(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant |x|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|x| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
LUMENIS LTD.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|x| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0--11 (set forth the amount on which the filing
fee is calculated and state how it was determined.):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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LUMENIS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
April 30, 2003
Dear Shareholder:
You are cordially invited to attend the 2003 Annual General Meeting of
shareholders of Lumenis Ltd. ("Lumenis" or the "Company") on May 27, 2003,
beginning at 9:00 a.m., local time, at 1221 Avenue of the Americas, 26th Floor,
New York, NY 10020-1089. 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. Shareholders of record can also
vote their shares by using the Internet. Instructions for using this convenient
service are set forth on the enclosed proxy card.
Very truly yours,
Prof. Jacob A. Frenkel
Chairman of the Board of Directors
LUMENIS LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Lumenis Ltd.:
The Annual General Meeting of shareholders of Lumenis Ltd. ("Lumenis" or the
"Company") will be held at 1221 Avenue of the Americas, 26th Floor, New York, NY
10020-1089, on May 27, 2003 at 9:00 a.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 elect outside directors for the Company to serve until fiscal year 2006
("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 2003 ("Proposal 3")
4. To approve the compensation of the Company's directors for serving on the
Board of Directors ("Proposal 4")
5. To approve a directors' and officers' liability insurance arrangement for
fiscal year 2003 ("Proposal 5")
6. To permit a majority of the option grants under the Israel 2003 Option
Plan to be made to officers and directors and to ratify and approve the
Plan for the purpose of its operation in that manner ("Proposal 6")
7. To approve the arrangement between the Company and Dr. Darrell Rigel, a
director of the Company ("Proposal 7")
8. To approve an extension of the post-termination exercise period for
options granted to directors under the Company's 1999 Share Option Plan
and to approve an amendment to the Plan for this purpose ("Proposal 8")
9. To approve the employment terms and compensation of Avner Raz as Chief
Executive Officer of the Company ("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 April 24,
2003 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 VOTE
BY FILLING IN, DATING AND SIGNING THE ENCLOSED PROXY AND MAILING IT PROMPTLY IN
THE ACCOMPANYING ENVELOPE, OR BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED
PROXY TO VOTE YOUR PROXY BY INTERNET. THE PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY.
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,
Stephen B. Kaplitt
Executive Vice President, General Counsel and Secretary
Yokneam, Israel, April 30, 2003
LUMENIS LTD.
Yokneam Industrial Park
Yokneam, Israel 20692
PROXY STATEMENT
Table of Contents
GENERAL INFORMATION........................................................ 1
The Proxy............................................................... 1
Shareholders Entitled to Vote........................................... 1
Quorum; Required Vote................................................... 1
Proxy Solicitation...................................................... 2
Shareholder Duties...................................................... 2
PROPOSAL 1 - ELECTION OF DIRECTORS......................................... 3
Nominees................................................................ 3
PROPOSAL 2 - ELECTION OF OUTSIDE DIRECTORS UNDER THE COMPANIES LAW......... 5
PROPOSAL 3 - APPOINTMENT OF BRIGHTMAN ALMAGOR & CO. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2003............................. 6
Audit Committee Report.................................................. 7
PROPOSAL 4 - APPROVAL OF DIRECTORS' COMPENSATION........................... 8
PROPOSAL 5 - APPROVAL OF A DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
ARRANGEMENT........................................................... 9
PROPOSAL 6 - APPROVAL OF A MAJORITY OF THE OPTION GRANTS UNDER THE 2003
ISRAEL OPTION PLAN TO BE MADE TO OFFICERS AND DIRECTORS AND
RATIFICATION AND APPROVAL OF THE PLAN FOR THE PURPOSE OF ITS
OPERATION IN THIS MANNER.............................................. 9
PROPOSAL 7 - APPROVAL OF THE ARRANGEMENT BETWEEN THE COMPANY AND DR.
DARRELL RIGEL......................................................... 15
PROPOSAL 8 - APPROVAL OF EXTENSION OF THE POST-TERMINATION EXERCISE
PERIOD FOR OPTIONS GRANTED UNDER THE 1999 SHARE OPTION PLAN
TO DIRECTORS.......................................................... 15
Background.............................................................. 16
General Terms and Conditions of the Plan................................ 17
Terms of the Options.................................................... 17
Certain Israeli Tax Effects............................................. 18
Certain U.S. Federal Income Tax Effects................................. 18
Nonqualified Stock Options.............................................. 18
Incentive Stock Options................................................. 18
Exercise by Delivery of Shares.......................................... 19
Transferred Options: Estate and Gift Taxes.............................. 20
-i-
PROPOSAL 9 - APPROVAL OF THE EMPLOYMENT TERMS AND COMPENSATION OF AVNER
RAZ AS CHIEF EXECUTIVE OFFICER OF THE COMPANY......................... 20
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND BOARD COMMITTEES......... 21
Committees of the Board of Directors.................................... 21
Executive Committee..................................................... 21
Audit Committee......................................................... 22
Compensation Committee.................................................. 22
Fiduciary Duties of Office Holders...................................... 22
Disclosure of Personal Interests of an Office Holder.................... 23
Disclosure of Personal Interests of Controlling Shareholders............ 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............. 23
Section 16(A) Beneficial Ownership Reporting Compliance................. 25
EXECUTIVE COMPENSATION..................................................... 25
Option/SAR Grants in Last Fiscal Year................................... 26
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values.................................................. 27
Director's Compensation................................................. 28
Employment Agreements, Termination Provisions and Change in
Control Provisions...................................................... 28
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions.................................................. 31
EQUITY COMPENSATION PLAN INFORMATION....................................... 31
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION........................ 31
General Compensation Policy............................................. 31
Factors................................................................. 32
Base Salaries........................................................... 32
Annual Incentive Compensation Awards.................................... 32
Other Incentive Compensation Awards..................................... 32
Certain Agreements...................................................... 33
Compensation of Chief Executive Officer................................. 33
Deductibility of Compensation........................................... 33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 34
PERFORMANCE GRAPH.......................................................... 35
PROPOSALS OF SHAREHOLDERS.................................................. 36
OTHER BUSINESS............................................................. 36
ADDITIONAL INFORMATION..................................................... 36
Exhibit A - Israel 2003 Share Option Plan
Exhibit B - 1999 Share Option Plan, as proposed to be amended
-ii-
LUMENIS 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 Lumenis Ltd., an Israeli corporation
("Lumenis" or the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board") for use at the Annual
General Meeting of shareholders of the Company to be held on May 27, 2003, at
9:00, local time, at 1221 Avenue of the Americas, 26th Floor, New York, NY
10020-1089, and at any adjournment or adjournments thereof (the "Annual
Meeting"). This Proxy Statement and the accompanying form of proxy are first
being mailed to shareholders on or about April 30, 2003. There were
approximately 36,942,439 Ordinary Shares outstanding at the close of business on
April 24, 2003, the record date for the Annual Meeting, with each share entitled
to one vote per share on each matter submitted to shareholders for consideration
at the Annual Meeting.
The Proxy
Mr. Arie Genger, Vice Chairman and Chief Executive Officer of the Company,
and Stephen B. Kaplitt, Executive 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. A
Shareholder's proxy will also be revoked upon receipt by the Chairman of the
Annual Meeting of written notice from such shareholder of the revocation of his,
her or its proxy or 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. The Company has set the close of business on April
24, 2003 as the record date for shareholders entitled to notice of, and to vote
at, the Annual Meeting (the "Record Date").
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 on the proposal at the Annual Meeting in person or by proxy is required
to approve each of the proposals specified in this Proxy Statement (Proposals 1
- - 9). There are additional requirements for approval of Proposal 2 as described
in that Proposal.
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,
electronic mail, 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 $4,000 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 the company and towards the company's other
shareholders and to refrain from abusing his, her or its 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.
-2-
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members, five of whom are
also nominees for election at the Annual Meeting. Except for the Outside
Directors, each Director serves until the next Annual Meeting following that
Annual Meeting at which such Director was elected, or until his/her earlier
resignation or 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 on an exchange located outside of Israel, are required
to appoint two individuals to serve as Outside Directors on its Board of
Directors. At all times at least two of the Company's directors who served as
independent directors under the qualification requirements of the Nasdaq
National Market could also qualify as Outside Directors. For additional
information regarding Outside Directors, and the criteria pursuant to which a
member of the board will be considered as an Outside Director, see "Proposal 2 -
Election of Outside Directors" below. Outside Directors that were in office in
2002 have been granted Company stock options (see "Security Ownership of Certain
Beneficial Owners and Management" and "Executive Compensation - Director's
Compensation").
The Board of Directors has nominated for election the following persons to
serve as directors of the Company until the next Annual Meeting: Prof. Jacob A.
Frenkel, who serves as the Chairman of the Board; Mr. Arie Genger, who serves as
Vice Chairman of the Board and (until June 20, 2003) as Chief Executive Officer;
Mr. Avner Raz, who will become Chief Executive Officer of the Company effective
as of June 20, 2003; Dr. Darrell S. Rigel; Mr. Sash A. Spencer; and Mr. Robert
A. Mintz. All of the above named nominees except Mr. Robert A. Mintz are
currently members of the Board of Directors. In addition, the Board of Directors
has nominated two persons for election as Outside Directors, as described in
Proposal 2 below.
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
Nominee Business Experience
Professor Jacob A. Frenkel Prof. Frenkel, age 60, joined the Board of
Directors of the Company on January 25, 2000, and
was elected Chairman of the Board. Professor
Frenkel is the Chairman of Merrill Lynch
International Inc. 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). Previously, he
served as Governor of the Bank of Israel from 1991
through 2000. During his tenure as Governor, he
led the liberalization of the Israeli financial
system, removed foreign
-3-
Nominee Business Experience
exchange controls, and reduced Israel's inflation
rate to a level prevailing in the major industrial
countries. Prior to becoming the Governor of the
Bank of Israel, he served from 1987 through 1991
as the Economic Counselor and Director of Research
at the International Monetary Fund, 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 57, joined the Board of Directors
of the Company on July 16, 2001 and was elected
Vice Chairman of the Board. From January 2003 to
June 2003 Mr. Genger is appointed Chief Executive
Officer of the Company. In 1985, Mr. Genger
founded Trans-Resources Inc. ("TRI"), of which he
has been Chairman of the Board of Directors and
Chief Executive Officer since 1986. TRI is a
privately owned specialty chemical company. Mr.
Genger is the father of Sagi Genger, the Company's
Chief Operating Officer.
Avner Raz Mr. Raz, age 59, joined the Board of Directors of
the Company on April 28, 2003, and has been
appointed Chief Executive Officer of the Company
effective as of June 20, 2003. He has been
President and Chief Executive Officer of Elisra
Electronic Systems Ltd. since 1994. Mr. Raz has a
B.S. degree in Electronic Engineering from the
Technion, Israel Institute of Technology and an
M.S. degree in Engineering Systems and Economics
from Stanford University.
Dr. Darrell S. Rigel Dr. Rigel, age 52, 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. Dr. 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 interactive computer systems
industry. Dr. Rigel graduated from Massachusetts
Institute of Technology with a BS and an MS in
Management Information Sciences and received his
MD from the George Washington University School of
Medicine.
Sash A. Spencer Mr. Spencer, age 71, joined the Board of Directors
of the Company on June 23, 1999. He is the
founder, Chief Executive Officer and principal
owner 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.
Robert A. Mintz Mr. Mintz, age 51, serves as the General Manager
of Carr-Gottstein Properties, a real estate
company engaged, among other things, in asset
acquisitions and sales, secured and unsecured
borrowing, financial and management accounting and
leasing supervision. Between 1973-1977
-4-
Nominee Business Experience
Mr. Mintz was an attorney at Burr, Pease & Kurtz,
handling appellate civil cases in areas including
contract, anti-trust and tort. Mr. Mintz holds an
MBA from Stanford Graduate School of Business.
Carr-Gottstein Properties, of which Mr. Mintz is General Manager, is an
affiliate of Mr. Barnard Gottstein, who beneficially owns 6.2% of the Ordinary
Shares (see "Security Ownership of Certain Beneficial Owners and Management").
Mr. Mintz was initially proposed as a nominee by Mr. Gottstein, as disclosed in
a Schedule 13D Amendment filed by Mr. Gottstein on April 18, 2003, and was
subsequently nominated by the Board of Directors for election as a director.
In March 2002, Cedar Chemical Corporation and Vicksburg Chemical Company,
related privately held corporations, which were indirectly majority owned by Mr.
Arie Genger, filed voluntary petitions for reorganization in the U.S. Bankruptcy
Court for the Southern District of New York (Case Nos. 02-11039 and 02-11040
(SMB)).
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting on the proposal at the Annual 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 - ELECTION OF OUTSIDE DIRECTORS UNDER THE COMPANIES LAW
Under the Companies Law, the Company is required to have two directors who
meet the independence and other criteria established by that law. An "Outside
Director" is defined under the Companies Law as an individual who at the time
of, and two years prior to, appointment (and his or her relatives, partners,
employers or corporate entities controlled by such person), had and continues to
have no potential conflict of interest with the Company. Outside Directors are
required to serve on the Company's audit committee formed under the Companies
Law, whose approval is required to effect specified actions and transactions
with office holders and others. The Company's audit committee may not approve
such actions or transactions unless at the time of approval the two Outside
Directors are serving as members thereof and at least one of them is present at
the audit committee meeting at which the approval is granted. For additional
information regarding the audit committee, see "Information Concerning the Board
of Directors and Board Committees - Audit Committee" below.
Each Outside Director serves for a three-year term that may be extended
for one additional three-year term or until his or her term of office has been
terminated in accordance with the Companies Law. Moreover, the Companies Law
requires that where all members of the board of directors of a public company
are of one gender, at least one Outside Director be of the other gender.
The names of the nominees for the positions of Outside Directors of the
Company are as follows:
Nominee Business Experience
Prof. Boleslaw Goldman Prof. Goldman, age 65, has an M.D. degree from
the Medical School, Hebrew University,
Jerusalem and did further studies at the
Post-Graduate Medical School, Tel Aviv
University in Genetics and Endocrinology, and
at
-5-
Nominee Business Experience
Worcester Foundation for Experimental Biology,
Shrewsbury, USA. Prof. Goldman serves, since
1990, as the Director of The Chaim Sheba
Medical Center, Tel Hashomer, and, since 1997,
as the Chairman of the National Helsinki
Committee for Human Genetic Research.
Mrs. Leslie Eichner Mrs. Eichner, age 54, serves as the President
of the Manhattan Club, which is the largest
urban timeshare development in the world.
Previously, Mrs. Eichner served as President
of Alexsey Consulting, a firm specializing in
consulting to senior management, as well as
President of the Alley Corporation, which is a
real estate management firm. Mrs. Eichner also
previously served as Vice President of Chase
Manhattan Bank, and was responsible for senior
human resources.
The Shareholders are being asked to appoint the Outside Director nominees
listed above for a three-year term as provided by the Companies Law (and until
the 2006 Annual General Meeting). Election of Outside Directors requires the
vote of the holders of a majority of the Ordinary Shares present and voting on
the proposal at the Annual Meeting in person or by proxy, provided that either:
(i) such majority vote includes at least one-third of the votes of shareholders
which are not Controlling Shareholders or their representatives, and are present
in person or by proxy at the meeting; or (ii) the total number of shares voted
against the election of an Outside Director by the shareholders which are not
Controlling Shareholders or their representatives, does not represent more than
one percent of the aggregate voting rights in the company.
The term "Controlling Shareholder" includes any person having the ability
to direct the activity of a company, other than an ability that solely derives
from his or her position as an officer or director in such company. The
Companies Law includes a presumption under which a person who holds 50% or more
of the voting power in a company, or 50% or more of the power to elect such
company's directors or Chief Executive Officer, 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 a personal 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.
The Board of Directors recommends a vote FOR the proposal to elect each of
the above-named nominees as Outside Directors.
PROPOSAL 3 - APPOINTMENT OF BRIGHTMAN ALMAGOR & CO. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL YEAR 2003
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 2003.
The following table sets forth the fees for professional services rendered
by Deloitte Touche Tohmatsu, including its member firm Brightman, for the audit
of the Company's financial statements for the year ended December 31, 2002, and
the fees billed by them for other services rendered during 2002.
-6-
Audit Fees $ 601,000
Financial Information Systems Design and
Implementation Fees --
All Other Fees* $ 413,000
*Includes $290,000 for tax-related services and $123,000 for special services
relating to the Securities and Exchange Commission investigation of the Company.
The Audit Committee has considered whether the provision of the above
non-audit services by Brightman is compatible with maintaining Brightman's
independence and has approved such services.
It is anticipated that representatives of Brightman will be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
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 2003, and to authorize the Audit Committee
and the Board of Directors of the Company to agree upon the level of Brightman's
compensation.
An affirmative vote of a majority of the Ordinary Shares present and
voting on the proposal 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 2003.
Audit Committee Report
The Audit Committee provides assistance to the Board of Directors in
fulfilling its legal and fiduciary obligations with respect to the Company's
financial reporting process. 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 and discussed the audited financial statements in the Company's 2002
Annual Report with management, which review 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 the 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.
The Audit Committee received from the independent auditors the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committee) and it considered the
compatibility of non-audit services provided by the independent auditors with
the auditors' independence. The Audit Committee discussed with the independent
auditors the auditors' independence from management and the Company.
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 system of internal controls, and the overall
quality of the Company's financial reporting. The Audit Committee discussed with
the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees).
-7-
Based 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, 2002 for filing with the Securities
and Exchange Commission. The Audit Committee and the Board of Directors have
also recommended, subject to shareholder approval, the selection of the
Company's independent auditors.
The Audit Committee
Mr. S.A. Spencer (Chairman)
Mr. Philip Friedman
Mr. Mark Tabak
Mr. Aharon Dovrat
Dr. Darrell S. Rigel, M.D.
PROPOSAL 4 - 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:
The Audit Committee and the Board recommend the following:
1. To each of the directors (other than the Chairman, the Vice Chairman and
the Chief Executive Officer), a cash retainer fee for participation in
meetings of the Board of Directors or any committee thereof at $2,500 per
calendar quarter in 2003. 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 each of the Chairman and Vice Chairman of the Board of Directors, Prof.
Jacob Frenkel and Mr. Arie Genger, respectively, an annual advisory fee of
up to $120,000 per year; and
3. In accordance with the multiple year grants as approved by the 2001 Annual
Meeting, to each of the current directors (other than the Chairman, the
Vice Chairman and the Chief Executive Officer) and nominees upon their
election, a fully vested grant of 10,000 options and to each of the
Chairman and Vice Chairman of the Company a fully vested grant of 50,000
options, at a per share exercise price equal to the last reported sales
price of the Company's shares on May 12, 2003; and
4. To the Vice Chairman of the Board of Directors, Mr. Arie Genger,
reimbursement for certain out-of-pocket expenses incurred during the 2003
period that he held the position of Chief Executive Officer.
The affirmative vote of a majority of the Ordinary Shares present and
voting on the proposal at the Annual Meeting in person or by proxy is necessary
for approval of the Directors' compensation described above.
The Board of Directors recommends a vote FOR the approval of the
Directors' compensation as set forth above.
Shareholders as being separately asked to vote upon the employment terms
and compensation of Mr. Avner Raz, who will become Chief Executive Officer of
the Company effective as of June 20, 2003. See Proposal 9 below.
-8-
PROPOSAL 5 - APPROVAL OF A DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
ARRANGEMENT
Under the Companies Law, the procurement of directors' and officers'
liability insurance 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 arrangement described below.
Article 68B to 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 of an office holder against the following liabilities incurred
as a result of acts performed in his or her capacity as an office holder: (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 or her
act would not prejudice the company's interests; and (iii) financial liability
imposed upon the office holder in favor of another person. The Company is
currently insured by a directors' and officers' liability insurance policy that
extends $50 million in coverage for certain claims.
Subject to shareholder approval, the Company may obtain directors' and
officers' liability insurance with up to a $100 million limit of liability.
Shareholder approval of this Proposal 5 will extend to any supplement,
modification or substitution of such insurance.
Approval of the insurance arrangement as described above, with respect to
each of the officers and directors of the Company, requires the affirmative vote
of a majority of the Ordinary Shares present and voting on the proposal at the
Annual Meeting in person or by proxy.
The Board of Directors recommends a vote FOR the approval of the
directors' and officers' liability insurance arrangement as set forth above.
PROPOSAL 6 - APPROVAL OF A MAJORITY OF THE OPTION GRANTS UNDER THE 2003 ISRAEL
OPTION PLAN TO BE MADE TO OFFICERS AND DIRECTORS AND RATIFICATION AND APPROVAL
OF THE PLAN FOR THE PURPOSE OF ITS OPERATION IN THIS MANNER
The Board of Directors is proposing for shareholder approval, in
accordance with the NASDAQ shareholder approval requirements, permission to
administer the Company's Israel 2003 Share Option Plan (the "Plan") in a manner
that would permit a majority of the option grants thereunder to be made to
officers and directors.
In March 2003 the Board of Directors approved the Plan, which is intended
to provide incentive compensation to, and to encourage share ownership by,
directors, officers and employees (the "Optionees") of Lumenis and its
subsidiaries (collectively, the "Company"), that are residents of the State of
Israel. Office holders and other employees of the Company or of its subsidiaries
and directors of the Company or its subsidiaries who are residents of the State
of Israel are eligible to participate in the Plan. As of April 14, 2003, the
Company had approximately 322 employees who are residents of the State of Israel
eligible to participate in the Plan. Three of these employees are executive
officers, all of whom would likely be granted options under the Plan. In
addition, three of the directors or nominees are Israeli residents who would
likely be granted options under the Plan.
The Plan was adopted to make available to Israeli Optionees certain
Israeli income tax benefits (described below) which are possible only under new
plans adopted in 2003 or later.
-9-
When the Board adopted the Plan in March 2003, it intended that the Plan
be administered as a "broadly based plan" which under current NASDAQ
requirements does not require shareholder approval. In October 2002, NASDAQ
published guidance stating that its current shareholder approval requirement for
stock option plans in which officers or directors participate "contains an
exception for broadly based plans, that is, plans in which at least a majority
of the eligible participants are not officers or directors and at least a
majority of the grants go to employees other than officers and directors." Since
a majority of the eligible participants would not be officers or directors and
the Board and the Company intended that the Plan be administered so that the
majority of the grants go to employees other than officers or directors, the
Board's approval of the Plan was not subject to shareholder approval. However,
as previously announced, the Company was engaged in a search for a new Chief
Executive Officer, and on April 25, 2003 announced the appointment of Avner Raz,
an Israeli resident, as Chief Executive Officer, effective as of June 20, 2003.
In the process of recruiting and attracting the most qualified Israeli
candidates for this position the Company came to realize that it would be
necessary to make substantial option grants under an option plan which qualified
for the new Israeli tax benefits. These tax benefits would not be available if a
comparable option grant was made under a separate arrangement outside of the
Plan. Although the current NASDAQ shareholder approval rule provides that "In a
case where the shares are issued to a person not previously employed by the
company, as an inducement essential to the individual's entering into an
employment contract with the company, shareholder approval will generally not be
required," the size of the grant which the Company might have to make to an
outstanding CEO candidate would cause the Plan, at least for some time, to no
longer satisfy the "broadly based plan" requirement that a majority of the
grants go to employees other than officers and directors, and even the
above-quoted "inducement" exception may not be sufficient to exempt the Company
from the NASDAQ requirement that the Plan be administered as a broadly based
plan, absent shareholder approval. In fact, as part of his compensation
arrangement for the position of Chief Executive Officer, the Company agreed to
grant Mr. Raz, subject to shareholder approval of Proposal 9 below, options for
400,000 shares under the Plan
Accordingly, the Company is seeking shareholder approval to permit the
Plan to be operated in a manner which would permit a majority of the option
grants thereunder to be made to officers and directors, and to ratify and
approve the Plan for the purpose of its operation in this manner. If shareholder
approval is not obtained, the Company would continue to administer the Plan, but
would do so in compliance with NASDAQ's "broadly based plan exception"
(including the requirement that a majority of the grants go to employees other
than officers and directors), and a portion of the option grant to Mr. Raz
described above and in Proposal 9 below would be made under one or more of the
Company's other stock option plans, rather than under the Plan.
A full copy of the Plan is attached as Exhibit A to this Proxy Statement.
The material features of the Plan are summarized below and such summary is
qualified in its entirety by reference to the complete text of the Plan.
Background: Options granted under the Plan may contain such terms as will
qualify the options for the special tax treatment under section 102(b)(2) 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)
5763-2003 (the "Rules") ("102(b)(2) Options").
The 102(b)(2) Options to be granted to Optionees and any shares issued upon
exercise of such Options and any other shares received subsequently following
any realization of rights resulting from a 102(b)(2) Option or from shares
issued upon exercise of a 102(b)(2) Option, including without limitation bonus
shares, will be issued to a trustee nominated by the Company's Compensation
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 end of the tax year in
which the options were granted (the "Holding Period"); and thereafter, the
Trustee is to transfer the
-10-
Options or the Option shares, as the case may be, to the Optionees and/or to any
third party upon the Optionee's demand, subject to any deduction or withholding
required under the Ordinance, the Rules or any other applicable law.
With respect to any 102(b)(2) Options, subject to the provisions of Section 102
and any rules, regulations or orders or procedures promulgated thereunder, an
Optionee shall not be entitled to sell or release from trust any Share received
upon the exercise of a 102(b)(2) Options or any share received subsequently
following any realization of rights, including without limitation, bonus shares,
until the lapse of the holding period required under Section 102 of the
Ordinance.
Administration: The Plan is to be administered by the Compensation Committee of
the Board (the "Committee"). However, the Board has residual authority if no
Committee is then constituted or if the Committee ceases to operate for any
reason.
Subject to the provisions of the Plan, applicable law or NASDAQ rules, the
Committee has sole authority, in its absolute discretion: (a) to determine which
of the eligible employees or directors of the Company and its subsidiaries shall
be granted Options; (b) to designate an Option as a 102(b)(2) Option 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 under the Plan; (f) to prescribe the forms and terms of the
Option Agreements under the Plan; (g) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in connection with the
administration of the Plan; and (h) to accelerate the vesting of any previously
granted Option, in the event of a public offering, merger, acquisition, transfer
of assets or liquidation. All decisions, determinations and interpretations of
the Committee shall be final and binding on all Optionees.
However, only the Board will be entitled to grant Options to Optionees pursuant
to the Plan, as required under the Israeli Companies Law, 1999, and the
Committee shall only be authorized to issue Ordinary Shares underlying Options
which have been granted by the Board and duly exercised.
Shares Issuable Under the Plan: The shares which may be issued upon exercise of
Options 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 (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, 2,000,000 Ordinary Shares.
Option Price: Unless the Committee determines otherwise, the option exercise
price shall be the last reported sales price of the Ordinary Shares on NASDAQ
(the "Fair Market Price") on the date of grant.
Terms of Options: The Committee shall determine the dates after which Options
may be exercised, in whole or in part. An Option may be made exercisable in
installments, and may be exercisable in whole or in part, with the unexercised
portion of the Option remaining exercisable. 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, the Chief Executive Officer ("CEO"), the
officers reporting directly to the CEO of the Company and the Executive Vice
Presidents, Options granted under the Plan will become fully vested and
exercisable 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 when making the grant. A "Change in Control" means the first
to occur of any of the following dates:
-11-
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 Securities Exchange Act of 1934 (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" means 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);
(i) 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
(ii) The consummation of any of the following transactions 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
(i) 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
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reducing the number of voting securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, 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.
Post-Employment Termination Exercise Provisions. Options granted 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 for a period of ninety
(90) days after the date 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 employee optionee shall cease
to be employed by the Company or any subsidiary thereof by reason of a
disability, Options may remain exercisable to the extent exercisable at the time
of cessation of employment for a period of 12 months from the date of cessation
of employment. "Cessation of employment" means the date upon which 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 will expire with respect to all Ordinary Shares not
exercisable at the time of termination of the Option. Options granted under the
Plan may provide that 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, the Options will remain exercisable 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, to the extent that the Optionee
was entitled to exercise it on the date of death for a period of 12 months from
the date of death. Options granted to directors may provide that if, prior to
the Termination Date, the director optionee ceases to serve as a director (for a
reason other than removal for cause) after having served as such for at least
two years, the option will remain exercisable after cessation of service as a
director to the extent it was exercisable at the time of cessation of such
service, until the Termination Date (or such earlier expiration date as may be
set forth in the option grant or agreement). In addition, options granted to Mr.
Avner Raz, the Company's new Chief Executive Officer, may provide that if, prior
to the Termination Date, Mr. Raz shall cease to be employed by the Company,
other than for cause, death or disability or as a result of voluntary
termination by Mr. Raz, the option will remain exercisable after cessation of
employment to the extent it was exercisable at the time of cessation of
employment, until the Termination Date (or such earlier expiration date as may
be set forth in the option grant or agreement).
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.
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.
Amendment or Discontinuance of Plan: Subject to any applicable law and NASDAQ
rules, the Committee or the Board 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
-13-
arrangement under Section 102 of the Ordinance, provided that no such action
shall adversely affect Options granted prior to such amendment or modification
without consent of any Optionee adversely affected.
Governing Law: The Plan and all instruments thereunder 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 or any other state, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
Israeli Income Tax Consequences: Upon the sale of shares received following the
exercise of an Option or upon release from the trust, whichever is earlier, the
Optionee will realize a capital gain in an amount equal to the difference
between (i) the fair market value of the share purchased upon such exercise, on
the date such share was sold or released from the trust, as the case may be, and
(ii) the exercise price of the option. Capital gains realized will be taxed at a
rate of 25%. Capital gain derived from the sale of shares is not liable for any
social security taxes.
In cases where the exercise price of an Option is lower than the average
fair market value of the Company's shares during 30 trading days prior to the
date of grant, the excess of this average fair market value of the shares over
the exercise price (the "Rebate") shall be considered as ordinary income.
Upon the sale of shares received following the exercise of an Option or
upon release from the trust, whichever is earlier, the taxable gain shall be
taxed in two parts: (1) The Rebate will be taxable as ordinary income and will
be subject to social security taxes. Income tax rates will be determined in
accordance with the Optionee's marginal tax rate (up to 50%). (2) The difference
between (i) the fair market value of the share on the date such shares were sold
or released from the trust, as the case may be, and (ii) the exercise price of
the option (plus the Rebate) shall be taxable as capital gain at a rate of 25%
provided that the Rebate is not higher than the excess of the fair market value
of the underlying shares upon date of sale and the exercise price of the options
plus any selling related expenses incurred by the employee. Capital gain derived
from the sale of shares is not liable for any social security taxes. To the
extent the shares received following the exercise of an Options are sold during
the Trust Period, the taxable gain will be considered as ordinary income and
will be liable for social security taxes for both the employer and the employee.
Income tax rates will be determined in accordance with the Optionee's marginal
tax rate (up to 50%).
The Company will not be entitled to a tax deduction in the amount of the
capital gain realized by the Optionee.
The foregoing provides only a general description of the application of
Israeli income tax laws to option grants under the Plan. Because of the
complexities of the tax laws, Optionees are encouraged to consult a tax advisor
as to their individual circumstances.
New Plan Benefits: Except for the grant to Mr. Avner Raz on April 24, 2003 of
400,000 options, which grant is subject to shareholder approval at the Annual
Meeting (see Proposal 9 below, in addition to this Proposal), of which 133,336
will vest at the end of twelve months and 22,222 at the end of each 3 months
thereafter over a total of 4 years, no grants have yet been made under the Plan.
It is not possible to determine how many Options will be granted in the future,
and how many will vest rather than be forfeited. Therefore, it is not possible
to determine with certainty the dollar value or number of Ordinary Shares that
will be distributed to Optionees under the Plan.
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting on the proposal at the Annual Meeting in person or by proxy
is necessary to permit a majority of the grants
-14-
under the Plan to be made to officers and directors and to ratify and approve
the Plan for the purpose of its operation in that manner.
The Board of Directors recommends a vote FOR approval of this proposal.
PROPOSAL 7 - APPROVAL OF THE ARRANGEMENT BETWEEN THE COMPANY AND DR. DARRELL
RIGEL
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.
Dr. Darrell Rigel, a director, evaluates for the Company some of its
products and applications, for the purpose of providing the Company with
information on the use of its equipment by its physician customers and for use
in developing new products or applications. In addition, the Company pays Dr.
Rigel $2,000 per each Medical Advisory Group meeting which he chairs, plus
expenses. The Medical Advisory Group is a group of independent physicians which,
in addition to providing professional insights to the Company, helps the Company
to gain maximum leverage from its marketing efforts. As physicians and
businesspeople in the field, the committee members critically evaluate the
Company's technology, customer service and quality assurance.
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting on the proposal at the Annual Meeting in person or by proxy
is necessary for approval of the above-described arrangement between the Company
and Dr. Darrell Rigel.
The Board of Directors recommends a vote FOR the arrangement between the
Company and Dr. Darrell Rigel, a director of the Company.
PROPOSAL 8 - APPROVAL OF EXTENSION OF THE POST-TERMINATION EXERCISE PERIOD FOR
OPTIONS GRANTED UNDER THE 1999 SHARE OPTION PLAN TO DIRECTORS
The Board of Directors is proposing for shareholder approval, as required
by the Companies Law, extension of the post-termination exercise period for
options granted to directors under the Company's 1999 Share Option Plan (the
"1999 Plan") and to approve an amendment to the 1999 Plan for this purpose.
Article VI of the 1999 Plan provided that share options granted thereunder
to employees may provide that if, prior to the tenth anniversary of the date of
grant (the "Termination Date"), an optionee shall cease to be employed by the
Company or a subsidiary thereof (otherwise than by reason of death or
disability), the option will remain exercisable for a period not extending
beyond three months after the date of cessation of employment (unless
specifically stated otherwise in the specific option grant letter) to the extent
it was exercisable at the time of cessation of employment. If, prior to the
Termination Date, an optionee shall cease to be employed by the Company or any
subsidiary thereof by reason of a disability within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), options
granted under the Plan may provide that they will remain exercisable for a
period not extending beyond one year after the date of cessation of employment
to the extent exercisable at the time of cessation of employment. In no event,
however, shall an option be exercisable after the Termination Date. The option
shall expire with respect to all Ordinary Shares 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
-15-
exercise an option pursuant to the preceding sentences of this paragraph,
options granted under the 1999 Plan may provide that they will remain
exercisable until the earlier of (i) the Termination Date, and (ii) one year
from the date of death, by the person or persons to whom the optionee's rights
under the option pass by will or by applicable laws of descent and distribution
and to the extent that the optionee was entitled to exercise it on the date of
death.
Notwithstanding the above, if prior to the Termination Date, an optionee
shall cease to be employed by the Company for reasons which, as determined by
the Company in its discretion, amount to bad faith, gross negligence or fraud,
or as a result of the termination of such optionee for cause, any option or
portion of an option not exercised as of the date of cessation of employment
will expire and terminate on such date, unless specifically stated otherwise in
the specific option grant letter.
Although the 1999 Plan does not specifically require that the exercise
period for options granted under the 1999 Plan to directors who completed their
service on the board be limited to three months, in fact, the option grants to
directors under the 1999 Plan have so provided, consistent with the exercise
period applicable to employees who leave the Company. In order to retain and
attract the most highly qualified directors, the Company is proposing to amend
the option grants and agreements relating to grants under the 1999 Plan to
current and future directors and to provide in all grants which were made in the
past to directors under the 1999 Plan, as well as any future grant which may be
made to directors under the 1999 Plan, that if prior to the Termination Date,
the director optionee ceases to serve as a director (for a reason other than
removal for cause) after having served as director of the Company for at least
two years, the option will remain exercisable after cessation of service as a
director to the extent it was exercisable at the time of cessation of such
service, until the Termination Date (or such earlier expiration date as may be
set forth in the option grant or agreement, as amended). For the avoidance of
doubt, shareholders are also being asked to approve an amendment to Article VI
of the 1999 Plan to include language to this effect with respect to directors.
The amendment will not affect executive officers or employees who are not
directors.
As of April 24, 2003, a total of 2,237,350 options are outstanding under
the 1999 Plan, including 66,000 held by current executive officers as a group,
493,850 held by other employees, and 1,677,500 held by current directors (other
than Mr. Raz, who has not received any grants under the 1999 Plan), as follows,
all of which directors would benefit from the amendment:
Options Held Under the
Director 1999 Plan
--------------------- ----------------------
Mr. Aharon Dovrat 10,000
Mr. Arie Genger 1,000,000
Dr. Darell Rigel 50,000
Prof. Jacob Frenkel 458,500
Mr. Mark Tabak 50,000
Mr. Philip Friedman 50,000
Mr. Sash Spencer 39,000
Mr. Thomas Hardy 0
Mr. Zeev Tadmor 20,000
Background
The 1999 Plan was introduced in the Company in 1999 and approved by
shareholders on May 30, 2000 at the 2000 Annual General meeting of shareholders.
The 1999 Plan is intended to provide incentive compensation to and to encourage
share ownership by, the directors, officers employees and certain consultants
and dealers of the Company and its subsidiaries in order to align their
interests with
-16-
those of the Company's shareholders. A description of the 1999 Plan is set forth
below. The description is intended to be a summary of the material provisions of
the 1999 Plan, is not purported to be complete and is qualified in its entirety
by reference to the 1999 Plan, a copy of which, as proposed to be amended, is
attached hereto as Exhibit B.
General Terms and Conditions of the Plan
The Plan is administered by the Option Committee or Compensation Committee
(in each case, the "Committee"), which has the absolute discretion on different
issues relating to the administration of the 1999 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 shall be granted, to determine the exercise price of each option and the
time during which the options may be exercised.
The shares optioned under the 1999 Plan are Ordinary Shares which the
Company may acquire and deposit with a trustee and will not exceed, in the
aggregate, 5,000,000 Ordinary Shares. The option price in the case of each
option granted under the 1999 Plan may be not less than 85% of the last reported
sales price of the Ordinary Shares in the Nasdaq Stock Market on the date of the
grant. No option will be transferable, except by will or by laws of descent and
distribution.
The Board of Directors or the Committee may, without the consent of the
Company's shareholders, at any time, terminate the 1999 Plan entirely, and at
any time or from time to time amend or modify the Plan, provided that such
amendment will not adversely affect options already granted prior to such
amendment or termination. The 1999 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 1999 Plan, the Committee will determine the dates after which
options may be exercised, in whole or in part. No option may be exercised after
the tenth anniversary of the date that the option was granted, and no option
granted to an employee of the Company will be exercisable before such employee
accumulates at least one year of service with the Company.
The Plan provides that with respect to the Company's directors, the Chief
Executive Officer ("CEO") of the Company and the officers reporting directly to
the CEO, the options held by such persons will become exercisable immediately
upon a change in control of the Company. A change in control will occur upon one
of the following events: (i) acquisition of any voting securities by any person
immediately after which such person becomes a beneficial owner of 20% or more of
the voting power of the Company, unless such Person has filed a Schedule 13D at
any time during the 12 month period prior to the 1999 Plan being first approved
by the Board of Directors (except for non-control acquisitions), (ii) change in
the majority of members of the board of the directors of the Company in any two
year period unless such change was approved by at least two-thirds of the
incumbent board and (iii) approval of certain transactions by the Company's
shareholders (such as a merger, liquidation, or sale of assets).
To the extent that the aggregate fair market value of the Company's
Ordinary Shares with respect to which incentive stock options are exercisable
for the first time by an optionee during any calendar year under the 1999 Plan
and any other stock option plan of the Company exceed $100,000, such options
will be treated as nonqualified stock options ("NSOs"). Such fair market value
will be determined as of the date on which each such incentive stock option is
granted.
No incentive stock option may be granted to an individual if, at the time
of the proposed grant, such individual owns (or is deemed to own under the Code
stock possessing more than ten percent of the
-17-
total combined voting power of all classes of stock of the Company unless (A)
the exercise price of such incentive stock option is at least 110 percent of the
fair market value of a share of Company stock at the time such incentive stock
option is granted and (B) such incentive stock option is not exercisable after
the expiration of five years from the date such incentive stock option is
granted.
Certain Israeli Tax Effects
Options granted under the 1999 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 as was drafted before its
last amendment under the new Israeli tax reform enacted as of January 1, 2003 or
3(i) of the Israeli Income Tax Ordinance. No significant adverse Israeli tax
implications are expected to arise as a result of the extension of the
post-termination exercise period of options granted under the 1999 Plan to
Israeli directors.
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 1999 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 1999 Plan
participant who is subject to the requirements of Section 16 of the Securities
Exchange Act of 1934.
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. The holding period for such stock will begin on the option exercise
date.
Incentive Stock Options
An optionee will not be in receipt of taxable income upon the grant of an
ISO. An optionee's timely exercise of an ISO will not result in federal income
tax consequences to the Company and will not result in ordinary income to the
optionee, but may result in the imposition of an increase in the alternative
minimum tax to the optionee. 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 U.S. Federal Income Tax Effects - Nonqualified Stock
Options.")
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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 holding period for such stock will begin on the option exercise date. The
Company, under these circumstances, will not be entitled to any federal income
tax deduction in connection with either the exercise of the ISO or the sale of
such stock by the optionee.
If, however, stock acquired pursuant to the exercise of an ISO is disposed
of by the optionee prior to the expiration of two years from the date of grant
of the ISO or within one year from the date such stock is transferred to him
upon exercise (a "disqualifying disposition"), any gain realized by the optionee
generally will be taxable at the time of such disqualifying disposition as
follows: (i) at ordinary income rates to the extent of the difference between
the option price and the lesser of the fair market value of the stock on the
date the ISO is exercised or the amount realized on such disqualifying
disposition and (ii) if the stock is a capital asset of the optionee, as
short-term or long-term capital gain to the extent of any excess of the amount
realized on such disqualifying disposition over the fair market value of the
stock on the date which governs the determination of the optionee's ordinary
income. In such case, the Company may claim a federal income tax deduction at
the time of such disqualifying disposition for the amount taxable to the
optionee as ordinary income. Any capital gain recognized by the optionee will be
long-term or short-term capital gain, depending on the length of time such
shares were held by the optionee.
The amount by which the fair market value of the stock on the exercise
date of an ISO exceeds the option price will be an item of adjustment for
purposes of the "alternative minimum tax" imposed by Section 55 of the Code.
Exercise by Delivery of Shares
According to a published ruling of the U.S. Internal Revenue Service (the
"IRS"), an optionee who pays the option price upon exercise of an NSO, in whole
or in part, by delivering Ordinary Shares of the Company already owned by him
will recognize no gain or loss for federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above
for NSOs. (See "Certain U.S. Federal Income Tax Effects - Nonqualified Stock
Options.") With respect to shares acquired upon exercise which are equal in
number to the shares surrendered, the basis of such shares will be equal to the
basis of the shares surrendered, and the holding period of shares acquired will
include the holding period of the shares surrendered. The basis of additional
shares received upon exercise will be equal to the fair market value of such
shares on the date which governs the determination of the optionee's ordinary
income, and the holding period for such additional shares will commence on such
date.
The U.S. Treasury Department has issued proposed regulations that, if
adopted in their current form, would appear to provide for the following rules
with respect to the exercise of an ISO by surrender of previously owned shares
of corporation stock. If the shares surrendered in payment of the exercise price
of an ISO are "statutory option stock" (including stock acquired pursuant to the
exercise of an ISO) and if, on the date of surrender, the applicable holding
period for such shares had not been met, such surrender will constitute a
"disqualifying disposition" and any gain realized on such transfer will be
taxable to the optionee, as discussed above. Otherwise, when shares of the
Company's stock are surrendered upon exercise of an ISO, in general, (i) no gain
or loss will be recognized as a result of the exchange, (ii) the number of
shares received that is equal in number to the shares surrendered will have a
basis equal to the shares surrendered and (except for purposes of determining
whether a disposition will be a disqualifying disposition) will have a holding
period that includes the holding period of the shares surrendered, and (iii) any
additional shares received will have a zero basis and will have a holding period
that begins on the date of the exchange. If any of the shares received are
disposed of within two years of the date of grant of the ISO or within one year
after exercise, the shares with the lowest basis will be
-19-
deemed to be disposed of first, and such disposition will be a disqualifying
disposition giving rise to ordinary income as discussed above.
Transferred Options: Estate and Gift Taxes
If ISOs or NSOs are held until death, federal and, if applicable, state
estate and inheritance taxes would be imposed on the fair market value of the
options at the time of death.
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting on the proposal at the Annual Meeting in person or by proxy
is necessary for approval of extension of the post-termination exercise period
of options granted under the Company's 1999 Share Option Plan to directors and
to approve the amendment to the 1999 Plan, as described above, for this purpose.
The Board of Directors recommends a vote FOR the approval of this
proposal.
PROPOSAL 9 - APPROVAL OF THE EMPLOYMENT TERMS AND COMPENSATION OF AVNER RAZ AS
CHIEF EXECUTIVE OFFICER 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.
Mr. Raz has entered into an employment Agreement with the Company, dated
April 24, 2003 ("Raz Agreement"), pursuant to which effective as of June 20,
2003, Mr. Raz shall be appointed as the Company's Chief Executive Officer
("Commencement Date") for a 4-year period ("Term"), and at a date no later than
the Commencement Date, Mr. Raz shall be appointed as a member of the Company's
Board of Directors. Pursuant to the Raz Agreement, Mr. Raz is entitled to an
annual base salary of $530,000. In addition, for 2003, Mr. Raz is entitled to a
minimum guaranteed bonus of $250,000 unconditional upon any performance criteria
and to an additional bonus, based on the performance criteria as set by the
Board of Directors and linked to the performance bonuses payable to the current
senior executives of the Company, not exceeding $250,000. Moreover, Mr. Raz is
entitled to a one-time cash payment of US$270,000 as a signing bonus.
Mr. Raz was granted options to purchase up to 400,000 of the Company's
Ordinary Shares, subject to shareholder approval of this Proposal. The exercise
price shall be US$1.205 per share, reflecting the 30 days average closing price
of the Company's Ordinary Shares on the NASDAQ prior to the date of grant. The
options will vest over 48 months as follows: 133,336 options shall vest at the
end of the first 12 months of employment following which an additional amount of
22,222 options shall vest at the end of each three month period, consecutively.
In addition, the Raz Agreement provides for all benefits, such as Management
Insurance Fund, Advance Study Fund and medical and dental insurance, as are
generally granted to the Company's senior executives.
In the event the Raz Agreement and Mr. Raz's employment is terminated by
(i) the Company (ii) by Mr. Raz if the Company files for bankruptcy, becomes or
is declared insolvent or due to a change in control or (iii) by Mr. Raz upon a
material deterioration in his employment terms, Mr. Raz will be entitled to a
sum equal to the compensation (including bonuses and other benefits) that he
would have been paid if he had continued working for the Company for the full
Term. In addition, all previously unvested options shall be accelerated and
fully vest.
The Company's monetary undertakings under the Raz Agreement are secured by
a bank guarantee issued by Bank Hapoalim B.M. in the amount of US$3,000,000. The
amount of the guarantee
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declines over time as follows: on June 20, 2004, the guaranteed amount is
reduced by US$800,000. Thereafter, the guaranteed amount will be reduced by
US$733,333 on June 30, 2005, 2006 and 2007 and the guarantee will terminate on
August 5, 2007.
The Raz Agreement also includes confidentiality and non-competition
provisions.
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting on the proposal at the Annual Meeting in person or by proxy
is necessary for approval of the above-described employment agreement (including
options grant) between the Company and Mr. Avner Raz.
The Board of Directors recommends a vote FOR the agreement between the
Company and Mr. Avner Raz, a director of the Company.
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 2002 fiscal year, the
Board of Directors held nine 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),
except for Mr. Aharon Dovrat.
Committees of the Board of Directors
The Board of Directors of the Company has an Executive Committee, Audit
Committee and Compensation Committee. During 2002 the Company did not have a
nominating 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 currently consists of the
following four directors: Prof. Jacob A. Frenkel (Chairman), Mr. Arie Genger,
Mr. Thomas G. Hardy, and Prof. Zehev Tadmor. During the 2002 fiscal year, the
Executive Committee held two meetings.
-21-
Audit Committee
Under the Companies Law, the board of directors of a public company,
including a company whose shares are traded on a stock exchange abroad, must
appoint an audit committee, comprised of at least three independent directors
and all Outside Directors but excluding: the chairman of the board of directors;
the general manager; the chief executive officer; any controlling shareholder or
a relative thereof; and any director employed by the Company or who provides
services to the Company on a regular basis. The purpose of the audit committee
is to provide assistance to the Board of Directors in fulfilling its legal and
fiduciary obligations with respect to matters involving the accounting,
auditing, financial reporting and internal control functions of the Company, in
consultation with management, the internal auditor and the Company's independent
accountants.
The approval of the Audit Committee is required to effect specified
actions and transactions with office holders, Controlling Shareholders (for
description of a Controlling Shareholder - See Proposal 2 - "Election of Outside
Directors") 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 current
NASDAQ rules, the Company is required to have an audit committee consisting of
at least three members comprised solely of independent directors. The
responsibilities of the audit committee under NASDAQ rules include, among other
things, evaluating the independence of the Company's outside auditors.
The Company's Audit Committee currently consists of the following five
directors, the majority of whom qualify as independent directors in compliance
with the NASDAQ rules: Mr. S.A. Spencer (Chairman); Mr. Philip Friedman, Mr.
Aharon Dovrat, Dr. Darrell S. Rigel, M.D. and Mr. Mark Tabak. During the 2002
fiscal year, the Audit Committee held five meetings.
Compensation Committee
The Compensation Committee was formed in January 2003. Together with the
Board, 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 executive
officers of the Company and reviews the recommendations of the Chief Executive
Officer of the Company concerning general compensation matters relating to
employees and certain consultants. The Company's Compensation Committee
currently consists of the following four directors: Prof. Jacob A. Frenkel, Mr.
Thomas Hardy, Mr. Sash Spencer and Mr. Mark Tabak (the "Compensation
Committee"). During the 2002 fiscal year, the Compensation Committee did not
hold any meetings; the full Board of Directors determined executive compensation
matters.
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
-22-
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 50% or more of the voting power in a company, or
50% or more of the power to elect such company's directors or Chief Executive
Officer, 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 a personal 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 a majority of the voting power present
and voting at the meeting, provided that either (i) such majority vote includes
at least one-third of the votes of shareholders who have no personal interest in
the transaction and are present at the meeting; or (ii) the total number of
shares voted against the transaction by shareholders who have no personal
interest in the transaction, does not represent more than one percent of the
aggregate voting rights in the company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the Company's Ordinary Shares as of April 24, 2003 by (i) each person known
to the Company to be the beneficial owner of more than 5% of the outstanding
Ordinary Shares, (ii) all directors and nominees of the Company, (iii) the Chief
Executive Officer and the four next highest paid executive officers of the
Company for the year ended December 31, 2002 (the "Named Officers"), and (iv)
all directors and executive officers as a
-23-
group. The Company had approximately 36,942,439 Ordinary Shares outstanding as
of the close of business on April 24, 2003.
Beneficial ownership of shares is determined under rules of the Securities
and Exchange Commission and generally includes any shares over which a person
exercises sole or shared voting or investment power. The table below includes
the number of shares underlying options that are exercisable within 60 days
after April 24, 2003. Ordinary Shares subject to these options are deemed to be
outstanding for the purpose of computing the ownership percentage of the person
holding these options, but are not deemed to be outstanding for the purpose of
computing the ownership percentage of any other person.
Options
Exercisable
within 60 Total Beneficial Percentage
Beneficial Owner Shares Owned Days(a) Ownership Ownership
- ----------------------------------------------------------------------------------------------------------------------
Coherent, Inc.(1) 5,432,099 0 5,432,099 14.7%
Capital Research & Management Company(2) 4,221,140 0 4,221,140 11.4
Hermes Investment Management Ltd. (3) 3,000,000 0 3,000,000 8.1
Arie Genger(4) 1,027,105 1,350,000 2,377,105 6.4
SMALLCAP World Fund, Inc.(2) 2,270,000 0 2,270,000 6.1
BT Pension Scheme(3) 2,125,000 0 2,125,000 5.8
Barnard Gottstein(5) 2,272,134 0 2,272,134 6.2
Aharon Dovrat 15,000 35,000 50,000 *
Jacob A Frenkel 22,500 808,500 831,000 2.3
Prof. Boleslaw Goldman 0 0 0 0
Avner Raz 0 0 0 0
Leslie Eichner 0 0 0 0
Robert A. Mintz 22,300 0 22,300 *
Phillip Friedman 95,000 110,000 205,000 *
Thomas Hardy 101,500 10,000 111,500 *
Darrell S. Rigel 15,000 110,000 125,000 *
Sash A. Spencer 54,000 49,000 103,000 *
Mark H. Tabak 0 110,000 110,000 *
Zehev Tadmor 1,000 80,000 81,000 *
Yacha Sutton 137,600 508,000 645,600 1.8
Sagi Genger 268,000 183,167 451,167 1.2
Kevin Morano 120,000 66,667 186,667 *
Alon Maor 10,000 79,998 89,998 *
Robert Grant 0 30,000 30,000 *
All directors and executive officers as a
group(22) 1,736,120 3,243,748 4,979,868 13.5
(a) As of April 24, 2003 all options were out of the money.
* Less than 1%
(1) The address of Coherent is 5100 Patrick Henry Drive, Santa Clara,
California 95054. Pursuant to the Asset Purchase Agreement under which the
Company acquired the Coherent Medial Group and Coherent acquired its
Ordinary Shares, Coherent agreed, subject to certain exceptions, to vote
its shares during the period ending April 30. 2009 in the same manner and
proportion as the remaining outstanding share are
-24-
voted, provided that Coherent may vote its shares in accordance with the
recommendation of the Company's Board of Directors.
(2) Includes 2,270,000 shares also beneficially owned by SMALLCAP World Fund,
Inc. ("World"). The address of each of Capital Research and Management
Company ("Capital") and World is 333 South Hope Street, Los Angeles,
California 90071. The joint Schedule 13G submitted by these entities
indicates that Capital is a registered investment adviser which is deemed
to beneficially own its shares as a result of acting as an investment
adviser to various registered investment companies, including World, which
has sole voting power over 2,270,000 Ordinary shares.
(3) The address of Hermes Investment Management Ltd. ("Hermes") and BT Pension
Scheme ("BT") is Lloyds Chambers, 1 Portsoken Street, London E1 8HZ. The
Schedule 13G submitted indicates that Hermes shares the power to sell or
vote the 2,125,000 Ordinary Shares owned by BT and 875,000 Ordinary Shares
owned by Royal Mail Pension Plan.
(4) The address of Mr. Arie Genger is 375 Park Avenue, New York, New York
10152. The 1,027,105 shares include (a) 199,225 shares held directly by
Mr. Genger, (b) 822,647 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, and
(c) 5,233 shares beneficially owned by Mr. Genger's spouse, as to which
Mr. Genger disclaims beneficial ownership. The 1,350,000 options include
250,000 options as to which Mr. Genger has transferred the economic
interest to a third party.
(5) The address of Mr. Gottstein is 550 West 7th Avenue, Suite 1540,
Anchorage, Alaska 99501.
Section 16(A) Beneficial Ownership Reporting Compliance
In 1999, the Company ceased to qualify as a "foreign private issuer" as
defined in the Exchange Act and became subject to the reporting requirements of
Section 16(a) of the Exchange Act. Section 16(a) requires that the Company's
directors and executive officers, and holders of more than 10% of the Company's
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, 2002, its directors, executive officers, and holders of more than 10% of its
Ordinary Shares complied with the filing requirements of Section 16(a), except
for the late filings described below. 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. Messrs. Moshe Grencel, Sagi Genger, Robert Grant and Zehev
Tadmor were each late in 2002 in filing their Form 5.
EXECUTIVE COMPENSATION
The following table sets forth information concerning total compensation
earned by the Named Officers during the fiscal years indicated for services
rendered to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------------------------- Securities
Other Annual Underlying All Other
Compensation Options/SARs Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)(1) Granted (#) ($)
- --------------------------- ------ ------------ ----------- ------------ ------------- ------------
Yacha Sutton* 2002 300,000 -- 40,500(2) 100,000 77,058(3)
Chief Executive 2001 280,000 750,000 39,000(2) 550,000 359,134(3)
Officer 2000 240,000 -- 36,000(2) 400,000 350,355(3)
Sagi Genger 2002 250,016 -- 48,586(4) 150,000 --
Executive Vice President, 2001 211,796 500,000 21,471(4) 440,000 9,609(5)
Chief Operating Officer 2000 120,000 -- 9,294(4) 100,000 17,873(5)
-25-
Kevin Morano* 2002 198,073 -- -- 300,000 --
Executive Vice President,
Chief Financial Officer
Alon Maor 2002 200,013 -- 135,430(6) 100,000 --
Executive Vice President 2001 210,459 90,000 306,122(6) 155,000 --
Aesthetic Business Unit 2000 322,122 -- 415,384(6) -- --
Robert Grant* 2002 189,936 71,200 36,946(7) 100,000 --
Executive Vice President 2001 96,435 100,043 50,768(7) 90,000 --
Medical Business Unit
* Mr. Sutton's employment agreement expired on December 31, 2002, Mr. Grant
left the Company on March 4, 2003 and Mr. Morano joined the Company on
March 3, 2002.
(1) For certain Named Officers, 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) Includes $18,000 for housing rent for 2002, 2001 and 2000 and $22,500,
$21,000 and $18,000 for payments made in respect of an Advance Study Fund
for 2002, 2001 and 2000.
(3) Includes $26,563, $318,750 and $318,750 incurred pursuant to a
non-competition agreement between Yacha Sutton and the Company in
connection with the Company's acquisition of Laser Industries Ltd., of
which Mr. Sutton had been President and Chief Operating Officer, for 2002,
2001 and 2000, respectively, and $50,495, $40,384 and $31,605 for
Management Fund and severance compensation for 2002, 2001 and 2000,
respectively.
(4) Includes $33,071 and $16,579 related to the costs associated with the
guarantee provided by the Company for Mr. Genger's indebtedness which he
incurred in connection with certain relocation expenses (see "Employment
Agreement with Mr. Sagi Genger") for 2002 and 2001, respectively, and
$15,515 for car allowance for 2002 and $4,892 and $9,294 for payments made
in respect of an Advance Study Fund for 2001 and 2000, respectively.
(5) Includes $9,609 and $17,873 for Management Fund and severance compensation
for 2001 and 2000, respectively.
(6) Includes $38,200 for reimbursement for children's education expenses in
2002, and $97,230, $54,323 and $111,111 for reimbursement relating to
housing rent for 2002, 2001 and 2000, respectively. In addition, includes
payments for sales commission of $170,090 and $257,977 for 2001 and 2000,
respectively, and $12,500 for 2001 as reimbursement of relocation
expenses.
(7) Includes $20,312, $38,768 for tax equalization payments in 2002 and 2001,
respectively, $16,634 for redemption of unused vacation days for 2002 and
$12,000 reimbursement of rent expenses for 2001.
Option/SAR Grants in Last Fiscal Year.
The following table provides information on options granted to the Named
Officers during the last fiscal year pursuant to the Company's option plans.
The table also shows, among other data, hypothetical potential gains from
options granted in 2002. These hypothetical gains are based entirely on assumed
annual growth rates of 5% and 10% in the value of Ordinary Shares from a
starting price equal to the exercise price, over the life of the options granted
in fiscal year 2002. The assumed rates of growth were selected by the SEC for
illustrative
-26-
purposes only, and are not intended to predict future stock prices, which will
depend upon market conditions and the Company's future performance and
prospects. No SARs were granted during the last fiscal year and no SARs are
currently outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
------------------------------------------------------------- ------------------------
Percent of
Number of Total Options
Securities Granted to Exercise
Underlying Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
Yacha Sutton 100,000(1)(3)(4) 3.89% 4.00 8/4/2007 110,513 244,204
Sagi Genger 100,000(1)(3) 3.89% 4.00 8/4/2007 110,513 244,204
50,000(2)(5) 1.95% 9.09 2/27/2012 285,833 724,356
Kevin Morano 100,000(1)(3) 3.89% 4.00 8/4/2007 110,513 244,204
200,000(2) 7.78% 7.86 4/3/2012 988,622 2,505,363
Alon Maor 50,000(1)(3) 1.95% 4.00 8/4/2007 55,256 122,102
Robert Grant 50,000(1)(3)(4) 1.95% 4.00 8/4/2007 55,256 122,102
(1) Options have a term of five years from respective grant dates.
(2) Options have a term of 10 years from respective grant dates.
(3) These options vest in three equal annual installments on August 4, 2003,
2004 and 2005.
(4) Because employment terminated before these options vested, these options
have terminated.
(5) These options vest in three equal annual installments on February 27,
2003, 2004 and 2005.
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 2002 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, 2002 and the aggregate number and dollar
value of unexercised in-the-money options for Ordinary Shares, if any, held at
December 31, 2002. The value of unexercised in-the-money options at fiscal
year-end is the difference between the exercise or base price of such options
and the fair market value of the underlying Ordinary Shares on December 31,
2002, which was $2.00 per share. Actual gains, if any, upon exercise will depend
on the value of Ordinary Shares on the date of any exercise of options.
-27-
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at Fiscal
Shares at Fiscal Year End (#) Year End ($)(1)
Acquired on Value ------------------------------ ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ------------ ------------ ----------- ------------- ----------- --------------
Yacha Sutton -- -- 341,000 484,000 -- --
Sagi Genger -- -- 33,000 457,000 -- --
Kevin Morano -- -- -- 300,000 -- --
Alon Maor -- -- 39,999 165,001 -- --
Robert Grant -- -- 30,000 145,000 -- --
(1) The closing price of the Ordinary Shares on December 31, 2002 was $2.00
per share.
Director's Compensation
At the 2002 Annual Meeting of Shareholders, the shareholders approved for
each director (other than the Chairman and Vice-Chairman), a cash retainer fee
for participation in meetings of the Board of Directors or any committee of
$2,500 per calendar quarter. Directors are not entitled to receive any
additional per-meeting fee, but will be reimbursed for their reasonable travel
and accommodation expenses. In addition, the shareholders approved a future
annual option grant of 10,000 options to each director and 50,000 options to
each of the Chairman and Vice Chairman of the Board. The Chairman of the Board
of Directors, Prof. Frenkel, and the Vice Chairman of the Board of Directors,
Mr. Arie Genger, are each entitled to an advisory fee of up to $120,000 per
year. Shareholder approval for the compensation terms of the Company's directors
is sought annually; see "Proposal 4 - Approval of Directors' Compensation." For
a description of Mr. Thomas G. Hardy's former consulting agreement with the
Company, see "Certain Relationships and Related Transactions", below. See also
"Proposal 7 - Approval of the Arrangement between the Company and Dr. Darrell
Rigel" and "Proposal 9 - Approval of the Employment Terms and Compensation of
Avner Raz as Chief Executive Officer of the Company."
Employment Agreements, Termination Provisions and Change in Control
Provisions
Employment Agreement with Mr. Yacha Sutton
Effective January 1, 2000, the Company entered into an employment
agreement with Mr. Yacha Sutton (the "Sutton Agreement"), pursuant to which Mr.
Sutton was employed by the Company in the position of Chief Executive Officer.
In April 2001, the Board approved an increase in Mr. Sutton's annual base salary
to $300,000. The Sutton Agreement expired on December 31, 2002.
Under the Sutton Agreement, Mr. Sutton was entitled to use a Company
vehicle in accordance with the Company's existing policies and the Company
provided Mr. Sutton with such additional benefits as are 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.
Following the expiration of the Sutton Agreement and Mr. Sutton's
employment, the Company was obligated to pay him (i) any severance payment to
which he was entitled pursuant to applicable Israeli law less any amounts
received by Mr. Sutton from (x) his Managers' Insurance as a severance payment
and (y) other payments made in his favor to Keren Hishtalmut Fund, (ii) earned
but unpaid benefits under Company plans (iii) vested share options under the
terms of the respective option agreements and option plans, and (iv) a special
bonus on the sale of a subsidiary of the Company. In return, Mr. Sutton waived
any claims against the Company.
-28-
Employment Agreement with Mr. Sagi Genger
Mr. Genger has entered into an employment agreement with the Company and
Lumenis Inc., dated as of January 21, 2003, which is effective as of July 1,
2001 (the "Genger Agreement"). The Genger Agreement may be terminated at the
option of either party upon 90 days prior notice. Pursuant to the Genger
Agreement, Mr. Genger serves as the Chief Operating Officer of the Company and
Lumenis Inc. The Genger Agreement provides for an annual base salary of
$250,000. In addition, Mr. Genger is entitled to a bonus equal to 100% of his
annual base salary if 100% of targets are met. In addition, the Genger Agreement
provides for all benefits, such as pension, life insurance, medical and dental
insurance, disability insurance, certain saving programs and participation in
the Company's 401K plan, as are generally granted to the Company's senior
executives.
In the event of any termination of the Genger Agreement and Mr. Genger's
employment, the Company and Lumenis Inc. will only be obligated to pay (i) base
salary and benefits through the notice period, provided that Mr. Genger
continues his employment obligations through such period (if so required), (ii)
the lump sum severance payment to which Mr. Genger is entitled by law, but in no
event less than the last month's salary for each 12-month period of Mr. Genger's
employment with the Company and Lumenis Inc. and a pro-rata portion for any
shorter period since the last anniversary and through the notice period.
Moreover, in the event that Mr. Genger's employment with the Company and Lumenis
Inc. is terminated by (i) the Company or Lumenis Inc. (ii) due to a change in
control or (iii) by Mr. Genger for good cause, Mr. Genger will be entitled to a
lump sum of $350,000 and benefits for a 12-month period, payments pursuant to
the Company's bonus plan as if he was employed throughout the whole calendar
year for which the bonus is paid and acceleration of vesting of all unvested
options that would by their terms vest in the 12-month period following
termination.
The Genger Agreement also includes confidentiality and non-competition
terms and conditions.
In addition to the above, the Company and Mr. Genger entered into a pledge
agreement effective as of June 1, 2002 in connection with the 2001 guarantee by
the Company of $2 million in debt incurred by Mr. Genger in connection with
certain relocation expenses. Pursuant to the pledge agreement, the guarantee is
secured by 149,500 Ordinary Shares held by Mr. Genger. The guarantee will
terminate on the earlier to occur of (i) June 1, 2003; or (ii) the termination
of Mr. Genger's employment with the Company. The Company and Mr. Genger had
intended to extend the guarantee; however, since the Sarbanes-Oxley Act of 2002
prohibits any extension or modification of a loan to an executive officer, the
guarantee cannot be extended beyond June 1, 2003. See "Certain Relationships and
Related Transactions" below.
Employment Agreement with Mr. Kevin Morano
Mr. Morano has entered into an employment agreement with the Company and
Lumenis Inc., dated as of January 21, 2003, which is effective as of March 1,
2002 (the "Morano Agreement"). The Morano Agreement may be terminated at the
option of either party upon 90 days prior notice. Pursuant to the Morano
Agreement, Mr. Morano serves as the Chief Financial Officer of the Company and
Lumenis Inc. The Morano Agreement provides for an annual base salary of
$250,000. In addition, Mr. Morano is entitled to a bonus equal to 100% of his
annual base salary if 100% of targets are met. In addition, the Morano Agreement
provides for all benefits, such as pension, life insurance, medical and dental
insurance, disability insurance, certain saving programs and participation in
the Company's 401K plan, as are generally granted to the Company's senior
executives.
In the event of any termination of the Morano Agreement and Mr. Morano's
employment, the Company and Lumenis Inc. will only be obligated to pay (i) base
salary and benefits through the notice period, provided that Mr. Morano
continues his employment obligations through such period (if so
-29-
required), (ii) the lump sum severance payment to which Mr. Morano is entitled
by law, but in no event less than the last month's salary for each 12-month
period of Mr. Morano's employment with the Company and Lumenis Inc. and a
pro-rata portion for any shorter period since the last anniversary and through
the notice period. Moreover, in the event that Mr. Morano's employment with the
Company and Lumenis Inc. is terminated by (i) the Company or Lumenis Inc. (ii)
due to a change in control or (iii) by Mr. Genger for good cause, Mr. Morano
will be entitled to a lump sum of $300,000 and benefits for a 12-month period,
payments pursuant to the Company's bonus plan as if he was employed throughout
the whole calendar year for which the bonus is paid and acceleration of vesting
of all unvested options that would by their terms vest in the 12-month period
following termination.
The Morano Agreement also includes confidentiality and non-competition
terms and conditions.
Employment Agreement with Mr. Alon Maor
Effective August 3, 2001, the Company entered into an employment agreement
with Mr. Alon Maor (the "Maor Agreement") pursuant to which Mr. Maor serves as
Executive Vice President, the Aesthetic Business Unit. The Maor Agreement may be
terminated by either party upon the provision of six-months prior notice or
three years after the effective date. The term will extend for additional one
year periods following the completion of the initial three-year term unless
either party delivers a notice of intention not to renew no later than six
months preceding the expiration of the then-current term.
Pursuant to the Maor Agreement, Mr. Maor receives an annual base salary in
the amount of $200,000, an annual housing allowance equal to his actual rent or
acquisition costs, but subject to an annual maximum of $96,000, an annual
allowance for the education of his children from pre-school through high school
(subject to a tax gross up), the sum of $20,000 for certain relocation expenses
(part of which may be reimbursed if Mr. Maor is terminated for cause prior to
the second anniversary of the Maor Agreement); and all benefits, such as
pension, life insurance, medical and dental insurance disability insurance,
certain saving programs and participation in the Company's 401K plan, as are
granted to the Company's Senior Executives.
In addition, Mr. Maor shall be awarded an annual bonus of 90% of his
annual base salary payment if the Aesthetic Business Unit meets certain annual
targets mutually agreed upon by the Chief Executive Officer and Mr. Maor. If
achievement of the goals exceeds or is less than 100%, the percentage of base
salary to be paid as bonus shall correspondingly be increased in excess of or
decreased below the set 90%.
The Maor Agreement also includes confidentiality and non-competition terms
and conditions.
Employment Agreement with Mr. Robert Grant
Effective July 11, 2002, the Company entered into an employment agreement
with Mr. Robert Grant (the "Grant Agreement") pursuant to which Mr. Grant served
as Executive Vice President, Medical Business Unit. The Grant Agreement was
terminated on March 4, 2003.
Pursuant to the Grant Agreement, Mr. Grant received an annual base salary
in the amount of $200,000, as of July 1, 2002, and an annual target bonus of
$180,000, based on performance goals measured as follows: 50% based on corporate
performance, 40% based on Surgical and Ophthalmic business performance and 10%
based on individual performance. In addition, Mr. Grant was entitled to a
$72,000 retention bonus.
-30-
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
No present member of the Compensation Committee or the Board (which during
2002 and during January 2003 determined executive compensation for the Company)
is currently, or was at any time during the fiscal year ended December 31, 2002,
an officer or employee of the Company, other than Mr. A. Genger (and, effective
as of June 20, 2003, Mr. Raz). Mr. Thomas G. Hardy served as a consultant to the
Company during 2002. See "Certain Relationships and Related Transactions" below.
The consultant agreement between the Company and Mr. Hardy terminated on October
31, 2002. See also "Proposal 7 - Approval of the Arrangement Between the Company
and Dr. Darrell Rigel" and "Proposal 9 - Approval of the Employment Terms and
Compensation of Avner Raz as Chief Executive Officer of the Company." No
executive officer of the Company served on the board of directors or
compensation committee of any entity that has one or more executive officers
serving as members of the Company's Board of Directors or Compensation
Committee.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's Ordinary
Shares that may be issued upon the exercise of options and rights under all of
the Company's existing equity compensation plans as of December 31, 2002.
- -------------------------------------------------------------------------------------------------------------------
Number of securities remaining
Number of securities to Weighted-average exercise available for future issuance
be issued upon exercise price of outstanding under equity compensation
of outstanding options options, warrants and plans (excluding securities
Plan Category and rights rights reflected in column (a))
(a) (b) (c)
- -------------------------------------------------------------------------------------------------------------------
Equity compensation plans 12,425,745 $13.263 1,183,722
approved by security
holders
- -------------------------------------------------------------------------------------------------------------------
Equity compensation plans None N/A N/A
not approved by security
holders
- -------------------------------------------------------------------------------------------------------------------
After December 31, 2002, the Israel 2003 Option Plan was adopted by the Board of
Directors without shareholder approval. For a description of this Plan, see
Proposal 6 above. In addition, as part of the new financing arrangement with the
Bank Hapoalim B.M. ("Bank") entered into in February 2003 the Company re-priced
the outstanding 1,136,300 options held by the Bank to an exercise price of
$1.17, the current market price, and granted the Bank an additional 275,000
options at an exercise price of $1.17.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
General Compensation Policy
During 2002, Executive compensation policies were determined by the full
Board of Directors. The Board's fundamental compensation policy is to make a
substantial portion of executive officers' compensation contingent on the
Company's growth, financial performance and meeting 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 Board and the Compensation Committee believe
that providing incentives to the executive officers
-31-
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 officer's 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; (iii) may include either or both stock options
under the Company's stock option plan and/or eligibility for incentive
compensation; and (iv) special severance provisions in case of termination of
employment by the Company, due to a change in control, or termination by the
executive for good cause; in such event the executive will be entitled to a
specified sum and benefit payments generally paid monthly over a 9-month period,
payments pursuant to a bonus as if he was employed throughout the whole calendar
year for which bonus is paid and acceleration of vesting of all unvested options
that would by their terms vest in the 12-month period following termination.
Factors
The principal factors considered in establishing the components of each
executive officer's compensation package for the 2002 fiscal year are summarized
below. The Board and the Compensation Committee may, in their respective
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 Board's
and 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
Board and the Compensation Committee take into account the effect of corporate
transactions that have been consummated during the relevant year and, where
appropriate, also consider 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 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 Board and 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 under any grant is generally set at a price
equal to the market price of the Ordinary Share on the date of the grant. The
options therefore do not have any value to the executive unless the market price
of the Ordinary Shares rises. The Board and the Compensation Committee
-32-
believe that these stock options more closely align the executives' interests
with those of the Company's shareholders, and focus management on building
profitability and long-term shareholder value.
Certain Agreements
The Board recognizes that there are circumstances which may result in
departure or distraction of the executive officers and other key personnel.
Because the Board considered it essential to the best interests of the Company's
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. S.
Genger and Morano to ensure retention and motivation of these executives and is
currently negotiating with additional senior executive officers their employment
terms. By entering into these retention agreements with current management, the
Company's intention was to provide these senior executives with adequate
incentive to remain with the Company. 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
The Vice Chairman of the Board of Directors, Mr. Arie Genger, was
appointed as Chief Executive Officer of the Company effective January 1, 2003
and will hold that position until the appointment of Mr. Avner Raz is effective
on June 20, 2003. Mr. A. Genger has not entered into an employment agreement
with the Company and is only entitled to the compensation and reimbursement as
described above (See Proposal 4 - "Approval of Directors' Compensation"), for
serving as Vice Chairman of the Board of Directors. Mr. A. Genger does not
receive any additional compensation from the Company for acting as Chief
Executive Officer other than reimbursement for certain out-of-pocket expenses
incurred by him in such position.
Mr. Sutton was employed by the Company in the position of Chief Executive
Officer until December 31, 2002. The employment agreement of Mr. Sutton became
effective as of January 1, 2000. The material terms of Mr. Sutton's employment
agreement are described above under the heading "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements." In setting Mr.
Sutton's compensation, the Board considered factors such as individual and
corporate performance (without reference to any specific performance related
targets) and individual experience and expertise. In addition, the Board
considered Mr. Sutton's overall compensation relative to compensation levels of
chief executive officers of other comparable companies. No particular weight was
given by the Board to any of the foregoing factors.
Deductibility of Compensation
The Board and the Compensation Committee will, in general, seek to ensure
that compensation paid to the Company's executive officers will not fail to be
deductible to the Company by reason of application of Section 162(m) of the
United States Internal Revenue Code of 1986, as amended. The Board and the
Compensation Committee believe, 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.
-33-
THE BOARD OF DIRECTORS
PROF. JACOB A. FRENKEL
Mr. ARIE GENGER
Mr. AHARON DOVRAT
Mr. PHILIP FRIEDMAN
Mr. THOMAS G. HARDY
DR. DARRELL S. RIGEL
Mr. SASH A. SPENCER
Mr. MARK H. TABAK
PROF. ZEHEV TADMOR
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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. The
initial term of the Hardy Agreement, which was approved by shareholders at the
2001 Annual General Meeting, was through September 30, 2001 and was extended for
an additional one-month period. The parties subsequently extended the Hardy
Agreement for an additional year through October 31, 2002 with an automatic
renewal for a successive one-year period unless earlier terminated by either
party. The extended period of the Hardy Agreement was approved by the
shareholders at the 2002 Annual General Meeting. Pursuant to the initial term,
in consideration of the consulting services, the Company paid Mr. Hardy a
consulting fee in the amount of $5,000 for each day of services that were
rendered. During the extended term, the Company paid Mr. Hardy an annual
consulting fee of $180,000. The Hardy Agreement was terminated on October 31,
2002. Under the terms of the Hardy Agreement, Mr. Hardy assisted the Company in
strategic planning. During 2002 Mr. Hardy received approximately $183,000 from
the Company for services rendered.
The Company and TRI, whose chairman and chief executive officer is Mr.
Arie Genger, the Vice-Chairman of the Board of Directors and Chief Executive
Officer of the Company, entered into a Sub-lease Agreement made as of June 30,
2001 (the "Sublease Agreement") pursuant to which TRI subleases to the Company
office space in New York. In consideration for the use of this space, the
Company pays rent to TRI as a percentage of TRI's fixed rent, escalation rent
and electricity charges pursuant to TRI's lease with its landlord. In addition,
the Company has entered into an Office Service Agreement pursuant to which TRI
provides Lumenis with certain office support services including: receptionist
telephone support, certain secretarial support, office supply purchasing
assistance, catering services, computer and communication support and other
similar office support functions as needed. In consideration for the services
provided under the Office Service Agreement, the Company pays TRI a monthly fee
equal to $15,000. For 2002 the Company incurred rent expenses to TRI of
approximately $467,000 under the Sublease Agreement and incurred an additional
$180,000 under the Office Service Agreement. The Sublease Agreement and the
Office Service Agreement were extended on November 1, 2002 for an additional
period of 18 months and will expire on September 29, 2004. The extension of the
Sublease Agreement and the Office Service Agreement were made under the same
terms of the original agreements, except for enlarging the space leased and the
respective rent payments. This extension of the Sublease Agreement and the
Office Service Agreement is subject to the approval of the Company's Board of
Directors.
During 2001, the Board of Directors and the Audit Committee approved the
grant to Mr. Sagi Genger, the Company's Chief Operating Officer, of a guarantee
in the amount of $2,000,000 in connection with his relocation. The guarantee is
secured by 149,500 of the Company's shares held by Mr. Genger, which were valued
at $4,364,000 as of June 1, 2001. The guarantee is to terminate on the earlier
to occur of (i) June 1, 2003 or (ii) the termination of Mr. Genger's employment
with the Company. In the event of termination by the Company of Mr. Sagi
Genger's employment or in the event of a change in control of the Company, the
Company may recover any payments made under the guarantee only to the
-34-
extent of the shares pledged. The Company and Mr. Sagi Genger had intended to
extend the guarantee, however, the Sarbanes-Oxley Act of 2002 prohibits any
extension or modification of a loan to an executive officer; accordingly the
guarantee cannot be extended beyond June 1, 2003.
During 2002, the Company was involved in the following transactions with
Coherent, Inc., beneficial owner of more than 10% of the outstanding Ordinary
Shares: purchases of raw material in the amount of $26,690,000, rent expenses at
one of the Company's facilities in the amount of $3,251,000 and other
non-operating expenses in the amount of approximately $693,000.
See also "Proposal 7 - Approval of the Arrangement Between the Company and
Dr. Darrell Rigel."
For the employment terms and compensation of Mr. Avner Raz, a director in
the Company, see "Proposal 9 - Approval of the Employment Terms and Compensation
of Avner Raz as Chief Executive Officer of the Company".
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return to the NASDAQ Stock Market Index and the MG Medical Appliances/Equipment
Index (provided by Media General Financial Services, Inc.) over the five year
period beginning on December 31, 1997 and ending on December 31, 2002. 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 MG Medical
Appliances/Equipment 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.
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL.]
1997 1998 1999 2000 2001 2002
LUMENIS LTD. 100.00 27.10 24.68 31.13 50.84 5.16
MG GROUP INDEX 100.00 125.47 126.09 181.89 173.11 164.03
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35 124.64 86.94
-35-
PROPOSALS OF SHAREHOLDERS
Under Rule 14a-8 of the Securities Exchange Act of 1934 (the "Exchange
Act"), any shareholder of the Company who intends to present a proposal at the
2004 Annual General Meeting of shareholders and who wishes the proposal to be
included in the Proxy Statement for such meeting must submit the proposal in
writing to the Secretary of the Company, at the principal executive offices of
the Company. The proposal must be received no later than January 1, 2004.
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 2004 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 General Meeting of shareholders to be
held in 2004, if the Company is not provided with notice of a shareholder
proposal, which proposal has not been submitted for inclusion in the Company's
Proxy Statement, by March 15, 2004 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 2002 Annual Report on Form 10-K to shareholders
are being mailed to the shareholders concurrently 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,
Mr. Stephen B. Kaplitt,
Executive Vice President,
General Counsel and Secretary
Yokneam, Israel
April 30, 2003
-36-
Exhibit A
LUMENIS LTD.
ISRAEL 2003
SHARE OPTION PLAN
ARTICLE I.
Purpose
This Israel 2003 Share Option Plan (the "Plan") is intended to provide incentive
compensation to, and to encourage share ownership by, the directors, officers,
employees (the "Optionees") of Lumenis Ltd. and its subsidiaries (collectively,
the "Company"), that are residents of the State of Israel 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 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 law rules or regulation
applicable within the Israeli law.
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 more than
50 percent of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
Options granted under the Plan may contain such terms as will qualify such
options for the special tax treatment under section 102(b)(2) 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) 5763-2003 (the "Rules")
("102(b)(2) Options").
The Company's election of the type of 102 Options granted to Employees (the
"Election"), shall be appropriately filed with the Israeli Tax Authorities at
least 30 days before the date of grant of 102(b)(2) Options. The Election shall
obligate the Company to grant only the type of 102 Options it has elected, and
shall apply to all Optionees who were granted Approved 102 Options until the end
of the year following the year during which the Company first granted 102(b)(2)
Options, all in accordance with the provisions of Section 102(g) of the
Ordinance. For the avoidance of doubt, the Company has elected the type of 102
Options to be granted as the 102(b)(2) Options and such Election shall not
prevent the Company from granting unapproved 102 Options simultaneously.
The 102(b)(2) 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(b)(2)
Option or from shares issued upon exercise of a 102(b)(2) Option, including
without limitation bonus shares, 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 end of the tax year in which the
options were granted (the "Holding Period"), 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.
With respect to any 102(b)(2) Options, subject to the provisions of Section 102
and any rules or regulation or orders or procedures promulgated thereunder, an
Optionee shall not be entitled to sell or release from trust any Share received
upon the exercise of a 102(b)(2) Options and/or any share received subsequently
following any realization of rights, including without limitation, bonus shares,
until the lapse of the holding period required under Section 102 of the
Ordinance.
For the purposes of this Plan the Company has appointed Ernst and Young (Israel)
(Kost Forer and Gabbay), or any substitute thereof to serve 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.
All options granted hereunder, whether together or separately, shall be 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 or NASDAQ Stock
Market ("NASDAQ") rule the Committee shall have the power to recommend to the
Board and the Board shall have the full power and authority to: (i) designate
participants; (ii) determine the terms and provisions of the respective Option
Agreements, including, but not limited to, the number of Options to be granted
to each Optionee, the number of Shares to be covered by each Option, provisions
concerning the time and the extent to which the Options may be exercised and the
nature and duration of restrictions as to the transferability or restrictions
constituting substantial risk of forfeiture and to cancel or suspend awards, as
necessary; (iii) determine the Fair Market Value of the Shares covered by each
Option; (iv) make an election as to the type of Approved 102 Option; and (v)
designate the type of Options.
The Committee shall have full power and authority to: (i) alter any restrictions
and conditions of any Options or Shares subject to any Options (ii) interpret
the provisions and supervise the administration of the Plan; (iii) accelerate
the right of an Optionee to exercise in whole or in part, any previously granted
Option; (iv) determine the exercise price of the Option; (v) prescribe, amend
and rescind rules and regulations relating to the Plan; and (vi) make all other
determinations deemed necessary or advisable for the administration of the Plan.
Notwithstanding the above, the Committee shall not be entitled to grant Options
to the Optionees, however, it will be authorized to issue Shares underlying
Options which have been granted by the Board and duly exercised pursuant to the
provisions herein in accordance with section 112(a)(5) of the Companies Law
5759-1999 ("Companies Law"). All decisions, determinations and interpretations
of the Committee shall be final and binding on the Optionee.
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 (together, the "Ordinary Shares").
-2-
Under the Plan, the total number of Ordinary Shares which may be purchased
pursuant to options granted hereunder shall not exceed, in the aggregate,
2,000,000 Ordinary Shares. 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, among other matters, the number of Shares to which
the Option relates, the vesting dates, the purchase price per share, the
expiration date and such other terms and conditions as the Committee or the
Board in its discretion may prescribe, provided that they are consistent with
this 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, 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
Office holders and other employees of the Company or of its subsidiaries and
directors of the Company or its subsidiaries who are residents of the State of
Israel, shall 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) 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, 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"), officers
reporting directly to the CEO of the Company or EVPs, 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
-3-
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
-4-
(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 employee 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 for a period of ninety (90) days after the date 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, Options granted hereunder may
remain exercisable to the extent exercisable at the time of cessation of
employment for a period of 12 months from the date 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
Shares 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 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 for a
period of 12 months from the date of the death of the Optionee. Options granted
to directors may provide that if, prior to the Termination Date, the director
optionee ceases to serve as a director (for a reason other than removal for
cause) after having served as such for at least two years, the option will
remain exercisable after cessation of service as a director to the extent it was
exercisable at the time of cessation of such service, until the Termination Date
(or such earlier expiration date as may be set forth in the option grant or
agreement). In addition, options granted to the Company's Chief Executive
Officer who is scheduled to assume this position as of June 20, 2003 may provide
that if, prior to the Termination Date, he shall cease to be employed by the
Company, other than for cause, death or disability or as a result of voluntary
termination by him, the option will remain exercisable after cessation of
employment to the extent it was exercisable at the time of cessation of
employment, until the Termination Date (or such earlier expiration date as may
be set forth in the option grant or agreement).
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.
-5-
ARTICLE VII.
Special Tax Provisions
INTENTIONALLY OMITTED.
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.
Cashless exercise of Options will be permitted under the Plan. Such payment will
be made in Israeli Shekels (according to the exchange rate between the US Dollar
and the Israeli Shekel at the date of exercise) 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.
Notwithstanding the aforesaid, cashless exercise of Options will be permitted
under the Plan. The Ordinary Shares purchased shall there upon be promptly
delivered to the Trustee, 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 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
-6-
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/she shall have
become the holder of record thereof, and with respect to shares held by the
Trustee subject to the provisions of Article I herein and section 102 to the
Ordinance.
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.
-7-
ARTICLE XVI.
Rights deriving from the exercise of Options
To avoid doubt, the Optionees shall not have any of the rights or privileges of
shareholders of the Company in respect of any Shares purchasable upon the
exercise of any Option, nor shall they be deemed to be a class of shareholders
or creditors of the Company for purpose of the operation of sections 350 and 351
of the Companies Law or any successor to such section, until registration of the
Optionee as holder of such Shares in the Company's register of shareholders upon
exercise of the Option in accordance with the provisions of the Plan, but in
case of Options and Shares held by the Trustee, subject to the provisions of
Article VI of the 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 affected.
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.
-8-
ARTICLE XX.
Effectiveness and Term of Plan
The Plan shall become effective upon the approval of the Board of the Company
and will expire on the tenth anniversary of the date of such 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 XXI.
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, whether of the State of Israel or any
other state, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
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Exhibit B
ESC MEDICAL SYSTEMS LTD.
1999 SHARE OPTION PLAN
ARTICLE I
Purpose
This 1999 Share Option Plan (The "Plan") is intended to provide incentive
compensation to, and to encourage share ownership by, the directors, officers,
employees and certain consultants and dealers of ESC medical Systems Ltd. and
its subsidiaries (collectively, the "Company") in order to align their interests
with those of the Company's shareholders, and to encourage such parties to
remain in their respective capacities with the Company.
The word "subsidiary", when used in the Plan, shall mean any corporation
(other than the Company) in an unbroken chain of corporation beginning with the
Company if, at the time of the granting of the option, each of the corporations
(other than the last corporation in the chain) owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
It is intended that certain options granted under this Plan will qualify
as "incentive stock options" under Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code"); provided, however, that incentive
stock options shall only be granted to employees of the Company.
ARTICLE II
Administration
The Plan shall be administered by the Option Committee or, in the absence
thereof, the Compensation Committee of the Board of Directors (in each case the
"Committee"). Subject to the provisions of the Plan and any applicable law or
NASDAQ rule, the Committee shall have sole authority, in its absolute
discretion: (a) to determine which of the eligible employees, directors, dealers
and consultants of the Company and its subsidiaries shall be granted options;
(b) to authorize the granting of both incentive stock options and non-qualified
options; (c) to determine the times when options shall be granted and the number
of shares to be issued or transferred upon the exercise of each option; (d)
subject to the limitations of ARTICLE V, to determine the exercise price of each
option; (e) to determine the time or times at which each option becomes
exercisable, the duration of the exercise period and any other restrictions on
the exercise of options issued hereunder; (f) to prescribe the form or forms of
the option agreements under the Plan (which forms shall be consistent with the
terms of the Plan but need not be identical); (g) to adopt, amend and rescind
such rules and regulations as, in its option, may be advisable in connection
with the administration of the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all optionees.
ARTICLE III
Shares
The shares to be optioned under the Plan shall either be (i) authorized
but unissued Ordinary Shares, par value NIS 0.1 per share, of the Company, or
(ii) Ordinary Shares which the Company may acquire and deposit with General
Investec Trust Company. Ltd., or any substitute thereof as Trustee under the
Plan (the "Trustee") and under the terms of a Trust Agreement as shall be
approved and amended from time to time by the Board or the Executive Committee
thereof (together, the "Ordinary Shares"). Under the Plan, the total number of
Ordinary Shares which may be purchased pursuant to options granted hereunder
shall not exceed, in the aggregate, five million (5,000,000) Ordinary Shares,
except as such number of shares shall be adjusted or increased in accordance
with the provisions of ARTICLE X and Article XIX hereof.
The number of Ordinary Shares available for grant of options under the
Plan shall be decreased by the sum of the number of shares with respect to which
options have been issued and that are then outstanding and the number of shares
issued upon exercise of options. In the event that any outstanding option under
the Plan for any reason expires, is terminated, or is canceled prior to the end
of the period during which options may be granted, the Ordinary Shares
underlying such option, may again be subject to an option under the Plan.
ARTICLE IV
Eligibility of Participants
Subject to ARTICLE VII, officers and other employees of the Company or of
its subsidiaries and directors of the Company or its subsidiaries shall be
eligible to participate in the Plan and receive incentive stock options or
non-qualifying options.
Directors who are not employees, future employees, dealers, or consultants
of the Company shall also be eligible to participate in the Plan.
ARTICLE V
Option Price
In the case of each option granted under the Plan, the option exercise
price shall be not less than eighty-five percent (85%) of the last reported
sales price (as expressed in either dollars or shekels adjusted to increase in
Israeli CPI) of the Ordinary Shares on the Nasdaq Stock Market ("NASDAQ") (the
"Fair Market Price"), on the date of grant.
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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 my
be exercisable in whole or in part, with the unexercised portion of the option
remaining exercisable.
Any other provision of the Plan notwithstanding and subject to ARTICLE
VII, no option shall be exercised after the tenth anniversary of the date that
the option was granted (the "Termination Date"), and no option granted to an
employee of the Company shall be exercisable before such employee accumulates at
least one year of service with the company.
With respect to the directors, the Chief Executive Office ("CEO") and the
officers reporting directly to the CEO of the Company, the options granted
hereunder shall become exercisable with respect to the entire amount of the
Ordinary Shares underlying such options immediately upon a change in control of
the Company, unless the Board or the Committee determined otherwise with respect
to any specific director or officer upon approval of the options granted. A
"Change in Control" means the first to occur of any of the following dates:
(i) An acquisition (other than directly from the Company)of any voting
securities of the Company by any "Person" (as the term person is
used for purposes of Section 13(d) or 14 (d) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the combined voting power of the Company's
then outstanding voting securities, unless such Person has filed a
Schedule 13D within the 12 month period prior to the Plan being
first approved by the Board of Directors; provided, however, in
determining whether a Change in Control has occurred, voting
securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a
part thereof or a trustee thereof acting solely in its capacity as
trustee) maintained by (X) the Company or (Y) any corporation or
other Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (B) the Company or its Subsidiaries, or (C) any
Person who files in connection with such acquisition a Schedule 13D
which expressly disclaims any intention to seek control of the
Company and does not expressly reserve the right to seek such
control; provided, however, that any amendment to such statement of
intent which either indicates an intention or reserved 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
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period, to constitute at least a majority of the members of the
Board; provided, however, that if the election, or nomination for
election by the Company's common stockholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of the Agreement, be
considered a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization
is a "Non-Control Transaction" i.e., meets any of the
requirements described in (a) or (b) below:
(a) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly
or indirectly immediately following such merger,
consolidation or reorganization, at least eighty percent
(80%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities
immediately before such merger, consolidation or
reorganization;
(b) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the surviving
corporation immediately following the consummation of
such merger, consolidation or reorganization; and
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding voting securities as a
result of the acquisition of voting securities by
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the Company which, by reducing the number of voting securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of voting securities by the
Company, and after such, a Beneficial Owner acquires additional voting
securities which increase the percentage of the then outstanding voting
securities beneficially owned by the Subject Person, then a Change in Control
shall occur.
Share options granted hereunder to employees may provide that if, prior to
the Termination Date, an optionee shall cease to be employed by the Company or a
subsidiary thereof (otherwise than by reason of death or disability), the option
will remain exercisable for a period not extending beyond three months after the
date of cessation of employment (unless specifically stated otherwise in the
specific option grant letter) to the extent it was exercisable at the time of
cessation of employment. If, prior to the Termination Date, an employee optionee
shall cease to be employed by the Company or any subsidiary thereof by reason of
a disability within the meaning of Section 22(e)(3) of the Code, options granted
hereunder may provide that they will remain exercisable for a period not
extending beyond one year after the date of cessation of employment to the
extent exercisable at the time of cessation of employment. In no even, however,
shall an option be exercisable after the Termination Date. The option shall
expire with respect to all Ordinary Share covered thereby into which at the time
of termination of the option, the option was not exercisable. In the event of
the death of an optionee prior to the Termination Date and while employed by the
Company or a subsidiary thereof or while entitled to exercise an option pursuant
to the preceding sentences of this paragraph, options granted hereunder may
provide that they will remain exercisable until the earlier of (i) the
Termination Date, and (ii) one year from date of death, by the person or persons
to whom the optionee's rights under the option pass by will or by applicable
laws of descent and distribution and to the extent that the optionee was
entitled to exercise it on the date of death. Options granted to directors may
provide (both as to future grants and by amendment to already outstanding
grants) that if, prior to the Termination Date, the director optionee ceases to
serve as a director (for a reason other than removal for cause) after having
served as a director of the Company for at least two years, the option will
remain exercisable after cessation of service as a director to the extent it was
exercisable at the time of cessation of such service, until the Termination Date
(or such earlier expiration date as may be set forth in the option grant or
agreement).
Notwithstanding the above, if prior to the Termination Date, an optionee
shall cease to be employed by the Company for reasons which, as determined by
the Company in its discretion, amount to bad faith, gross negligence or fraud,
or as a result of the termination of such optionee for cause, any option or
portion of an option not exercised as of the date of cessation of employment
will expire and terminate on such date, unless specifically stated otherwise in
the specific option grant letter.
ARTICLE VII
Special Provisions Applicable to Incentive Stock Options Only
The aggregate fair market value (determined at the time the option is
granted) of the Ordinary Shares with respect to which any incentive stock option
is granted that is exercisable
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for the first time by the optionee during any calendar year, (under this Plan or
any other share option plan of the Company or any parent or subsidiary thereof)
shall not exceed $100,000.
No incentive stock option may be granted to an individual who, at the time
the option is granted, owns directly, or indirectly within the meaning of
Section 422(b)(6) of the Code, Ordinary Shares possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or of
any parent or subsidiary thereof, unless (i) such option has an option price of
at least 110 percent of the fair market value of the Ordinary Shares on the date
of the grant of such option and (ii) such option cannot be exercised more than
five years after the date it is granted.
ARTICLE VIII
Exercise of Options
An optionee may exercise any exercisable option by signing and returning
to the Company at its principal office, a "Notice of Exercise" in the form
prescribed from time to time by the Company together with payment of the
exercise price. Such payment will be made in dollars or Shekels in accordance
with the terms of the related option grant letter. Each notice of Exercise shall
include an acknowledgment by the optionee, if applicable, that the Company has
not registered the shares issuable upon exercise of the option under the United
States Securities Act of 1933, as amended (the "Securities Act"), or any similar
law, and a representation by the optionee that he is acquiring such shares for
investment and not with a view to their distribution or resale as such terms are
defined in Rule 144 under the Securities Act ("Rule 144"). The optionee shall
sign and deliver to the Company, upon its request, a separate investment
representation, certificate or such other document as may be required by the
Company's counsel, to such effect; provided, however, that such representation,
certificate or other document may provide, if applicable, that the said
investment restriction shall not be operative as to the shares subject to the
option which may in the future be registered pursuant to the Securities Act.
Furthermore, the Company may place an appropriate legend on any share
certificate delivered to an optionee to the effect that, among other things
deemed to be necessary to be stated in such legend, such shares were acquired
pursuant to such an investment representation without registration of the
shares.
Payment for Ordinary Shares purchased upon the exercise of an option
granted hereunder shall be made in full upon exercise of the option, by wire
transfer or certified or bank cashier's check payable to the order of the
Company, or by other means acceptable to the Company. The Ordinary Shares
purchased shall thereupon be promptly delivered; provided, however, that the
Company may, in its discretion, require that an optionee pay to the Company or
the Trustee, at the time of exercise, such amount as the Company deems necessary
to satisfy its obligation to withhold Israeli or United States Federal, state,
or local income or other taxes incurred by reason of the exercise or the
transfer of shares thereupon.
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ARTICLE IX
Non-Transferability of Option Rights
No option shall be transferable, except by will or the laws of descent and
distribution. During the lifetime of the optionee, the option shall be
exercisable only by optionee, or by such optionee's legal representative.
ARTICLE X
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of Ordinary Shares which may be purchased upon
exercise of the options granted hereunder, the number of Ordinary Shares covered
by each outstanding option and the price per share of each such option shall be
appropriately adjusted for any increase or decrease in the number of outstanding
shares of the Company resulting from a stock split or other subdivision or
consolidation of shares or payments of stock dividends or distributions or other
increases or decreases in the number of outstanding Ordinary Shares effected
without receipt of consideration by the Company or in the event of any other
extraordinary transaction.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become issuable upon exercise of an option.
ARTICLE XI
No Obligation to Exercise Option
The grant of an option pursuant to the plan shall impose no obligation on
the optionee to exercise such option.
ARTICLE XII
Use of Proceeds
The proceeds received from the issuance of Ordinary Shares upon exercise
of options, pursuant to the Plan shall be used for such purposes as the Company
shall determine to be appropriate.
ARTICLE XIII
Rights as a Shareholder
The company shall not be required to recognize an optionee as a
shareholder with respect to any share issuable or transferable, as the case may
be, upon the exercise of such option by the
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optionee until such optionee shall have become the holder of record of such
share, and such optionee shall not be entitled to vote or to any dividends or
distributions or other rights in respect of such share for which the record date
is prior to the date on which he shall have become the holder of record thereof.
ARTICLE XIV
Employment Rights
Nothing in the Plan or in any option granted hereunder shall confer on any
optionee who is a director, officer or employee of the Company or any of its
subsidiaries any right to interfere in any way with the right of the Company or
any of its subsidiaries to terminate the optionee's employment at any time.
ARTICLE XV
Compliance with The Law
The Company shall not be liable for the non-issuance or non-transfer or
any delay in issuance or transfer of any Ordinary Shares issuable or transferred
, as the case may be, upon the exercise of any options granted under the Plan
which results from the inability of the Company to obtain, or from any delay in
obtaining, from any regulatory body having jurisdiction, all requisite authority
to issue or transfer Ordinary Shares of the Company upon exercise of the options
under the Plan or upon the transfer of Ordinary Shares issued upon such
exercise, if counsel for the Company deems such authority necessary for lawful
issuance or transfer of any such shares. Appropriate legends may be placed on
the stock certificates evidencing shares issued upon exercise of options to
reflect such transfer restrictions.
ARTICLE XVI
Voting of Ordinary Shares
Shares held by the Trustee under the Plan shall be voted in accordance
with the instructions of the Board.
ARTICLE XVII
Cancellation of Options
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
In the event that the average of the Fair Market Price (as calculated in
ARTICLE V) of the Company's Ordinary Shares for a continuous period of three
months is less than seventy-five (75%) of the exercise price of any option, the
Committee may, with the consent of the optionee,
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cancel such option and grant a new option (which may require extended vesting
period) under the Plan to the optionee.
ARTICLE XVIII
Transfer of Shares
By exercise of an option granted hereunder, the optionee agrees that any
sale, transfer or other disposition of any of the Ordinary Shares issued upon
such exercise shall be made in accordance with the applicable requirements of
Rule 144, including, if applicable, the volume limitations applicable to
"affiliates" of the Company.
ARTICLE XIX
Amendment or Discontinuance of Plan
Subject to any applicable law and NASDAQ Rule, the Board or the Committee
may, without the consent of the Company's shareholders or any optionee under the
Plan, at any time terminate the Plan entirely and at any time or from time to
time amend or modify the Plan, provided that no such action shall adversely
affect options granted hereunder prior to such amendment or modification without
consent of any optionee aversely effected and, with respect to incentive stock
options, the Board shall not, without approval of the stockholders, (a) increase
the total number of Ordinary Shares which may be purchased pursuant to incentive
stock options granted under the Plan, except as contemplated in ARTICLE X, or
(b) expand the persons eligible to receive options under the Plan.
ARTICLE XX
Taxes
Each optionee shall be solely liable for all taxes and other fees
resulting from the grant and/or exercise of options granted under the Plan and
disposition of shares acquired pursuant to the exercise of an option.
Each optionee shall consult with his/her individual tax advisers to
determine the possible tax consequences of the grant and/or exercise of options
granted under the Plan and the disposition of shares acquired pursuant to the
exercise of the an option in his/her personal tax circumstances.
ARTICLE XXI
Effectiveness and Term of Plan
The Plan was adopted on November 11, 1999. The plan will expire and
terminate on November 11, 2009. No option may be granted pursuant to the Plan
after the termination of the
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Plan, however, options outstanding on that date may still be exercised in
accordance with the terms of their grant.
ARTICLE XXII
Governing Law
The Plan and all instruments issued hereunder shall be governed by and
interpreted in accordance with the laws of the State of Israel, subject to the
provisions of the Code with respect to "incentive stock options" and subject to
the provisions of applicable United States securities laws with respect to
certain terms used herein.
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PROXY
ANNUAL MEETING OF SHAREHOLDERS OF
LUMENIS LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Messrs. Arie Genger and Stephen B. Kaplitt
and each or any of them, proxies of the undersigned, with full power of
substitution to vote all of the shares of Lumenis Ltd., an Israeli corporation
(the "Company"), which the undersigned may be entitled to vote at the Annual
General Meeting of Shareholders of the Company to be held at 1221 Avenue of the
Americas, 26th Floor, New York, NY 10020-1089, on May 27, 2003 at 9:00 a.m.
(local time) or at any adjournment or postponement thereof.
This proxy will be voted as specified. If a choice is not specified, this
proxy will be voted FOR the nominee directors, FOR the nominee Outside
Directors, FOR Proposals 3, 4, 5, 6, 7, 8 and 9 and in the discretion of the
proxies, with respect to all other matters which may properly come before the
meeting and any and all adjournments thereof.
(Continued and to be signed on the reverse side)
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ANNUAL MEETING OF SHAREHOLDERS OF
LUMENIS LTD.
May 27, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS IN
PROPOSALS 1 AND 2 AND "FOR" PROPOSALS 3 THROUGH 9.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
- --------------------------------------------------------------------------------
1. To elect the following nominees to serve as directors of the Company until
the next Annual General Meeting of shareholders:
2. To elect the following nominees to serve as Outside Directors of the
Company until the 2006 Annual General Meeting:
NOMINEES
|_| FOR ALL NOMINEES |_| Prof. Jacob A. Frenkel Director
|_| Mr. Arie Genger Director
|_| WITHHOLD AUTHORITY |_| Dr. Darrell S. Rigel, M.D. Director
FOR ALL NOMINEES |_| Mr. Sash A. Spencer Director
|_| Mr. Avner Raz Director
|_| FOR ALL EXCEPT |_| Mr. Robert A. Mintz Director
(See instructions below) |_| Professor Boleslaw Goldman Outside Director
|_| Mrs. Leslie Eichner Outside Director
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: |X|
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that |_|
changes to the registered name(s) on the account may not be submitted via
this method.
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 2003.
4. To approve the compensation of the Company's directors |_| |_| |_|
for serving on the Board of Directors.
5. To approve the Directors' and Officers' liability |_| |_| |_|
insurance arrangement.
6. To permit a majority of the option grants under the |_| |_| |_|
Israel 2003 Option Plan to be made to officers and
directors and to ratify and approve the Plan for the
purpose of its operation in that manner.
7. To approve the arrangement between the Company and Dr. |_| |_| |_|
Darrell Rigel, a director of the Company.
8. To extend the post-termination exercise period for |_| |_| |_|
options granted under the 1999 Share Option Plan to
directors and to approve an amendment to Plan for this
purpose.
9. To approve the employment terms and compensation of |_| |_| |_|
Avner Raz as Chief Executive Officer of the Company.
Check here if you plan to attend the meeting |_|
Signature of Shareholder _______________________________ Date: _________________
Signature of Shareholder _______________________________ Date: _________________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
-2-
ANNUAL MEETING OF SHAREHOLDERS OF
LUMENIS LTD.
May 27, 2003
***IF YOU WISH TO VOTE BY INTERNET, PLEASE READ THE INSTRUCTIONS BELOW***
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
VOTE BY INTERNET OR MAIL 24 HOURS A DAY, 7 DAYS A WEEK
If you vote your proxy by internet, you do NOT need to mail back your
proxy card.
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
possible.
-OR-
INTERNET - Access "www.voteproxy.com" and follow the on-screen instructions.
Have your control number available when you access the web page.
COMPANY NUMBER _________________
ACCOUNT NUMBER _________________
CONTROL NUMBER _________________
Internet voting is available through 4 P.M. Eastern Time the business day prior
to the Annual Meeting day.
Your internet vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
If voting by mail, please sign your name or names exactly as stenciled
hereon. For a joint account, each joint owner should sign. Persons signing in a
representative capacity should indicate their capacity.
Use the internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
Please detach and mail in the envelope provided IF you are not voting
via the Internet.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS IN
PROPOSALS 1 AND 2 AND "FOR" PROPOSALS 3 THROUGH 9.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
1. To elect the following nominees to serve as directors of the Company until
the next Annual General Meeting of shareholders:
2. To elect the following nominees to serve as Outside Directors of the
Company until the 2006 Annual General Meeting:
NOMINEES
|_| FOR ALL NOMINEES |_| Prof. Jacob A. Frenkel Director
|_| Mr. Arie Genger Director
|_| WITHHOLD AUTHORITY |_| Dr. Darrell S. Rigel, M.D. Director
FOR ALL NOMINEES |_| Mr. Sash A. Spencer Director
|_| Mr. Avner Raz Director
|_| FOR ALL EXCEPT |_| Mr. Robert A. Mintz Director
(See instructions below) |_| Professor Boleslaw Goldman Outside Director
|_| Mrs. Leslie Eichner Outside Director
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: |X|
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 2003.
4. To approve the compensation of the Company's directors |_| |_| |_|
for serving on the Board of Directors.
5. To approve the Directors' and Officers' liability |_| |_| |_|
insurance arrangement.
6. To permit a majority of the option grants under the |_| |_| |_|
Israel 2003 Option Plan to be made to officers and
directors and to ratify and approve the Plan for the
purpose of its operation in that manner.
7. To approve the arrangement between the Company and Dr. |_| |_| |_|
Darrell Rigel, a director of the Company.
8. To extend the post-termination exercise period for |_| |_| |_|
options granted under the 1999 Share Option Plan to
directors and to approve an amendment to Plan for this
purpose.
9. To approve the employment terms and compensation of |_| |_| |_|
Avner Raz as Chief Executive Officer of the Company.
Check here if you plan to attend the meeting |_|
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
Signature of Shareholder _______________________________ Date: _________________
Signature of Shareholder _______________________________ Date: _________________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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