SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
ESC MEDICAL SYSTEMS LTD.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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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.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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ESC MEDICAL SYSTEMS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
May ___, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual General
Meeting of shareholders of ESC Medical Systems Ltd. ("ESC" or the
"Company") on _______, 2001, beginning at 4:30 p.m., local time, at the
__________________________. 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
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.
("ESC" or the "Company") will be held at the _____________________________,
on _________, 2001 at 4:30 p.m., local time, for the following purposes:
1. To elect the directors of the Company to serve until the
next Annual Meeting ("Proposal 1")
2. To approve the proposed directors' and officers' insurance
arrangements ("Proposal 2")
3. To appoint the firm of Brightman, Almagor & Co., a member
firm of Deloitte, Touche, Tohmatsu ("Brightman"), as the
Company's independent auditors for fiscal year 2001
("Proposal 3")
4. To change the Company's name from "ESC Medical Systems Ltd."
to "Lumenis Ltd." or such name as shall be determined by the
Board of Directors and approved by the Israeli Registrar of
Companies ("Proposal 4")
5. To amend the Company's Articles of Association to increase
the capitalization of the Company by authorizing 50,000,000
new Ordinary Shares, par value NIS 0.10 per share ("Proposal
5")
6. To approve the options granted by the Company to Bank
Hapoalim, B.M. ("Proposal 6")
7. To approve the engagement of Mr. Thomas G. Hardy, a director
of the Company, as a consultant of the Company ("Proposal
7")
8. To approve the adoption of the 2000 Share Option Plan and
the grant of share options thereunder ("Proposal 8")
9. To approve the compensation of the Company's directors for
serving on the Board of Directors ("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 _______,
2001 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, you may revoke your appointment of proxy at the meeting 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, ___________, 2001
ESC MEDICAL SYSTEMS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
PROXY STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION........................................................7
The Proxy...............................................................7
Shareholders Entitled to Vote...........................................7
Quorum; Required Vote...................................................7
Proxy Solicitation......................................................8
Shareholder Duties......................................................8
PROPOSAL 1 - ELECTION OF DIRECTORS.........................................9
Nominees...............................................................10
PROPOSAL 2 - APPROVAL OF DIRECTORS' AND OFFICERS' INSURANCE
ARRANGEMENTS..............................................................13
PROPOSAL 3 - APPOINTMENT OF BRIGHTMAN, ALMAGOR & CO. AS THE
COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 2001.......................13
Audit Committee Report.................................................13
PROPOSAL 4 - CHANGE OF THE COMPANY'S NAME TO LUMENIS LTD.................14
PROPOSAL 5 - AMENDMENT OF THE ARTICLES OF ASSOCIATION TO INCREASE THE
AUTHORIZED SHARE CAPITAL OF THE COMPANY...................................15
PROPOSAL 6 - APPROVAL OF THE ISSUANCE OF OPTIONS TO BANK HAPOALIM, B.M....16
PROPOSAL 7 - APPROVAL OF THE ENGAGEMENT OF MR. THOMAS G. HARDY AS A
CONSULTANT OF THE COMPANY.................................................17
PROPOSAL 8 - APPROVAL OF THE 2000 SHARE OPTION PLAN AND THE GRANT OF
SHARE OPTIONS THEREUNDER..................................................18
Background.............................................................18
General Terms and Conditions of the Plan...............................18
Terms of the Options...................................................18
Certain Israeli Tax Effects............................................19
Certain U.S. Federal Income Tax Effects................................20
Nonqualified Stock Options.............................................20
Incentive Stock Options................................................20
Transferred Options: Estate and Gift Taxes.............................21
PROPOSAL 9 - APPROVAL OF DIRECTORS' COMPENSATION..........................22
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES........23
Executive Committee....................................................24
Audit Committee........................................................24
Compensation Committee.................................................24
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions..............................................25
Fiduciary Duties of Office Holders.....................................25
Disclosure of Personal Interests of an Office Holder...................25
Disclosure of Personal Interests of Controlling Shareholders...........26
EXECUTIVE OFFICERS OF THE COMPANY.........................................26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............30
Section 16(A) Beneficial Ownership Reporting Compliance................31
EXECUTIVE COMPENSATION....................................................31
Option/SAR Grants in Last Fiscal Year..................................32
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values..........................................33
Employment Agreements, Termination Provisions and Change
in Control Provisions..................................................34
REPORT OF COMPENSATION COMMITTEE..........................................36
PERFORMANCE GRAPH.........................................................39
OTHER BUSINESS............................................................40
ADDITIONAL INFORMATION....................................................40
Appendix A - 2000 Share Option Plan
Appendix B - Audit Committee Charter
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_________2001, at 4:30 p.m., local time, at the_______________, 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 __________. There were approximately __________
Ordinary Shares outstanding on___________2001, 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, 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 by voting in
person at the Annual Meeting.
Shareholders Entitled to Vote
Pursuant to the Israeli Companies Law, 1999 - 5759 (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. Therefore,
shareholders of record owning Ordinary Shares at the close of business on
_______, 2001 (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 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 is generally
adjourned to the same day in the following week at the same time and place
or any time and place as the Chairman of the meeting may determine with the
consent of the holders of a majority of the voting power represented at the
meeting and voting on the question of adjournment. At such reconvened
meeting, the required quorum consists of any two or more shareholders
present in person or by proxy.
The affirmative vote of a majority of the Ordinary Shares present
and voting at the Annual Meeting is required to approve the proposals
specified in this proxy statement (Proposals 1 - 9).
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.
Shareholder 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 is empowered by the articles of association to appoint an office
holder in the Company, is under a duty to act in fairness towards the
Company. The Companies Law does not describe the substance of these duties.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members. Except
for the Outside Directors, as defined below, each Director serves until the
next Annual Meeting following that Annual Meeting or Extraordinary 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 Meeting convened after such appointment and may be reelected
by the shareholders.
Under the Companies Law, Israeli public companies, including a
company whose shares are traded at an exchange located outside of Israel,
are required to appoint two individuals to serve as Outside Directors on
the Board of Directors of such company. An "Outside Director" is defined
under the Companies Law, as an individual, who at the time of appointment,
and two years prior to such appointment, such individual (and such
individual's relatives, partners, employers or corporate entities
controlled by such person) had and continues to have no potential conflict
of interest with the Company. The Outside Directors have been granted
options of the Company (see "Security Ownership of Certain Beneficial
Owners and Management"). The initial term of an Outside Director will be
three years and may be extended for an additional three year period. The
following individuals were designated as the Outside Directors of the
Company's Board of Directors on July 25, 2000, and shall serve as directors
until the 2003 Annual Meeting of Shareholders of the Company:
Name Outside Director
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Philip Friedman Mr. Friedman, age 50, joined the Board
of Directors June 23, 1999. Mr.
Friedman is the founder, President and
Chief Executive Officer of Computer
Generated Solutions, Inc., a leading
privately held technology 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. Mr.
Friedman was recognized as an
Entrepreneur of the Year of the City of
New York in 1996.
Mark H. Tabak Mr. Tabak, age 49, joined the Board of
Directors of the Company on June 23,
1999. Mr. Tabak is the Vice Chairman of
Multiplan, Inc. and founder, President
and Chief Executive Officer of
International Managed Care Advisors,
LLC, a company that invests in and
develops managed care type delivery
systems mainly addressing primary care
needs in Latin America, Western and
Central Europe and Asia. Mr. Tabak is
also managing partner of Healthcare
Capital Partners, affiliated with
Capital Z Partners, a $3 billion
investment fund focusing on investing
in healthcare, insurance and financial
services. Between 1993 and 1996, Mr.
Tabak served as President of AIG
Managed Care, a subsidiary of American
International Group. Between 1990 and
1993, Mr. Tabak served as President and
Chief Executive Officer of Group Health
Plan, a managed care company and from
1986 to 1990, he served as President
and Chief Executive Officer of Clinical
Pharmaceuticals, Inc., a pharmacy
benefit management company he founded
in 1986. From 1982 to 1986, he served
as President and Chief Executive
Officer of Health America Development
Corporation.
The Board of Directors has nominated for election the following
persons to serve as directors of the Company until the next Annual Meeting
of shareholders: Prof. Jacob A. Frenkel, who serves as the Chairman of the
Board; Mr. Arie Genger, who, once elected to the board, will serve as Vice
Chairman of the Board of Directors; Mr. Aharon Dovrat; Mr. Thomas G. Hardy;
Prof. Darrell S. Rigel, M.D.; Mr. S.A. Spencer; Prof. Zehev Tadmor; and Dr.
Bernard Couillaud. Dr. Couillaud was first elected to the Board on April
30, 2001, the date of the closing of the acquisition of the Medical Group
of Coherent, Inc. ("Coherent") by the Company. Pursuant to the Asset
Purchase Agreement, between the Company and Coherent, dated February 25,
2001, as amended (the "Asset Purchase Agreement"), the Company agreed that,
for as long as Coherent continues to be the beneficial owner of at least
10% of the Company's outstanding share capital, it will take all necessary
action to nominate Coherent's designee to the Company's Board of Directors.
Dr. Couillaud is Coherent's designee for that position. Except for Mr.
Genger, all of the above named nominees are currently members of the Board
of Directors.
Each of the above named nominees has consented to being named in
this Proxy Statement and will serve as a director if elected. If, however,
at the time of the Annual Meeting 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 may
choose to recommend, or will vote to allow the vacancy created thereby to
remain open until filled by the Board of Directors, as decided by the Board
of Directors.
Nominees
The following table lists the name, age and positions with the
Company of each of the nominees and the month and year in which each
director was first elected.
Nominee Business Experience
- ------- -------------------
Professor Jacob A. Frenkel Prof. Frenkel, age 58, joined the Board
of Directors of the Company on January
25, 2000, and was elected Chairman of
the Board. Professor Frenkel is the
President of Merrill Lynch International
and Chairman of Merrill Lynch's
Sovereign Advisory Group and Global
Financial Institutions Group. He is also
the Chairman and CEO of the Group of
Thirty (G-30). From 1991 through 2000,
he served as Governor of the Bank of
Israel. 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. From
1987 through 1991, Professor Frenkel
served as the Economic Counselor and
Director of Research at the
International Monetary Fund, and also
held the David Rockefeller Chair of
International Economics at the
University of Chicago, where he served
on the faculty from 1973 to 1987. In
1994, he was named the Weisfeld
Professor of Economics of Peace and
International Relations at Tel Aviv
University.
Arie Genger Mr. Genger, age 55, is the founder of
Trans-Resources Inc. ("TRI"), and has
been TRI's Chairman of the Board of
Directors and Chief Executive Officer
since 1986. TRI is a leading global
developer, producer and marketer of
specialty chemical products.
Dr. Bernard Couillaud Dr. Couillaud, age 57, joined the Board
of Directors of the Company on April 30,
2001. He has served as President and
Chief Executive Officer of Coherent, as
well as a member of Coherent's Board of
Directors, since July 1996. Dr.Couillaud
served as Vice President and General
Manager of the Coherent Laser Group from
March 1992 to July 1996. From July 1990
to March 1992, Dr. Couillaud served as
Manager of Coherent Advanced Systems
Business Unit, and from September 1987
to July 1990 he served as Director of
Research and Development for the
Coherent Laser Group. From November
1983, when he joined Coherent Laser
Group, to September 1987, Dr. Couillaud
held various managerial positions with
Coherent. Dr. Couillaud received his PhD
in Chemistry from Bordeaux University,
Bordeaux, France.
Aharon Dovrat Mr. Dovrat, age 69, 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 also
serves as the chairman of the board of
directors of: Dovrat & Company, Isal
Ltd., Breezecom Ltd., a wireless
telecommunications equipment technology
company, and Cognifit Ltd. In addition,
Mr. Dovrat serves as a member of the
board of directors of DS Polaris Ltd.,
Technomatix Technologies Ltd., a
software company, Delta Galil Ltd., a
textile company, Dovrat Shrem & Co. and
B.O.S.- Better Online Solutions.
Thomas G. Hardy Mr. Hardy, age 55, joined the
Board of Directors of the Company in
February 1998. From January 2000 through
May 2001, Mr. Hardy served as Vice
Chairman of the Board of Directors of
Trans Resources Inc. He was President
and Chief Operating Officer of TRI from
December 1993 to December 2000, and was
Executive Vice President of TRI from
June 1987 to December 1993. In addition,
Mr. Hardy has been a director and member
of the Financial Advisory Committee of
TRI since October 1992. Mr. Hardy was a
director of Laser Industries Ltd. from
January 1990 until February 1998, when
it merged with the Company.
Professor Darrell S. Rigel Professor Rigel, age 50, 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, 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. Professor Rigel is a former
president of the American Academy of
Dermatology. In 1996, Professor Rigel
founded and assumed the Presidency of
Interactive Horizons, Inc., a privately
held company in the industry of
interactive computer systems. Professor
Rigel graduated from Massachusetts
Institute of Technology with an B.S. and
an M.S. in Management Information
Sciences.
Sash A. Spencer Mr. Spencer, age 69, 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 also serves as a member of the
board of directors of TRI.
Professor Zehev Tadmor Prof. Tadmor, age 64, 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. He 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, and as chairman of
the Yitzchak Rabin Center for Israel
Studies since June 2000. 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 TRI Professor Tadmor also
serves on the board of governors of
Technion, the USA-Israel Science &
Technology Commission, and is an elected
member of the Israeli Academy of Science
and Humanities and the USA National
Academy of Engineering.
The affirmative vote of the holders of a majority of the voting
power represented 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 the above named nominees as directors.
PROPOSAL 2 - APPROVAL OF DIRECTORS' AND OFFICERS' INSURANCE ARRANGEMENTS
Under the Companies Law, the procurement of insurance coverage
for a company's directors and officers must be approved by the company's
Audit Committee, Board of Directors and shareholders. The Company's Audit
Committee and Board of Directors have approved the procurement of insurance
as discussed below. The shareholders of the Company are being asked at the
Annual Meeting to approve the proposed directors' and officers' insurance
arrangements described below.
Article 68B of the Company's Articles of Association provides
that the Company may insure its past or present office holders to the
maximum extent permitted by law. Under the Companies Law, a company may
enter into a contract for the insurance against liability of any of its
office holders for: (i) a breach of his or her duty of care to the company
or to another person; (ii) a breach of his or her 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) financial liability imposed upon him or her in favor of
another person concerning an act performed by him in his or her capacity as
an office holder. The Company is currently insured by an directors' and
officers' liability insurance policy that extends $100,000,000 in coverage.
Subject to shareholder approval, and following the expected
increase in Company activities as a result of the Coherent transaction, the
Company will obtain directors' and officers' liability insurance with a
$250,000,000 limit of liability. Shareholder approval of this Proposal 2
will extend to any renewal or substitution thereof (from time to time)
under comparable coverage.
Approval of the insurance arrangements as described above, with
respect to each of the officers and directors of the Company, requires the
affirmative vote of a majority of the votes present or represented and
entitled to vote on this subject matter at the Annual Meeting.
The Board of Directors recommends a vote FOR the approval of the
directors' and officers' insurance arrangements as set forth above.
PROPOSAL 3 - APPOINTMENT OF BRIGHTMAN, ALMAGOR & CO. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2001
The Company is submitting for approval the appointment of
Brightman, Almagor & Co. ("Brightman"), a member firm of Deloitte, Touche,
Tohmatsu, as its independent auditors to audit the consolidated financial
statements of the Company and its subsidiaries for fiscal year 2001. During
the fiscal year 2000, the total remuneration that was paid by the Company
to Brightman for its audit services was $380,000 and the total amount for
other services was $88,000.
The Board of Directors recommends that the shareholders appoint
Brightman, as independent auditors, to audit the accounts of the Company
and its subsidiaries for fiscal year 2001, and to authorize the Board of
Directors of the Company to agree upon the level of Brightman's
compensation.
Representatives of Brightman will not be present at the Annual
Meeting.
Audit Committee Report
The Audit Committee oversees the Company's financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited financial
statements in the Company's 2000 Annual Report with management which
included a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who
are responsible for expressing an opinion on the conformity of those
audited financial statements with generally accepted accounting principles,
their judgments as to the quality, not just the acceptability, of the
Company's accounting principles and such other matters as are required to
be discussed with the Audit Committee under generally accepted auditing
standards. In addition, the Audit Committee has discussed with the
independent auditors the auditors' independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board and it considered the compatibility of
nonaudit services with the auditor's independence.
The Audit Committee discussed with the Company's internal and
independent auditors the overall scope and plans for their respective
audits. The Audit Committee meets with the internal and independent
auditors, with and without management present, to discuss the results of
their examinations, their evaluations of the Company's internal controls,
and the overall quality of the Company's financial reporting. The Audit
Committee has also discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees).
In reliance on the reviews and discussions referred to above, the
Audit Committee recommended to the Board of Directors (and the Board of
Directors has approved) that the audited financial statements be included
in the Annual Report on Form 10-K for the year ended December 31, 2000 for
filing with the Securities and Exchange Commission. The Audit Committee and
the Board of Directors have also recommended, subject to stockholder
approval, the selection of the Company's independent auditors.
THE AUDIT COMMITTEE
S.A. Spencer (Chairman)
Prof. Zehev Tadmor
Mark Tabak
Philip Friedman
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 auditors for fiscal
year 2001.
The Board of Directors recommends a vote FOR the appointment of
Brightman, Almagor & Co., a member firm of Deloitte, Touche, Tohmatsu, as
the Company's independent auditors for fiscal year 2001.
PROPOSAL 4 - CHANGE OF THE COMPANY'S NAME TO LUMENIS LTD.
Under the Companies Law, the Company may change its name if such
change is approved by a majority of the shares outstanding, present and
voting at a duly convened meeting of the shareholders of the Company. Upon
approval by the shareholders, the Company must solicit the approval of the
Israeli Companies Registrar. Upon the grant of such approval by the
Companies Registrar, the name change may take effect.
The Board of Directors has proposed to change the Company's name
from "ESC Medical Systems Ltd." to "Lumenis Ltd." or, if such name is not
approved by the Companies Registrar, to another name as chosen by the
Company's Board of Directors. Lumenis is derived from lumen, the Latin word
for light. The Board of Directors believes that the new proposed name will
more closely identify the business of the combined entities (ESC and
Coherent) and strengthen identification of the Company's product line.
Moreover, the Board of Directors believes that this name change will
symbolize the joining of forces between ESC and Coherent.
On May 8, 2001, Lumenos, Inc. filed a complaint in the United
States District Court for the District of Massachusetts, in which it
alleged that the Company and its wholly owned indirect subsidiary ESC
Medical Systems Inc. (together, "ESC Medical") infringe the name and mark
of "Lumenos" due to the Company and ESC Medical's contemplated name change
to "Lumenis." The complaint further alleges unfair competition and related
causes of action pertaining to the name change. Neither the Company nor its
indirect subsidiary has been served with this complaint. If served, both
companies intend to vigorously defend against the suit. If, however, the
Company is not successful in its defense, shareholders are requested, by
approving Proposal 4, to authorize the Board to approve another name for
the Company.
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
change of the Company's name.
The Board of Directors recommends a vote FOR the approval of the
change of the Company's name from "ESC Medical Systems Ltd." to "Lumenis
Ltd." or such name as shall be determined by the Board of Directors and
approved by the Israeli Registrar of Companies.
PROPOSAL 5 - AMENDMENT OF THE ARTICLES OF ASSOCIATION TO INCREASE THE
AUTHORIZED SHARE CAPITAL OF THE COMPANY
The Board has recommended an increase of the registered share
capital of the Company from NIS 5,000,000 to NIS 10,000,000, which will
result in an increase in the amount of Ordinary Shares from 50,000,000
Ordinary Shares of par value NIS 0.10 to 100,000,000 Ordinary Shares of par
value NIS 0.10. The new shares shall entitle their holders to such rights
as are specified in the Articles of Association of the Company.
The Company's Board of Directors believes that the increase in the
number of authorized Ordinary Shares is in the best interest of the Company
and its shareholders. The proposed amendments will give the Company a
sufficient number of unreserved and unissued shares to allow the Company to
pursue equity financing transactions, strategic alliances, and
acquisitions, to compensate consultants and employees, and for other
transactions which management believes may enhance shareholder value. Any
remaining authorized shares may be issued in the future by the Board of
Directors, without further shareholder approval (unless required by
applicable laws, regulations or rules), for such corporate purposes as the
Board may deem in the best interest of the Company.
The increase in the authorized shares proposed by the Board is
designed to provide flexibility to the Company. The issuance of a
significant amount of additional authorized shares, however, could result
in dilution of the beneficial ownership interests and/or voting power of
the Company's current shareholders. The additional authorized shares could
be used for purposes that might be deemed to be in defense of a potential
takeover threat. The Company does not presently contemplate, however, using
any of the authorized shares for such purpose.
The Board of Directors recommends a vote FOR the amendment of the
Company's Articles of Association to increase the capitalization of the
Company by authorizing 50,000,000 new Ordinary Shares, par value NIS 0.10
per share.
PROPOSAL 6 - APPROVAL OF THE ISSUANCE OF OPTIONS TO BANK HAPOALIM, B.M.
The purpose of the proposal is to seek shareholder approval, in
accordance with the NASDAQ Stock Market rules, the issuance of options to
purchase up to 2,500,000 Ordinary Shares to Bank Hapoalim, B.M. or one of
its associates ("Lender" or "Optionee"). The options were issued, subject
to shareholder approval, in connection with the financing that was made
available by the Lender on April 30, 2001 and used, in part, for the
recently completed purchase of the Medical Group of Coherent.
On April 30, 2001, the Company closed the acquisition of
substantially all of the assets and related liabilities of the Medical
Group of Coherent. The consideration for the transaction was as follows:
$100 million in cash, 5,432,099 Ordinary Shares of the Company and $12.9
million in an 18-month 5% subordinated note, plus an earn-out payment of up
to $25 million. On April 30, 2001, the Lender loaned to a subsidiary of the
Company the cash portion of the purchase price, and made a revolving credit
facility available to the Company.
The Company is seeking shareholder approval since the Ordinary
Shares issuable pursuant to the options, if aggregated with the 5,432,099
Ordinary Shares issued to Coherent, would exceed 20% of the Ordinary Shares
issued and outstanding as of the date that the Coherent transaction was
announced. In accordance with the NASDAQ Stock Market rules, shareholder
approval is required for the listing of shares issued in connection with an
acquisition to the extent that such shares would exceed 20% of the issued
and outstanding Ordinary Shares of the issuer.
The Company and its subsidiaries were provided by Lender with the
following facilities: (1) a term loan facility ("Term Loan Facility") of
$100 million which was used to fund the cash portion of the purchase price,
payable semi-annually commencing October 30, 2002 and until April 30, 2007,
(2) a revolving credit facility ("Revolving Credit Facility") of up to $50
million, which will be provided from April 24, 2001 until April 24, 2002,
and of up to $20 million, which will be provided from April 24, 2002 until
April 23, 2003, and (3) an additional term loan facility (the "Additional
Financing Facility") of up to $91.2 million to refinance, if needed, the
Company's outstanding convertible notes, available until September 2002.
Interest on the Term Loan is payable quarterly and accrues at a
rate equal to LIBOR plus 1.75% per annum. However, if shareholder approval
of the options is not obtained within 100 days of the making of the Loan,
the interest rate on the Term Loan will increase retroactively to LIBOR
plus 8% and the subsidiary of the Company which is the borrower will be
required to pay a facility fee of $2.7 million. Any loans made to the
Company under the Revolving Credit Facility will accrue interest at a rate
equal to LIBOR plus 1% per annum.
In addition, in connection with the various credit facilities, ESC
has granted to the Lender, subject to shareholder approval, options to
purchase an aggregate of 2,500,000 Ordinary Shares. Such shares, upon
issuance, would represent approximately 7.25 % of the issued and
outstanding shares. The options will expire on April 30, 2006 and have an
exercise price of $20.25 per share, subject to adjustment. The options are
subject to equitable adjustment upon the occurrence of a stock split, stock
dividends, reclassifications and other similar events. In addition, in the
event of a public offering prior to the expiration date, the exercise price
of options exercised in connection with such public offering shall be an
amount equal to the lower of (a) 85% of the public offering price and (b)
$20.25.
The options may be exercised by the Optionee at any time until
their expiration on April 30, 2006. In addition, under the terms of the
options, ESC may be in a position to require that the Optionee exercise a
significant portion of the options or risk forfeiting a portion of its
options. The Optionee was granted the right to have shares acquired upon
exercise of the options included, on a pro rata basis, in any registered
offering effected by the Company for the public resale of Ordinary Shares
by shareholders.
The Optionee has also agreed, following the exercise of the
options, not to vote a number of shares representing more than 4.99% of the
outstanding shares and has granted to the Company a proxy to vote any
shares in excess of such 4.99%.
The credit facilities and the option agreement pursuant to which
the options were issued are filed as exhibits 10.1, 10.2 and 10.4 to the
Company's Current Report on Form 8-K dated May 15, 2001. The foregoing
descriptions are qualified in their entirety by reference to such exhibits.
The Board of Directors believes that the granting of the options
(i) will help align the interests of the Lender and the Company by
providing the Lender with a meaningful equity interest in the Company, (ii)
should help minimize the direct costs of the Term Loan, and (iii) could
serve as a future source of financing. The Board of Directors also noted
that the exercise price of the option represented a premium of
approximately 37% over the closing price per share on February 9, 2001, the
last trading day prior to the Company's announcing that it was engaged in a
possible transaction with Coherent (and a premium of approximately 23% over
the closing price per share on February 23, 2001, the last trading day
prior to the Company's announcement that it had entered into a definitive
agreement with Coherent). Based on the foregoing, the Board of Directors
believes that the granting of the Options was in the best interests of the
Company and its shareholders and recommends that shareholders vote in favor
of this proposal.
This proposal, under the NASDAQ Stock Market rules, requires the
approval of the holders of a majority of the votes cast.
The Board of Directors unanimously recommends a vote FOR the
approval of the options granted by the Company to Bank Hapoalim, B.M.
PROPOSAL 7 - APPROVAL OF THE ENGAGEMENT OF MR. THOMAS G. HARDY AS A
CONSULTANT OF THE COMPANY
Under the Companies Law, shareholders must approve the terms of an
engagement of a company with any of its directors relating to such
director's additional role or position with the company. Under the Companies
Law, such shareholders approval will be required after such terms were
approved by a company's audit committee and board of directors.
The Company's management retained Mr. Thomas G. Hardy, a director,
as an outside consultant and agreed with Mr. Hardy on the terms relating to
such engagement (the "Hardy Agreement") which commenced as of October 1,
2000 and which will terminate on September 30, 2001; provided, however,
that either party may terminate the Hardy Agreement at any time, by giving
30 days advance written notice to the other party. Under the terms of the
Hardy Agreement, Mr. Hardy will assist the Company in strategic planning
and integration activities relating to the acquisition of Coherent. In
consideration of the performance of the services, the Company will pay Mr.
Hardy a per diem consulting fee in the amount of $5,000 for each day of
services that are rendered. Through the end of April 2001, Mr. Hardy became
entitled to receive approximately $100,000 from the Company for services
rendered, subject to any required approvals. The Audit Committee and the
Board of Directors have approved the terms of the Hardy Agreement. Mr.
Hardy did not participate in the discussion and vote relating to the terms
of the Hardy Agreement.
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 engagement of Mr. Hardy as a consultant.
The Board of Directors recommends a vote FOR the engagement of Mr.
Thomas G. Hardy, a director of the Company, as a consultant of the Company.
PROPOSAL 8 - APPROVAL OF THE 2000 SHARE OPTION PLAN AND THE GRANT OF SHARE
OPTIONS THEREUNDER
The Board of Directors is proposing for shareholder approval, in
accordance with the NASDAQ Stock Market rules, the Company's 2000 Share
Option Plan (the "Plan"). Shareholder approval of the Plan is also required
by Section 422 of the U.S. Internal Revenue Code of 1986, 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 Company adopted the Plan in November 2000. The Plan is
intended to encourage stock ownership by employees, directors and
consultants. By encouraging stock ownership, the Company seeks to motivate
such individuals to contribute materially to the Company's success. This
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 "Appendix A."
General Terms and Conditions of the Plan
The Plan is administered by the Compensation Committee (the
"committee"), which has the absolute discretion on 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 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 options may be exercised and to determine additional
jurisdictions under which the Plan will be implemented.
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, 10,000,000 Ordinary Shares, subject to the applicable
adjustments provided for under the Plan. Unless otherwise determined by the
committee, the option price in the case of each option granted under the
Plan, will be the closing price of the Ordinary Shares on 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 amend or terminate the
Plan at any time; except, that, unless otherwise determined by the Board of
Directors, an amendment that requires stockholder approval in order for the
Plan to continue to comply with Section 162(m) of the Code, or any other
law, regulation or stock exchange requirement will not be effective unless
approved by the requisite vote of stockholders. In addition, no amendment
may be made which adversely affects any of the rights of an optionee under
any option theretofore granted, without such optionee's consent. 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 of grant of an option (the
"Termination Date").
Under the Plan, any options held by the Company's directors, the
Chief Executive Officer ("CEO") of the Company and the officers reporting
directly to the CEO, will become immediately exercisable upon a change in
control of the Company. A change in control will be deemed to have occurred
upon the occurrence of any 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 time 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) upon the consummation of certain transactions
entered into by the Company (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
("NQSOs"). 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.
Unless otherwise provided for in the agreement evidencing the
award of options (the "option agreement"), if prior to a Termination Date,
an optionee's employment or service is terminated by the Company without
cause, the options to the extent exercisable will remain exercisable until
the Termination Date and will expire thereafter (the "post termination
exercise period") and any option which has not become exercisable as of the
date of termination of employment or service will expire as of the date of
such termination of employment or service. If an optionee's employment or
service is terminated by reason of death or if the optionee dies during the
post termination exercise period, the optionee's estate or beneficiaries
may exercise such options, to the extent then exercisable, until the
Termination Date and the option shall expire thereafter.
Notwithstanding the above, unless otherwise provided in the option
agreement, if prior to the Termination Date, (1) an optionee ceases to be
employed by the Company or ceases to provide services to the Company for
reasons which, as determined by the Company in its discretion, amount to
bad faith, gross negligence or fraud, or (2) the optionee's employment or
service is terminated by the Company for "cause," then any option or a
portion thereof which has not been exercised as of the date of such
termination of employment or service shall be immediately cancelled.
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.
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 or her upon exercise (a "disqualifying disposition"),
any gain realized by the optionee generally will be taxable at the time of
such disqualifying disposition as follows: (i) at ordinary income rates to
the extent of the difference between the option price and the lesser of the
fair market value of the stock on the date the ISO is exercised or the
amount realized on such disqualifying disposition and (ii) if the stock is
a capital asset of the optionee, as short-term or long-term capital gain to
the extent of any excess of the amount realized on such disqualifying
disposition over the fair market value of the stock on the date which
governs the determination of the optionee's ordinary income. In such case,
the Company may claim a federal income tax deduction at the time of such
disqualifying disposition for the amount taxable to the optionee as
ordinary income. Any capital gain recognized by the optionee will be
long-term or short-term capital gain, depending on the length of time such
shares were held by the optionee.
The amount by which the fair market value of the stock on the
exercise date of an ISO exceeds the option price will be an item of
adjustment for purposes of the "alternative minimum tax" imposed by Section
55 of the Code.
Transferred Options: Estate and Gift Taxes
If ISOs or NSOs are held until death, federal and, if applicable,
state estate and inheritance taxes would be imposed on the fair market
value of the options at the time of death. Certain individuals, however,
may realize estate and gift tax savings by making lifetime gifts of NSOs to
permitted family members, trusts for their benefit, or other entities.
Federal and, if applicable, state gift taxes would be imposed on the fair
market value of the NSOs at the time of the completed gift, subject to
applicable federal and state gift tax credits and exclusions. The IRS has
taken the position that a gift of an option is not complete until the
donee's right to exercise the option is no longer conditioned on the
performance of services by the optionee. Generally, federal and state gift
and estate tax savings may be realized if the value of the NSOs at the time
of the completed gift is less than the value of the NSOs (or the proceeds
from the disposition thereof) at such later time as the optionee might make
a gift of the NSOs or, if no gift is made, at the time of the optionee's
death.
The fair market value of options for gift or estate tax purposes
may be determined using any one of a number of standard valuation methods,
such as the Black-Scholes or binomial models. Valuation models should
consider, among other things, such factors as strike price, the current
value and volatility of the underlying stock, the expected dividends on the
underlying stock, the risk-free rate over the option term and the option's
remaining life. In Revenue Procedure 98-34, 1998-17 IRB 1, the IRS sets
forth a "safe harbor" method of valuation which, if followed, will be
accepted by the IRS in valuing options for estate and gift tax purposes.
This IRS model is relevant only where the underlying stock is
publicly-traded and imposes certain other restrictions, such as the
disallowance of certain market discounts permitted by other valuation
models.
The optionee (or if the optionee is deceased, the optionee's
estate), rather than the donee, will recognize ordinary income for federal
income tax purposes upon the exercise of the transferred option (just as if
there had been no transfer). (See "Certain Federal Income Tax
Effects--Nonqualified Stock Options.")
The following table sets forth the name, position, and grant
information for eligible employees and directors who have been granted
options under the Plan, subject to stockholder approval of the Plan on or
before ___, 2001.
NEW PLAN BENEFITS
- ---------------------------------------------------------------------------------------------------------
Name Position No. of shares underlying
Options granted
- ---------------------------------------------------------------------------------------------------------
Yacha Sutton Chief Executive Officer 150,000
- ---------------------------------------------------------------------------------------------------------
Louis Scafuri Chief Operating Officer 125,000
- ---------------------------------------------------------------------------------------------------------
Peter D'Errico Vice President, Corporate 0
Marketing
- ---------------------------------------------------------------------------------------------------------
Alon Maor Chief Executive Officer, Asia 100,000
Pacific Operation (1)
- ---------------------------------------------------------------------------------------------------------
Raphael Werner Chief Executive Officer, Americas 42,375
Business Unit (2)
- ---------------------------------------------------------------------------------------------------------
Executive Officer Group 938,750
- ---------------------------------------------------------------------------------------------------------
Non-Executive Director Group 950,000
- ---------------------------------------------------------------------------------------------------------
Non-Executive Officer Employee Group 3,010,250
- ---------------------------------------------------------------------------------------------------------
(1) Subsequent to December 31, 2000, Mr. Maor assumed the post of Vice President, European Operations.
(2) Subsequent to December 31, 2000, Mr. Werner assumed the post of Vice President, Service.
Benefits under the Plan will depend on a number of factors,
including the fair market value of the common stock on future dates and the
exercise decisions made by the optionees. Consequently, it is not possible
to determine the benefits that might be received by the optionees receiving
grants under the Plan.
The affirmative vote of the holders of a majority of the voting
power represented at the Annual Meeting in person or by proxy is necessary
for approval of the Plan.
The Board of Directors recommends a vote FOR the approval of the
adoption of the 2000 Share Option Plan and the grant of share options
thereunder.
PROPOSAL 9 - APPROVAL OF DIRECTORS' COMPENSATION
Under the Companies Law, shareholders must approve the
compensation terms of the Company's directors that have been approved by
the Company's Audit Committee and Board of Directors. Subject to
shareholder approval, the Company's Audit Committee and Board of Directors,
based upon the recommendation of the Company's Compensation Committee and
upon the findings of two compensation experts who were retained by the
Compensation Committee to assist the Board of Directors with a comparison
analysis of option grants to directors of other companies, approved the
following option grants as of February 22, 2001 to the directors of the
Company who served as directors during the year 2000 and to Mr. Arie Genger
who served as special advisor of the Board and who is nominated in the
Annual Meeting as a director. The option grants described below are subject
to shareholders approval and are being granted, as a reward for the
director's efforts and contribution in the successful completion of the
Coherent transaction:
A.
1. A one-time fully vested grant of an option to purchase 50,000
Ordinary Shares, at a per share purchase price of $10.90.
2. A one-time grant to the Chairman of the Board of Directors, Prof.
Frenkel, of an option to purchase 300,000 Ordinary Shares, under
the same exercise price and vesting period applicable to the other
directors.
3. A one-time fully vested grant of an option to purchase 300,000
Ordinary Shares to Mr. Arie Genger, the special advisor to the
Board (currently nominated as Vice-Chairman at the Annual
Meeting).
4. An acceleration of Mr. Genger's unvested options. The options are
subject to a lock-up arrangement regarding the sale of such
options. The lock-up arrangements allow Mr. Genger to sell his
shares in accordance with the original vesting schedule (except
for the sale of an amount of shares necessary to enable a cashless
exercise of the whole package).
5. As an additional reward for their contribution in the Coherent
transaction, the Audit Committee and the Board of Directors
approved on April 24, 2001 an acceleration of the vesting period
of the unvested options of the members of the Board.
All options granted to the directors and Mr. Genger will be granted
under the Plan, subject to the approval of the Plan by the
shareholders at this Annual Meeting.
B. In addition to the special option grants related to the Coherent
transaction, the Audit Committee and the Board recommend the approval of a
future annual grant of 10,000 options to each director of the Company and
an annual grant of 50,000 options to each of the Chairman and Vice-Chairman
of the Company.
C. In addition to the option grants, the Audit Committee and the Board
recommend the following:
1. To each of the directors who serves on any one or more of the
sub-committees of the Board (other than the Chairman), a cash
retainer fee for participation in meetings of the Board of
Directors or any sub committee at $2,500 per calendar quarter.
Such directors will not be entitled to receive any additional
per-meeting fee but would be reimbursed for their reasonable
travel and accommodation expenses; and
2. To the Chairman of the Board of Directors, Prof. Frenkel, and to
Mr. Arie Genger (if elected as a member of the Board), an advisory
fee of up to $120,000 per year (in the aggregate).
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 2001.
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 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 (except the Audit Committee, which must consist of at least three
directors, and include all of the Outside 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 2000 fiscal
year and since the annual general meeting held on May 30, 2000 (the "2000
Meeting"), the Board of Directors held thirteen meetings. Each of the
incumbent directors attended 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 Compensation Committee.
Executive Committee
The Executive Committee has been empowered and authorized 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 powers of the Executive Committee are 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; Aharon Dovrat; S.A. Spencer; and Prof.
Zehev Tadmor. During the 2000 fiscal year and since the 2000 Meeting, the
Executive Committee held two 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
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 Audit Committee Charter is attached as
Appendix "B" to this Proxy Statement.
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
four directors, each of whom qualify as an independent director in
compliance with the NASDAQ Stock Market rules: S.A. Spencer (Chairman);
Prof. Zehev Tadmor; Mark Tabak and Philip Friedman. During the 2000 fiscal
year and since the 2000 Meeting, the Audit Committee held five meetings.
Compensation Committee
The Compensation Committee administers the stock option plans of
the Company and its subsidiaries, determines the base compensation and
bonus/incentive compensation of the Chief Executive Officer and the four
highest paid executives of the Company (the "Named Officers") and reviews
the recommendations of the Chief Executive Officer of the Company. The
members of the Company's Compensation Committee since December 31, 2000 are
Aharon Dovrat (Chairman), Thomas G. Hardy and Mark Tabak (the "Compensation
Committee"). During the 2000 fiscal year and since the 2000 Meeting, the
Compensation Committee held four meetings.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
No member of the Compensation Committee is currently, or was at
any time during the fiscal year ended December 31, 2000, an officer or
employee of the Company. No executive officer of the Company 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.
In April 2001, the Board of Directors ratified changes to the
compensation terms of certain executive officers of the Company, subject to
the execution of amendments to existing employment agreements.
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 with 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 the office holder's approval or performed by the
office holder by virtue of the office holder's 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 the office holder's 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 the office holder 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 or her
position as an office holder. Each of the directors and executive officers
of the Company 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 the office
holder may have and all related material information known to the office
holder, 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 the office holder has the right to appoint at least one
director or the general manager. Under the Companies Law, an extraordinary
transaction is a transaction: other than in the ordinary course of
business; otherwise than on market terms; or that is likely to have a
material impact of the company's profitability, assets or liabilities.
Under the Companies Law, once an office holder complies with the above
disclosure requirement, the board of directors may approve a transaction
between the company and an office holder, or a third party in which an
office holder has a personal interest, unless the articles of association
provide otherwise. A transaction that is adverse to the company's interest
may not be approved. If the transaction is an extraordinary transaction,
both the audit committee and the board of directors must approve the
transaction. Under specific circumstances, shareholder approval may also be
required. An office holder who has a personal interest in a matter, which
is considered at a meeting of the board of directors or the audit
committee, may not be present when this matter is considered or vote on
this matter.
Disclosure of Personal Interests of Controlling Shareholders
Under the Companies Law, the disclosure requirements which apply
to an office holder also apply to a controlling shareholder of a public
company. The Companies Law defines "control" as the ability to direct the
activity of a corporation, except for ability that is solely derived from
an officer's or director's position in such company. The Companies Law
includes a presumption under which a person who 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 those shareholders who have no personal interest in the transaction
and who vote against the transaction do not represent more than one percent
of the voting rights in the company.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals are the executive officers and key
management of the Company:
Name Position and Business Experience
- ---- --------------------------------
Yacha Sutton Mr. Sutton, age 57, has served as 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 Operating Officer of Laser
Industries Ltd. Prior to such time, Mr. Sutton
served as an Executive Vice President and Chief
Financial Officer of Laser Industries Ltd.
Louis Scafuri Mr. Scafuri, age 49, joined the Company in May
1999 as the Chief Executive Officer of North
American 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. Genger, age 29, 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, from
1997 through 1999. Prior to that, Mr. Genger
worked from 1996 through 1997 at Holding
Capital Group, a boutique investment house. Mr.
Genger has an M.B.A. and B.S. in Finance,
International Management and Legal Studies from
the Wharton School of Business. Mr. Genger is
the son of Mr. Arie Genger, a shareholder who
owns more than 5% of the Company's issued and
outstanding Ordinary Shares and is a nominee
for director.
Asif Adil Mr. Adil, age 46, Executive Vice President of
the Company, began to serve as Executive Vice
President of Business Operations on September
1, 2000. Mr. Adil previously worked with
McKinsey & Company, Inc. for the past 12 years,
during the last six of which he was a partner.
At McKinsey, he was a leader of the North
American Healthcare and Consumer Sectors. In
addition to responsibility for ESC's
direct-to-consumer initiative (Aculight), he
leads ESC's business operations in North
America and the United Kingdom. Mr. Adil has
counseled governments and clients across a
spectrum of business opportunities focused in
the healthcare and consumer sectors. He has
worked extensively with new and established
companies on strategic business issues
including pricing and promotion, branding,
acquisition and divestitures, and global
product launches. Knowledge building in
e-commerce and alliances were Mr. Adil's areas
of specialty at McKinsey. He has also held
senior management positions with Sony
Corporation and PepsiCo Inc. He has an M.B.A.
with Distinction from Cornell University and is
a licensed C.P.A.
Yossi Gal Mr. Gal, age 45, joined the Company in July
2000 as Vice President of Human Resources.
Prior to joining the Company, Mr. Gal served as
Vice President of Human Resources and MIS in GE
Medical Systems Israel from 1997 to 2000.
Previously, Mr. Gal worked with Elscint Ltd.
for 16 years in a number of managerial
positions, which included Human Resources,
Planning and Control Director of Elscint's
Manufacturing Division and Corporate Manager of
Staffing and Overseas Personnel. Mr. Gal has a
B.A. in Sociology and Political Science from
Haifa University and an M.Sc. In Management &
Behavioral Science from the Technion.
Moshe Grencel Mr. Grencel, age 47, joined the Company in
January 2001 as Vice President of Operations.
Prior to joining ESC, Mr. Grencel served as
General Manager of Elscint Industrial Solutions
from 1998 to 2001. From years 1994 to 1998, Mr.
Grencel served as Vice President of
Manufacturing at Elscint Ltd. Mr. Grencel has a
B.Sc. degree in Industrial Engineering from the
Technion.
Alon Maor Mr. Maor, age 38, joined the Company in January
1999 as the President and Representative
Director of ESC Japan. Since May 2001, Mr. Maor
has served as Vice President of European
Operations. From January 2000 through April
2001, Mr. Maor served as Chief Executive
Officer 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.
Israel Ohana, Ph.D Dr. Ohana, age 47, joined the Company in
February 2000 as the Vice President, Research
and Development. Prior to joining the Company,
Dr. Ohana served as Vice President 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 of patents and
scientific publications. Dr. Ohana received a
BA in physics and mathematics from the Hebrew
University of Jerusalem, Israel and an M.A. and
Ph.D. in Physics from the Hebrew University of
Jerusalem, Israel.
Hadar Solomon Mr. Solomon, age 44, was appointed Vice
President, General Counsel and Corporate
Secretary in March 1998, after having served as
Vice President, Corporate Affairs, General
Counsel and Secretary of Laser Industries Ltd.
since May 1988. From July 1984 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.
Raphael Werner Mr. Werner, age 42, was appointed as Vice
President, Service in 2001. Prior to that, he
served as Chief Executive Officer, North
American Operations since July 2000, and as
Vice President, Operations of the Company since
September 1999. He 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 April
1997. From April 1993 to April 1997, he served
as Laser Industries Ltd.'s Director and Vice
President, Operations. Mr. Werner holds a B.S.
in Industrial Engineering from Tel Aviv
University.
Robert Grant Mr. Grant, age 32, joined the Company in May
2001 as Vice President, Surgical Business Unit,
following the closing of the Company's
acquisition of the Coherent Medical Group.
Prior to the acquisition, from August 2000
though April 2001, Mr. Grant served as
Coherent's Vice President of Business
Development, and from February 1999 through
April 2001 as Coherent's Managing Director of
European Operations. From March 1997 until
January 1999, Mr. Grant served as Director of
Business Development at HGM, Inc. and from 1995
to 1997 he served as a General Manager of the
Australasia Operation of Sulzermedica AG. He
has also held various positions, including
Director of Marketing, Asia Pacific; Country
Manager, Japan; and Asia Pacific Sales Manager
for Telectronics Pty Ltd. and HGM, Inc. Mr.
Grant holds a B.A. from Brigham Young
University and received his Masters in Business
with honors from the American Graduate School
of International Management.
Jonathan T. Pearson Mr. Pearson, age 35, joined the Company in May
2001 as Vice President of Asia Pacific
Operations, following the closing of the
Company's acquisition of the Coherent Medical
Group. Prior to joining the Company, Mr.
Pearson worked for Coherent since 1994, serving
in a variety of management roles covering
business development, marketing and regulatory
issues, including Director of Asia Pacific
Operations. During his seven-year career at
Coherent, Mr. Pearson focused exclusively on
Asia, establishing and expanding direct sales
operations in Japan, the People's Republic of
China and Hong Kong. Mr. Pearson holds a B.A.
from the University of Washington and a Master
of International Management from the American
Graduate School of International Management
(Thunderbird).
Robert M. Di Silvio Mr. Di Silvio, age 47, joined the Company in
May 2001 as Vice President of Sales for the
Americas, following the closing of the
acquisition of the Coherent Medical Group.
Prior to the acquisition, Mr. Di Silvio served
since May 1999 as Coherent's Vice President,
Field Operations, North American Sales. Prior
to Coherent, Mr. DiSilvio worked at
Datex-Ohmeda, Inc. for seven years in various
managerial positions, including service as Vice
President/General Manager from September 1997
through October 1998, and as General Manager
Australia/New Zealand, from January 1995
through August 1997. Mr. DiSilvio's twenty year
career in the medical device market has also
included a number of general management, sales
and marketing management positions with other
industry leading companies, including Medical
Data Electronics, Inc. and Hewlett-Packard's
Medical Products Group. Mr. Di Silvio holds a
B.A. in Economics and Organic Chemistry and an
M.S. in Biochemistry from the Univerisity of
Connecticut.
James Holtz, Ph.D. Dr. Holtz, age 56, joined the Company in May
2001 as Interim Vice President, Aesthetics
Business Unit, following the closing of the
Company's acquisition of the Coherent Medical
Group. Prior to the acquisition, Dr. Holtz
served as Executive Vice President of Coherent
Star, a business unit of Coherent Medical Group
responsible for hair removal and other
aesthetic applications. In 1993, Dr. Holtz
founded Star Medical Technologies, which
developed and manufactured the LightSheer diode
laser. Dr. Holtz served as Chairman of the
Board of Star Medical Technologies until its
acquisition by Coherent in 1998. Dr. Holtz has
a B.A. in Physics from Stanford University and
a Ph.D. in Physics from the University of
California, Berkeley.
Thomas Brunner Mr. Brunner, age 60, joined the Company in May
2001 as Vice President, Ophthalmic Business
Unit, following the closing of the Company's
acquisition of the Coherent Medical Group.
Prior to the acquisition, Mr. Brunner served as
Coherent's Vice President of the Ophthalmic
Business Unit since May 1996. In his
twenty-year career with the Coherent Medical
Group, Mr. Brunner has held a variety of
management positions. Mr. Brunner has more than
30 years experience in the medical laser
industry and, in addition to his service with
Coherent, served from 1980 to 1984 as Vice
President of Marketing and Sales for Cooper
LaserSonics and from 1984 to 1987 as President
of Laserscope before rejoining Coherent in
1988. Mr. Brunner is on the Board of the
American Society for Laser Medicine and Surgery
and has served as its Treasurer since 1987. He
holds a B.S. degree in Electrical Engineering
from Lehigh University and an M.B.A. with a
major in Finance from the University of
Delaware.
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 May 24, 2001 (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 33,070,391
Ordinary Shares outstanding as of May 24, 2001. Pursuant to the Asset
Purchase Agreement, on April 30, 2001 Coherent acquired 5,432,099 Ordinary
Shares of ESC in exchange for certain assets, principally relating to its
Medical Group. This table does not include the new grants subject to
shareholder approval in this annual meeting.
Beneficial Owner Shares Owned Options Total
Exercisable Beneficial Percentage
within 60 days Ownership Ownership
----------------------------------------------------------------------------------------------------
Coherent, Inc. (1) 5,432,099 0 5,432,099 16.43%
Provident Investment 3,053,917 0 3,053,917 9.24%
Counsel (2)
Arie Genger (3) 2,279,757 500,000 2,779,757 8.28%
Bernard Gottstein (4) 1,939,634 0 1,939,634 5.87%
Aharon Dovrat 0 20,000 20,000 0.07%
Bernard Couillaud (5) 0 0 0 --
Jacob A. Frenkel 10,000 400,000 410,000 1.23%
Philip Friedman 25,000 40,000 65,000 --
Thomas Hardy 91,515 0 91,515 --
Darrell S. Rigel 6,000 40,000 46,000 --
Sash A. Spencer 11,000 40,000 51,000 --
Mark H. Tabak 0 40,000 40,000 --
Zehev Tadmor 0 20,000 20,000 --
Yacha Sutton 225,000 298,005 523,005 1.57%
Louis Scafuri 5,000 445,000 450,000 1.34%
Alon Maor 0 100,000 100,000 --
Raphael Werner 0 9,000 9,000 --
All directors and 525,415 1,669,500 2,194,915 6.59%
executive officers as a
group (24 persons)
- --------------------
- -- Less than 1%.
(1) The address of Coherent, Inc. ("Coherent") is 5100 Patrick Henry
Drive, Santa Clara, California 95054.
(2) The address of Provident Investment Counsel is 300 North Lake
Avenue, Pasadena, CA 91101-4022.
(3) 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.
(4) The address of Mr. Gottstein is 550 West 7th Avenue, Suite 1540,
Anchorage, Alaska 99501.
(5) Excluding those shares beneficially owned by Coherent, of which
Dr. Couillaud is President and Chief Executive Officer.
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 outstanding Ordinary Shares, file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Ordinary Shares. The Company
believes that during the fiscal year ended December 31, 2000, its
directors, executive officers, and holders of more than 10% of its Ordinary
Shares complied with the filing requirements of Section 16(a), with the
exception of one director who inadvertently failed to make a timely report
on a Form 4, but who has since complied with the filing requirement. In
making this statement, the Company has relied solely on a review of copies
of reports filed under Section 16(a) furnished to the Company and on the
written representations of its directors and executive officers.
EXECUTIVE COMPENSATION
The following table sets forth information concerning total
compensation earned by or paid to the Named Officers as of December 31,
2000 during the fiscal years indicated for services rendered to the Company
and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
Compensation
Securities
Variable Other Underlying
Name and Compensation Annual Options/SARs All Other
Principal Position Year Salary Bonus Compensation Granted Compensation
($) ($) ($) (1) (#) ($)
------
Yacha Sutton 2000 240,000 0 36,000(2) 400,000 318,750(3)
Chief Executive Officer 1999 $87,298 0 28,977 223,005 318,750
1998 N/A N/A N/A N/A 660,284
Louis Scafuri 2000 277,884 262,000 -- 0 0
Chief Operating 1999 163,461 275,519 -- 450,000 0
Officer * 1998 N/A N/A N/A N/A 0
Alon Maor 2000 322,122 0 415,384(4) 0
Chief Executive 1999 282,153 0 442,453 100,000 0
Officer, Asia 1998 N/A N/A N/A N/A 0
Pacific Operation **
Peter D'Errico 2000 149,038 64,854 -- 100,000 0
Vice President - 1999 N/A N/A N/A N/A 0
Corporate Marketing 1998 N/A N/A N/A N/A 0
Raphael Werner 2000 173,539 60,000 -- 0 0
Chief Executive 1999 84,000 66,000 -- 66,000 0
Officer, Americas 1998 82,750 33,000 -- 0 0
Business Unit ***
---------------
* Prior to May 2000, Mr. Scafuri served as the Chief Executive
Officer, North American Operations.
** Prior to January 2000, Mr. Maor served as the President and
Representative Director of ESC Japan. Subsequent to December 31,
2000, Mr. Maor assumed the post of Vice President, European
Operations.
*** As of May 2001, Mr. Werner assumed the position of Vice President,
Service.
N/A The Named Officers were not actively employed by the Company as of
such time.
(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 includes $18,000 for flat rent and $18,000 for a payment
made in respect of an Advance Study Fund.
(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) Payment includes $111,111 for reimbursements relating to flat
rental and $257,977 in sales commissions.
Option/SAR Grants in Last Fiscal Year
The following table provides information on options granted to the
Named Officers during the last fiscal year pursuant to the Company's option
plans.
The table also shows, among other data, hypothetical potential
gains from options granted in fiscal year 2000. These hypothetical gains
are based entirely on assumed annual growth rates of 5% and 10% in the
value of the price of Ordinary Share over the life of the options granted
in fiscal year 2000. The assumed rates of growth were selected by the SEC
for illustrative purposes only, and are not intended to predict future
stock prices, which will depend upon market conditions and the Company's
future performance and prospects. No SAR's were granted during the last
fiscal year and no SAR's are currently outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Option Grants Appreciation for Option
Term
Number of
Securities Percent of Total
Name Underlying Options Granted Exercise
Options to Employees in Price Expiration 5%($) 10%($)
Granted (#)(1) Fiscal Year ($/sh) Date
Yacha Sutton 400,000(2) 16% 8.875 01 / 10 2,232,576 5,657,786
Louis Scafuri 0 0 -- -- -- --
Alon Maor 0 0 -- -- -- --
Peter D'Errico 100,000 4% 8 12/09 503,116 1,274,994
Raphael Werner 0 0 -- -- -- --
(1) All options have a term of ten years from respective grant dates.
(2) The Compensation Committee of the Board accelerated Mr. Sutton's
options as of January 2, 2001. In connection with such
acceleration Mr. Sutton agreed to a lock-up arrangement mirroring
the original vesting period prohibiting Mr. Sutton from selling
shares acquired from exercise of such options, except with respect
to the sale of shares necessary to enable a cashless exercise of
other options.
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 2000 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, 2000 and the aggregate
number and dollar value of unexercised in-the-money options for Ordinary
Shares, if any, held at December 31, 2000. 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 29, 2000, which was $12.0625 per
share. Actual gains, if any, upon exercise will depend on the value of
Ordinary Shares on the date of any exercise of options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SARVALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year End (#) Fiscal Year End ($)(1)
Shares
Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Name Exercise Realized ($)
(#)
Yacha Sutton 0 0 289,671 333,334 1,594,415 1,063,335
Louis Scafuri 0 0 445,000 0 3,115,980 --
Alon Maor 0 0 100,000 0 700,200 --
Peter D'Errico 0 0 20,000 80,000 81,300 325,200
Raphael Werner 0 0 26,000 31,000 181,717 416,110
- ------------
(1) The closing price of the Ordinary Shares on December 31, 2000 was $12.065 per share.
Director's 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 and a future annual option grant of 10,000
options (see "Proposal 9 - - Approval of Director's Compensation").
Directors (other than the Chairman) are not entitled to receive any
additional per-meeting fee, but will be reimbursed for their reasonable
travel and accommodation expenses.
Employment Agreements, Termination Provisions and Change in Control
Provisions
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 not less
than $20,000. Mr. Sutton is entitled to use a Company vehicle in accordance
with the Company's existing policies and the Company provides Mr. Sutton
with such additional benefits as generally provided by the Company to its
senior executives, including managers' insurance and Education Fund. 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 was granted options to purchase up to 400,000 of the
Company's Ordinary Shares at an exercise price of $8.75 per share under the
terms and conditions of the Company's 1999 Option Plan (the "1999 Plan").
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 1999 Plan.
In the event of any termination of the Sutton Agreement and Mr.
Sutton's employment, the Company will only be obligated to pay (i) base
salary and benefits until the effective date of termination, provided that
Mr. Sutton continues his employment obligations through such period (if so
required by the Company), (ii) any severance payment to which Mr. Sutton
will be entitled pursuant to applicable Israeli law 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 is a party to an employment agreement with Louis Scafuri
(the "Scafuri Agreement") pursuant to which Mr. Scafuri serves as Chief
Operating Officer for the Company's North American Operations. The Scafuri
Agreement is effective as of May, 2001.
The Scafuri Agreement provides for an annual base salary in the
amount of $270,000, a target cash bonus equal to 100% of the annual base
salary, and an extraordinary performance bonus of up to 200% of annual
salary if certain performance targets are achieved.
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 Chief Executive Officer of
Asia Pacific Operations. The Maor Agreement may be terminated by either
party upon the expiration of the term by a giving six-months prior notice.
Pursuant to the Maor Agreement, Mr. Maor will receive an annual base
salary in the amount of (Y)22,000,000 (twenty-two million yen), an annual
housing allowance of approximately Y12,000,000, an annual allowance of
Y5,000,000 for the education of his children (subject to a tax gross up), 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 Mr. Maor to enter into a
confidentiality and non-competition agreement in accordance with standard
Company policy.
Employment Agreement with Peter D'Errico
ESC Medical Systems, Inc. is party to an employment agreement with
Peter D'Errico (the "D'Errico Agreement") pursuant to which Mr. D'Ericco
serves as the Vice President of Corporate Marketing for the Company. As of
January 6, 2000, Mr. D'Errico received an annual base salary of $155,000.
Mr. D'Errico may be entitled to a bonus in the amount of $87,500 depending
the achievement of certain performance targets.
The D'Errico Agreement also provides for an option to purchase an
aggregate of 100,000 Ordinary Shares. The options will vest over a period
of five years with an exercise price of $8.00 per share. Mr. D'Errico is
also entitled certain benefits which the Company provides for similarly
situated employees. Pursuant to the D'Errico Agreement, in the event of a
termination of Mr. D'Errico's Agreement as a result of death or disability,
or for reasons which are beyond Mr. D'Errico's control, Mr. D'Errico will
be entitled to a severance payment in the amount equal to six-months
salary. The D'Errico Agreement also provides for Mr. D'Errico to enter into
a confidentiality and non-competition agreement in accordance with standard
Company policy.
Employment Agreement with Raphael Werner
The Company is a party to an employment agreement with Mr. Raphael
Werner (the "Werner Agreement") pursuant to which Mr. Werner was appointed
Chief Executive Officer of the Company's American operations. The term of
the Werner Agreement commenced on July 1, 2000. Under the terms of the
Werner Agreement, the Company is required to give Mr. Werner three months
prior notice in the event the Company terminates the Werner Agreement
within 24 months from the date of Mr. Werner's relocation to the United
States. The Werner Agreement provides for an annual base salary of $180,000
and an annual bonus of $90,000 for meeting certain targets as fully
detailed in the Werner Agreement.
Pursuant to the Werner Agreement, the Company is obligated to pay up
to $15,000 to Mr. Werner to cover expenses associated with relocation of
Mr. Werner and his family back to Israel, unless the termination of
employment was initiated by Mr. Werner. The Werner Agreement provides for
benefits similar to those provided by the Company to other similarly
situated employees. Under the terms of the Werner Agreement, Mr. Werner is
also obligated to enter into confidentiality and non-competition agreement
in accordance with standard Company policy.
REPORT OF COMPENSATION COMMITTEE
General Compensation Policy
The Compensation 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
Compensation 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 2000 fiscal year are
summarized below. The Compensation Committee may, in its discretion, apply
entirely different factors, particularly different measures of financial
performance, in setting executive officers' compensation for future fiscal
years. However, all compensation decisions will be designed to further the
general compensation policy indicated above.
Base Salaries
Base salaries for executive officers are determined based upon the
Compensation Committee's evaluation of the responsibilities of the position
held and the experience of the individual, and by reference to historical
levels of salary paid by the Company and its predecessors.
Salary adjustments are based on a periodic evaluation of the
performance of the Company and each executive officer, and also take into
account new responsibilities. In the case of executive officers with
responsibility for a particular business unit, such unit's financial
results are also considered. The Compensation Committee takes into account
the effect of corporate transactions that have been consummated during the
relevant year and, where appropriate, also considers non-financial
performance measures. These include increases in market share,
manufacturing efficiency gains, improvements in product quality and
improvements in relations with customers, suppliers and employees.
Annual Incentive Compensation Awards
The variable compensation payable annually to executive officers
(including the Chief Executive Officer) generally consists principally of
annual incentive compensation awards. Annual incentive compensation
provides for bonuses determined in accordance with a formula relating to
achievement of Company performance goals. Such performance goals are set
annually by the Compensation Committee.
Other Incentive Compensation Awards
The other principal component of executives' compensation is stock
options, which are intended as a tool to attract, provide incentive to and
to retain those executives who make the greatest contribution to the
business, and who can have the greatest effect on the long term
profitability of the Company. The exercise price of stock options is set at
a price equal to the market price of the Ordinary Share at the time of the
grant. The options therefore do not have any value to the executive unless
the market price of the Ordinary Shares rises. The Compensation Committee
believes that these stock options more closely align the executives'
interests with those of its 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.
Scafuri, Maor, D'Errico, Werner and certain other senior executives of the
Company 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.
Compensation of Chief Executive Officer
In order to secure and continue to retain the services of Mr. Sutton
following the departure of former Chief Executive Officer Mr. Shimon
Eckhouse, the Company entered into an employment agreement with Mr. Sutton
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 employment agreement became effective as of January 1, 2000. The
material terms of Mr. Sutton's employment agreement are described under the
heading "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. No particular weight was give 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
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, 1997 (the
last trading day of the first fiscal year in which the Company's Ordinary
Shares were publicly traded), and ending on December 31, 2000. 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.
GRAPHIC OMITTED
PROPOSALS OF SHAREHOLDERS
Under Rule 14a-8 of the Exchange Act, any shareholder of the Company
who intends to present a proposal at the 2002 Annual 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 [ ], 2002.
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 2002 Annual 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 Meeting of shareholders to be
held in 2002, 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 [ ], 2002, 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 2000 Annual Report to shareholders are being
mailed to the shareholders simultaneously with this Proxy Statement. The
financial statements and financial information appearing in such Annual
Report are incorporated by reference herein.
By Order of the Board of Directors,
Hadar Solomon, Advocate,
Secretary, Vice President and
General Counsel
Yokneam, Israel
_________, 2001
Appendix A
ESC MEDICAL SYSTEMS LTD.
2000 SHARE OPTION PLAN
ARTICLE I
Purpose
This 2000 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 (the "Optionees")
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 the sense of proprietorship of such parties,
and to stimulate the active interest of such parties in the development and
financial success of the Company by providing them with opportunities to
purchase shares in the Company, pursuant to the Plan approved by the board
of directors of the Company (the "Board") and its shareholders and to
encourage such parties to remain in their respective capacities with the
Company.
The word "employee", when used in this Plan, shall have the meaning, with
respect to each Optionee, as provided in the relevant regulation under the
jurisdiction where implemented.
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" (the "ISOs") under Section 422 of the United
States Internal Revenue Code of 1986, as amended (the "Code"); provided,
however, that ISOs shall only be granted to U.S. resident employees of the
Company. Options granted to U.S. resident employees, that do not contain
terms that will qualify them as ISOs shall be referred to herein as
Non-Qualified Stock Options (the "NQSOs").
Each Option Agreement (as such term is defined hereunder) between the
Company and the U.S. resident Optionee shall state whether such Option will
or will not be treated as an ISO. No ISO shall be granted unless such
Option, when granted, qualifies as an "incentive stock option" under
Section 422 of the Code. Any ISO granted under the Plan shall contain such
terms and conditions, consistent with the Plan, as the Company may
determine to be necessary to qualify such Option as an "incentive stock
option" under Section 422 of the Code.
Options granted to Israeli Optionees under the Option Plan may or may not
contain such terms as will qualify such options for the special tax
treatment under section 102 of the Israeli Tax Ordinance (New Version),
5721-1961, as amended (the "Ordinance"), and the Income Tax Rules (Tax
Benefits in Stock Issuances to Employees) 5749-1989 (the "Rules") ("102
Options"). The 102 Options which shall be granted to Optionees and/or any
shares issued upon exercise of such Options and/or any other shares
received subsequently following any realization of rights resulting from a
102 Option or from shares issued upon exercise of a 102 Option, shall be
issued to a trustee nominated by the Committee, and approved in accordance
with the provisions of Section 102 of the Ordinance (the "Trustee") and
held for the benefit of the Optionees for a period of not less than two
years (24 months) from the date of grant, and thereafter, the Trustee will
transfer the Options or the Option shares, as the case may be, to the
Optionees and/or to any third party upon his/her demand, subject to any
deduction or withholding required under the Ordinance, the Rules or any
other applicable law, provided, however, that Options granted to Optionees
who are employees of any of the Company's subsidiaries shall also be
subject to a pre-ruling of the tax authorities. Options that do not contain
terms that may qualify them for the special tax treatment under Section 102
of the Ordinance, shall be referred to herein as Section 3(I) Options
("3(I) Options").
Options granted to Optionees who are both, residents and ordinarily
residents in the United Kingdom under the Plan may or may not contain such
terms as will qualify such options for the special tax treatment under the
Income and Corporation Taxes Act, 1988, provided, however, that approved
options can only be granted to UK resident employees.
Options granted to Optionees who are residents of the Netherlands, under
the Plan may or may not contain such terms as will qualify such options for
the special tax treatment under the Dutch Personal Income Tax Act (PITA)
and the Wage Tax Act (WTA), provided, however, that options under the Dutch
special tax regime can only be granted to Dutch resident employees.
All options granted hereunder, whether together or separately, shall be
collectively referred to hereinafter as the "Options".
ARTICLE II
Administration
The Plan shall be administered by the Compensation Committee of the Board
(the "Committee"). Notwithstanding the above, the Board shall automatically
have a residual authority if no Committee shall be constituted or if such
Committee shall cease to operate for any reason whatsoever.
Subject to the provisions of the Plan and any applicable law, NASDAQ Stock
Market ("NASDAQ") rule, the Companies Act (1985) introduced in the UK, 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 designate an Option as 102 Option and/or as an 3(I) Option (for
Israeli Optionees), as ISOs or as NQSOs (for U.S. Optionees), as approved
options and/or unapproved options (for UK Optionees) and options under the
special tax regime for the residents of the Netherlands,, and to authorize
the granting of such 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) 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 and terms 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
determine other jurisdictions in which the Plan shall be applicable; (h) to
adopt, amend and rescind such rules and regulations as, in its opinion, may
be advisable in connection with the administration of the Plan; (i) to
accelerate the right of an Optionee, in whole or in part, to any previously
granted Option, in the event of a public offering, merger, acquisition,
transfer of assets and/or liquidation. 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 be either (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 and under the terms of a Trust Agreement as shall be approved and
amended from time to time by the Board or the Executive Committee thereof
(together, the "Ordinary Shares").
Under the Plan, the total number of Ordinary Shares which may be purchased
pursuant to options granted hereunder shall not exceed, in the aggregate,
ten million (10,000,000) Ordinary Shares of which 6,000,000 shall be
reserved for ISOs. The Ordinary 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.
Each Option granted pursuant to the Plan, shall be evidenced by a written
agreement between the Company and the Optionee (the "Option Agreement").
Each Option Agreement shall state a number of the Shares to which the
Option relates and the type of Option granted thereunder (whether a 102
Option, a 3(I) Option, an ISO, an NQSO, an approved or unapproved option
for UK Optionees, Options under special tax regime and Options that are not
subject to special tax regime for Optionees in the Netherlands or any other
kinds of Option suitable under the Plan). Options may be granted at any
time after this Plan has been approved by the Company, subject to any
further approval or consent required under Section 102 of the Ordinance or
the Rules, in case of 102 Options, or of the U.S. Treasury, in case of ISOs
and other applicable law, the Inland Revenue in the case of UK and the tax
inspector in the Netherlands, except that any and all Options shall be
effective upon their grant provided that all required approvals shall have
been received in respect of the grant of such Option, as required under the
relevant rules and regulations, and the Optionee has signed and delivered
to the Company a notice and undertaking as required under such rules.
ARTICLE IV
Eligibility of Participants
Subject to ARTICLE VII, office holders 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. Directors who are not
employees, future employees, dealers, or consultants of the Company shall
also be eligible to participate in the Plan.
To the extent applicable and anything in the Plan to the contrary
notwithstanding, all grants of Options to directors and office holders
("Nosei Misra" - as such term is defined in the Companies Law, 5759-1999
(the "Companies Law") shall be authorized and implemented only in
accordance with the provisions of the Companies Law, as in effect from time
to time, or Executive Officers, as such term is defined under the SEC rules
and regulations.
ARTICLE V
Option Price
Unless the Committee determines otherwise, the option exercise price shall
be the last reported sales price of the Ordinary Shares on the 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").
With respect to the directors, Chief Executive Officer ("CEO") and the
officers reporting directly to the CEO of the Company, the Options granted
hereunder shall become exercisable with respect to the entire amount of the
Ordinary Shares underlying such Options immediately upon a Change in
Control of the Company, unless the Board or the Committee determined
otherwise with respect to any specific director or officer upon approval of
the Options granted. A "Change in Control" means the first to occur of any
of the following dates:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company by any "Person" (as the term
person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the combined voting power of the
Company's then outstanding Voting Securities, unless such Person
has filed a Schedule 13D within the 12 month period prior to the
Plan being first approved by the Board; 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; or
(iii) The consummation of any of the following transactions as entered
into by the Company:
(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 (i) or (ii) below:
(i) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own,
directly or indirectly immediately following such
merger, consolidation or reorganization, at least
eighty percent (80%) of the 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; or
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds of
the members of the board of directors of the
surviving corporation immediately following the
consummation of such merger, consolidation or
reorganization;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the
Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such, a Beneficial Owner acquires
additional Voting Securities which increase the percentage of the then
outstanding Voting Securities beneficially owned by the Subject Person,
then a Change in Control shall occur.
Share options granted hereunder to employees may provide that if,
prior to the Termination Date, an Optionee shall cease to be employed
or to grant any services, without cause by the Company or a
subsidiary thereof (otherwise than by reason of death or disability),
the option will remain exercisable 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, provided, however, that non-exercisable
options will become void, at the date 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 until the
Termination of the Plan to the extent exercisable at the time of
cessation of employment. For the purposes hereof, "cessation of
employment" shall mean the date upon notification of termination of
employment has been delivered, by either the Company or the Optionee.
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 (i) the Termination Date, and (ii) 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 Agreement.
ARTICLE VII
Special Tax Provisions
The aggregate fair market value (determined at the time the Option is
granted) of the Ordinary Shares with respect to which any ISO 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 ISO 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.
The aggregate fair market value (determined at the time the Option is
granted) of the Ordinary Shares with respect to which any approved 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 $50,000.
No approved option to UK resident employees, may be granted to an
individual who, at the time the option is granted, owns 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.
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 United States Dollars, Israeli
Shekels, Japanese Yen, British Pounds Sterling, Dutch Guilder or EURO, in
accordance with the terms of the related Option Agreement. The Notice of
Exercise shall specify the number of Shares with respect to which the
Option is being exercised. The Company is obligated to issue Shares upon
such Notice of Exercise of an Option granted under the Plan upon (a) the
Company's completion of any registration or other qualifications of the
Ordinary Shares under any state and/or federal law, rulings or regulations
or (b) representations and undertakings by the Optionee (or his legal
representative, heir or legatee, in the event of the Optionee's death) to
assure that the sale of the Ordinary Shares complies with any registration
exemption requirements which the Company in its sole discretion shall deem
necessary or advisable. Such required representations and undertakings may
include representations and agreements that such Optionee (or his legal
representative, heir, or legatee): (a) is purchasing the Ordinary Shares
for investment and not with any present intention of selling or otherwise
disposing thereof; and (b) agrees to have placed upon the face and reverse
of any certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the
Company or a reference thereto and (ii) that, prior to effecting any sale
or other disposition of any such Shares, the Optionee must furnish to the
Company an opinion of counsel, satisfactory to the Company, that such sale
or disposition will not violate the applicable requirements of State and
federal laws and regulatory agencies.
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. 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 or grant, as the case may be, such amount as the Company deems
necessary to satisfy its obligation to withhold Israeli, United States
Federal, state, or local income U.K. tax laws and Dutch tax laws 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, Etc.
The aggregate number of Ordinary Shares which may be purchased upon
exercise of the Options granted hereunder, the number of Ordinary Shares
covered by each outstanding Option and the price per share of each such
option shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of the Company resulting from a stock split or
other subdivision or consolidation of shares or payments of stock dividends
or distributions or other increases or decreases in the number of
outstanding Ordinary Shares effected without receipt of consideration by
the Company or in the event of any other extraordinary transaction.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share
which might otherwise become issuable upon exercise of an Option.
ARTICLE XI
No Obligation to Exercise Option
The grant of an Option pursuant to the Plan shall impose no obligation on
the Optionee to exercise such Option.
ARTICLE XII
Use of Proceeds
The proceeds received from the issuance of Ordinary Shares upon exercise of
Options, pursuant to the Plan shall be used for such purposes as the
Company shall determine to be appropriate.
ARTICLE XIII
Rights as a Shareholder
The Company shall not be required to recognize an Optionee as a shareholder
with respect to any share issuable or transferred, as the case may be, upon
the exercise of such Option by the Optionee until such Optionee shall have
become the holder of record of such share, and such Optionee shall not be
entitled to vote or to any dividends or distributions or other rights in
respect of such share for which the record date is prior to the date on
which he shall have become the holder of record thereof.
ARTICLE XIV
Employment Rights
Neither the Option Plan nor the Option agreement with the Optionee shall
impose any obligation on the Company or a subsidiary thereof, to continue
any Optionee in its employ, or the hiring by the Company of the Optionee's
services and nothing in the Plan or in any Option granted pursuant thereto
shall confer upon any Optionee any right to continue in the employ or
service of the Company or a subsidiary thereof or restrict the right of the
Company or a subsidiary thereof to terminate such employment or service
hiring 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
Optionees shall only be entitled to all rights of a shareholder in the
Company upon the full payment of the exercise price of the Options granted
under this Plan. Shares held by the Trustee under the Plan, which have been
fully paid shall be voted in accordance with the instructions in writing of
the Optionees. The provisions of this Article XVI shall not in any way
affect the provisions of Article XIII of this Plan.
ARTICLE XVII
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 XVIII
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, including amendments deriving
or needed as result of any legal changes or tax reform that may be enacted
in Israel in the future or any other legal arrangements which may replace
the current legal arrangement under Section 102 of the Ordinance, 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 ISOs, the Board shall not, without approval
of the stockholders: (a) increase the total number of Ordinary Shares which
may be purchased pursuant to ISOs granted under the Plan, except as
contemplated in ARTICLE X, and (b) expand or change the persons eligible to
receive options under the Plan
ARTICLE XIX
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 Option in his/her personal tax
circumstances.
The Company and/or the Trustee (where applicable) shall withhold taxes
according to the requirements under the applicable laws, rules, and
regulations, including the withholding of taxes at source. Furthermore, the
Optionee shall agree to indemnify the Company and the Trustee (where
applicable) any shareholder, director, manager or other Nosei Misra in the
Company, and hold them harmless against and from any and all liability for
any such tax or interest or penalty thereon, including without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any
such tax from any payment made to the Optionee.
The Board, the Committee and/or the Trustee shall not be required to
release any Share certificate, issued upon exercise of an Option, to an
Optionee, until all required payments have been fully made.
ARTICLE XX
Effectiveness and Term of Plan
The Plan shall become effective upon shareholder approval and will expire
on the tenth anniversary of the date of such shareholder approval. 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 and Other National Regulations
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
all applicable laws, rules, and regulations, (especially rules of
accounting) whether of the State of Israel, the United States, the United
Kingdom or the Netherlands, or any other State having jurisdiction over the
Company and the Optionee, including the registration of the Shares under
the United States Securities Act of 1933, the Companies Act, 1985 in the UK
or the Law for the Supervision of Listed Shares in the Netherlands, and to
such approvals by any governmental agencies or national securities
exchanges as may be required.
Appendix B
ESC MEDICAL SYSTEMS LTD.
CHARTER OF THE AUDIT COMMITTEE
As Adopted by the Board of Directors on July 25, 2000
PURPOSE OF THE COMMITTEE
The Committee's purpose is to provide assistance to the Board in fulfilling
its legal and fiduciary obligations with respect to matters involving the
accounting, auditing, financial report, and internal control functions of
the Company and its subsidiaries.
COMPOSITION OF THE COMMITTEE
Committee shall be comprised of three or more directors as determined from
time to time by resolution of the Board. The Chairman of the Committee
shall be designated by the Board, provided that if the Board does not so
designate a Chairman, the members of the Committee, by majority vote, may
designate a Chairman. All "outside directors" pursuant to the then
applicable requirements of the Israeli Companies Law, 1999 shall be members
and each member of the Committee shall be qualified to serve on the
Committee pursuant to the then applicable requirements of NASDAQ.
MEETINGS OF THE COMMITTEE
1. The Committee shall meet with such frequency and at such intervals
as it shall determine is necessary to carry out its duties and
responsibilities.
2. The Committee, in its discretion, may ask members of management or
others to attend its meetings (or portions thereof) and to provide
pertinent information as necessary. Without derogating from the
foregoing, the Committee will notify the internal auditor of the
Company of its meeting and allow him to participate, and the
independent auditors will also be invited to those meetings in
which issues relating to financial auditing will be considered.
3. The Committee shall maintain minutes of its meetings and records
relating to those meetings and provide copies of such minutes to
the Board.
DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
In carrying out its duties and responsibilities, the Committee's policies
and procedures should remain flexible, so that it may be in a position to
best react or respond to changing circumstances or conditions. While there
is no "blueprint" to be followed by the Committee in carrying out its
duties and responsibilities, the following should be considered within the
authority of the Committee:
(1) Make recommendations to the Board as to the selection of the firm
of independent public accountants to audit the books and accounts
of the Company and its subsidiaries for each fiscal year.
(2) Review and approve the Company's independent auditors' annual
engagement letter, including the proposed fees contained therein;
(3) Review the performance of the Company's independent auditors and
make recommendations to the Board regarding the replacement or
termination of the independent auditors when circumstances
warrant;
(4) Oversee the independence of the Company's independent auditors
by, among other things:
a. requiring the independent auditors to deliver to the
Committee on a periodic basis a formal written statement
delineating all relationships between the independent
auditors and the Company; and
b. actively engaging in a dialogue with the independent
auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence of
the independent auditors and recommending that the Board
take appropriate action to satisfy itself of the auditors'
independence;
(5) Instruct the Company's independent auditors that, without
derogating from their responsibilities under any applicable law,
they are ultimately accountable to the Committee and the Board,
and that the Committee and the Board are responsible for the
selection, evaluation and termination of the Company's
independent auditors;
(6) Review the annual audit plan and scope of the audit with the
Company's independent auditors;
(7) Reviews with management and the independent auditors at the
completion of the annual audit examinations:
a. the Company's annual financial statements and related
footnotes to be included in the Company's Annual Report to
Shareholders;
b. the independent accountant's audit of the annual financial
statements and their report thereto;
c. any significant changes in the independent accountant's
audit plan;
d. any difficulties or disputes with management encountered
during the course of the audit; and
e. other matters related to the conduct of the audit which are
to be communicated to the Committee under generally accepted
auditing standards.
(8) Consider and review with the independent auditors and with
management the adequacy of the Company's system of internal
controls, including information systems controls and security, as
well as any related significant findings and recommendations of
the independent auditors and internal auditors together with
management's responses thereto;
(9) Establish and maintain free and open means of communication
between and among the Board and Committee, and the Company's
independent auditors, the Company's internal auditing department
and management, including by providing such parties with
appropriate opportunities to meet privately with the Committee;
(10) Review and reassess annually the Committee's charter;
(11) Prepare the report required by the rules of the SEC to be
included in the Company's annual proxy statement;
(12) Report regularly to the Board on its activities, as appropriate;
(13) Approve certain transactions with office holders and related
parties pursuant to applicable laws and conduct a review of
potential conflict of interest situation where appropriate;
(14) Make recommendations to the Board of Directors as to the
appointment and dismissal of internal auditor, approve the
internal auditor's periodic audit plan, and;
(15) Perform such additional activities, and consider such other
matters, within the scope of its responsibilities, as the
Committee or the Board deems necessary or appropriate.
******************************************************************************
While the Committee has the duties and responsibilities set forth in this
charter, the Committee is not responsible for planning or conducting the
audit or for determining whether the Company's financial statements are
complete and accurate and are in accordance with generally accepted
accounting principles. Similarly, it is not the responsibility of the
Committee to resolve disagreements, if any, between management and the
independent auditors which may arise or to ensure that the Company complies
with all laws and regulations.
Nothing contained in this charter is intended to, or should be construed
as, creating any responsibility or liability of the members of the
Committee except to the extent otherwise provided under the Israeli
Companies Law which shall continue to set the legal standard for the
conduct of the members of the Committee.
******************************************************************************
PROXY
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ____________
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 Meeting of shareholders of the Company to be held at
___________________on _____________at 4:30 p.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.
__________, 2001
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 and in the discretion of the proxies, with respect to all other
matters which may properly come before the meeting and any and all
adjournments thereof.
1. To elect the following nominees to serve as directors of the
Company until the next Annual General Meeting of shareholders:
Prof. Jacob A. Frenkel, Mr. Arie Genger, Mr. Aharon Dovrat, Mr.
Thomas G. Hardy, Prof. Darrell S. Rigel, M.D., Mr. S.A. Spencer,
Prof. Zehev Tadmor and Dr. Bernard Couillaud. 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
contrary below) above
[ ] [ ]
=====================================================================
(Instructions: Write the name of each nominee in the space above
for whom authority to vote is withheld).
2. To approve the proposed directors' and officers' insurance
arrangements.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To appoint the firm of Brightman Almagor & Co., a member firm of
Deloitte, Touche, Tohmatsu, as the Company's independent auditors
for fiscal year 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To change the Company's name from "ESC Medical Systems Ltd." to
"Lumenis Ltd." or such name as shall be determined by the Board of
Directors and approved by the Israeli Registrar of Companies.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To amend the Company's Articles of Association to increase the
capitalization of the Company by authorizing 50,000,000 new
Ordinary Shares, par value NIS 0.10 per share.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To approve the options granted by the Company to Bank Hapoalim,
B.M.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To approve the engagement of Mr. Thomas G. Hardy, a director of
the Company, as a consultant of the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. To approve the adoption of the 2000 Share Option Plan and the
grant of share options thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
9. To approve the compensation of the Company's directors for serving
on the Board of Directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- -----------------------
(SIGNATURE)
- -----------------------
(SIGNATURE IF HELD JOINTLY)
Dated: _____________, 2001
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.