Israeli Court Approval
Under the Companies Law, use of a net issuance mechanism to satisfy tax withholding obligations of persons who hold a company’s equity-based awards may be deemed a share repurchase that requires, in certain cases, a court approval to protect the interests of its creditors. Net issuance mechanisms are widely used in U.S. equity plans and do not require court approval.
Accordingly, on October 10, 2021, the Company filed a motion with the Tel Aviv District Court Economic Department (the “Israeli court”) for approval of a program of up to $60,000,000, to be utilized, as determined by the board, in connection with the net issuance mechanism and possible future share repurchases (the “Motion”). If granted, the approval by the Israeli court would be limited to the period specified in the Israeli court decision which is typically a six (6) month period.
On October 12, 2021, the Israeli court reviewed the Motion and granted a preliminary decision (the “Decision”) ordering the Company to serve the Motion and the Decision on certain authorities in Israel, including the Official Receiver (the “Authorities”), publish a notice to its creditors, and file any document or notice received from the Authorities or from the Company’s creditors, with the court. The Israeli court ordered the Authorities to submit their position regarding the Motion until November 12, 2021. On October 14, 2021, the Official Receiver’s position statement, which supported the Motion, was filed with the Israeli court. The creditors of the Company may apply to the Israeli court and object to the Motion until November 14, 2021.
The Motion, if approved as requested, would also permit the Company to engage, if so determined by its board of directors, in share repurchase programs. Any such share repurchase program and the use of a net issuance mechanism would be subject to the aggregate $60,000,000 limit. The Company does not have a current intention to adopt a share repurchase program.
Assuming the Israeli court approves the Motion, the Company expects to make successive requests, every six months, to the Israeli court for approval to use the net issuance mechanism for the foreseeable future for awards in the U.S. and other jurisdictions where vesting and/or exercise triggers a tax liability for the Company’s directors, officers and other employees, absent unusual circumstances, and possible future share repurchase plans. Taxation is not currently triggered by the vesting and/or exercise of equity awards in Israel.
Proposal
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve the amendment to the Company’s compensation policy for executive officers and directors and the corresponding amendment to the compensation terms of the Company’s directors and Chief Executive Officer, each as detailed in the Company’s Proxy Statement, dated November 5, 2021.
Vote Required
See “Vote Required for Approval of the Proposal” above.
Board Recommendation
The Board unanimously recommends a vote “FOR” the proposal.
