PROPOSAL FOUR
INCREASE IN THE COMPANY’S AUTHORIZED SHARE CAPITAL
Background
The Company’s authorized share capital is currently NIS 1,025,000, divided into 100,000,000 (one hundred million) Ordinary Shares, and 2,500,000 (two million, five hundred thousand) Preferred Shares, nominal value NIS 0.01 per share (“Preferred Shares”). At the Meeting, we are proposing to effect an increase in our authorized share capital by NIS 1,000,000 such that our authorized share capital will consist of NIS 2,025,000, divided into 200,000,000 (two hundred million) Ordinary Shares and 2,500,000 (two million, five hundred thousand) Preferred Shares. As of the Record Date, 64,859,567 Ordinary Shares were issued, of which 30,216,661 Ordinary Shares were outstanding and 34,642,906 Ordinary Shares were held in treasury and an additional 1,306,346 Ordinary Shares were reserved for issuance under our 2008 Equity Incentive Plan. This increase is designed to maintain our current flexibility to conduct future issuances of our Ordinary Shares, in the ordinary course from time to time to fund our operations and to perform equity-based acquisitions or licensing transactions.
Certain Risks and Disadvantages Associated with the Increase in Authorized Share Capital
Future issuances of Ordinary Shares will dilute the voting power and ownership of our existing shareholders, and, depending on the amount of consideration received in connection with the issuance, could also reduce shareholders’ equity on a per-share basis. Although the primary purpose of the increase in authorized share capital is to maintain our capital-raising position and liquidity when engaging in certain major transactions, these additional Ordinary Shares may also be issued in the future for other purposes, such as compensation, giving rise to further opportunities for dilution. We currently do not have any major transactions planned that would require us to increase our authorized share capital. Our Board is not proposing the increase with the specific intent of using the newly-authorized reserve as an anti-takeover device and has no current knowledge of any specific effort undertaken by any person, as of the date hereof, to accumulate the Company’s securities for the specific purpose of obtaining control of the Company. However, the authorized Ordinary Shares may be used at any time by the Company, at the discretion of its management and the Board, to discourage, resist, frustrate, impede or otherwise prevent any takeover transaction, including one that is favored by a majority of the independent shareholders (for example, by permitting issuances that would dilute the share ownership of a person seeking to effect a change in the composition of the Board or management of the Company or contemplating a tender offer or other transaction for the combination of the Company with another company). The newly available authorized shares resulting from the increase in authorized share capital may therefore have the potential to limit the opportunity for our shareholders to dispose of their Ordinary Shares at a premium.
Interests of Certain Persons
Certain of our executive officers and directors have an interest in this proposal as a result of their ownership of Ordinary Shares. However, we do not believe that our executive officers or directors have interests in this proposal that are different than or greater than those of any of our other shareholders.
Proposal
The increase in authorized share capital described will be effected by way of amendment of Article 7 of the Company’s Articles of Association as follows (additions are underlined, deletions are struck through):
“7.The registered share capital of the Company consists of NIS 1,025,000 2,025,000, divided into 100,000,000 (One Hundred Million) 200,000,000 (two hundred million) Ordinary Shares, par value NIS 0.01 per share and 2,500,000 (Two Million, Five Hundred Thousand) Preferred Shares, par value NIS 0.01 per share.”
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve the amendment to the Articles of Association of the Company as set forth in the Proxy Statement to effect an increase in the Company’s authorized share capital.”