accordance with the amount of stock held
by them, have the same rights and privileges as regards the 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".
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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 form 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 reasonably 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.
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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 a 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 Companies Law.
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 hereinabove
prescribed has been 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 (33 1/3%) 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
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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 shareholders, 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 is 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 or 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 a 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
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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 Medical Systems 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 appointor of such
person's duly authorized attorney, or, if such appointor 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 or 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
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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 be
exercised or done by the Company by action of its shareholders at 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 had 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 any 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 think 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 thereon.
(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.
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37. Delegation of Powers. (a) The Board of Directors may, subject to the
provisions of the Statutes, 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
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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 death, 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 Companies Law,
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 the 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) 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) 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.
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(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 choose 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
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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 are 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
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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 debenture 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 Companies Law,
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 of 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 by 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.
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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, and if no 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, INDEMNITY AND INSURANCE
68. Exemption. 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.
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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 powers 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 by 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 by 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 Registered Office. Any such notice or other document
shall be deemed to have been 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
C-18
<PAGE>
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 so
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 registered in the Register of
Shareholders is located in the State of Israel.
* * * *
C-19
<PAGE>
PROXY
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 30, 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 the
Intercontinental Hotel of New York, 111 East 48th Street, New York, New York,
on May 30, 2000 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.
May 30, 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.
<PAGE>
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 for all nominees listed above
contrary below)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 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.
