FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of June 2005
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Commission File Number 0-16174
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TEVA PHARMACEUTICAL INDUSTRIES LIMITED
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(Translation of registrant's name into English)
5 Basel Street, P.O. Box 3190
Petach Tikva 49131 Israel
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F:
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also hereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g(3)-2(b): 82-
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[TEVA LOGO]
June 21, 2005
Dear Shareholder,
You are cordially invited to attend the 2005 Annual Meeting of Shareholders
of Teva Pharmaceutical Industries Limited, to be held at Teva's executive
offices at 5 Basel Street, Petach Tikva, Israel, on July 27, 2005 at 5:00 p.m.
local time.
At the Annual Meeting, shareholders will vote on the matters listed in the
enclosed Notice of Annual Meeting of Shareholders. Teva's board of directors
recommends a vote FOR all of the proposals listed in the Notice. Management will
also report on the affairs of the Company and a discussion period will be
provided for questions and comments of general interest to shareholders.
We look forward to greeting personally those shareholders who are able to
be present at the meeting; however, whether or not you plan to attend in person,
it is important that your shares be represented. Accordingly, please sign and
date the enclosed Voting Instruction Card and then, at your earliest
convenience, mail it in the envelope provided.
Teva urges all of its shareholders to review our annual report on Form
20-F, which is available on our web site at www.tevapharm.com.
Thank you for your cooperation.
Sincerely,
Eli Hurvitz
Chairman of the Board
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Notice of Annual Meeting of Shareholders
Notice is hereby given that the 2005 Annual Meeting of Shareholders of Teva
Pharmaceutical Industries Limited will be held at Teva's executive offices at 5
Basel Street, Petach Tikva, Israel on July 27, 2005 at 5:00 p.m. local time.
The agenda for the Annual Meeting is to adopt the following resolutions:
1. To receive and discuss the Company's consolidated balance sheet as of
December 31, 2004 and the consolidated statements of income for the year
then ended.
2. To approve the board of directors' recommendation that the cash dividend
for the year ended December 31, 2004, which was paid in four installments
and aggregated NIS 0.975 (approximately US$0.22) per ordinary share, be
declared final.
3. To appoint Dr. Leora (Rubin) Meridor as a Statutory Independent Director
(as defined below) for an additional term of three years, following the
expected expiration of her initial term of appointment on December 7, 2005.
4. To elect the following four directors, each to serve for an additional
three-year term: Eli Hurvitz, Ruth Cheshin, Prof. Michael Sela and Harold
Snyder.
5. To approve the purchase of director's and officer's liability insurance for
the directors and officers of the Company and its subsidiaries, with the
same existing annual coverage of up to $250 million, for the period from
June 1, 2005 through May 31, 2006.
6. To approve the Company's 2005 Omnibus Long-Term Share Incentive Plan.
7. To approve an amendment to provisions of the Company's Articles of
Association relating to the indemnification of directors and officers in
order to incorporate certain provisions of recent amendments of the Israeli
Companies Law regarding indemnification of directors and officers, and more
closely correlate the text of the Company's Articles with the text of the
Israeli Companies Law (as amended).
8. To approve an amendment to the Company's Articles of Association that would
increase the registered share capital of the Company by NIS 50,000,000 to a
total of NIS 150,000,000 by the creation of 500,000,000 additional ordinary
shares of par value NIS 0.1 each.
9. To appoint Kesselman & Kesselman, a member of PricewaterhouseCoopers
International Ltd. ("PwC"), as the Company's independent registered public
accounting firm for the year ending December 31, 2005 and to authorize the
audit committee to determine their compensation and the board of directors
to ratify such determination.
Only shareholders of record at the close of business on June 20, 2005 will
be entitled to this notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors,
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
Uzi Karniel, Adv.
Corporate Secretary
Table of Contents
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Page
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The Meeting 2
Record Date; Shareholders Entitled to Vote 2
Quorum and Voting Procedure 2
Shareholder Nominations 3
Householding of Proxy Materials 3
Expenses of Solicitation of Proxies 3
Proposal 1: Presentation of Financial Statements 4
Proposal 2: Approval of Dividend 4
Proposal 3: Appointment of Statutory Independent Director 4
Proposal 4: Election of Directors 4
Directors 5
Directors Being Considered for Election at this Annual Meeting 5
Continuing Directors 6
Board Practices and Committees 7
Statutory Independent Directors 8
Committees of the Board 8
Code of Ethics 10
Proposal 5: Approval of Liability Insurance 10
Proposal 6: Approval of the Teva Pharmaceutical Industries Limited 2005
Omnibus Long-Term Share Incentive Plan 10
Term of the Plan 10
Shares Available for Issuance Under the Plan 10
Purpose 11
General Administration 11
Eligibility 12
Types of Incentive Awards Available Under the Plan 12
Other Information 14
United States Federal Income Taxes 16
Proposal 7: Amendment to the Company's Articles of Association
(Indemnification of Directors and Officers) 16
Proposal 8: Amendment to the Company's Articles of Association
(Increase in Registered Share Capital) 17
Proposal 9: Appointment of Independent Registered Public Accounting Firm 18
Independent Registered Public Accounting Firm Fees 18
Policy on Pre-Approval of Audit and Non-Audit Services of Independent
Registered Public Accounting Firm 19
Audit Committee Charter Exhibit A
Teva Pharmaceutical Industries Limited 2005 Omnibus
Long-Term Share Incentive Plan Exhibit B
The Meeting
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The 2005 Annual Meeting of Shareholders of the Company will be held at the
Company's executive offices at 5 Basel Street, Petach Tikva, Israel on July 27,
2005 at 5:00 p.m. local time.
Record Date; Shareholders Entitled to Vote
Only shareholders of record at the close of business on June 20, 2005 will
be entitled to notice of, and to vote at, the Annual Meeting. At such time, each
issued and outstanding ordinary share, par value NIS 0.1 per share, shall be
entitled to one vote on all matters properly submitted at the Annual Meeting.
Quorum and Voting Procedure
Two shareholders who are present at the Annual Meeting, in person or by
proxy or represented by their authorized persons, and who hold in the aggregate
twenty-five percent or more of the paid-up share capital of the Company are
necessary to constitute a legal quorum.
Other than as described below, the vote of the holders of a majority of
shares of stock participating at the Annual Meeting, in person or by proxy or
through their representatives, is required to adopt any proposal.
The third proposal, relating to the approval of the extension of Dr. Leora
(Rubin) Meridor's term of appointment, is subject to one of the following
conditions: (i) the majority of the votes cast at the meeting and voting in
favor of the appointment shall include at least one-third of the votes of
shareholders who are not controlling persons (as such term is defined in the
Israeli Companies Law), participating at the meeting (not including
abstentions); or (ii) the total number of objecting votes of shareholders who
are not controlling persons (as such term is defined in the Israeli Companies
Law) do not exceed 1% of the total voting rights in the Company.
In addition, in accordance with applicable Nasdaq rules, the Company is
seeking shareholder approval with respect to the sixth proposal, relating to the
Company's 2005 Omnibus Long-Term Share Incentive Plan. The Company has chosen
not to avail itself of an exemption from this Nasdaq requirement, which exempts
foreign private issuers, such as the Company, from practices that are contrary
to generally accepted business practices in its home jurisdiction.
Finally, each of the seventh and eighth proposals, relating to the
amendments to the Company's Articles of Association, requires the affirmative
vote of at least 75% of shares voting at the Annual Meeting in person or by
proxy.
Under the terms of the Depositary Agreement among Teva and The Bank of New
York, which acts as the Depositary, and the holders of the Company's American
Depositary Receipts ("ADRs"), the Depositary shall endeavor (insofar as is
practicable and in accordance with the Articles of Association of the Company)
to vote or cause to be voted the number of ordinary shares represented by your
ADRs in accordance with your instructions. If your instructions are not received
by the Depositary, the Depositary shall give a discretionary proxy for the
ordinary shares represented by your ADRs to a person designated by the Company.
-2-
Shareholder Nominations
Under the terms of Teva's Articles of Association, any shareholder may
nominate candidates for election as directors. Any such nominations must be
delivered to Teva at its executive offices within 10 days of the notice of the
Annual Meeting and contain the information required by Article 60(e) of Teva's
Articles of Association.
Householding of Proxy Materials
Some banks, brokers and other nominee record holders may be participating
in the practice of "householding" proxy statements and annual reports. This
means that only one copy of this proxy statement or the Company's annual report
may have been sent to multiple shareholders in your household. The Company will
promptly deliver a separate copy of either document to you if you write to or
call the Company at the following address or phone number: Teva Pharmaceutical
Industries Limited, 5 Basel Street, Petach Tikva, Israel, phone: 972-3-926-7554,
Attn: Investor Relations. If you want to receive separate copies of the
Company's annual report and proxy statement in the future, or if you are
receiving multiple copies and would like to receive only one copy for your
household, you should contact your bank, broker or other nominee record holder,
or you may contact the Company at the above address and phone number.
Expenses of Solicitation of Proxies
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy
card and any additional information furnished to shareholders. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
ordinary shares for reasonable expenses incurred by them in forwarding proxy
soliciting materials to such beneficial owners. The Company has retained
MacKenzie Partners, Inc. to assist with the solicitation of proxies for a fee
not to exceed $7,500, plus reimbursable expenses. In addition to solicitation by
mail, certain of the Company's directors, officers and regular employees,
without additional remuneration, may solicit proxies by telephone, facsimile and
personal interviews.
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PROPOSAL 1: PRESENTATION OF FINANCIAL STATEMENTS
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The board of directors has approved and is presenting to the shareholders
for receipt and discussion at the Annual Meeting Teva's Consolidated Balance
Sheet as of December 31, 2004 and the Consolidated Statements of Income for the
year then ended, which are included in Teva's Annual Report on Form 20-F for the
year ended December 31, 2004.
PROPOSAL 2: APPROVAL OF DIVIDEND
--------------------------------
The board of directors recommends that the shareholders approve the board's
recommendation that the cash dividend for the year ended December 31, 2004,
which was paid in four installments and aggregated NIS 0.975 (approximately US
$0.22) per ordinary share, be declared final.
PROPOSAL 3: APPOINTMENT OF STATUTORY INDEPENDENT DIRECTOR
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Following the recommendation of Teva's nominating committee, the board of
directors recommends that the shareholders approve the extension of the
appointment of Dr. Leora (Rubin) Meridor as a Statutory Independent Director (as
defined below) for an additional term of three (3) years following the expected
expiration of her initial term of appointment on December 7, 2005.
Under the provisions of the Israeli Companies Law, the Company is required
to nominate and elect not less than two directors who are required to meet the
independence criteria of the Israeli Companies Law ("Statutory Independent
Directors"). A Statutory Independent Director can be elected for a period of
three years, which term of service may be extended for one additional period of
three years.
Dr. Meridor has been a director of Teva since December 2002. She has been
the Chair of the Board of Bezeq International Ltd. and Walla Communications Ltd.
since 2001. She served as Chair of the Board of Hapoalim Capital Markets between
2001 and 2004. From 1996 to 2000, Dr. Meridor served as Senior Vice President
and Head of the Credit and Risk Management Division of the First International
Bank of Israel. Between 1983 and 1996, Dr. Meridor held various positions in the
Bank of Israel, the last of which was Head of the Research Department. Dr.
Meridor has held various teaching positions with the Hebrew University and has a
Bachelor's degree in Mathematics and Physics, a Master's degree in Mathematics
and a Ph.D. in Economics from the Hebrew University, Jerusalem. She serves on
several boards of directors (NICE Systems Ltd., Isrotel Ltd., GEJ Yizum Ltd. and
Weizmann Institute of Science) and qualifies as a Statutory Independent Director
under the Israeli Companies Law.
PROPOSAL 4: ELECTION OF DIRECTORS
---------------------------------
Following the recommendation of Teva's nominating committee, which
considers candidates' knowledge and experience and their ability to contribute
to the future development of Teva's global business activities, the board of
directors recommends that the shareholders approve the election of the following
four directors, each to serve for an additional three-year term: Eli Hurvitz,
Ruth Cheshin, Prof. Michael Sela and Harold Snyder.
Directors
The following table sets forth information as to the directors of Teva
as of May 10, 2005:
Director Term
Name Age Since Ends
---- --- ----- ----
Eli Hurvitz - Chairman(1)(2) 72 1968 2005
Ruth Cheshin(2) 68 1989 2005
Abraham E. Cohen 67 1992 2007
Leslie Dan 75 2001 2007
Prof. Meir Heth 72 1977 2007
Prof. Moshe Many 76 1987 2007
Dr. Leora (Rubin) Meridor(3) 57 2002 2005
Dr. Max Reis 77 2001 2006
Carlo Salvi 68 2004 2006
Prof. Michael Sela 81 1987 2005
Dov Shafir 73 1969 2007
Prof. Gabriela Shalev(3) 63 2003 2006
David Shamir 44 2004 2006
Harold Snyder 82 1996 2005
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(1) Eli Hurvitz is the father of Chaim Hurvitz, Teva's Group Vice President
International.
(2) Ruth Cheshin and Eli Hurvitz are sister- and brother-in-law.
(3) Statutory Independent Director elected in accordance with the Israeli
Companies Law.
Directors Being Considered for Election at this Annual Meeting
Eli Hurvitz has served as Chairman of the Board of Teva since April 2002.
Previously, he was Teva's President and Chief Executive Officer for over 25
years and has been employed at Teva for over 40 years. He serves as Chairman of
the Board of The Israel Democracy Institute (IDI), Chairman of the Board of
NeuroSurvival Technologies Ltd. (NST) (a private company), Member of the Belfer
Center for Science and International Affairs at John F. Kennedy School of
Government at Harvard University, and a director of Vishay Intertechnology. He
was a member of the board of Koor Industries Ltd. from 1997 through 2004. He
served as the President of the Israel Manufacturers Association from 1981
through 1986. He received his B.A. in Economics and Business Administration from
the Hebrew University in 1957.
Ruth Cheshin is the President of the Jerusalem Foundation, a multi-national
organization which raises funds around the world for the creation of social,
educational and cultural projects for all the citizens of Jerusalem. Ms. Cheshin
is also an active member on many of the city's most important boards.
Dr. Leora (Rubin) Meridor. Please see the third proposal, above, for Dr.
Meridor's biographical information.
Prof. Michael Sela is a Professor of Immunology at the Weizmann Institute
of Science, where he was the President from 1975 through 1985 and served as a
Deputy Chairman of the Board of Governors of the Weizmann Institute of Science
from 1985 through 2004. He received his Ph.D. degree in Biochemistry from the
Hebrew University in 1954.
Harold Snyder, now retired, was Senior Vice President of Teva
Pharmaceuticals USA, Inc., Teva's principal subsidiary, and the former President
of Biocraft Laboratories, Inc. Mr. Snyder founded Biocraft Laboratories in 1964.
He had previously served as President of Stoneham Laboratories Inc. He received
his B.S. in Science from New York University in 1948 and his M.A. in Natural
Science from Columbia University in 1950.
-5-
Continuing Directors
Abraham E. Cohen served as Senior Vice President of Merck & Co. and, from
1977 to 1988, as President of the Merck Sharp & Dohme International Division.
Since his retirement in January 1992, Mr. Cohen has been active as an
international business consultant. He is presently a director of Akzo Novel NV,
Chugai Pharmaceutical Co. USA and Vasomedical, Inc.
Leslie Dan is the Chairman of Novopharm Limited, which he founded and
managed until its acquisition by Teva in 2000. Mr. Dan serves on several
hospital boards in Canada and is a director of Draxis Pharmaceutical Company and
Chairman of Viventia Biotech Inc.
Prof. Meir Heth has served on Teva's board since 1977 and as Chairman of
the Board from 1994 to 2002. During his service at Teva, Prof. Heth served as
Chairman of the Executive Committee for an extended period. Recently, Prof. Heth
was designated as the financial expert on Teva's audit committee. Prof. Heth has
served as Chairman of the Board of Bank Leumi Le'Israel Ltd. and as Chairman of
Bank Leumi Trust Company of New York from 1987 to 1988. From 1978 to 1986, Prof.
Heth was Chairman of the Tel Aviv Stock Exchange. Prof. Heth served at The Bank
of Israel beginning in 1962 in various positions, including Senior Economist
from 1962-1968, Supervisor of Banks from 1969 to 1975 and Senior Advisor to the
Governor from 1975 to 1977. Prof. Heth is a Professor at the Law School of the
College of Management and serves as Chairman of Psagot-Ofek Investment House
Ltd. and as a director of Nilit Ltd.
Prof. Moshe Many, M.D., Ph.D. has served as president of the Ashqelon
Academic College since January 2002. He previously served as the President of
the Tisom International School of Management. He is a former President of Tel
Aviv University, the former Medical Director of the Ramat Marpeh Hospital and
the former Deputy Chairman of Maccabi Health Care Fund. He has been a Department
Head at Tel Hashomer Hospital since 1976. He has served as a director at Elbit
Medical Imaging since 1997 and at Israel Laser Industries from 1994 to 1998. He
received his M.D. from Geneva University in 1952 and his Ph.D. in Surgery from
Tufts University in 1969.
Dr. Max Reis has a Ph.D. in Chemical Engineering from the Imperial College,
London and attended the Advanced Management Program of the Harvard Business
School. From 1971 until 1986 he was Chairman or Managing Director of half a
dozen companies in the Israel Chemicals Group. From 1986 until 1990, he served
as President of Technion Israel Institute of Technology. From 1992 until 1999,
he was Chairman of the Audit Committee of the Board of Directors of the Union
Bank of Israel. Today, he is Chairman of Degem Systems Ltd. and serves on the
boards of Oridion Medical Ltd., Yachin Hakal Ltd., and Gaon Holdings Ltd.
Carlo Salvi commenced his service on Teva's board upon completion of the
acquisition by Teva of Sicor Inc. in January 2004. Previously, Mr. Salvi served
as Vice Chairman of Sicor from August 2001. Mr. Salvi was Sicor's President and
Chief Executive Officer from August 1998 to September 2001. In addition, Mr.
Salvi served as a director of Sicor since February 1997 and was Chairman of the
Board of Sicor S.p.A. from February 1997 to June 1999. Prior to the merger of
Gensia Inc. and Rakepoll Holdings in 1997, Mr. Salvi was a consultant to Alco
Chemicals Ltd. from 1995 to 1997 and served as General Manager of Alco from 1986
to 1995.
Dov Shafir, Colonel (retired) of the Israel Defense Forces, served as
chairman of the Executive Committee of Teva's board from 1992 until 2002 and
presently serves as a director of Ofer Technologies Ltd. and "Am-Shav"
Initiative and Technological Applications Ltd.
-6-
Prof. Gabriela Shalev has been a member of the Faculty of Law of the Hebrew
University since 1964, where from 1986 she held the position of Professor of
Contract Law. Having retired from the Hebrew University in 2002, she is
currently President and Rector of Ono Academic College. Over the years she has
been a visiting professor in many law schools in Europe and the U.S. Prof.
Shalev was a member of the board of directors and chairperson of the audit
committee of Bank Hapoalim Ltd., Israel's largest commercial bank, from 1990
until 1996. Since 1995, she has been a member of the board of directors and
chairperson of the audit committee of the Israel Electric Company. Currently she
is also a director of Koor Industries Ltd. and Osem Investments Ltd., as well as
a member of various committees serving non-profit organizations. Prof. Shalev
qualifies as a Statutory Independent Director under the Israeli Companies Law.
David Shamir has served as the General Manager of Texas Instruments Israel
Ltd since 2001. From 1986 to 2001, he served in several R&D and management
positions in Motorola Semiconductor Israel Ltd. He received his B.Sc. in
Computer Engineering from the Technion, Israel Institute of Technology in 1986.
Board Practices and Committees
------------------------------
Teva's board of directors is currently comprised of 14 persons, five of
whom are being considered for election at this Annual Meeting. Ten of the board
members have been determined to be independent within the meaning of applicable
Nasdaq regulations. The board includes two Statutory Independent Directors, as
mandated under the Israeli Companies Law, which also requires that such
directors meet additional criteria to help ensure their independence. See "--
Statutory Independent Directors" below. The terms of the directors are set forth
in the table above.
All directors are entitled to review and retain copies of Teva's
documentation and examine Teva's assets, as required to perform their duties as
directors and to receive assistance, in special cases, from outside experts at
the expense of Teva (subject to approval by the board or by the appropriate
court).
Board Practices and Procedures. Teva's board members are generally elected
for terms of three years. Teva believes that this system of multi-year terms
allows Teva's directors to acquire and provide Teva with the benefit of a high
level of expertise with respect to its complex business.
Board Meetings. Meetings of the board of directors are generally held every
four to six weeks throughout the year, with additional special meetings
scheduled when required. The board held 15 meetings during 2004.
Executive Sessions of the Board. The independent members of the board met
in executive session (without management or non-independent directors'
participation) one time during 2004. They will continue to meet in executive
session on a regular basis.
Directors Service Contracts. Teva does not have any contracts with any of
its non-executive directors that would provide for benefits upon termination of
employment.
Home Country Practice. Teva is in compliance with corporate governance
standards as currently applicable to Teva under Israeli, U.S., SEC and Nasdaq
laws and regulations.
Communications with the Board. Shareholders or other interested parties can
contact any director or committee of the board by writing to them care of Teva
Pharmaceutical Industries Limited, 5 Basel Street, Petach Tikva, Israel, Attn:
Corporate Secretary or Internal Auditor.
-7-
Comments or complaints relating to Teva's accounting, internal controls or
auditing matters will also be referred to members of the audit committee as well
as other bodies of the Company. The board has adopted a global "whistleblower"
policy, which provides employees and others an anonymous means of communicating
with the audit committee.
Statutory Independent Directors
Under the Israeli Companies Law, publicly held Israeli companies such as
Teva are required to appoint not less than two Statutory Independent Directors.
All Statutory Independent Directors must also serve on the audit committee. All
other board committees must include at least one Statutory Independent Director.
Such Statutory Independent Directors are appointed by the general meetings by
the holders of a majority of Teva's ordinary shares and must meet certain
non-affiliation criteria - all as provided under Israeli law. A Statutory
Independent Director is appointed for an initial term of three consecutive
years, and may be reappointed for one additional three-year term. Regulations
promulgated under Israeli law set the minimum and maximum compensation that may
be paid to Statutory Independent Directors. At present, Dr. Leora (Rubin)
Meridor and Prof. Gabriela Shalev serve in this capacity.
Committees of the Board
Teva's Articles of Association provide that the board of directors may
delegate its powers to one or more committees of the board as it deems
appropriate to the extent such delegation is permitted under the Israeli
Companies Law. Each committee must include at least one Statutory Independent
Director. The board has appointed audit, compensation, nominating, finance,
science and technology, and community affairs committees. In 2004, the board and
all of its committees held a total of 47 meetings.
Audit Committee
The Israeli Companies Law mandates the appointment of an audit committee
comprised of at least three directors. The audit committee must include all
Statutory Independent Directors and may not include certain members, as provided
under Israeli Companies Law (such as the Chairman of the Board, or any director
who is employed by Teva or regularly provides services to Teva). Under the
Israeli Companies Law, the audit committee is responsible for overseeing the
business management practices of the Company in consultation with the Company's
internal auditor and independent registered public accounting firm, making
recommendations to the board to improve such practices and approving certain
transactions with interested parties.
In accordance with the Sarbanes-Oxley Act of 2002 and Nasdaq requirements,
Teva's audit committee is directly responsible for the appointment, compensation
and oversight of Teva's independent registered public accounting firm. In
addition, the audit committee is responsible for assisting the board in
monitoring Teva's financial statements, the effectiveness of its internal
control over financial reporting and its compliance with legal and regulatory
requirements. During 2004, Teva adopted an audit committee charter embodying
these responsibilities, which is attached hereto as Exhibit A. Prior to its
adoption of the charter, Teva relied on an exemption from the Nasdaq requirement
and instead followed its home country practice of following the above mandates
under the Israeli Companies Law. The audit committee charter sets forth the
scope of the committee's responsibilities, including its structure, processes
and membership requirements; purpose; and specific responsibilities and
authority with respect to registered public accounting firms, complaints
relating to accounting, internal accounting controls or auditing matters,
authority to engage advisors, and funding as determined by the audit committee.
-8-
The current members of Teva's audit committee are Dov Shafir (Chairman),
Prof. Gabriela Shalev, Dr. Leora (Rubin) Meridor, Dr. Max Reis, Prof. Moshe Many
and Prof. Meir Heth, all of whom have been determined to be independent as
defined by the applicable Nasdaq rules and those of the SEC. During 2004, the
committee held 10 meetings. The board has determined that Prof. Meir Heth is an
audit committee financial expert, as defined by applicable SEC regulations.
Compensation Committee
The compensation committee is responsible for determining, or recommending
for determination, the compensation of Teva's executive and other officers and
making proposals to the board with respect to the terms of employment of such
individuals. The current members of Teva's compensation committee are Prof. Meir
Heth (Chairman), Harold Snyder, Dov Shafir, Abraham E. Cohen and Prof. Gabriela
Shalev or, in her absence, Dr. Leora (Rubin) Meridor, all of whom have been
determined to be independent as defined by the applicable Nasdaq rules and those
of the SEC. During 2004, the committee held 12 meetings.
Nominating Committee
The role of the nominating committee is to recommend to the board the slate
of director nominees for election to the board of directors and to identify and
recommend candidates, subject to the approval of the board of directors, to fill
vacancies occurring between annual shareholder meetings. Before recommending an
incumbent, replacement or additional director, the committee will review his/her
qualifications, including capability, availability to serve, conflicts of
interest and other relevant factors. Members of the nominating committee are
Prof. Meir Heth (Chairman), Prof. Moshe Many, Dov Shafir, Abraham E. Cohen and
Dr. Leora (Rubin) Meridor or, in her absence, Prof. Gabriela Shalev, all of whom
have been determined to be independent as defined by the applicable Nasdaq rules
and those of the SEC. The committee held one meeting in 2004.
Finance Committee
The finance committee is responsible for overseeing financial strategies
and financing policies, as well as a variety of other financial-related matters.
The current members of the committee are Eli Hurvitz (Chairman), Dr. Leora
(Rubin) Meridor, Prof. Gabriela Shalev, Carlo Salvi and Prof. Meir Heth. The
committee held four meetings in 2004.
Science and Technology Committee
The science and technology committee is primarily engaged in the review and
analysis of the annual budgets and plans of innovative and generic R&D and
Teva's relationship with the scientific community. The current members of the
committee are Prof. Moshe Many (Chairman), Eli Hurvitz, Prof. Gabriela Shalev,
or in her absence, Dr. Leora (Rubin) Meridor, Prof. Michael Sela, Dr. Max Reis,
Dov Shafir, Abraham E. Cohen and Harold Snyder. The committee held three
meetings in 2004.
Community Affairs Committee
The community affairs committee is primarily engaged in the review and
oversight of Teva's programs relating to community and public policy issues.
These activities include financial and other participation with respect to
various medical, educational and cultural institutions and events. The current
members of the committee are Eli Hurvitz (Chairman), Ruth Cheshin, Prof.
Gabriela Shalev, Prof. Meir Heth, Dov Shafir, Leslie Dan and Prof. Michael Sela.
The committee held two meetings in 2004.
-10-
Code of Ethics
--------------
Teva has adopted a code of business conduct applicable to its executive
officers, directors and all other employees. A copy of the code is available to
every Teva employee on Teva's intranet site, upon request to its human resources
department, to investors by contacting Teva's investor relations department and
to others through the legal department or the internal auditor. Any waivers of
this code for executive officers or directors will be disclosed through the
filing of a Form 6-K. As referred to above, the board of directors has approved
a whistleblower policy, which functions in coordination with Teva's code of
business conduct and provides an anonymous means for employees and others to
communicate with various bodies of Teva, including the audit committee of its
board of directors.
PROPOSAL 5: APPROVAL OF LIABILITY INSURANCE
-------------------------------------------
The Israeli Companies Law requires shareholder approval of the purchase of
liability insurance for directors. The purchase of such insurance is standard
practice for companies similar to Teva, and Teva believes that the purchase of
such insurance is critical to maintaining and attracting quality directors and
officers. The audit committee of the board of directors approved, and the board
of directors approved and recommends that the shareholders approve, the purchase
of director's and officer's liability insurance for the directors and officers
of the Company and its subsidiaries, with the same existing annual coverage of
up to $250 million, for the period from June 1, 2005 through May 31, 2006.
PROPOSAL 6: APPROVAL OF THE TEVA PHARMACEUTICAL INDUSTRIES LIMITED 2005 OMNIBUS
LONG-TERM SHARE INCENTIVE PLAN
------------------------------
The board of directors has approved and recommends that the shareholders
approve the Company's 2005 Omnibus Long-Term Share Incentive Plan (the "Plan").
Substantially all of the ordinary shares and options available for grant under
the Company's current employee stock option plans have been granted. In addition
to the grant of stock options, the Plan also allows for the grant of performance
shares, performance share units, restricted stock, restricted stock units and
other equity-based awards. The following summary is not a complete description
of all provisions of the Plan and is qualified in its entirety by reference to
the text of the Plan, which is attached hereto as Exhibit B.
Term of the Plan
----------------
If approved by shareholders, the Plan will be effective as of August 1,
2005. No incentive would be granted under the Plan after July 31, 2010, although
the term and exercise of incentives that were previously granted may extend
beyond that date.
Shares Available for Issuance Under the Plan
--------------------------------------------
The Plan would provide for a maximum of 50 million ordinary shares (or
American Depository Shares representing ordinary shares ("ADSs")) in a "fungible
pool of shares" available for issuance thereunder (or pursuant to exercise of
options to be granted thereunder). That pool of shares will be reduced by one
share for every stock option that is granted, and "full-value" shares reduce the
pool by the ratio of the current share price to the Company's current option
Black-Scholes value, each as determined on or about the date of the grant of the
award. For example, if the Company's option Black-Scholes value is 33%, then
each "full-value" share reduces the pool by three shares. "Full-value"
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incentives consist of performance shares, performance share units, restricted
stock, restricted share units and other incentive awards denominated in full
ordinary shares or ADSs.
In no event may incentive awards representing more than 1.6% of Teva's
outstanding ordinary shares be granted in any calendar year.
Any ordinary shares under the Plan that are not purchased or awarded under
an incentive that has lapsed, expired, terminated or been canceled may be used
for the further grant of incentives under the Plan. Incentives and similar
awards issued by an entity that is merged into or with the Company, acquired by
the Company or otherwise involved in a similar corporate transaction with the
Company are not considered issued under the Plan.
Purpose
-------
The Plan is intended to encourage officers and key employees of the Company
and directors, officers and key employees of its subsidiaries and affiliates to
acquire the Company's ordinary shares or ADSs. The board believes that the Plan
will serve the interests of the Company and its shareholders because it allows
approximately 1,500 eligible participants to have a greater personal financial
interest in the Company through ownership of, or the right to acquire, its
ordinary shares or ADSs, which in turn will stimulate the efforts of the
participants on the Company's behalf, and maintain and strengthen their desire
to remain with the Company. The board also believes that the Plan will assist in
the recruitment of individuals who may be eligible to participate in the Plan.
It is intended that the Plan shall serve as the primary plan under which
equity-based awards are awarded on a worldwide basis to eligible participants
who are employed by or perform services for the Company or the Company's
subsidiaries and affiliates, following receipt of all regulatory approvals, to
the extent required.
General Administration
----------------------
Plan Administration. Under the Plan, the board of directors will have
exclusive authority to: (i) approve one or more subplans that will be
established in accordance with the overall terms of the Plan, to facilitate
local administration of the Plan in Israel and in various other jurisdictions in
which the Company and its subsidiaries operate, and to conform the broad
provisions of the Plan with legal and tax requirements of each such jurisdiction
(each a "Subplan"); (ii) annually allocate the portion of ordinary shares to be
specifically utilized in connection with each Subplan and determine the types of
incentive awards to be granted thereunder; (iii) annually establish broad
guidelines, policies and parameters that shall be applicable to all incentive
awards granted under the Subplans during the forthcoming year, as the board
deems appropriate (the "Annual Policies"); (iv) grant awards to the Company's
executive officers; (v) approve any changes to the Plan or any Subplan (other
than a change in the overall number of ordinary shares covered by the Plan), as
may be necessary to comply with legal or tax requirements or which they may
otherwise deem necessary and appropriate; and (vi) make determinations with
respect to adjustments of ordinary shares pursuant to the terms of the Plan. Any
of such authorities might be delegated to a committee comprised of "independent
directors" as defined under Nasdaq rules, and shall include at least one
Statutory Independent Director (as defined under Israeli law), subject and to
the extent such delegation is permitted under applicable law.
In all other respects, the Plan would be administered (a) at
the level of the Plan itself, by a committee appointed by the board as
determined in the last sentence of the preceding paragraph, and (b) at the
Subplan level by a committee appointed by the governing board of the local
Company subsidiary and consisting of not less than two members (each such
committee, as applicable, the "Committee"). The Committee will have the power,
subject to the terms of the Plan and any Annual Policies, to the extent such
policies have been adopted, to approve eligible participants, determine the type
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or types of incentives to be granted to each participant, and the terms and
conditions of any incentive granted, and interpret and administer the Plan or
applicable Subplan and any incentive award or other similar agreement. The terms
and provisions of incentives and the agreements evidencing incentives need not
be uniform among participants, whether or not such participants are similarly
situated. Any decision or action taken or to be taken by the Committee, arising
out of or in connection with the administration of the Plan or any Subplan,
shall, to the maximum extent permitted by applicable law, be within its
discretion and shall be final, binding and conclusive upon the Company, its
subsidiaries and all participants.
Eligibility
-----------
Eligible Participants. Directors, officers and key employees of the Company
and its subsidiaries and affiliates who have been approved by the Committee as
participants would be eligible to receive grants of incentives under the Plan.
No individual would at any time have a right to be selected for participation in
the Plan. Incentives granted to directors of the Company would be subject to the
prior approval of the shareholders of the Company. Participation in the Plan
would be limited to participants who have entered into a written agreement
evidencing the terms of an incentive award.
Types of Incentive Awards Available Under the Plan
--------------------------------------------------
Options. The board and the Committee may grant options under the Plan to
participants ("Options"). The exercise price of each Option would be determined
by the Committee; provided, that the exercise price shall not be less than 100%
of the fair market value of an ADS/ordinary share on the date the Option is
granted, or the grant thereof is approved, as applicable under the laws or
regulations of the various jurisdictions. The period of each Option would be
fixed by the Committee and would not exceed nine years from the date of grant
(the "Termination Date"), unless otherwise determined by the Committee.
Subject to any acceleration of Options in connection with a change in
control of the Company or other similar corporate transactions, Options granted
under the Plan will vest and become exercisable subject to vesting no earlier
than the second anniversary of the date of grant.
Unless otherwise determined by the Committee, if, prior to the Termination
Date, a participant ceases to be employed by the Company or a subsidiary or
affiliate, as applicable, for any reason other than death, disability,
retirement or cause, Options will remain exercisable, to the extent they were
exercisable at the time of cessation of employment, for a period not extending
beyond three months after the date of cessation of employment, and in no event
later than the Termination Date. If a participant's employment is terminated for
cause, or ceases to be employed by voluntary termination at a time when the
Company, or any subsidiary or affiliate, as applicable, is entitled to terminate
such participant's employment for cause, such participant's Options (both vested
and unvested Options) shall terminate immediately, unless prohibited by
applicable law. The terms and conditions under which a participant's Options
shall otherwise terminate in connection with any cessation of employment would
be provided in the participant's incentive award agreement.
Performance Share Awards. The board and the Committee may grant awards
under which payment shall be made in ADSs/ordinary shares if the performance of
the Company or any subsidiary, business unit, division or affiliate of the
Company approved by the board or the Committee during the award period meets
certain goals established by the Committee ("Performance Share Awards").
Performance goals may include share price, pre-tax profits, earnings per share,
return on shareholders' equity, return on assets, sales, net income or any
combination of the foregoing or any other financial or other measurement
established by the Committee ("performance goals"). At any time prior to the end
-12-
of an award period, the Committee may revise the performance goals and the
computation of payment if unforeseen events occur that have a substantial effect
on the performance of the Company or any subsidiary, business unit, division or
affiliate of the Company. The Committee will establish the method of calculating
the amount of payment to be made under a Performance Share Award if the
performance goals are met, including the fixing of a maximum payment, which
shall be expressed in terms of ADSs/ordinary shares. In order to receive
payment, a grantee of a Performance Share Award must remain in the employ of the
Company or any subsidiary or affiliate until the completion of the award period,
except that the Committee may, in its discretion, provide for a full or partial
payment where such an exception is deemed equitable. The Committee may, in its
discretion, at the time of the granting of a Performance Share Award, provide
that the cash equivalent of any dividends declared on the ordinary shares during
the award period shall be paid to the participant at the time the Performance
Shares become payable to the participant.
Performance Share Unit Awards. The board and the Committee may grant
performance share units (each, a "Performance Share Unit," and any award of
Performance Share Units is referred to as a "Performance Share Unit Award") to
participants. Each Performance Share Unit is a notional unit representing the
right to receive one ordinary share on a settlement date based upon the
satisfaction of the applicable performance goals. At any time prior to the end
of an award period, the Committee may revise the performance goals and the
computation of payment if unforeseen events occur that have a substantial effect
on the performance of the Company or any subsidiary, business unit, division or
affiliate of the Company. The Committee will establish the method of calculating
the amount of payment to be made under a Performance Share Unit Award if the
performance goals are met, including the fixing of a maximum payment, which
shall be expressed in terms of ADSs/ordinary shares. In order to receive
payment, a grantee of a Performance Share Unit Award must remain in the employ
of the Company or any subsidiary or affiliate until the performance goals are
satisfied, except that the Committee may, in its discretion, provide for a full
or partial payment where such an exception is deemed equitable. A Participant
who has been granted a Performance Share Unit Award shall have no rights other
than those of a general creditor of the Company. A Performance Share Unit
represents an unfunded and unsecured obligation of the Company, subject to the
terms of the participant's incentive award agreement.
Restricted Share Awards. The board and the Committee may grant restricted
ADSs/ordinary shares to a Participant ("Restricted Share Awards"). The Committee
may also designate whether any Restricted Share Award is intended to be
performance-based. A grantee of a Restricted Share Award (other than
performance-based awards) must remain in the employment of the Company,
subsidiary or affiliate during a period designated by the Committee in order to
retain the ADSs/ordinary shares under the Restricted Share Award; provided that,
unless specifically determined by the Committee, the Restricted Share Award will
be subject to vesting no earlier than the second anniversary of the date of
grant If the grantee leaves the employment of the Company, subsidiary or
affiliate prior to the end of such period, the Restricted Share Award would
terminate and the ADSs/ordinary shares would be returned immediately to the
Company, or cancelled. The Committee may also provide for complete or partial
exceptions to the employment restriction as it deems equitable. During the
restricted period, the grantee would be entitled to vote such ordinary shares
and, subject to the Committee's discretion in certain cases, receive dividends.
Furthermore, during such period, the grantee may not transfer such ordinary
shares, and each certificate for ADSs/ordinary shares issued shall contain a
legend giving appropriate notice of the restrictions in the grant.
Restricted Share Unit Awards. The board and the Committee may grant
restricted share units (each, a "Restricted Share Unit," and any award of
Restricted Share Units is referred to as a "Restricted Share Unit Award") to
participants. Each Restricted Share Unit is a notional unit representing the
right to receive one ordinary share on a settlement date. Upon a date or dates
on or following the expiration of a restricted period during which a grantee
must remain in the employment of the Company, subsidiary or affiliate, the
-13-
Company shall settle the Restricted Share Unit Award, unless earlier forfeited,
by delivering: (i) a number of ordinary shares equal to the number of Restricted
Share Units subject to the Restricted Share Unit Award then vested and not
otherwise forfeited; and (ii) if applicable, a number of ordinary shares having
a value equal to any unpaid dividends declared on such ordinary shares during
the restricted period. Unless specifically determined by the Committee, the
Restricted Share Unit will be subject to vesting no earlier than the second
anniversary of the date of grant. The Committee may, in its discretion, provide
for complete or partial exceptions to the employment restriction as it deems
equitable. A Participant who has been granted a Restricted Share Unit Award
shall have no rights other than those of a general creditor of the Company. A
Restricted Share Unit represents an unfunded and unsecured obligation of the
Company, subject to the terms of the participant's incentive award agreement.
The Committee may designate whether any Restricted Share Unit Award is intended
to be performance-based.
Other Share-Based Awards. The board may establish other share-based awards
payable in ADSs/ordinary shares, which may be granted to participants by the
board or Committee based on such terms and conditions not inconsistent with the
terms of the Plan and which may be made as additional compensation for services
rendered by a participant or may be in lieu of cash or other compensation.
Other Information
-----------------
Amendments to or Termination of the Plan. The board may from time to time
amend the Plan as permitted by applicable statutes, rules and regulations,
except that it may not, without the consent of the participants affected, revoke
or alter, in a manner unfavorable to participants, any incentives then
outstanding. The board also may not amend the Plan where shareholder approval is
required by applicable law or regulation. The board may discontinue the Plan at
any time.
Transferability. Incentives granted under the Plan are not assignable or
transferable, except for limited circumstances upon a grantee's death or as
determined by the Committee pursuant to the terms of any written incentive award
agreement.
Change in Control Provisions. The terms of any incentive award agreement
shall provide in the award agreement that, upon a Change in Control (as defined
below) of the Company, all restrictions with respect to Options, Restricted
Share Awards, Restricted Share Unit Awards and Other Share-Based Awards, as
applicable, shall lapse and such awards shall become vested and exercisable in
full; provided, however, that (1) the participant is employed on the effective
date of the Change in Control, or has incurred an involuntary termination of
employment without cause on account of the Change in Control within the three
months prior to the effective date of the Change in Control, and (2) the terms
and conditions of the incentive award agreement for the applicable incentive
award do not prohibit such treatment. In addition, the board has the discretion
to terminate and cash-out outstanding Options upon a Change in Control.
Upon a Change in Control, the successor company may assume or substitute
for an Option. An Option shall be considered assumed or substituted for if
following the Change in Control the award confers the right to purchase, for
each ordinary share subject to the Option, immediately prior to the Change in
Control, the common stock of the successor company; provided, that if such
consideration received in the transaction constituting a Change in Control is
not solely common stock of the successor company, the board or the Committee
may, with the consent of the successor company, provide that the consideration
to be received upon the exercise of an Option, for each ordinary share subject
thereto, will be solely common stock of the successor company substantially
equal in fair market value to the per share consideration received by holders of
ordinary shares in the transaction constituting a Change in Control. The
determination of such substantial equality of value of consideration shall be
made by the board in its sole discretion and its determination shall be
conclusive and binding.
-14-
With respect to Performance Share Awards and Performance Share Unit Awards,
the terms of the incentive award agreement shall provide that upon a Change in
Control of the Company, a pro rata portion of the Performance Share Award or
Performance Share Unit Award, as applicable, shall be considered earned and
payable, based on the portion of the award period completed as of the date of
the Change in Control. The shares based on the portion of the award period not
yet completed will be assumed, converted, or replaced with restricted stock or
restricted stock units in the successor's company and will remain subject to
performance goals for the remainder of the award period; provided, however, that
if the successor company does not assume, convert or replace the remaining
Performance Share Awards or Performance Share Unit Awards, the full award will
be considered earned and payable upon the Change in Control.
For purposes of the Plan, a "Change in Control" is defined to mean a change
in ownership or control of the Company effected through any of the following
transactions:
A merger, consolidation or other reorganization approved by the Company's
shareholders, unless securities representing more than fifty percent (50%) of
the total combined voting power of the voting securities of the successor
company are immediately thereafter beneficially owned, directly or indirectly
and in substantially the same proportion, by the persons who beneficially owned
the Company's outstanding voting securities immediately prior to such
transaction; or
The sale, transfer or other disposition of all or substantially all of the
Company's assets in complete liquidation or dissolution of the Company; or
Any transaction or series of related transactions pursuant to which any
person or any group of persons comprising a "group" within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company or
a person that, prior to such transaction or series of related transactions,
directly or indirectly controls, is controlled by or is under common control
with, the Company) becomes directly or indirectly the beneficial owner (within
the meaning of the Exchange Act) of securities possessing (or convertible into
or exercisable for securities possessing) more than fifty percent (50%) of the
total combined voting power of the Company's securities outstanding immediately
after the consummation of such transaction or series of related transactions,
whether such transaction involves a direct issuance from the Company or the
acquisition of outstanding securities held by one or more of the Company's
shareholders; or
The individuals who constituted the Company's board of directors as of the
effective date of the Plan (the "Incumbent Board") cease for any reason to
constitute at least a majority of the directors of the Company; provided,
however, that individuals whose election, or whose nomination for election by
the Company's shareholders, was approved by a vote of at least two-thirds (2/3)
of the Incumbent Board shall be considered, for purposes of the Plan, members of
the Incumbent Board; and provided, further, 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 the Exchange Act) (an "Election Contest") or other actual or
threatened solicitation of proxies or consents by or on behalf of a person or
entity other than the board of the Company (a "Proxy Contest"), including by
reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest.
-15-
United States Federal Income Taxes
----------------------------------
The following is a brief discussion of the U.S. Federal income tax
consequences of transactions relating to options under the Plan based on the
Internal Revenue Code of 1986, amended (the "Code"). The Plan is not qualified
under Section 401(a) of the Code. This discussion is not intended to be
exhaustive and does not describe state or local tax consequences.
With respect to the Options, which are nonqualified options and not
incentive stock options that satisfy the requirements of Code Section 422: (1)
no income is realized by the participant at the time the Option is granted; (2)
generally, at exercise, ordinary income is realized by the participant in an
amount equal to the difference between the exercise price paid for the ordinary
shares and the fair market value of the ordinary shares on the date of exercise,
and the participant's employer is generally entitled to a tax deduction in the
same amount subject to applicable tax withholding requirements; and (3) at sale,
appreciation (or depreciation) after the date as of which amounts are includable
in income is treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
PROPOSAL 7: AMENDMENT TO THE COMPANY'S ARTICLES OF ASSOCIATION
(INDEMNIFICATION OF DIRECTORS AND OFFICERS)
-------------------------------------------
In March 2005, the Israeli Legislature adopted an amendment to the 1999
Israeli Companies Law that codified a company's ability to provide
indemnification to corporate officers for expenses incurred in connection with
certain kinds of governmental inquiries or investigations in certain
circumstances. The proposed amendment to Section 103 of Teva's Articles of
Association incorporates the provisions of this new legislation. At the same
time, a number of other language and phrasing amendments have been included in
the proposed amendment to Section 103 to make the text more closely parallel the
provisions of the 1999 Israeli Companies Law, as amended. The proposed amendment
has been approved by the audit committee and the board of directors of the
Company.
The proposed revised version of Section 103 of Teva's Articles is set forth
below. The amendment is shown in English translation; however, the Hebrew
version of the Articles is binding on the Company. Note that under both Israeli
Law and the Company's Articles, the term "officer" encompasses both officers and
directors.
"103. Subject to the provisions of the Law, the Company shall be entitled
to agree in advance to indemnify any officer of the Company, as a result of a
liability or an expense imposed on him or her or expended by him or her as a
result of any action which was performed by said officer in his or her capacity
as an officer of the Company, in respect of any of the following:
(a) Financial liability imposed upon said officer in favor of another
person by virtue of a decision by a court of law, including a decision
by way of settlement or a decision in arbitration which has been
confirmed by a court of law, provided that the agreement to indemnify
shall be limited to events that, in the opinion of the Board of
Directors of the Company, are foreseeable, in light of the Company's
activities at the time that the agreement of indemnification was
given, and shall further be limited to amounts or criteria that the
Board of Directors has determined to be reasonable under the
circumstances, and provided further that in the agreement of
indemnification the events that the Board of Directors believes to be
foreseeable in light of the Company's activities at the time that the
agreement of indemnification was given are mentioned, as is the amount
-16-
or criteria that the Board of Directors determined to be reasonable
under the relevant circumstances.
(b) Reasonable litigation expenses, including attorney fees, expended by
the officer as a result of an inquiry or a proceeding conducted in
respect of such officer by an authority authorized to conduct same,
which was concluded without the submission of an indictment against
said officer and either (i) without any financial penalty being
imposed on said officer instead of a criminal proceeding (as such term
is defined in the Israeli Companies Law, 1999), or (ii) with a
financial penalty being imposed on said officer instead of a criminal
proceeding, in respect of a criminal charge which does not require
proof of criminal intent.
(c) Reasonable litigation expenses, including attorney fees, which said
officer shall have expended or shall have been obligated to expend by
a court of law, in any proceedings which shall have been filed against
said officer by or on behalf of the Company or by another person, or
with regard to any criminal charge of which said officer was
acquitted, or with regard to any criminal charge of which said officer
was convicted which does not require proof of criminal intent."
PROPOSAL 8: AMENDMENT TO THE COMPANY'S ARTICLES OF ASSOCIATION
(INCREASE IN REGISTERED SHARE CAPITAL)
--------------------------------------
The board of directors has approved an increase in the registered share
capital of the Company by NIS 50,000,000 to a total of NIS 150,000,000 by the
creation of 500,000,000 additional ordinary shares of par value NIS 0.1 each,
and the amendment of Article 6 of the Company's Articles of Association in
accordance with the foregoing so that it will read as follows:
"The registered share capital of the Company is NIS 150,000,000 (one
hundred and fifty million New Israeli Shekels) consisting of 1,500,000,000
shares of NIS 0.1 par value each, divided as follows:
1,499,575,693 Ordinary Shares, par value NIS 0.1 per share
424,247 Ordinary "A" Shares, par value NIS 0.1 per share
60 Deferred shares, par value NIS 0.1 per share."
If the amendment is approved by the affirmative vote of at least 75% of the
shares voting at the Annual Meeting in person or by proxy, the board would then
have the power, without soliciting shareholder approval, to issue additional
authorized shares, except to the extent that such approval may be required by
law or Nasdaq or other regulations, and such additional authorized shares may be
issued for such consideration, cash or otherwise, at such times and in such
amounts as the board in its discretion may determine. The future issuance by the
Company of ordinary shares may dilute the equity ownership of current
shareholders of the Company.
Over the past several years, the Company has issued, or reserved for
issuance, ordinary shares in connection with stock splits, acquisitions and
financings. These include the 100% stock splits effected in February 2000, in
December 2002 and most recently in June 2004. In addition, the Company issued an
aggregate of 46,657,668 ADRs in connection with the acquisition of Sicor, Inc.
in January 2004 and further reserved for issuance an aggregate of 30,133,232
ordinary shares upon conversion of the $1.1 billion of convertible debentures
sold in connection with the Sicor acquisition. As a result of such transactions,
the Company has approximately 266.8 million shares remaining available for
-17-
future issuance on a fully diluted basis. Accordingly, in order to maintain
flexibility for future stock splits, acquisitions and financings, the board is
recommending that the Company's shareholders approve the proposed amendment.
PROPOSAL 9: APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
------------------------------------------------------------------------
The audit committee of the board of directors recommends that the
shareholders appoint Kesselman & Kesselman, a member of PwC, as the Company's
independent registered public accounting firm for the year ending December 31,
2005, and further authorize the audit committee to determine their compensation
and the board of directors to ratify such determination.
Representatives of PwC are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so and will
also be available to respond to appropriate questions from shareholders.
Independent Registered Public Accounting Firm Fees
--------------------------------------------------
Teva paid the following fees for professional services rendered by PwC, as
Teva's independent registered public accounting firm, for the years ended
December 31, 2004 and 2003:
2004 2003
---- ----
($ in thousands)
Audit Fees $ 3,816 $ 2,287
Audit-Related Fees 808 1,182
Tax Fees 5,133 4,871
All Other Fees 25 16
--------------------------- ----------- -----------
Total $ 9,782 $ 8,356
The audit fees for the years ended December 31, 2004 and 2003 were for
professional services rendered for the audits of Teva's annual consolidated
financial statements, review of consolidated quarterly financial statements,
statutory audits of Teva and its subsidiaries, issuance of comfort letters,
consents and assistance with review of documents filed with the SEC.
The audit-related fees for the years ended December 31, 2004 and 2003 were
for assurance and related services related to due diligence regarding mergers
and acquisitions, accounting consultations and audits in connection with
acquisitions, employee benefit plan audits, internal control reviews, attest
services that are not required by statute or regulation and consultations
concerning financial accounting and reporting standards.
Tax fees for the years ended December 31, 2004 and 2003 were for services
related to tax compliance, including the preparation of tax returns and claims
for refund, and tax planning and tax advice, including assistance with tax
audits and appeals, advice related to mergers and acquisitions, tax services for
employee benefit plans and assistance with respect to requests for rulings from
tax authorities.
All other fees for the years ended December 31, 2004 and 2003 were for
general guidance related to accounting issues and the purchase of accounting
software and human resources benchmarking software.
-18-
Policy on Pre-Approval of Audit and Non-Audit Services of Independent
Registered Public Accounting Firm
---------------------------------
Teva's audit committee is responsible for the oversight of its independent
registered public accounting firm's work. The audit committee's policy is to
pre-approve all audit and non-audit services provided by PwC. These services may
include audit services, audit-related services, tax services and all other
services. The audit committee sets forth the basis for its pre-approval in
detail, listing the particular services or categories of services which are
pre-approved, and setting forth a specific budget for such services. Additional
services may be pre-approved by the audit committee on an individual basis. Once
services have been pre-approved, PwC and Teva's management then report to the
audit committee on a periodic basis regarding the extent of services actually
provided in accordance with the applicable pre-approval, and regarding the fees
for the services performed.
-19-
Exhibit A
---------
Teva Pharmaceutical Industries Limited
Audit Committee Charter
Status
The Audit Committee is a committee of the Board of Directors (the "Board").
Membership
The Audit Committee shall consist of three (3) or more directors (other
than the Chairman of the Board), all of whom, in the judgment of the Board,
shall be independent in accordance with the requirements of the Israeli
Companies Law - 1999 (the "Companies Law"), the U.S. Securities and Exchange
Commission (the "SEC") and NASDAQ. The Committee shall include the Company's two
(2) independent external directors ("Statutory Independent Directors") elected
in accordance with the Companies Law. Each member shall have, in the judgment of
the Board, the ability to read and understand the Company's basic financial
statements. A member of the Audit Committee shall be, in the judgment of the
Board, an audit committee financial expert in accordance with the rules and
regulations of the SEC and may also serve as the audit committee financial
expert who, in the judgment of the Board, shall have accounting or related
financial management expertise in accordance with NASDAQ listing standards. The
Chairman of the Audit Committee (the "Chairman") shall be designated by the
Board.
Purpose
The Audit Committee shall represent and assist the Board with the oversight
of: (a) the integrity of the Company's financial statements; (b) the
qualifications and independence of the Company's independent registered public
accounting firm; (c) the effectiveness of the Company's internal controls; and
(d) the performance of the Company's internal audit function and its independent
registered public accounting firm. Furthermore, in accordance with the Companies
Law, the Audit Committee shall approve any transaction or act requiring its
approval and find defects, to the extent such exist, in the business management
of the Company, in consultation with the Company's independent registered public
accounting firm and internal auditor, and propose to the Board ways of
correcting them. Except as otherwise required by applicable laws, regulations or
listing standards, all major decisions are considered by the Board as a whole.
Responsibilities
1. Select and retain (subject to approval by the Company's shareholders),
and terminate when appropriate, the independent registered public accounting
firm, set the independent registered public accounting firm's compensation
(subject to approval by the Company's shareholders and/or the Board), oversee
and evaluate the work of the independent registered public accounting firm and
pre-approve all audit services to be provided by the independent registered
public accounting firm.
2. Pre-approve all permitted non-audit services to be performed by the
independent registered public accounting firm and establish policies and
procedures for the engagement of the independent registered public accounting
firm to provide permitted audit and non-audit services.
3. At least annually, receive and review: (a) a report by the independent
registered public accounting firm describing the independent registered public
accounting firm's internal quality-control procedures and any material issues
raised by the most recent internal quality-control review, peer review or Public
Company Accounting Oversight Board review of the independent registered public
accounting firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, in respect of one or
more independent audits carried out by the firm, and any steps taken to deal
with any such issues; and (b) other required reports from the independent
registered public accounting firm.
4. At least annually, consider the independence of the independent
registered public accounting firm, including whether the provision by the
independent registered public accounting firm of permitted non-audit services is
compatible with its independence, and obtain and review a report from the
independent registered public accounting firm describing all relationships
between the auditors and the Company.
5. Review with the independent registered public accounting firm: (a) the
scope and results of the audit; (b) significant financial reporting issues and
judgments made in connection with the preparation of the Company's financial
statements, including critical accounting policies,
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judgments made in connection with the preparation of the financial statements
and analyses of the effects of alternative U.S. generally accepted accounting
principles ("U.S. GAAP"); (c) any problems or difficulties that the independent
registered public accounting firm encountered in the course of the audit work,
and management's response; (d) any accounting adjustments that were proposed by
the independent registered public accounting firm but were "passed" (as
immaterial or otherwise) and any material communications between the audit team
and the independent registered public accounting firm's national office
respecting auditing or accounting issues presented by the engagement; and (e)
any questions, comments or suggestions the independent registered public
accounting firm may have relating to the internal controls, or accounting
practices and procedures, of the Company or its subsidiaries.
6. Review, at least annually, the scope and results of the internal audit
program, including then current and future programs of the Company's internal
auditor, procedures for implementing accepted recommendations made by the
independent registered public accounting firm, and any significant matters
contained in reports from the internal auditor.
7. Review with the independent registered public accounting firm, the
internal auditor and management: (a) the adequacy and effectiveness of the
systems of internal controls (including any significant deficiencies, material
weaknesses and significant changes in internal controls reported to the Audit
Committee by the independent registered public accounting firm or management),
accounting practices, and disclosure controls and procedures, and management
reports thereon, of the Company and its subsidiaries; (b) any material written
communications between the independent registered public accounting firm and
management, such as any management letter or schedule of unadjusted differences;
and (c) current accounting trends and developments; and take such action with
respect thereto as may be deemed appropriate.
8. Review with management and the independent registered public accounting
firm the annual and quarterly financial statements of the Company, including:
(a) the Company's disclosures under "Operating and Financial Review and
Prospects"; (b) any material changes in accounting principles or practices used
in preparing the financial statements prior to the filing of a report on Form
20-F or Form 6-K with the SEC; and (c) the items required by Statement of
Auditing Standards 61 as in effect at that time, in the case of the annual
statements, and Statement of Auditing Standards 100 as in effect at that time,
in the case of the quarterly statements.
9. Recommend to the Board, based on the review described in paragraphs 4
and 8 above, whether the financial statements should be included in the annual
report on Form 20-F.
10. Review from time to time with the Company's management earnings press
releases, as well as Company policies with respect to earnings press releases,
financial information and earnings guidance provided to analysts and rating
agencies.
11. Discuss the Company's policies with respect to risk assessment and risk
management, including any off-balance sheet arrangements, and review contingent
liabilities and risks that may be material to the Company and major legislative
and regulatory developments which could materially impact the Company's
contingent liabilities and risks.
12. Review: (a) the status of compliance with laws, regulations, and
internal procedures; and (b) the scope and status of systems designed to promote
the Company's compliance with laws, regulations and internal procedures,
including the Company's Code of Business Conduct, through receiving reports from
management, legal counsel and third parties, as determined by the Audit
Committee.
13. Establish procedures for the confidential and anonymous receipt,
retention and treatment of complaints regarding the Company's accounting,
internal controls and auditing matters, as well as for the confidential and
anonymous submission by the Company's employees of concerns regarding
questionable accounting or auditing matters.
14. Establish policies for the hiring of employees and former employees of
the independent registered public accounting firm.
15. Obtain the advice and assistance, as appropriate, of independent
counsel and other advisors as necessary to fulfill the responsibilities of the
Audit Committee, and receive appropriate funding from the Company, as determined
by the Audit Committee, for the payment of compensation to any such advisors.
16. Conduct an annual performance evaluation of the Audit Committee and
evaluate the adequacy of its charter.
17. Approve, in accordance with the Companies Law and NASDAQ requirements,
and subject to
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Board and/or shareholder approval to the extent required, any:
a. proposed transaction in which an executive officer or director of the
Company (an "office holder") has a direct or indirect personal
interest and which is outside the ordinary course of the Company's
business, and which is not in accordance with market conditions or may
materially influence the earnings, assets or liabilities of the
Company;
b. material action that may otherwise be deemed to constitute a breach of
the duty of loyalty of any office holder, provided that such action is
done in good faith and does not cause the Company harm;
c. terms of service of directors (including terms of their employment as
officers of the Company); and
d. indemnification of, insurance for, and exemptions to, office holders;
subject, in each case, to the condition that any such transaction does not
harm the Company's welfare, as determined by the Audit Committee. The Audit
Committee shall not be entitled to grant these approvals unless at least
one of the two Statutory Independent Directors was present at the meeting
in which the approval was given.
Meetings
The Audit Committee shall meet at least six (6) times each year and at such
other times as it deems necessary to fulfill its responsibilities. The Company's
internal auditor and the independent registered public accounting firm shall be
given notice of Audit Committee meetings and shall be entitled to participate
therein, unless the Audit Committee determines to exclude them from all or any
part of the meeting. Upon the request of the Company's internal auditor to
convene a meeting of the Audit Committee to discuss a particular matter, the
Chairman shall convene such meeting within a reasonable time following the date
of the request, provided that the Chairman shall believe that there is a good
reason for such a meeting. The Audit Committee shall periodically meet
separately, in executive session, with management, the internal auditor and the
independent registered public accounting firm. The Committee shall periodically
report to the Board with respect to its activities and make recommendations to
the Board, as appropriate.
Limitation of Committee's Role
While the Audit Committee has the authority, powers and responsibilities
set forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements and
disclosures are complete, accurate, and in accordance with U.S. GAAP and
applicable legal, accounting, and other requirements. These are the
responsibilities of the Company's management and the independent registered
public accounting firm.
Charter Amendment
Any member of the Audit Committee may submit proposed Charter amendments to
the Board. The Board shall circulate any proposed Charter amendment to members
of the Committee immediately upon receipt. By a majority vote, the Board may
approve amendments to this Charter.
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Exhibit B
---------
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
2005 OMNIBUS LONG-TERM SHARE INCENTIVE PLAN
1. Purpose
-------
The Teva Pharmaceutical Industries Limited 2005 Omnibus Long-Term Share
Incentive Plan (the "Plan") is intended to encourage directors, officers and key
employees of Teva Pharmaceutical Industries Limited (the "Company") and its
subsidiaries and affiliates to acquire the Company's ordinary shares, par value
NIS 0.1 ("Ordinary Shares"), or American Depositary Shares ("ADSs") representing
Ordinary Shares. Each ADS currently represents one Ordinary Share. It is
believed that the Plan will serve the interests of the Company and its
shareholders because it allows Participants (as defined in Section 3 below) to
have a greater personal financial interest in the Company through ownership of,
or the right to acquire, its Ordinary Shares or ADSs, which in turn will
stimulate the efforts of the Participants on the Company's behalf, and maintain
and strengthen their desire to remain with the Company. It is believed that the
Plan also will assist in the recruitment of individuals who may be eligible to
participate in the Plan.
It is intended that the Plan shall serve as the primary plan under which
equity-based awards are awarded on a worldwide basis to Participants who are
employed by or perform services for the Company or the Company's subsidiaries
and affiliates.
2. Administration
--------------
The Board of Directors of the Company (the "Board") will have exclusive
authority to (i) approve one or more subplans that will be established, within
the parameters and according to the overall terms and provisions of the Plan, to
facilitate local administration of the Plan in Israel and in various other
jurisdictions in which the Company and its subsidiaries operate, and to conform
the broad provisions of the Plan with legal and tax requirements of each such
jurisdiction (each a "Subplan"); (ii) annually allocate from within the
aggregate number of Ordinary Shares covered by the Plan, a portion of such
Ordinary Shares to be specifically utilized in connection with each of the
Subplans, and determine the types of Incentives (as defined in Section 5 below)
to be granted; (iii) annually establish such broad overriding policies, broad
guidelines or parameters that shall be applicable to all Incentives granted
under the Subplans during the forthcoming year as the Board may deem appropriate
(the "Annual Policies"); (iv) grant awards to executive officers of the Company;
(v) approve any supplements to or amendments, restatements or alterations of the
Plan or any such Subplan (other than a change in the overall number of Ordinary
Shares covered by the Plan), as may be necessary to comply with legal or tax
requirements or which they may otherwise deem necessary and appropriate, and
(vi) make determinations with respect to adjustments of Ordinary Shares pursuant
to Section 6(b). Any such actions or authority may be delegated to a committee
comprised of "independent directors" as defined under the rules and regulations
of the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), and shall include at least one Statutory Independent Director (as
defined under Israeli law), subject and to the extent such delegation is
permitted under applicable law.
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In all other respects, the Plan shall be administered (a) at the level of
the Plan itself, by a committee appointed by the Board as determined in the last
sentence of the preceding paragraph, and (b) at the Subplan level by a committee
appointed by the governing board of the local Company subsidiary and consisting
of not less than two members (each such committee, as applicable, the
"Committee"). The Committee shall have the power, within the parameters and
terms and conditions of the Plan and any Annual Policies, to the extent that
such policies may have been adopted, to (i) approve the Participants to whom
Incentives may be granted under the Plan (or any Subplan); (ii) determine the
type or types of Incentives to be granted to each Participant; (iii) determine
the terms and conditions of any Incentive granted; and (iv) interpret and
administer the Plan or applicable Subplan and any instrument or agreement
entered into under or in connection with the Plan or any such Subplan, including
any Incentive award agreement. The terms and provisions of Incentives and the
agreements evidencing Incentives need not be uniform and may be made selectively
among Participants who receive, or are eligible to receive, Incentives under the
Plan or any Subplan, whether or not such Participants are similarly situated.
The Committee shall have the responsibility of construing and interpreting
the Plan and any Subplan, including the right to construe disputed Plan
provisions, and of establishing, amending and construing such rules and
regulations as it may deem necessary or desirable for the proper administration
of the Plan or any Subplan. Any decision or action taken or to be taken by the
Committee, arising out of or in connection with the construction,
administration, interpretation and effect of the Plan or any Subplan and of its
rules and regulations, shall, to the maximum extent permitted by applicable law,
be within its absolute discretion and shall be final, binding and conclusive
upon the Company, or the relevant Company subsidiary, all Participants and any
person claiming under or through any Participant.
For the purpose of this Section and all subsequent Sections, (i) the Plan
shall be deemed to include this Plan and any Subplans, supplements to or
amendments, restatements or alternative versions of this Plan or any Subplan
approved by the Board which, in the aggregate, shall constitute one Plan
governed by the terms set forth herein, and (ii) the Committee shall be deemed
to include such other governing board (or a sub-committee of such board)
pursuant to which its authority under the Plan has been delegated, as permitted
by applicable law and the rules and regulations of NASDAQ.
3. Eligibility
-----------
(a) Participants. Directors, officers and key employees of the Company and
its subsidiaries and affiliates who have been approved by the Committee as
participants (collectively referred to as "Participants" and individually as a
"Participant") shall be eligible to receive grants of Incentives under the Plan.
Incentives granted to directors of the Company shall be subject to the prior
approval of the shareholders of the Company. Once such approval is obtained, the
Ordinary Shares subject to Incentives shall count against the maximum number of
Ordinary Shares permitted to be issued under the Plan pursuant to Section 6(a).
Participation in the Plan shall be limited to Participants who have entered into
a written agreement evidencing the terms of an Incentive award granted pursuant
to the terms of the Plan. However, no individual shall at any time have a right
to be selected for participation in the Plan.
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(b) No Right to Continued Employment. Nothing in the Plan shall interfere
with or limit in any way the right of the Company or its subsidiaries or
affiliates to terminate the employment of a Participant at any time, nor confer
upon any Participant the right to continue in the employ of the Company or its
subsidiaries or affiliates, as applicable. No director, officer or key employee
shall have a right to receive an Incentive or any other benefit under this Plan
or, having been granted an Incentive or other benefit, to receive any additional
Incentive or other benefit. Except as may be otherwise specifically stated in
any other employee benefit plan, policy or program, neither any Incentive under
this Plan nor any amount realized from any such Incentive shall be treated as
compensation for the purpose of calculating an employee's benefit under any such
benefit plan, policy or program.
4. Term of the Plan
----------------
This Plan shall be effective as of August 1, 2005, subject to the approval
of the Plan by the shareholders of the Company at the 2005 Annual Meeting (the
"Effective Date"). No Incentive shall be granted under the Plan after July 31,
2010, but the term and exercise of Incentives granted theretofore may extend
beyond that date.
5. Incentives
----------
Incentives under the Plan may be granted in any one or a combination of the
following awards: (a) Share Options; (b) Performance Share Awards; (c)
Performance Share Unit Awards; (c) Restricted Share Awards; (e) Restricted Share
Unit Awards; and (f) other Share-Based Awards (collectively, "Incentives"). All
Incentives shall be subject to the terms and conditions set forth in the Plan
and in any Incentive award agreement executed by the Participant and the Company
and such other terms and conditions as may be established by the Committee.
6. Ordinary Shares Available for Incentives; Adjustments; Delay in Delivery;
-------------------------------------------------------------------------
Limit on Aggregate Incentives and Change in Control Provisions
--------------------------------------------------------------
(a) Ordinary Shares Available. Subject to the provisions of Section 6(b),
the maximum number of Ordinary Shares (or ADSs representing Ordinary Shares)
that may be issued under the Plan is 50 million in a fungible pool of Ordinary
Shares. The maximum number of available Ordinary Shares will be reduced by one
Ordinary Share for every Share Option that is awarded, and any award other than
a Share Option (each, a "Full-Value Award") shall reduce the pool by the ratio
of the current fair market value of an Ordinary Share (determined pursuant to
Section 7(b)) to the current Black-Scholes value of a Share Option, determined
on or about the date on which the Full-Value Award is granted (for example, in
the event the Black-Scholes value of a Share Option is 33% on or about the date
of grant, a Full-Value Award representing one Ordinary Share will reduce the
pool by three Ordinary Shares). In no event may Incentives representing more
than 1.6% of the Company's then outstanding Ordinary Shares be granted to
Participants in any calendar year. Any Ordinary Shares under this Plan that are
not purchased or awarded under an Incentive that has lapsed, expired, terminated
or been canceled may be used for the further grant of Incentives under the Plan.
Incentives and similar awards issued by an entity that is merged into or with
the Company, acquired by the Company or otherwise involved in a similar
corporate transaction with the Company are not considered issued under this
Plan. Ordinary Shares under this Plan may be delivered by the Company from its
authorized and
B-3
newly issued Ordinary Shares or from issued and reacquired Ordinary Shares held
as treasury stock, or both. In no event shall fractional shares be issued under
the Plan.
(b) Adjustment of Ordinary Shares. The aggregate number of ADSs/Ordinary
Shares that may be purchased or acquired pursuant to Incentives granted
hereunder, the number of ADSs/Ordinary Shares covered by each outstanding
Incentive and the price per share with respect to any Share Option shall be
appropriately adjusted for any increase or decrease in the number of outstanding
Ordinary Shares resulting from stock splits, recapitalizations, reorganizations
or any other subdivision or consolidation of Ordinary Shares or for other
capital adjustments or payments of stock dividends or distributions or other
increases or decreases in the outstanding Ordinary Shares effected without
receipt of consideration by the Company. Any adjustment shall be conclusively
determined by the Board in its sole discretion.
(c) Delay in Delivery.
(i) The Company is relieved from any liability for the nonissuance or
nontransfer, or for any delay in the issuance or transfer of any ADSs/Ordinary
Shares subject to Incentives, resulting from the inability of the Company to
obtain, or from any delay in obtaining, from any regulatory body having
jurisdiction or authority, any requisite approval to issue or transfer any such
ADSs/Ordinary Shares, if counsel for the Company deems such approval necessary
for the lawful issuance or transfer thereof.
(ii) Without limiting the generality of the foregoing, the Company shall
not have any obligation or liability as a result of any delay in issuing any
certificate evidencing ADSs/Ordinary Shares or in the delivery thereof to
Participants, or any act or omission of the Company-designated brokerage firm in
relation to the ADSs/Ordinary Shares.
(d) Limit on Aggregate Incentives. In any calendar year, subject to
adjustment pursuant to Section 6(b), aggregate Incentives granted to
Participants may not cover more than 1.6% of the Company's then outstanding
Ordinary Shares.
(e) Change in Control Provisions.
(i) Impact of Change in Control on Share Options, Restricted Share Awards,
Restricted Share Unit Awards and other Share-Based Awards. The terms of each
Incentive shall provide in the Incentive award agreement evidencing the
Incentive that, upon a Change in Control (as defined below), (a) Share Options
outstanding as of the date of the Change in Control shall become fully vested
and exercisable (b) restrictions on Restricted Share Awards and Restricted Share
Unit Awards shall lapse and the Restricted Share Awards and Restricted Share
Unit Awards shall become free of all restrictions and limitations and become
vested, and (c) the restrictions and other conditions applicable to any other
Share-Based Awards shall lapse, and such other Share-Based Awards shall become
free of all restrictions, limitations or conditions and become fully vested in
full and transferable to the full extent of the original grant, subject in each
case to any terms and conditions contained in the Incentive award agreement
evidencing such Incentive, including but not limited to a condition that such
treatment will apply only if the Participant remains employed on the effective
date of the Change in Control or has incurred an involuntary termination of
employment without cause on account of the Change in Control, as
B-4
determined by the Board or the Committee in its discretion, within a period of
up to 3 months prior to the effective date of the Change in Control.
Notwithstanding any other provision of the Plan, the Board or the Committee in
its discretion, may determine that, upon the occurrence of a Change in Control,
each Share Option outstanding shall terminate within a specified number of days
after notice to the Participant, and such Participant shall receive, with
respect to each Ordinary Share subject to such Share Option, an amount equal to
the excess of the fair market value (determined on the basis provided in Section
7(b)) of such share immediately prior to the occurrence of such Change in
Control over the exercise price per share of such Share Option, such amount to
be payable in cash, in one or more kinds of stock or property (including the
stock or property, if any, payable in the transaction) or in a combination
thereof, as the Board or Committee, in its discretion, shall determine.
(ii) Assumption of Share Options Upon Change in Control. In the event of a
Change in Control, the successor company may assume or substitute for a Share
Option. For the purposes of this Section 6(e)(ii), a Share Option shall be
considered assumed or substituted for if following the Change in Control the
award confers the right to purchase, for each Ordinary Share subject to the
Share Option immediately prior to the Change in Control, the common stock of the
successor company; provided, however, that if such consideration received in the
transaction constituting a Change in Control is not solely common stock of the
successor company, the Board or the Committee may, with the consent of the
successor company, provide that the consideration to be received upon the
exercise of a Share Option for each Ordinary Share subject thereto, will be
solely common stock of the successor company substantially equal in fair market
value to the per share consideration received by holders of Ordinary Shares in
the transaction constituting a Change in Control. The determination of such
substantial equality of value of consideration shall be made by the Board in its
sole discretion and its determination shall be conclusive and binding.
(iii) Impact of Change in Control on Performance Share Awards and
Performance Share Unit Awards. The terms of any Performance Share Award or
Performance Share Unit Award shall provide in the Incentive award agreement
evidencing the Performance Share Award or Performance Share Unit Award that,
upon a Change in Control:
(A) a pro rata portion of Performance Share Awards or Performance
Share Unit Awards shall be considered to be earned and payable based on the
portion of the Award Period (defined below) completed as of the date of the
Change in Control and based on performance to such date, or if performance
to such date is not determinable, based on target performance, and
(B) the remaining portion of Performance Share Awards and Performance
Share Unit Awards shall be assumed, converted or replaced with restricted
stock or restricted stock units, as applicable, in the successor company's
shares based on the portion of the Award Period not yet completed and based
on target performance. Such assumed, converted or replaced portion of the
Performance Share Award or Performance Share Unit Award shall be restricted
for the remainder of the Award Period. If the successor company does not
assume, convert or replace the remaining portion of the Performance Share
Award or Performance Share Unit Award as described in this Section
6(e)(iii)(B), the full award shall be considered earned and payable upon
consummation of the Change in Control. Notwithstanding the foregoing, the
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Incentive award agreement for a Performance Share Award or Performance Share
Unit Award may provide that, in the event of an involuntary termination of the
Participant's employment with the Company or any subsidiary or affiliate without
cause on account of the Change in Control, as determined by the Board or the
Committee in its sole discretion, within a period of up to 3 months prior to the
effective date of the Change in Control and/or in the event of an involuntary
termination of the Participant's employment without cause in such successor
company within the period of up to 24 months following such Change in Control,
the award shall be considered immediately and fully earned and payable.
(f) Definition of Change in Control. For purposes of the Plan, Change in
Control shall mean a change in ownership or control of the Company effected
through any of the following transactions:
(i) A merger, consolidation or other reorganization approved by the
Company's shareholders, unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting securities of the
successor company are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company's outstanding voting securities immediately prior
to such transaction; or
(ii) The sale, transfer or other disposition of all or substantially all of
the Company's assets in complete liquidation or dissolution of the Company; or
(iii) Any transaction or series of related transactions pursuant to which
any person or any group of persons comprising a "group" within the meaning of
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company or a person that, prior to such transaction or series of
related transactions, directly or indirectly controls, is controlled by or is
under common control with, the Company) becomes directly or indirectly the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing (or convertible into or exercisable for securities
possessing) more than fifty percent (50%) of the total combined voting power of
the Company's securities outstanding immediately after the consummation of such
transaction or series of related transactions, whether such transaction involves
a direct issuance from the Company or the acquisition of outstanding securities
held by one or more of the Company's shareholders; or
(iv) The individuals who constituted the Board as of the Effective Date
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the directors of the Company; provided, however, that individuals whose
election, or whose nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds (2/3) of the Incumbent Board shall be
considered, for purposes of this Plan, members of the Incumbent Board; and
provided, further, 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) (an "Election Contest") or other actual or
threatened solicitation of proxies or consents by or on behalf of a person or
entity other than the Board (a "Proxy Contest"), including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy Contest.
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7. Share Options
-------------
The Committee may grant options ("Share Options") hereunder to
Participants. The Share Options shall be subject to the following terms and
conditions and such other terms and conditions not inconsistent with the terms
of the Plan as the Committee may prescribe:
(a) Incentive Award Agreement. All Share Options granted pursuant to this
Section 7 shall be evidenced by a written Incentive award agreement in such form
and containing such terms and conditions as the Committee shall determine that
are not inconsistent with the provisions of the Plan. With respect to Share
Options granted to U.S. Participants, such Share Options granted are not
intended to qualify as incentive stock options under Section 422 of the U.S.
Internal Revenue Code (the "Code") and shall be designated as options which do
not so qualify.
(b) Share Option Price. The exercise price of each Share Option granted
under the Plan shall be determined by the Committee; provided, that the exercise
price shall not be less than 100 percent of the fair market value (as defined
below) of an Ordinary Share or ADS on the date the Share Option is granted, or
the grant thereof is approved, as applicable under the laws or regulations of
the various jurisdictions.
At any time when the Ordinary Shares or ADSs are quoted on the Tel Aviv
Stock Exchange Ltd. ("TASE"), NASDAQ or any other national securities exchange,
subject to applicable law, the fair market value shall be the closing price on
TASE, NASDAQ or such other exchange, as applicable, on the date on which the
option is granted, or, if not quoted on that day, then on the last preceding
date on which such Ordinary Shares or ADSs are quoted. If the Ordinary Shares or
ADSs are not quoted on TASE, NASDAQ or listed on an exchange, or if
representative quotes are not otherwise available, the fair market value of the
Ordinary Shares or ADSs shall mean the amount determined by the Committee to be
the fair market value based upon a good faith attempt to value the Ordinary
Shares or ADSs accurately and computed in accordance with applicable laws, rules
and regulations.
(c) Share Option Period. The period of each Share Option shall be fixed by
the Committee, provided that, unless otherwise determined by the Committee, the
period for Share Options shall not exceed nine years from the date of grant (the
"Termination Date").
(d) Exercise of Share Option and Payment. No ADSs/Ordinary Shares shall be
issued until full payment of the option price has been made. Payment for the
ADSs/Ordinary Shares acquired pursuant to a Share Option shall be made in full,
upon exercise of the Share Option, in immediately available funds, by cash or
certified or bank cashier's check.
(e) First Exercisable Date. The Committee shall determine how and when
ADSs/Ordinary Shares covered by a Share Option may be purchased. Subject to
Section 6(b), Share Options granted under the Plan shall vest and become
exercisable subject to vesting no earlier than the second anniversary of the
date of grant. Share Options may be exercisable in whole or in part and if an
option is exercisable in part, the portion thereof which is exercisable and not
exercised shall remain exercisable.
B-7
(f) Termination of Share Options. Unless otherwise determined by the
Committee, if prior to the Termination Date, a Participant ceases to be employed
by the Company or a subsidiary or affiliate, as applicable, (i) for any reason
other than death, disability, retirement or for cause, the Share Option will
remain exercisable by the Participant for a period not extending beyond three
months after the date of cessation of employment, but in no event later than the
Termination Date, to the extent it was exercisable at the time of cessation of
employment, and (ii) by reason of termination of employment for cause, or by
voluntary termination at a time when the Company, or any subsidiary or
affiliate, as applicable, is entitled to terminate such Participant's employment
for cause, the Share Option (both vested and unvested options) shall terminate
immediately, unless prohibited by applicable law. The terms and conditions under
which a Participant's Share Options shall terminate in connection with any
cessation of employment, other than as provided in (i) or (ii) above, shall be
provided in the Participant's Incentive award agreement.
(g) Escrow Agreement. The Committee may require a Participant who receives
a Share Option to enter into an escrow or trustee agreement providing that such
Share Option, or the Ordinary Shares to distributed in connection with the
exercise thereof, will remain in the physical custody of an escrow holder or
trustee, as necessary to satisfy applicable local law.
For purposes of the Plan, in the case of a Participant who is a director,
references to employment herein shall be deemed to refer to such director's
service in such capacity.
8. Performance Share Awards
------------------------
The Committee may grant awards under which payment shall be made in
ADSs/Ordinary Shares if the performance of the Company or any subsidiary,
division or affiliate of the Company approved by the Committee during the Award
Period (defined below) meets certain goals established by the Committee
("Performance Share Awards"). Such Performance Share Awards shall be subject to
the following terms and conditions and such other terms and conditions not
inconsistent with the terms of the Plan as the Committee may prescribe:
(a) Incentive Award Agreement. The terms of any Performance Share Award
granted under the Plan shall be set forth in a written Incentive award
agreement, which shall contain provisions determined by the Committee and not
inconsistent with the Plan.
(b) Award Period and Performance Goals. The Committee shall determine and
include in a Performance Share Award grant the period of time for which a
Performance Share Award is made ("Award Period"). The Committee also shall
establish, consistent with any Annual Policies, to the extent that any such
policies may have been established, performance objectives ("Performance Goals")
to be met by the Company or any subsidiary, division or affiliate of the Company
during the Award Period as a condition to payment of the Performance Share
Award. The Performance Goals may include share price, pre-tax profits, earnings
per share, return on shareholders' equity, return on assets, sales, net income
or any combination of the foregoing or any other financial or other measurement
established by the Committee. The Performance Goals may include minimum and
optimum objectives or a single set of objectives.
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(c) Payment of Performance Share Awards. The Committee shall establish the
method of calculating the amount of payment to be made under a Performance Share
Award if the Performance Goals are met, including the fixing of a maximum
payment. The Performance Share Award shall be expressed in terms of
ADSs/Ordinary Shares and referred to as "Performance Shares." After the
completion of an Award Period, the performance of the Company or subsidiary,
division or affiliate of the Company, as applicable, shall be measured against
the Performance Goals, and the Committee or the Board shall determine, in
accordance with the terms of such Performance Share Award, whether all, none or
any portion of a Performance Share Award shall be paid.
(d) Revision of Performance Goals. At any time prior to the end of an Award
Period, the Committee may revise the Performance Goals and the computation of
payment if unforeseen events occur that have a substantial effect on the
performance of the Company or any subsidiary, division or affiliate of the
Company and which, in the judgment of the Committee, makes the application of
the Performance Goals unfair unless a revision is made.
(e) Requirement of Employment. A grantee of a Performance Share Award must
remain in the employ of the Company or any subsidiary or affiliate until the
completion of the Award Period in order to be entitled to payment under the
Performance Share Award; provided, that the Committee may, in its discretion,
provide for a full or partial payment where such an exception is deemed
equitable.
(f) Escrow Agreement. The Committee may require a Participant who receives
a Performance Share Award to enter into an escrow or trustee agreement providing
that the Ordinary Shares to be distributed in connection with the settlement of
a Performance Share Award will remain in the physical custody of an escrow
holder or trustee, as necessary to satisfy applicable local law. To the extent
deemed appropriate by the Committee, such escrow or trustee agreements may
include a request to transfer the record ownership of such Ordinary Shares into
the name of the escrow agent.
(g) Dividends. The Committee may, in its discretion, at the time of the
granting of a Performance Share Award, provide that the cash equivalent of any
dividends declared on the Ordinary Shares during the Award Period, and which
would have been paid with respect to Performance Shares had they been owned by a
grantee, shall be paid to the Participant at the time the Performance Shares
become payable to the Participant.
9. Performance Share Unit Awards
-----------------------------
The Committee may grant performance share units (each, a "Performance
Share Unit," and any award of Performance Share Units is hereafter referred to
as a "Performance Share Unit Award") to Participants. Each Performance Share
Unit is a notional unit representing the right to receive one Ordinary Share as
provided in Section 9(c). Each Performance Share Unit Award shall be subject to
the following terms and conditions and such other terms and conditions not
inconsistent with the terms of the Plan as the Committee may prescribe:
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(a) Incentive Award Agreement. The terms of any Performance Share Unit
Award granted under the Plan shall be set forth in a written Incentive award
agreement, which shall contain provisions determined by the Committee and not
inconsistent with the Plan.
(b) Award Period and Performance Goals. The Committee shall determine and
include in a Performance Unit Share Award grant the Award Period. The Committee
also shall establish, consistent with any Annual Policies, to the extent that
any such policies may have been established, Performance Goals to be met by the
Company or any subsidiary, business unit, division or affiliate of the Company
during the Award Period as a condition to settlement of the Performance Share
Unit Award. The Performance Goals may include minimum and optimum objectives or
a single set of objectives.
(c) Payment of Performance Share Unit Awards. The Committee shall establish
the method of calculating the amount of payment to be made under a Performance
Share Unit Award if the Performance Goals are met, including the fixing of a
maximum payment. The Performance Share Unit Award shall be expressed in terms of
ADSs/Ordinary Shares and referred to as "Performance Unit Shares." After the
completion of an Award Period, the performance of the Company or subsidiary,
division or affiliate of the Company, as applicable, shall be measured against
the Performance Goals, and the Committee or the Board shall determine, in
accordance with the terms of such Performance Share Unit Award, whether all,
none or any portion of a Performance Share Unit Award shall be paid.
(d) Revision of Performance Goals. At any time prior to the end of an Award
Period, the Committee may revise the Performance Goals and the computation of
payment if unforeseen events occur that have a substantial effect on the
performance of the Company or any subsidiary, division or affiliate of the
Company and which, in the judgment of the Committee, makes the application of
the Performance Goals unfair unless a revision is made.
(e) Requirement of Employment. A grantee of a Performance Share Unit Award
must remain in the employ of the Company or any subsidiary or affiliate until
the completion of the Award Period in order to be entitled to payment under the
Performance Share Unit Award; provided, that the Committee may, in its
discretion, provide for a full or partial payment where such an exception is
deemed equitable.
(f) Dividends. The Committee may, in its discretion, at the time of the
granting of a Performance Share Unit Award, provide that the cash equivalent of
any dividends declared on the Ordinary Shares during the Award Period, and which
would have been paid with respect to Performance Unit Shares had they been owned
by a grantee, shall be paid to the Participant at the time the Performance Unit
Shares become payable to the Participant.
(g) Escrow Agreement. The Committee may require a Participant who receives
a Performance Share Unit Award to enter into an escrow or trustee agreement
providing that the Ordinary Shares to be distributed in connection with the
settlement of a Performance Share Unit Award will remain in the physical custody
of an escrow holder or trustee, as necessary to satisfy applicable local law.
B-10
(h) Creditors' Rights. A Participant who has been granted a Performance
Share Unit Award shall have no rights other than those of a general creditor of
the Company. A Performance Share Unit represents an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Incentive award agreement.
10. Restricted Share Awards
The Committee may grant ADSs/Ordinary Shares to a Participant, which shall
be subject to the following terms and conditions and such other terms and
conditions not inconsistent with the terms of the Plan as the Committee may
prescribe ("Restricted Share Award"):
(a) Incentive Award Agreement. The terms of any Restricted Share Award
granted under the Plan shall be set forth in a written Incentive award
agreement, which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The Committee shall have absolute discretion to
determine whether any consideration (other than services) is to be received by
the Company as a condition precedent to the issuance of the Ordinary Shares.
(b) Requirement of Employment. A grantee of a Restricted Share Award must
remain in the employment of the Company, subsidiary or affiliate during a period
designated by the Committee in order to retain the ADSs/Ordinary Shares under
the Restricted Share Award; provided that, unless specifically determined by the
Committee, the Restricted Share Award shall be subject to vesting no earlier
than the second anniversary of the date of grant ("Restricted Share Restriction
Period"). If the grantee leaves the employment of the Company, subsidiary or
affiliate prior to the end of the Restricted Share Restriction Period, the
Restricted Share Award shall terminate and the ADSs/Ordinary Shares shall be
returned immediately to the Company, or cancelled. The Committee may, in its
discretion, also provide for such complete or partial exceptions to the
employment restriction as it deems equitable.
(c) Rights of Holders of Restricted Share Awards. Beginning on the date of
grant of the Restricted Share Award and subject to the execution of an Incentive
award agreement, the Participant shall become a shareholder of the Company with
respect to any Ordinary Shares subject to the Restricted Share Award and shall
have all the rights of a shareholder, including the right to vote such Ordinary
Shares and, subject to the Committee's discretion pursuant to Section 10(f), the
right to receive distributions made with respect to such Ordinary Shares.
(d) Restrictions on Transfer and Legend on Ordinary Share Certificates.
During the Restricted Share Restriction Period, the grantee may not sell,
assign, transfer, pledge or otherwise dispose of Ordinary Shares. Each
certificate for ADSs/Ordinary Shares issued hereunder shall contain a legend
giving appropriate notice of the restrictions in the grant.
(e) Lapse of Restrictions. All restrictions imposed under the Restricted
Share Award shall lapse upon the expiration of the Restricted Share Restriction
Period if the conditions as to employment set forth above have been met. The
grantee shall then be entitled to have the legend removed from the certificates.
(f) Performance Goals. The Committee may designate whether any Restricted
Share Award is intended to be performance-based. Any such Restricted Share Award
shall be
B-11
conditioned on the achievement of one or more Performance Goals (as defined in
Section 8(b)) (subject to revision as provided in Section 8(d)).
(g) Escrow Agreement. The Committee may require a Participant who receives
a Restricted Share Award to enter into an escrow or trustee agreement providing
that the Ordinary Shares to be distributed in connection with the settlement of
the Restricted Share Award will remain in the physical custody of an escrow
holder or trustee, as necessary to satisfy applicable local law. To the extent
deemed appropriate by the Committee, such escrow or trustee agreements may
include a request to transfer the record ownership of such Ordinary Shares into
the name of the escrow agent.
(h) Dividends. The Committee may, in its discretion, at the time of the
Restricted Share Award, provide that any dividends declared on the Ordinary
Shares during the Restricted Share Restriction Period shall be (i) paid to the
grantee, or (ii) accumulated for the benefit of the grantee and paid to the
grantee only after the expiration of the Restricted Share Restriction Period.
11. Restricted Share Unit Awards
----------------------------
The Committee may grant restricted share units (each, a "Restricted Share
Unit," and any award of Restricted Share Units is hereafter referred to as a
"Restricted Share Unit Award") to Participants. Each Restricted Share Unit is a
notional unit representing the right to receive one Ordinary Share on the
Settlement Date (as defined below). Each Restricted Share Unit Award shall be
subject to the following terms and conditions and such other terms and
conditions not inconsistent with the terms of the Plan as the Committee may
prescribe:
(a) Incentive Award Agreement. The terms of any Restricted Share Unit Award
granted under the Plan shall be set forth in a written Incentive award
agreement, which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The Committee shall have absolute discretion to
determine whether any consideration (other than services) is to be received by
the Company as a condition precedent to the issuance of the ADSs/Ordinary
Shares.
(b) Requirement of Employment. A grantee of a Restricted Share Unit Award
must remain in the employment of the Company, subsidiary or affiliate during a
period designated by the Committee in order to receive ADSs/Ordinary Shares
under the terms of the Incentive award agreement; provided that, unless
specifically determined by the Committee, the Restricted Share Award shall be
subject to vesting no earlier than the second anniversary of the date of grant
("Restricted Unit Restriction Period"). If the grantee leaves the employment of
the Company, subsidiary or affiliate prior to the end of the Restricted Unit
Restriction Period, the Restricted Share Unit Award shall terminate, and all
rights of the grantee to such award shall terminate. The Committee may, in its
discretion, also provide for such complete or partial exceptions to the
employment restriction as it deems equitable.
(c) Settlement of Restricted Share Units. Upon a date or dates on or
following the expiration of the Restricted Unit Restriction Period, unless
earlier forfeited, the Company shall settle the Restricted Share Unit Award by
delivering (i) a number of Ordinary Shares equal to the
B-12
number of Restricted Share Units subject to the Restricted Share Unit Award then
vested and not otherwise forfeited, and (ii) if applicable, a number of Ordinary
Shares having a value equal to any unpaid dividends declared on the Ordinary
Shares subject to the Restricted Share Unit Award during the Restricted Unit
Restriction Period. No Ordinary Shares shall be issued to Participants at the
time a Restricted Share Unit Award is granted.
(d) Creditors' Rights. A Participant who has been granted a Restricted
Share Unit Award shall have no rights other than those of a general creditor of
the Company. A Restricted Share Unit represents an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Incentive award agreement.
(e) Performance Goals. The Committee may designate whether any Restricted
Share Unit Award is intended to be performance-based. Any such Restricted Share
Unit Award shall be conditioned on the achievement of one or more Performance
Goals (as defined in Section 8(b)) (subject to revision as provided in Section
8(d)).
(f) Escrow Agreement. The Committee may require a Participant who receives
a Restricted Share Unit Award to enter into an escrow or trustee agreement
providing that the Ordinary Shares to be distributed in connection with the
settlement of the Restricted Share Unit Award will remain in the physical
custody of an escrow holder or trustee, as necessary to satisfy applicable local
law.
12. Other Share-Based Awards
------------------------
The Board may establish other share-based awards payable in ADSs/Ordinary
Shares (each, a "Share-Based Award"), which may be granted to Participants by
the Committee based on such terms and conditions not inconsistent with the terms
of the Plan as the Board or the Committee may determine in its sole discretion.
Share-Based Awards may be made as additional compensation for services rendered
by a Participant or may be in lieu of cash or other compensation to which the
Participant is entitled from the Company or any subsidiary or affiliate.
13. Transferability
---------------
Each Incentive granted under the Plan will not be transferable or
assignable by the recipient, and may not be made subject to execution,
attachment or similar procedures, other than by will or the laws of descent and
distribution or as determined by the Committee pursuant to the terms of any
written Incentive award agreement in accordance with any other applicable law,
rule or regulation.
14. Discontinuance or Amendment of the Plan
---------------------------------------
The Board may discontinue the Plan at any time and may from time to time
amend or revise the terms of the Plan as permitted by applicable statutes, rules
and regulations, except that it may not, without the consent of the grantees
affected, revoke or alter, in a manner unfavorable to the grantees of any
Incentives hereunder, any Incentives then outstanding, nor may the Board amend
the Plan without shareholder approval where the absence of such approval would
cause the Plan to fail to comply with applicable law or regulation. Unless
approved by the Company's
B-13
shareholders or as otherwise specifically provided under this Plan, no
adjustments or reduction of the exercise price of any outstanding Incentives
shall be made in the event of a decline in stock price, either by reducing the
exercise price of outstanding Incentives or through cancellation of outstanding
Incentives in connection with a regranting of Incentives at a lower price to the
same individual.
15. No Limitation on Compensation
-----------------------------
Nothing in the Plan shall be construed to limit the right of the Company to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner that is not expressly authorized under the Plan.
16. No Constraint on Corporate Action
---------------------------------
Nothing in the Plan shall be construed (i) to limit, impair or otherwise
affect the Company's right or power to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell or transfer all or any part of its
business or assets, or (ii) except as provided in Section 14, to limit the right
or power of the Company or any subsidiary or affiliate to take any action that
such entity deems to be necessary or appropriate.
17. Withholding Taxes
-----------------
The Company or any of its subsidiaries or affiliates shall have the right
to make all payments or distributions pursuant to the Plan to a Participant net
of any applicable federal, state, local and foreign taxes required to be paid or
withheld as a result of (a) the grant of any Incentive, (b) the exercise of a
Share Option, (c) the delivery of Ordinary Shares, (d) the lapse of any
restrictions in connection with any Incentive or (e) any other event occurring
pursuant to the Plan. The Company, or any subsidiary or affiliate, as
applicable, shall have the right to withhold from wages or other amounts
otherwise payable to a Participant such withholding taxes as may be required by
law, or to otherwise require the Participant to pay such withholding taxes. If
the Participant shall fail to make such tax payments as are required, the
Company or any of its subsidiaries or affiliates shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Participant or to take such other action as may be
necessary to satisfy such withholding obligations.
18. Use of Proceeds
---------------
The proceeds received by the Company from the sale of ADSs/Ordinary Shares
under the Plan shall be added to the general funds of the Company and shall be
used for general corporate purposes.
19. Provision for Foreign Participants
----------------------------------
Incentives may be granted to Participants who are foreign nationals or
employed outside Israel, or both, on such terms and conditions different from
those applicable to Incentives to Participants employed in Israel as may, in the
discretion of the Committee, be necessary or desirable in order to recognize
differences in local law or tax policy. The Committee may also
B-14
impose conditions on the exercise or vesting of Incentives in order to minimize
the Company's obligation with respect to tax equalization for Participants on
assignments outside their home countries.
20. Restrictions
------------
The Committee shall have the power to impose such other restrictions on
Incentives as it may deem necessary or appropriate to ensure that such
Incentives satisfy all requirements for "performance-based compensation" within
the meaning of Section 162(m)(4)(C) of the Code or any successor provision
thereto, Section 102 of the Israeli Tax Ordinance or any other applicable tax
law provision.
21. Governing Law
-------------
The Plan shall be construed in accordance with and governed by the laws of
the State of Israel without giving effect to the principles of conflicts of
laws.
* * *
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
(Registrant)
By: /s/ Uzi Karniel
-----------------------------------
Name: Uzi Karniel
Title: General Counsel and
Corporate Secretary
Date: June 22, 2005