<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GALILEO TECHNOLOGY, LTD.
(Name of Registrant as Specified In Its Charter)
142 Charcot Ave
San Jose, CA 95131
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
GALILEO TECHNOLOGY LTD.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 3, 1999
TO THE SHAREHOLDERS OF GALILEO TECHNOLOGY LTD.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Galileo
Technology Ltd., a corporation formed under the laws of the State of Israel
(the "Company"), will be held on Tuesday, August 3, 1999 at 1:00 p.m., Israel
time, at the principal executive offices of the Company located at Moshav
Manof, D.N. Misgav 20184, Israel, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to each of the Galileo Technology Ltd. 1997
Employees' Stock Option Plan and the Galileo Technology Ltd. 1997 GTI
Stock Option Plan (together, the "Plans") to increase by 600,000 the
number of shares reserved for issuance under such Plans.
3. To approve a special resolution to increase the registered share capital
of the Company from NIS 500,000 (50,000,000 Ordinary Shares) to NIS
1,000,000 (100,000,000 Ordinary Shares).
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors.
5. To approve the 1998 Annual Report and Consolidated Financial Statements
of the Company.
6. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on June 30, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting and any
adjournments thereof.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if such shareholder
previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS
Avigdor Willenz
Chairman of the Board of Directors
and Chief Executive Officer
Manof, Israel
July 6, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
GALILEO TECHNOLOGY LTD.
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Galileo Technology Ltd. (the "Company") for use at the Company's
Annual Meeting of Shareholders (the "Annual Meeting") to be held Tuesday,
August 3, 1999 at 1:00 p.m., Israel time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held at the principal executive offices of the Company located at Moshav
Manof, D.N. Misgav 20184, Israel. The telephone number at that address is 011-
972-4-9999-555. The Company's principal executive offices in the United States
are located at 142 Charcot Avenue, San Jose, California 95131. The telephone
number at that address is (408) 367-1400.
These proxy solicitation materials were mailed on or about July 6, 1999 to
all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Shares Outstanding
Shareholders of record at the close of business on June 30, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
At the Record Date, 20,608,388 of the Company's Ordinary Shares (the "Ordinary
Shares") were issued, outstanding and entitled to vote at the Annual Meeting.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company, at either of the addresses set forth herein, a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself constitute revocation of a proxy.
Voting and Solicitation
Pursuant to the Company's Articles of Association, the presence, in person
or by proxy, of at least two shareholders entitled to vote upon the business
to be transacted in the Annual Meeting and holding or representing at least 60
percent of the outstanding Ordinary Shares of the Company represented at the
Annual Meeting in person or by proxy and voting thereon is necessary to
approve the matters upon which the shareholders will be asked to vote, except
that the affirmative vote of the holders of at least three-fourths of the
outstanding Ordinary Shares of the Company represented at the Annual Meeting
in person or by proxy and voting thereon is necessary for the approval of the
Special Resolution to increase the registered share capital of the Company.
Each Ordinary Share is entitled to one vote on each proposal or item that
comes before the Annual Meeting.
Under Israeli law, if a quorum is present in person or by proxy, broker
non-votes and abstentions will have no effect on whether the requisite vote is
obtained, as they do not constitute present and voting shares.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone, facsimile or other
method. No additional compensation will be paid for any such services. Costs
of solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
shareholders, will be borne by the Company. The Company may also retain
Corporate Investor Communications, Inc. ("CIC") to assist in the solicitation
of proxies. If retained, CIC will receive a fee for such services of
approximately $5,000 plus out-of-pocket expenses, which will be paid by the
Company. The Company may reimburse the reasonable charges and expenses of
brokerage houses or other nominees or fiduciaries for forwarding proxy
materials to, and obtaining authority to execute proxies from, beneficial
owners for whose account they hold Ordinary Shares.
<PAGE>
PROPOSAL ONE
Election of Directors
Nominees
The Articles of Association of the Company provide for a Board consisting
of not fewer than three nor more than eleven directors. The size of the Board
is currently set at four, and four directors are to be elected at the Annual
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the four nominees named below. All of the nominees named
below are presently directors of the Company. In the event that any nominee is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board to fill the vacancy. The term of office of each person elected
as a director will continue until the next annual general meeting of
shareholders or until his successor has been elected and qualified. It is not
expected that any nominee will be unable or will decline to serve as a
director.
The name of and certain other information regarding each nominee is set
forth in the table below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Avigdor Willenz......... 43 Chief Executive Officer and Chairman of the Board of
Directors
Manuel Alba............. 43 President of GTI and Director
Matty Karp(1)(2)........ 50 Director
Christopher J. 35 Director
Schaepe(1)(2)..........
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
There is no family relationship between any of the directors or executive
officers of the Company.
Mr. Willenz founded the Company in November 1992 and has served as the
Company's Chief Executive Officer and Chairman of the Board of Directors since
that time. Between 1988 and 1992, Mr. Willenz was Corporate Product Definition
Manager/Chief Engineer for IDT. Between 1984 and 1988, Mr. Willenz worked as
design manager at Elbit Computers Ltd. ("Elbit"). Mr. Willenz holds a B.S.E.E.
from the Technion in Israel.
Mr. Alba has served as a director of the Company since March 1994. Mr. Alba
has also been President of Galileo Technology, Inc., the Company's wholly-
owned U.S. subsidiary ("GTI"), since its incorporation in April 1994. From
1989 to 1994, Mr. Alba worked as a marketing manager at IDT. From 1983 to
1989, Mr. Alba worked as a Staff Market Development Engineer at National
Semiconductor Corporation. He holds a B.S.E.E. from the National Polytechnic
Institute (Mexico City), an M.S.E.E. from the University of Southern
California and an M.B.A. from the University of Santa Clara.
Mr. Karp has served as a director of the Company since August 1994. Mr.
Karp has been President of Kardan Technologies Ltd. and Active Chairman of
Kardan Technology Ventures since 1994. Since April 1994, he has also managed
the Nitzanim Venture Capital Fund. Between 1979 and 1994, Mr. Karp held
several corporate management positions at Elbit, most recently the position of
Senior Executive. Mr. Karp holds a B.S.E.E. from the Technion in Israel and is
a graduate of the AMP at the Harvard Business School.
Mr. Schaepe has served as a director of the Company since November 1995.
Mr. Schaepe is a general partner of Weiss, Peck & Greer Venture Partners, a
technology focused venture capital firm that he joined in 1991. Previously,
Mr. Schaepe served in corporate finance and capital markets roles at Goldman,
Sachs & Co. after his employment as a software engineer at International
Business Machines Corporation. He is a director of several private companies
and holds B.S. and M.S. degrees in computer science from Massachusetts
Institute of Technology and an M.B.A. from Stanford Business School.
2
<PAGE>
Board Meetings and Committees
The Board held a total of seven meetings during the year ended December 31,
1998. Each director attended all meetings of the Board and of the committees,
if any, upon which such director served.
The Audit Committee currently consists of Mr. Karp and Mr. Schaepe. The
principal functions of the Audit Committee are to recommend engagement of the
Company's independent auditors, to consult with the Company's auditors
concerning the scope of the audit and to review with them the results of their
examination, to review and approve any material accounting policy changes
affecting the Company's operating results and to review the Company's
financial control procedures and personnel. The Audit Committee held four
meetings during 1998.
The Compensation Committee currently consists of Mr. Karp and Mr. Schaepe.
The Compensation Committee determines compensation and benefits for the
Company's executive officers and administers the Company's equity incentive
plans. The Compensation Committee, which consists solely of outside directors
ineligible to participate in the Company's discretionary employee stock
programs, has sole and exclusive authority to grant stock options to officers
and to directors who are also employees or consultants of the Company. The
Compensation Committee held one meeting during 1998.
The Board does not have a nominating committee.
3
<PAGE>
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Ordinary Shares as of May 31, 1999 (i) by each
person who is known by the Company to own beneficially more than 10 percent of
the outstanding Ordinary Shares of the Company and (ii) by all of the
Company's directors and executive officers as a group.
<TABLE>
<CAPTION>
Ordinary Percentage of
Shares Ordinary
Beneficially Shares
Name and Address of Beneficial Owner Owned(1) Outstanding(2)
- ------------------------------------ ------------ --------------
<S> <C> <C>
Avigdor Willenz(3)................................ 5,565,594 27.0%
c/o Galileo Technology Ltd.
Moshav Manof
D.N. Misgav 20184, Israel
All directors and executive officers as a group (9
persons)(4)...................................... 6,907,337 33.6%
</TABLE>
- --------
(1) This table is based upon information supplied by directors and officers.
(2) Percent ownership is based on 20,581,625 Ordinary Shares outstanding as of
May 31, 1999. Shares issuable upon exercise of outstanding options are
considered outstanding for purposes of calculating the percentage of
Ordinary Shares of the person holding such options, but are not deemed
outstanding for computing the percentage of ownership of any other person.
(3) Includes 180,000 Ordinary Shares subject to options that Mr. Willenz
granted to three other executive officers of the Company. Also includes
20,455 Ordinary Shares issuable pursuant to stock options held by Mr.
Willenz that are exercisable within 60 days of May 31, 1999.
(4) Includes an aggregate of 275,058 Ordinary Shares issuable pursuant to
stock options held by directors and executive officers that are
exercisable within 60 days of May 31, 1999.
Compensation of Officers and Directors
The directors of the Company can be remunerated by the Company for their
services as directors to the extent such remuneration is approved by the
Company's shareholders at an annual general meeting. Directors currently do
not receive compensation for their services as directors but are reimbursed
for their expenses for each Board of Directors meeting attended.
The aggregate direct remuneration paid by the Company and GTI to all
executive officers (9 persons) in 1998 was approximately $1,002,000. During
1998, the Company set aside an aggregate amount of approximately $103,000 to
provide for pension, retirement or similar benefits for all executive
officers. During the same period, the Company accrued severance benefits for
the same group in the aggregate amount of approximately $123,000.
There are no employment agreements between the Company and any of its
officers or directors.
Option Grants to Executive Officers
The aggregate number of options issued by the Company and GTI to all
executive officers (7 persons) in 1998 was 458,793. The aggregate number of
options granted by the Company and GTI to all employees in 1998 was 3,206,651.
The aggregate number of options granted by the Company to non-employee
directors of the Company and GTI (2 persons) in 1998 was 50,000.
The Company did not make any awards during the fiscal year ended December
31, 1998 to any of the executive officers under any long-term incentive plan
providing compensation intended to serve as incentive for performance to occur
over a period longer than one fiscal year, excluding stock options.
4
<PAGE>
Report of the Compensation Committee of the Board of Directors
The Compensation Committee is comprised of two independent nonemployee
directors. As members of the Compensation Committee, it is our responsibility
to determine the most effective total executive compensation strategy, based
upon the business needs of the Company and consistent with shareholders'
interests, to administer the Company's executive compensation plans, programs
and policies, to monitor corporate performance and its relationship to
compensation of executive officers, and to make appropriate recommendations
concerning matters of compensation.
Compensation Philosophy.
The Company was formed in 1992 as a private company and initially offered
Ordinary Shares to the public in July 1997. The major goals of the
compensation program are to align compensation with the attainment of key
business objectives and to enable the Company to attract, retain and reward
capable executives who can contribute to the continued success of the Company.
Equity participation and a strong alignment to shareholders' interests are key
elements of the Company's compensation philosophy. The Company's executive
compensation program consists of base salary, incentive stock options and
standard benefits.
Base Salary. The Compensation Committee recognizes the importance of
maintaining compensation practices and levels of compensation competitive with
high technology companies in comparable stages of development. Base salary
represents the fixed component of the executive compensation program. The
Company's philosophy regarding base salaries is conservative, maintaining
salaries somewhat below or at approximately the competitive industry median.
Determination of base salary levels is established on an annual review of
marketplace competitiveness with high technology companies, and on individual
performance. Periodic increases in base salary relate to individual
contributions evaluated against established objectives, relative marketplace
competitiveness levels and length of service.
Stock Options. The Compensation Committee strongly believes that one of the
important goals of the compensation program should be to provide key employees
who have significant responsibility for the management, growth, and future
success of the company with an opportunity to increase their ownership of the
Company and potentially gain financially from Company stock price increases.
The interests of shareholders, executives and employees should thereby be
closely aligned. Executives and key employees are eligible to receive stock
options generally not more often than once a year, giving them the right to
purchase Ordinary Shares of the Company in the future at a price equal to fair
market value at the date of grant. All grants must be exercised according to
the provisions of the Company's stock option plans.
Other Benefits. The Company's philosophy is to provide adequate health- and
welfare-oriented benefits to executives and employees, but to maintain a
highly conservative position with respect to executive benefits.
Summary. The Compensation Committee believes that the compensation of
executives by the Company is appropriate and competitive with the compensation
provided by other high technology companies with which the Company competes
for executives and employees. The Committee believes its compensation
strategy, principles, and practices result in a compensation program tied to
shareholder returns and linked to the achievement of annual and longer-term
financial and operational results of the Company on behalf of the Company's
shareholders.
The Compensation Committee of the Board of Directors:
-- Matty Karp
-- Christopher J. Schaepe
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company currently consists of Mr. Karp
and Mr. Schaepe. Neither Mr. Karp nor Mr. Schaepe serves as a member of the
compensation committee of any other entity so as to create
5
<PAGE>
any compensation committee interlock. Neither Mr. Karp nor Mr. Schaepe serves
as an officer of the Company or GTI.
Certain Relationships and Related Transactions
Relationship with Kepler Software Ltd.
In 1996 and 1998, the Company purchased shares of Kepler Software Ltd.
("Kepler"). Mr. Avigdor Willenz, Chief Executive Officer and Chairman of the
Board of Directors of the Company, is Kepler's chairman of the board of
directors. At December 31, 1998, the shares of Kepler owned by the Company
represented approximately 37.5% of Kepler's outstanding shares.
PROPOSAL TWO
Approval of an Amendment to each of the Galileo Technology Ltd.
1997 Employees' Stock Option Plan and the Galileo Technology Ltd. 1997 GTI
Stock Option Plan
Background
The Board has approved, subject to shareholder approval, an amendment to
each of the Galileo Technology Ltd. 1997 Employees' Stock Option Plan (the
"GTL Plan") and the Galileo Technology Ltd. 1997 GTI Stock Option Plan (the
"GTI Plan," and together with the GTL Plan, the "Plans") increasing the
aggregate number of Ordinary Shares reserved for issuance under the Plans by
600,000 Ordinary Shares.
Description of the Proposal
Currently, the GTL Plan provides that a total of 3,838,718 Ordinary Shares
may be issued thereunder and the GTI Plan provides that a total of 2,570,000
shares may be issued thereunder. The number of shares that may be issued under
the Plans increases automatically in January each year by an aggregate of four
percent of the Ordinary Shares of the Company then outstanding. As of May 31,
1999, there were 506,187 shares available for option grant under the GTL Plan
and 217,445 shares available for option grant under the GTI Plan. The proposed
amendments to the GTL Plan and the GTI Plan will increase the number of shares
available for issuance under the two Plans by a total of 600,000 shares. The
allocation of the shares between the Plans will be determined by the Company's
Board of Directors. The proposed amendments to the Plans will ensure that
there will be a sufficient reserve of shares to permit the grant of further
options to existing and new employees of and consultants to the Company and
GTI.
Description of the GTL Plan
The GTL Plan is intended to strengthen the Company by providing selected
eligible Israeli employees of, and consultants to, the Company an opportunity
to participate in the Company's future by offering them an opportunity to
acquire shares in the Company so as to retain, attract and motivate them.
Administration of the GTL Plan may be either by the Board or a Committee of
the Board (in either case, the "Administrator"). The Administrator may select
key employees, including executive officers or consultants, to receive awards
under the GTL Plan and has broad discretion to determine the amount and type
of awards and terms and conditions of the awards. Individual grants will
generally be based on a person's present and potential contribution to the
Company. Nonemployee directors are not eligible to participate in the GTL
Plan. Since the grant of awards is based upon a determination made by the
Administrator after a consideration of various factors, the Company currently
cannot determine the nature and amount of any awards that will be granted in
the future to any eligible individual or group of individuals.
The consideration payable upon issuance or exercise of an award and any
taxes related to an award may be paid in cash or such other method of payment
as is authorized by the Administrator. The Administrator may, at
6
<PAGE>
any time prior to the exercise of options under the GTL Plan, reduce the
exercise price of such options to the then current fair market value if the
previous exercise price exceeds the then current fair market value of the
Ordinary Shares underlying such options. Awards generally may be exercised at
any time within three months after a participant's employment by, or
consulting relationship with, the Company terminates for any reason (but only
to the extent exercisable or payable at the time of termination). No award
shall be assignable or otherwise transferable by a participant other than by
will or by the laws of descent and distribution.
The Administrator may waive in whole or in part any or all restrictions,
conditions, vesting provisions or forfeiture provisions with respect to any
award granted under the GTL Plan. The Board may amend, alter or discontinue
the GTL Plan or any award at any time, except that the consent of a
participant is required if the participant's rights under an outstanding award
would be impaired. In addition, the shareholders of the Company must approve
any amendment or alteration of the GTL Plan to the extent required by
applicable laws, rules or regulations or to the extent that the Board
otherwise concludes that shareholder approval is advisable.
In the event of a consolidation or merger of the Company with or into
another corporation, each option outstanding under the GTL Plan shall be
assumed, or an equivalent substitute option issued, by the successor
corporation or its parent subsidiary.
Israeli Income Tax Consequences relating to the GTL Plan
The GTL Plan was approved by Israel's Income Tax Commissioner pursuant to
Section 102 of the Israel Income Tax Ordinance (New Version), 1961, which
entitles holders of options under the GTL Plan to certain Israeli tax
benefits. Section 102 provides, among other things, that holders of options
generally will not recognize income for Israeli tax purposes until the earlier
of (i) the delivery of the options or the Ordinary Shares by the Trustee to
the holder or to a third party pursuant to the holder's instructions and (ii)
a sale by the holder of the options or the beneficial rights under the
options. The gain recognized by a holder upon any such event will be treated
as a capital gain for Israeli income tax purposes. Upon such recognition of
gain by the holder, the Company shall be entitled to deduct the same amount as
an ordinary deduction.
Description of the GTI Plan
The GTI Plan is intended to strengthen the Company by providing selected
eligible key employees of, and consultants to, GTI an opportunity to
participate in the Company's and GTI's future by offering them an opportunity
to acquire shares in the Company so as to retain, attract and motivate them.
Administration of the GTI Plan may be either by the Company's Board or a
Committee of the Company's Board (in either case, the "Committee"). The
Committee may select key employees of GTI, including executive officers or
consultants, to receive awards under the GTI Plan and has broad discretion to
determine the amount and type of awards and terms and conditions of the
awards. Individual grants will generally be based on a person's present and
potential contribution to GTI and the Company. Nonemployee directors are not
eligible to participate in the GTI Plan. Since the grant of awards is based
upon a determination made by the Committee after a consideration of various
factors, the Company currently cannot determine the nature and amount of any
awards that will be granted in the future to any eligible individual or group
of individuals.
Awards may be granted in the form of incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonqualified stock options ("NQOs") (each ISO or NQO, an
"Option," and collectively, "Options") or stock purchase rights ("Stock
Purchase Rights"). Any award may be granted either alone or in addition to
other awards granted under the GTI Plan. The Committee may condition the grant
of the award upon the attainment of specified Company, group or division
performance goals or other criteria, which need not be the same for all
participants.
Options. Options granted under the GTI Plan may be ISOs or NQOs. The
exercise price of ISOs may not be less than the fair market value of the
shares subject to the Option on the date of grant. The exercise price of
7
<PAGE>
NQOs must be at least 85 percent of the fair market value of the shares
subject to the Option on the date of grant. The term of any Option granted
under the GTI Plan may not exceed ten years. Certain other limitations are
also applicable to ISOs in order to take advantage of the favorable tax
treatment that may be available for ISOs.
Stock Purchase Rights. Stock Purchase Rights consist of a grant to purchase
Ordinary Shares at a purchase price determined by the Committee. Stock
Purchase Rights are exercisable for a period of up to 30 days after the grant
date.
The consideration payable upon issuance or exercise of an award and any
taxes related to an award may be paid in cash, by check or by promissory note
of the participant, as authorized by the Committee. The Committee may, at any
time prior to the exercise of options under the GTI Plan, reduce the exercise
price of such options to the then current fair market value of the Ordinary
Shares underlying such Options. Awards generally may be exercised at any time
within three months after a participant's employment by, or consulting
relationship with, the Company terminates (but only to the extent exercisable
or payable at the time of termination). If termination is due to the
participant's death, retirement or disability, the award may be exercised for
12 months thereafter.
The Committee may adjust the performance goals and measurements applicable
to awards. The Committee also may waive in whole or in part any or all
restrictions, conditions, vesting or forfeiture with respect to any award
granted under the GTI Plan.
The Board may amend, alter or discontinue the GTI Plan or any award at any
time, except that the consent of a participant is required if the
participant's rights under an outstanding award would be impaired. In
addition, the shareholders of the Company must approve any amendment,
alteration or discontinuance of the GTI Plan (i) that would increase the total
number of shares reserved under the GTI Plan, (ii) with respect to provisions
solely as they relate to ISOs, to the extent required for the GTI Plan to
comply with Section 422 of the Code, (iii) to the extent required by other
applicable laws, rules or regulations or (iv) to the extent that the Board
otherwise concludes that shareholder approval is advisable.
In the event of a merger of the Company with or into another corporation,
each outstanding Option or Stock Purchase Right may be assumed, or an
equivalent option or right issued, by the successor corporation. If any Option
or Stock Purchase Right is not assumed or a substitute right not issued, the
Option or Stock Purchase Right shall terminate as of the date of the merger.
Certain United States Federal Income Tax Consequences relating to the GTI Plan
THE FOLLOWING SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS
BASED UPON EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE
APPLICABLE RULES ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY
STATEMENT DESCRIBES UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF GENERAL
APPLICABILITY, BUT DOES NOT PURPORT TO DESCRIBE PARTICULAR CONSEQUENCES TO
EACH INDIVIDUAL PLAN PARTICIPANT, OR FOREIGN, STATE OR LOCAL INCOME TAX
CONSEQUENCES, WHICH MAY DIFFER FROM THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.
Incentive Stock Options
Awards; Exercise. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company or GTI (including directors who are also employees).
The recipient of an Option (the "Optionee") does not recognize taxable income
upon
8
<PAGE>
either the grant or exercise of an ISO. However, the excess of the fair market
value of the shares purchased upon exercise over the Option exercise price
(the "Option Spread") is includable in the Optionee's "alternative minimum
taxable income" ("AMTI") for purposes of the alternative minimum tax. The
Option Spread is generally measured on the date of exercise and is includable
in AMTI in the year of exercise. Special rules regarding the time of AMTI
inclusion may apply for shares subject to a repurchase right or other
"substantial risk of forfeiture."
Sale of Option Shares. If an Optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the
shares other than to the Company should be taxable as capital gain. Under
these circumstances, GTI would not be entitled to a tax deduction at the time
the ISO was exercised or at the time the shares were sold. If an Optionee were
to dispose of shares acquired pursuant to an ISO before the end of the
required holding periods (a "Disqualifying Disposition"), the amount by which
the market value of the shares at the time the ISO was exercised exceeded the
exercise price (or, if less, the amount of gain realized on the sale) would be
taxable as ordinary income, and GTI would be entitled to a corresponding tax
deduction. Such income is subject to information reporting requirements and
may become subject to withholding. Gain from a Disqualifying Disposition in
excess of the amount required to be recognized as ordinary income is capital
gain. Optionees are required to notify the Company immediately prior to making
a Disqualifying Disposition. If shares are sold to the Company rather than to
a third party, the sale may not produce capital gain or loss. A sale of shares
to the Company could be taxable as a dividend unless the redemption satisfies
one of the paragraphs of Section 302(b) of the Code.
Nonqualified Stock Options
Award; Exercise. An Optionee is not taxable upon the award of a NQO.
Federal income tax consequences upon exercise will depend upon whether the
shares thereby acquired are subject to a "substantial risk of forfeiture." If
the shares are not subject to a substantial risk of forfeiture, or if they are
so restricted and the Optionee files an election under Section 83(b) of the
Code (a "Section 83(b) Election") with respect to the shares, the Optionee
will have ordinary income at the time of exercise measured by the Option
Spread on the exercise date. The Optionee's tax basis in the shares will be
their fair market value on the date of exercise, and the holding period for
purposes of determining whether capital gain or loss upon sale is long- or
short-term also will begin on that date. If the shares are subject to a
substantial risk of forfeiture and no Section 83(b) Election is filed, the
Optionee will not be taxable upon exercise, but instead will have ordinary
income on the date the restrictions lapse, in an amount equal to the
difference between the amount paid for the shares under the Option and their
fair market value as of the date of lapse; in addition, the Optionee's holding
period will begin on the date of lapse.
The amount of ordinary income taxable to an Optionee who was an employee at
the time of grant constitutes "supplemental wages" subject to withholding of
income and employment taxes by GTI, and GTI is entitled to a corresponding
income tax deduction.
Sale of Option Shares. Upon sale, other than to the Company, of shares
acquired under a NQO, an Optionee generally will recognize capital gain or
loss to the extent of the difference between the sale price and the Optionee's
tax basis in the shares, which will be long-term gain or loss if the
employee's holding period in the shares is more than one year. If shares are
sold to the Company rather than to a third party, the sale may not produce
capital gain or loss. A sale of shares to the Company could be taxable as a
dividend unless the redemption satisfies one of the paragraphs of Section
302(b) of the Code.
Stock Purchase Rights.
The tax treatment of Stock Purchase Rights is identical to that of NQOs, as
described above.
9
<PAGE>
Proposal
Shareholders are being asked to approve the amendment to each of the GTL
Plan and the GTI Plan. The affirmative vote of the holders of a majority of
the outstanding Ordinary Shares of the Company represented at the Annual
Meeting in person or by proxy and voting thereon is necessary for the approval
of this resolution.
Board Recommendation
The Board recommends a vote "FOR" approval of the proposal.
PROPOSAL THREE
Special Resolution to Increase the Registered Share Capital of the Company
from NIS 500,000 (50,000,000 Ordinary Shares) to NIS 1,000,000 (100,000,000
Ordinary Shares)
Background
The Company's authorized share capital currently consists of NIS 500,000
divided into 50,000,000 Ordinary Shares. As of May 31, 1999, the Company had
20,581,625 Ordinary Shares outstanding and 3,772,892 Ordinary Shares reserved
for issuance under the Company's Employee Stock Option and Stock Purchase
Plans. The Board of Directors recommends that the Company's authorized share
capital be increased to NIS 1,000,000 divided into 100,000,000 Ordinary
Shares. The Board of Directors believes that it is desirable to have a
sufficient number of Ordinary Shares available, as the occasion may arise, for
a possible share dividend to effect a stock split and possible future
financings and acquisition transactions, and other proper corporate purposes.
If the amendment to the Articles of Association is approved, the shares may be
issued from time to time by the Board of Directors. The availability of
additional shares for issuance in the future would give the Company greater
flexibility by allowing shares to be issued without incurring the delay and
expense of a special shareholders meeting.
Proposal
Shareholders are being asked to adopt a special resolution to increase the
Company's registered share capital from NIS 500,000 divided into 50,000,000
Ordinary Shares to NIS 1,000,000 divided into 100,000,000 Ordinary Shares. The
affirmative vote of the holders of at least three-fourths of the outstanding
Ordinary Shares of the Company represented at the Annual Meeting in person or
by proxy and voting thereon is necessary for the approval of this Special
Resolution.
Board Recommendation
The Board recommends a vote "FOR" approval of the proposal.
PROPOSAL FOUR
Ratification of Appointment of Independent Auditors
Background
The Board has selected Ernst & Young LLP as its independent auditors to
audit the consolidated financial statements of the Company for the 1999 fiscal
year. Ernst & Young LLP has been engaged as the Company's United States
auditors since 1996 and audited the Company's consolidated financial
statements for all fiscal years since 1994. Ernst & Young LLP has also been
GTI's independent auditors since fiscal year 1994. Ratzkovsky Fried & Co. had
been engaged as the Company's Israeli auditors from 1994 to 1996. Kost Forer &
Gabbay (a member firm of Ernst & Young International) and Ratzkovsky Fried &
Co. were engaged as the Company's Israeli joint independent auditors for
fiscal year 1997. Representatives of Ernst & Young LLP are expected to be
available to respond to questions raised during the Annual Meeting.
10
<PAGE>
Proposal
Shareholders are being asked to ratify the selection of Ernst and Young LLP
as the Company's independent auditor for the 1999 fiscal year. The affirmative
vote of the holders of a majority of the outstanding Ordinary Shares of the
Company represented and voting at the Annual Meeting is required for
ratification of the selection of the independent auditors.
Board Recommendation
The Board recommends a vote "FOR" approval of the proposal.
PROPOSAL FIVE
Approval of 1998 Annual Report and Consolidated Financial Statements
Background
The Company's Annual Report for 1998 was mailed to the Company's
shareholders on or about May 6, 1999. The Company's Consolidated Financial
Statements for the year ended December 31, 1998 are included in such report.
Proposal
Shareholders are being asked to adopt a resolution to approve the Annual
Report and Consolidated Financial Statements of the Company for the year ended
December 31, 1998. The affirmative vote of the holders of a majority of the
outstanding Ordinary Shares of the Company represented at the Annual Meeting
in person or by proxy and voting thereon is necessary for the approval of this
resolution.
Board Recommendation
The Board recommends a vote "FOR" approval of the proposal.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the enclosed proxy to vote the shares
they represent as the Board may recommend.
THE BOARD OF DIRECTORS
Dated: July 6, 1999
11
<PAGE>
1663-PS99
<PAGE>
DETACH HERE
PROXY
GALILEO TECHNOLOGY LTD.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) George Hervey and Avigdor Wilenz, or either of
them, each with full power of substitution, the lawful attorneys and proxies of
the undersigned to vote as designated below, and, in their discretion, upon such
other business as may properly be presented to the meeting, all of the Ordinary
Shares of GALILEO TECHNOLOGY LTD. that the undersigned shall be entitled to
vote at the Annual Meeting of Shareholders to be held on August 3, 1999 and any
adjournments or postponements thereof.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
DETACH HERE
[X] Please mark
votes as in
this example.
This Proxy when properly executed, will be voted in the manner directed by the
undersigned shareholder. WHEN NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS LISTED BELOW. This proxy may be revoked at any time
prior to the time it is voted by any means described on the accompanying Proxy
Statement.
1. To elect as directors Avigdor Wilenz, Manuel Alba, Matty Karp, and
Christopher J. Schaepe
FOR [_] [_] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[_]
---------------------------------------------
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's name
in the space provided above.)
2. To approve an amendment to each of the Galileo Technology Ltd. 1997
Employees Stock Option Plan and the Galileo Technology Ltd. 1997 GTI Stock
Option Plan (together, the "Plans") to increase by 600,000 the number of
shares reserved for issuance under such Plans.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To approve a special resolution to increase the registered share capital of
the Company from NIS 500,000 (50,000,000 ordinary shares) to NIS 1,000,000
(100,000,000 ordinary shares).
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To ratify the appointment of Ernst & Young LLP as the company's independent
auditors.
[_] [_] [_]
5. To approve the 1998 Annual Report of the Company.
[_] [_] [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please date and sign exactly as your name(s) appear(s) hereon, if shares are
held jointly, each holder should sign. Please give full title and capacity in
which signing if not signing as an individual.
Signature: Date: Signature: Date:
---------------- ----------- ---------------- --------
