UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than
the Registrant ¨
Check the appropriate box:
| x | Preliminary Proxy Statement |
| ¨ | Confidential, for Use
of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant
to §240.14a-12 |
Protalix BioTherapeutics, Inc.
(Name of Registrant
as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check
the appropriate box):
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) | Title of each class of securities to which transaction applies: |
| 2) | Aggregate number of securities to which transaction applies: |
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) | Proposed maximum aggregate value of transaction: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing: |
| 1) | Amount Previously Paid: |
| 2) | Form, Schedule or Registration Statement No: |
September 29, 2014
Dear Shareholder,
We cordially invite you to attend the 2014
Annual Meeting of Shareholders of Protalix BioTherapeutics, Inc. to be held at 6:30 p.m., Israel time, on November 10, 2014 at
our corporate headquarters, 2 Snunit Street, Science Park, Carmiel, Israel. The attached notice of annual meeting and proxy statement
describe the business we will conduct at the meeting and provide information about us that you should consider when you vote your
shares. As set forth in the attached proxy statement, the meeting will be held to consider the election of directors, to approve
an advisory vote on executive compensation, to approve an advisory vote on the frequency of an advisory vote on executive compensation,
to approve an amendment to our articles of incorporation providing that one-third (1/3) of the votes entitled to be cast on any
matter by a voting group shall constitute a quorum of that voting group for action on that matter, to adopt amendments to the Protalix
BioTherapeutics, Inc. 2006 Stock Incentive Plan to increase the number of shares of common stock available under the plan from
11,341,655 shares to 13,841,655 shares and to amend certain other terms of said plan, and the ratification of the appointment of
our independent registered public accounting firm for the fiscal year ending December 31, 2014. Please take the time to carefully
read each of the proposals shareholders are being asked to consider and vote on.
When you have finished reading the proxy
statement, please promptly vote your shares either via the Internet, by telephone or by marking, signing, dating and returning
the proxy card in the enclosed envelope. Your vote is important, whether or not you attend the meeting in person. We encourage
you to vote by proxy so that your shares will be represented and voted at the meeting. If you decide to attend the meeting and
vote in person, your proxy may be revoked at your request.
We appreciate your support and look forward
to your attending the meeting.
Sincerely,
Yossi Maimon
Vice President and Chief Financial Officer
2 Snunit Street, Science Park P.O.B. 455, Carmiel 20100, Israel
Tel: 972-4-988-9488 | Fax: 972-4-988-9489 | Web: www.protalix.com
———————————————————-
NOTICE OF 2014 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 10, 2014
———————————————————-
To the Shareholders of Protalix BioTherapeutics, Inc.:
The 2014 Annual Meeting of Shareholders of Protalix BioTherapeutics,
Inc. will be held at the following time, date and place for the following purposes:
TIME: |
6:30 p.m., Israel time |
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DATE: |
November 10, 2014 |
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PLACE: |
Protalix BioTherapeutics Headquarters, 2 Snunit Street, Science Park, Carmiel, Israel |
PURPOSES:
1. |
To elect seven members to the Board of Directors to serve for the ensuing year or until their respective successors have been duly elected. |
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2. |
To approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in the proxy statement that accompanies this notice. |
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3. |
To approve, on a non-binding advisory basis, on the frequency (every one, two or three years) that shareholders of the Company will have a non-binding, advisory vote on the compensation of the Company’s named executive officers. |
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4. |
To approve an amendment to our articles of incorporation providing that one-third (1/3) of the votes entitled to be cast on any matter by a voting group shall constitute a quorum of that voting group for action on that matter. |
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5. |
To adopt amendments to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan to increase the number of shares of common stock available under the plan from 11,341,655 shares to 13,841,655 shares and to amend certain other terms of said plan as described in the proxy statement that accompanies this notice. |
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6. |
To ratify the appointment of Kesselman & Kesselman, Certified Public Accountant (lsr.), a member of PricewaterhouseCoopers International Limited, as our independent registered public accounting firm for the fiscal year ending December 31, 2014. |
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7. |
To transact such other business that is properly presented at the meeting or any adjournment. |
All of these proposals are more fully described in the proxy
statement that follows. You may vote at the meeting and any adjournments if you were the record owner of our common stock at the
close of business on September 12, 2014. A list of shareholders of record will be available at the meeting and, during the 10 days
prior to the meeting, at the office of our Corporate Secretary at the above address.
Please sign, date and promptly return the enclosed proxy
card in the enclosed envelope, or vote by telephone or Internet (instructions are on your proxy card), so that your shares will
be represented whether or not you attend the annual meeting.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Yossi Maimon |
Carmiel, Israel |
Vice President and Chief Financial Officer |
September 29, 2014 |
and Corporate Secretary |
Protalix BioTherapeutics, Inc.
2 Snunit Street, Science Park
POB 455
Carmiel 20100, Israel
972-4-988-9488
———————————————————-
PROXY STATEMENT FOR PROTALIX BIOTHERAPEUTICS,
INC.
2014 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 10, 2014
———————————————————-
GENERAL INFORMATION ABOUT THE ANNUAL
MEETING
Why Did You Send Me this Proxy Statement?
We sent you this proxy statement and the
enclosed proxy card because the Board of Directors of Protalix BioTherapeutics, Inc. is soliciting your proxy to vote at the 2014
annual meeting of shareholders and any adjournments of the meeting to be held at 6:30 p.m., Israel time, on November 10, 2014 at
our corporate headquarters, 2 Snunit Street, Science Park, Carmiel, Israel. This proxy statement, along with the accompanying Notice
of Annual Meeting of Shareholders, summarizes the purposes of the meeting and the information you need to know to vote at the annual
meeting.
We anticipate that on or about October 10,
2014, we will begin sending this proxy statement, the attached Notice of Annual Meeting and the form of proxy enclosed to all shareholders
entitled to vote at the meeting. Although not part of this proxy statement, we are also sending along with this proxy statement
our Annual Report on Form 10-K which includes financial statements for the fiscal year ended December 31, 2013. You can
also find a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 on the Internet through the electronic
data system called EDGAR provided by the Securities and Exchange Commission, or the SEC, at http://www.sec.gov
or through the Investor Relations section of our website at http://www.protalix.com.
In addition, since we are also listed on the Tel Aviv Stock Exchange, we submit copies of all our filings with the SEC to the
Israeli Securities Authority and the Tel Aviv Stock Exchange. Such copies can be retrieved electronically through the Tel Aviv
Stock Exchange’s Internet messaging system (www.maya.tase.co.il) and through the MAGNA distribution site of the Israeli Securities
Authority (www.magna.isc.gov.il). Our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and information
on the website other than the proxy statement are not part of our proxy soliciting materials. Additional copies of the Annual
Report on Form 10-K for the fiscal year ended December 31, 2013 are available upon request.
Who Can Vote?
Only holders of record of our common stock,
par value $0.001 per share, on September 12, 2014, the record date, are entitled to vote at the annual meeting. On the record date,
there were 93,663,063 shares of common stock outstanding and entitled to vote. The common stock is currently our only outstanding
class of voting stock.
You do not need to attend the annual meeting
to vote your shares. Shares represented by valid proxies, received in time for the meeting and not revoked prior to the meeting,
will be voted at the meeting.
How Many Votes Do I Have?
Each share of common stock that you own
entitles you to one vote.
How Do I Vote?
Whether you plan to attend the annual meeting
or not, we urge you to vote by proxy. Voting by proxy will not affect your right to attend the annual meeting. If your shares are
registered directly in your name through our stock transfer agent, American Stock Transfer & Trust Company, or you have stock
certificates, you may vote:
| · | By mail. Complete, date, sign and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy
will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted,
they will be voted as recommended by our Board of Directors. |
| · | By Internet or by telephone. Follow the instructions attached to the proxy card to vote by Internet or telephone. |
| · | In person at the meeting. If you attend the meeting, you may deliver your completed proxy card in person or you may
vote by completing a ballot, which will be available at the meeting. |
If your shares are held in “street
name” (held in the name of a bank, broker or other nominee), you must provide the bank, broker or other nominee with instructions
on how to vote your shares and can generally do so as follows:
| · | By mail. You will receive instructions from your broker or other nominee explaining how to vote your shares. |
| · | By Internet or by telephone. Follow the instructions you receive from your broker to vote by Internet or telephone. |
| · | In person at the meeting. Contact the broker or other nominee who holds your shares to obtain a broker’s proxy
card and bring it with you to the meeting. You will not be able to vote at the meeting unless you have a proxy card from your broker. |
What am I Voting On?
You are voting on:
| · | The election of seven members to our Board of Directors to serve for the ensuing year or until their respective successors
have been duly elected (Shlomo Yanai, Moshe Manor, Amos Bar Shalev, Zeev Bronfeld, Yodfat Harel Buchris, Roger D. Kornberg, Ph.D.,
and Aharon Schwartz, Ph.D.). |
| · | To approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. |
| · | To approve, on a non-binding advisory basis, on the frequency (every one, two or three years) that shareholders of the Company
will have a non-binding, advisory vote on the compensation of the Company’s named executive officers. |
| · | To approve an amendment to our articles of incorporation providing that one-third (1/3) of the votes entitled to be cast on
any matter by a voting group shall constitute a quorum of that voting group for action on that matter. |
| · | The adoption of amendments to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan which increases the number of shares
of common stock authorized for issuance under the plan from 11,341,655 shares to 13,841,655 shares and to amend certain other terms
of said plan as described in this proxy statement. |
| · | The ratification of the appointment of Kesselman and Kesselman, Certified Public Accountant (Isr.), A Member of PricewaterhouseCoopers
International Limited, as our independent registered public accounting firm for the fiscal year ending December 31, 2014. |
How does the Board of Directors Recommend that I Vote at
the Meeting?
The Board of Directors recommends that you
vote as follows:
| · | “FOR” the election or re-election of all director nominees named in the “Proposal 1: Election of Directors”
section in this proxy statement. |
| · | “FOR” the approval, on a non-binding advisory basis, our executive compensation as disclosed in the proxy
statement that accompanies this notice and as described in “Proposal 2: Advisory Vote on Executive Compensation” section
in this proxy statement. |
| · | “FOR” the approval, on a non-binding advisory basis, of every one year as the frequency that our shareholders
will have a non-binding, advisory vote on our executive compensation as described in the “Proposal 3: Advisory Vote on the
Frequency of an Advisory Vote on Executive Compensation” section in this proxy statement. |
| · | “FOR” the approval of an amendment to our articles of incorporation providing that one-third (1/3) of the
votes entitled to be cast on any matter by a voting group shall constitute a quorum of that voting group for action on that matter
as described in the “Proposal 4: Amendment to the Articles of Incorporation to Decrease Quorum Requirement” section
in this proxy statement. |
| · | “FOR” the adoption of the amendments to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan as
described in “Proposal 5: Amendment to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan to Increase the Number
of Authorized Shares of Common Stock Reserved for Issuance under the Plan and amend certain other terms of the Plan” section
in this proxy statement. |
| · | “FOR”
the ratification of Kesselman and Kesselman as our independent registered public accounting
firm for the 2014 fiscal year, as named in “Proposal 6: Ratification of Independent
Registered Public Accounting Firm” section in this proxy statement. |
If any other matter is properly presented
at the meeting or any adjournment, the proxy card provides that your shares will be voted by the proxy holder listed on the proxy
card in accordance with his or her best judgment. At the time this proxy statement was printed, we knew of no matters that needed
to be acted on at the annual meeting, other than those discussed in this proxy statement.
What Constitutes a Quorum for the Meeting?
The holders of a majority of all of
the outstanding shares of common stock entitled to vote at the annual meeting, present in person or by proxy, shall
constitute a quorum at the annual meeting. Of the 93,663,063 shares of common stock outstanding as of the record date, a
majority, or at least 46,831,532 shares, must be present at the meeting in person or represented by proxy to hold the meeting
and conduct business. Once a quorum is established at a meeting, it shall not be broken by the withdrawal of enough votes to
leave less than a quorum. Shares held by shareholders of record who are present at the meeting in person or by proxy are
counted for purposes of determining whether a quorum exists. Abstentions and “broker non-votes” are
also counted as present and entitled to vote for purposes of determining whether a quorum exists. If a quorum is not present,
the meeting will be adjourned until a quorum is obtained.
What are the Voting Requirements to Approve a Proposal?
Election of directors
Assuming a quorum is present, nominees for
director will be elected by a plurality of the votes cast by the shares of common stock voting in person or represented by proxy
at the annual meeting. This means that the nominees who receive the most affirmative votes will be elected to the Board of Directors.
In voting to elect nominees to the Board of Directors, shareholders may vote in favor of all the nominees or any individual nominee
or withhold their votes as to all the nominees or any individual nominee. Shares not present at the annual meeting have no effect
on the election of directors.
Approval of non-binding advisory resolution on
executive compensation
You may vote “FOR,” “AGAINST”
or “ABSTAIN” on the advisory vote on executive compensation. If a quorum is present, approval requires that the number
of votes cast at the annual meeting in favor of the resolution exceeds the number of votes cast opposing the resolution. The outcome
of this vote is not binding; however, the Board of Directors and the Compensation Committee will consider the outcome of the vote
when developing and reviewing the future executive compensation plans. Abstentions and broker non-votes will have no effect.
Vote on a non-binding advisory resolution regarding
the frequency of the vote regarding executive compensation
Shareholders will be asked to vote on whether
to advise us to include in our proxy statement a non-binding, advisory vote on executive compensation every year, two years or
three years. You may vote “One Year,” “Two Years,” “Three Years” or “ABSTAIN.”
If a quorum is present, the outcome of this vote will be determined by a plurality of the votes cast, which means that, while the
outcome of this vote is not binding on us, we will take under advisement the choice (every year, two years or three years) that
receives the most votes. Abstentions and broker non-votes have no effect.
Amendment to the Articles of Incorporation to Decrease
Quorum Requirement
You may vote “FOR,” “AGAINST”
or “ABSTAIN” on the adoption of an amendment to our articles of incorporation providing that one-third (1/3) of the
votes entitled to be cast on any matter by a voting group shall constitute a quorum of that voting group for action on that matter.
If a quorum is present, adoption of the amendment requires that the number of votes cast at the annual meeting in favor of adoption
exceeds the number of votes cast opposing adoption. Abstentions and broker non-votes (shares held by brokers that do not have discretionary
authority to vote on a matter and have not received voting instructions from their clients) will have no effect.
Adoption of amendments to the Protalix
BioTherapeutics, Inc. 2006 Stock Incentive Plan to increase the number of authorized shares of common stock reserved for issuance
under the plan and to amend certain other terms of the plan
You may vote “FOR,” “AGAINST”
or “ABSTAIN” on the adoption of an amendment to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan to increase
the number of authorized shares of common stock reserved for issuance under the plan. If a quorum is present, adoption of the amendment
requires that the number of votes cast at the annual meeting in favor of adoption exceeds the number of votes cast opposing adoption.
Abstentions and broker non-votes (shares held by brokers that do not have discretionary authority to vote on a matter and have
not received voting instructions from their clients) will have no effect.
Ratification of the selection of Kesselman &
Kesselman as our independent auditor
You may vote “FOR,” “AGAINST”
or “ABSTAIN” on the ratification of the selection of Kesselman & Kesselman to serve as our principal independent
registered public accounting firm for the fiscal year ending December 31, 2014. If a quorum is present, ratification of the
appointment of our independent registered public accounting firm requires that the number of votes cast at the annual meeting in
favor of ratification exceeds the number of votes cast opposing ratification. Abstentions and broker non-votes will have no effect.
How are My Votes Cast when I Sign and Return a Proxy Card?
When you sign the proxy card or submit your
proxy by telephone or over the Internet, you appoint Yossi Maimon, our vice president and chief financial officer, as your representative
at the meeting. Yossi Maimon will vote your shares at the meeting as you have instructed them on the proxy card. Mr. Maimon may
appoint a substitute for himself.
Even if you plan to attend the meeting,
it is a good idea to complete, sign and return your proxy card or submit your proxy by telephone or over the Internet in advance
of the meeting in case your plans change. This way, your shares will be voted by you whether or not you actually attend the meeting.
May I Revoke My Proxy?
If you give us your proxy, you may revoke
it at any time before it is voted at the meeting. There will be no double counting of votes. You may revoke your proxy in any one
of the following ways:
| · | entering a new vote or by granting a new proxy card or new voting instruction bearing a later date (which automatically revokes
the earlier instructions); |
| · | if your shares are held in street name, re-voting by Internet or by telephone as instructed above (only your latest Internet
or telephone vote will be counted); |
| · | notifying our Corporate Secretary, Yossi Maimon, in writing before the annual meeting that you have revoked your proxy; or |
| · | attending the meeting in person and voting in person. Attending the meeting in person will not in and of itself revoke a previously
submitted proxy unless you specifically request it. |
Can my broker vote my shares for me?
No. A broker “non-vote” occurs
when a broker or nominee holding shares for a beneficial owner does not vote on a particular matter because the matter is not routine
and such broker or nominee does not have the discretionary voting authority to vote the shares for which it is the holder of record
with respect to a particular matter at the annual meeting and such broker or nominee has not received instructions from the beneficial
owner. Broker “non-votes,” and shares as to which proxy authority has been withheld with respect to any matter, are
generally not deemed to be entitled to vote for purposes of determining whether stockholders’ approval of that matter has
been obtained. Pursuant to New York Stock Exchange (“NYSE”) Rule 452, the uncontested election of directors (Proposal No. 1),
the approval of a non-binding advisory resolution on executive compensation (Proposal No.2), the vote on a non-binding advisory
resolution regarding the frequency of the vote regarding executive compensation (Proposal No. 3), the amendment to the Articles
of Incorporation to decrease the quorum requirement (Proposal No. 4) and the adoption of amendments to the Protalix BioTherapeutics,
Inc. 2006 Stock Incentive Plan which increase the number of shares of common stock authorized for issuance under the plan and amend
certain other terms of the plan (Proposal No. 5), are non-routine matters and, therefore, may not be voted upon by brokers without
instruction from beneficial owners. Consequently, proxies submitted by brokers for shares beneficially owned by other persons may
not, in the absence of specific instructions from such beneficial owners, vote the shares in favor of a director nominee or withhold
votes from a director nominee at the brokers’ discretion. Please complete your proxy and return it as instructed so your
vote can be counted.
What if I Receive More than One Proxy Card?
You may receive more than one proxy card
or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or
held in street name. Please vote in the manner described under “How Do I Vote?” for each account to ensure that all
of your shares are voted.
What if I do not Vote for Some of the Matters Listed on My
Proxy Card?
If you return your proxy card without indicating
your vote, your shares will be voted for the nominees listed on the card; for the approval, on an advisory basis,
of the executive compensation; for the approval, on an advisory basis, of every one year as the frequency that our shareholders
will have a non-binding, advisory vote on our executive compensation; for an amendment to our articles of incorporation
providing that one-third (1/3) of the votes entitled to be cast on any matter by a voting group shall constitute a quorum of that
voting group for action on that matter; for the adoption of the amendments to the Protalix BioTherapeutics, Inc. 2006 Stock
Incentive Plan to increase the number of shares reserved for issuance under the plan and to amend certain other terms of the plan;
and for the ratification of the appointment of Kesselman & Kesselman.
What if I Abstain?
An abstention on any proposal are not counted
as votes “for” or “against” the proposal and will not have any effect on the outcome of the vote on the
proposal.
Will My Shares be Voted if I do not Return My Proxy Card
and do not Attend the Annual Meeting?
If your shares are registered in your name
or if you have stock certificates, they will not be voted if you do not return your proxy card by mail or vote at the meeting as
described above under “How Do I Vote?”.
If your shares are held in street name and
you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above under “How
Do I Vote?,” the bank, broker or other nominee has the authority to vote your shares on certain routine matters scheduled
to come before the meeting even if it does not receive instructions from you. We encourage you to provide voting instructions.
This ensures your shares will be voted at the meeting in the manner you desire.
Is Voting Confidential?
Yes. Only the inspector of elections and
our employees that have been assigned the responsibility for overseeing the legal aspects of the annual meeting will have access
to your proxy card. The inspector of elections will tabulate and certify the vote. Any comments written on the proxy card will
remain confidential unless you ask that your name be disclosed.
What are the Costs of Soliciting these Proxies?
We will pay all of the costs of soliciting
these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these employees
and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries
to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for
their expenses. From time to time, we may engage a proxy solicitor to help us attain a quorum for the meeting.
Could other Matters be Decided at the Annual Meeting?
We do not know of any other matters that
will be considered at the annual meeting. If any other matters arise at the annual meeting at or by the direction of the board
of directors, the proxies will be voted at the discretion of the proxy holders.
What Happens if the Annual Meeting is Postponed or Adjourned?
Your proxy will still be valid and may be
voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.
Do I Need a Ticket to Attend the Annual Meeting?
Yes, you will need an admission ticket or
proof of ownership of common stock to enter the annual meeting. If you are a shareholder of record, your admission ticket is the
bottom half of the proxy card sent to you. If you plan to attend the annual meeting, please so indicate when you vote and bring
the ticket with you to the annual meeting. If your shares are held in the name of a bank, broker or other holder of record, your
admission ticket is the left side of your voting information form. If you do not bring your admission ticket, you will need proof
of ownership to be admitted to the annual meeting. A recent brokerage statement or letter from a bank or broker is an example of
proof of ownership. If you arrive at the annual meeting without an admission ticket, we will admit you only if we are able to verify
that you are a shareholder of our company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information,
as of September 26, 2014, regarding beneficial ownership of our common stock:
| · | each person who is known by us to own beneficially more than 5% of our common stock; |
| · | each of our Chief Executive Officer, our Executive Vice President, Research and Development, our Senior Vice President, Product
Development, our Chief Financial Officer and our Chief Operating Officer; and |
| · | all of our directors and executive officers collectively. |
Unless otherwise noted, we believe that all
persons named in the table have sole voting and investment power with respect to all shares of our common stock beneficially owned
by each of them. For purposes of these tables, a person is deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from September 26, 2014 upon exercise of options, warrants and convertible securities. Each beneficial
owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by
such person (but not those held by any other person) and that are exercisable within such 60 days from such date have been exercised.
The information set forth below is based upon information obtained from the beneficial owners, upon information in our possession
regarding their respective holdings and upon information filed by the holders with the SEC. The percentages of beneficial ownership
are based on 93,663,063 shares of our common stock outstanding as of September 26, 2014.
The address for all directors and officers
is c/o Protalix BioTherapeutics, Inc., 2 Snunit Street, Science Park, P.O. Box 455, Carmiel 20100, Israel.
Name and Address of Beneficial Owner | |
Amount
and Nature of
Beneficial Ownership | | |
Percentage
of Class (%) | |
Board of Directors and Executive Officers | |
| | | |
| | |
Shlomo Yanai (1) | |
| — | | |
| — | |
David Aviezer, Ph.D., MBA (2) | |
| 1,997,022 | | |
| 2.1 | |
Yoseph Shaaltiel, Ph.D. (3) | |
| 1,138,602 | | |
| 1.2 | |
Amos Bar Shalev | |
| 1,680 | | |
| * | |
Zeev Bronfeld (4) | |
| 3,348,057 | | |
| 3.6 | |
Yodfat Harel Buchris (5) | |
| 137,424 | | |
| * | |
Roger D. Kornberg, Ph.D. (6) | |
| 50,000 | | |
| * | |
Eyal Sheratzky | |
| — | | |
| — | |
Einat Brill Almon, Ph.D. (7) | |
| 523,668 | | |
| * | |
Yossi Maimon (8) | |
| 387,396 | | |
| * | |
Tzvi Palash (9) | |
| 217,375 | | |
| * | |
All executive officers and directors as a group (11 persons) (10) | |
| 7,801,224 | | |
| 8.1 | |
| |
| | | |
| | |
5% Holders | |
| | | |
| | |
Al-Rov (Israel) Ltd. (11) | |
| 4,915,383 | | |
| 5.3 | |
Federated Investors Inc. (12) | |
| 9,942,841 | | |
| 10.6 | |
Baillie Gifford & Co. (13) | |
| 6,407,588 | | |
| 6.8 | |
Allianz Asset Management AG (14) | |
| 5,814,887 | | |
| 6.2 | |
* less than 1%.
| (1) | Does not include 150,000 shares of our common stock underlying options that will not vest within 60 days of September 26,
2014 and are subject to certain conditions. |
| (2) | Consists of 1,761,897 shares of our common stock issuable upon exercise of outstanding options within 60 days of September
26, 2014 and 235,125 restricted shares of our common stock that have vested or will vest within 60 days of September 26, 2014.
Does not include 41,667 shares of our common stock underlying options that will not vest within 60 days of September 26, 2014 and
182,875 restricted shares of our common stock that will not vest within 60 days of September 26, 2014. |
| (3) | Consists of 463,754 shares of our common stock held by Dr. Shaaltiel, 556,723 shares of our common stock issuable upon exercise
of outstanding options within 60 days of September 26, 2014 and 118,125 restricted shares of our common stock that have vested
or will vest within 60 days of September 26, 2014. Does not include 24,167 shares of our common stock underlying options that will
not vest within 60 days of September 26, 2014 and 91,875 restricted shares of our common stock that will not vest within 60 days
of September 26, 2014. |
| (4) | Consists of 1,838,109 shares of our common stock held by directly by Mr. Bronfeld and 1,509,948 shares of our common
stock held by Biocell Ltd. Mr. Bronfeld is a director and Chief Executive Officer of Biocell. Mr. Bronfeld disclaims
beneficial ownership of the shares held by Biocell Ltd. except to the extent of his pecuniary interest therein. According to
public disclosures by Biocell Ltd., on August 13, 2014 it sold 4,400,000 shares of our common stock in a series of private
transactions. The proceeds of the transactions were to be used to cover the tax liability to the Israeli Tax Authorities in
connection with a then-pending in-kind distribution of Biocell’s shares of our common stock to its
shareholders. Subsequently, on September 16, Biocell distributed 8,556,371 shares of our common stock to its shareholders and
has reported that it intends to distribute its remaining 1,509,948 shares of our common stock to its shareholders in the very
short term. |
| (5) | Represents shares held by YP & 6 Partners Ltd. Mrs. Harel Buchris is a director and shareholder of YP & 6 Partners
Ltd. Mrs. Harel Buchris disclaims beneficial ownership of these shares except to the extent of her pecuniary interest therein. |
| (6) | Consists of 50,000 shares of our common stock issuable upon exercise of outstanding options within 60 days of September 26,
2014. |
| (7) | Consists of 419,605 shares of our common stock issuable upon exercise of outstanding options within 60 days of September 26,
2014 and 104,063 restricted shares of our common stock that have vested or will vest within 60 days of September 26, 2014. Does
not include 21,667 shares of our common stock underlying options that will not vest within 60 days of September 26, 2014 and 80,938
restricted shares of our common stock that will not vest within 60 days of September 26, 2014. |
| (8) | Consists of 283,333 shares of our common stock issuable upon exercise of outstanding options within 60 days of September 26,
2014 and 104,063 restricted shares of our common stock that have vested or will vest within 60 days of September 26, 2014. Does
not include 21,667 shares of our common stock underlying options that will not vest within 60 days of September 26, 2014 and 80,938
restricted shares of our common stock that will not vest within 60 days of September 26, 2014. |
| (9) | Consists of 160,000 shares of our common stock issuable upon exercise of outstanding options within 60 days of September 26,
2014 and 57,375 restricted shares of our common stock that have vested or will vest within 60 days of September 26, 2014. Does
not include 44,625 restricted shares of our common stock that will not vest within 60 days of September 26, 2014. |
| (10) | Consists of 3,950,915 shares of our common stock, 3,231,559 shares of our common stock issuable upon exercise of outstanding
options within 60 days of September 26, 2014 and 618,750 restricted shares of our common stock that have vested or will vest within
60 days of September 26, 2014. Does not include 109,167 shares of common stock issuable upon exercise of outstanding options and
481,250 restricted shares of our common stock that will not vest within 60 days of September 26, 2014. |
| (11) | The address is Alrov Tower, 46 Rothschild Blvd., Tel Aviv 66883, Israel. Consists of 4,229,337 shares of our common stock held
by Al-Rov (Israel) Ltd., or Al-Rov Israel, and 686,046 shares of our common stock held by Techno-Rov Holdings (1993) Ltd., or Techno-Rov
Holdings. Al-Rov Israel owns 100% of the outstanding shares of Al-Rov Technologies Holdings LTD, the holder of 80% of Techno-Rov
Holdings. |
| (12) | Based solely on a Schedule 13F-HR filed on August 7, 2014 by Federated Investors Inc. for the period ended June 30, 2014. |
| (13) | Based solely on a Schedule 13F-HR filed on August 1, 2014 by Baillie Gifford & Co. for the period ended June 30, 2014. |
| (14) | Based solely on a Schedule 13F-HR filed on August 13, 2014 by Allianz Asset Management AG for the period ended June 30, 2014. |
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires
our directors, executive officers and holders of more than 10% of our common stock to file with the SEC reports regarding their
ownership and changes in ownership of our equity securities. We believe that all Section 16 filings requirements were met
by our officers and directors during 2013. In making this statement, we have relied solely upon examination of the copies of Forms
3, 4 and 5, Schedule 13s and written representations of our former and current directors, officers and 10% shareholders.
PROPOSAL 1: ELECTION OF DIRECTORS
At the annual meeting, our shareholders will be asked to elect
seven directors for a one-year term expiring at the next annual meeting of shareholders. Each director will hold office until his
or her successor has been elected and qualified or until the director’s earlier resignation or removal.
Our Board of Directors recommends that the persons named below
be elected as directors of our company and it is intended that the accompanying proxy will be voted for their election as directors,
unless the proxy contains contrary instructions. Shares of common stock represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for any individual nominee or for all nominees will be voted (unless one or
more nominees are unable to serve) for the election of the nominees named below. The Board of Directors knows of no reason why
any such nominee should be unable or unwilling to serve, but if such should be the case, proxies will be voted for the election
of some other person or the size of the Board of Directors will be fixed at a lower number.
Each of the nominees currently serves as a member of
our Board of Directors other than Moshe Manor and Aharon Schwartz, Ph.D. The directors are elected by a plurality of the votes cast by the
shareholders present or represented by proxy and entitled to vote at the annual meeting.
Nominees for Election to the Board of
Directors
The names of the nominees for election to the Board of Directors
and certain information about such nominees are set forth below. For information concerning the number of shares of common stock
beneficially owned by each nominee, see “Security Ownership of Certain Beneficial Owners and Management” above.
Name |
|
Age |
|
Position |
|
|
|
|
|
Shlomo Yanai |
|
62 |
|
Chairman of the Board |
Moshe Manor |
|
58 |
|
President and Chief Executive Officer, Director Nominee |
Amos Bar Shalev |
|
61 |
|
Director |
Zeev Bronfeld |
|
63 |
|
Director |
Yodfat Harel Buchris |
|
42 |
|
Director |
Roger D. Kornberg, Ph.D. |
|
67 |
|
Director |
Aharon Schwartz, Ph.D. |
|
71 |
|
Director Nominee |
Shlomo Yanai. Shlomo Yanai has served as the Chairman
of our Board of Directors since July 2014. Mr. Yanai is currently the Chairman of the Board of Cambrex Corporation (NYSE:CBM) and
a director of Lumenis Ltd. (NASDAQ:LMNS). Mr. Yanai served as President and Chief Executive Officer of Teva from March 2007 until
May 2012 and, prior to joining Teva, Mr. Yanai was President and Chief Executive Officer of Makhteshim-Agan Industries Ltd. from
2003 until 2006. Before that, he was a Major General in the Israel Defense Forces, where he served for 32 years, in various positions,
the last two positions being Commanding Officer of the Southern Command and Head of the Division of Strategic Planning. Mr. Yanai
was the head of the Israeli security delegation to the peace talks at Camp David, Shepherdstown and Wye River. He currently serves
as a member of the Board of Governors of the Technion — Israel Institute of Technology of Haifa, Israel, and of the International
Advisory Board, MBA Program of Ben-Gurion University of the Negev, Israel, as well as an honorary member of the Board of the Institute
for Policy and Strategy of the Interdisciplinary Center (IDC), Herzliya, Israel. Mr. Yanai holds a bachelor’s degree in political
science and economics from Tel Aviv University, a master’s degree in national resources management from George Washington
University, and is a graduate of the Advanced Management Program of Harvard Business School and U.S. National War College (NDU).
Mr. Yanai was the recipient of the Max Perlman Award for Excellence in Global Business Management from Tel Aviv University, Israel
in 2005 and was awarded an honorary doctorate by Bar-Ilan University, Israel in 2012. We believe Mr. Yanai’s qualifications
to serve as Chairman of our Board of Directors include his vast global operating experience in the life-science and pharmaceutical
and agro-chemicals industry. He also brings a global perspective to the Board, incorporating his industry and Board leadership
experience and his distinguished military service.
Moshe Manor. Mr. Manor was appointed to be the
President and Chief Executive Officer of our company in September 2014 and his tenure is scheduled to commence on November 2, 2014.
Mr. Manor has served in a number of senior executive positions at Teva Pharmaceutical Industries Ltd., from 1984 through 2012.
Most recently, he served as President, Teva Asia & Pacific where he led the strategy and development of a high growth region
for Teva. Prior to that, he was Group Vice President, Global Branded Products, leading the Innovative Commercial and Research &
Development franchises. From 2006 through 2008, Mr. Manor was Senior Vice President, Global Innovative Resources, and was responsible
for generating over $3 billion in sales with Copaxone® and Azilect®. Previously, he served as director of Teva Israel.
Most recently, Mr. Manor serves on the Board of Directors of Kamedis Ltd. and Coronis Partners, and as Chairman of the Board of
Directors of a startup company named MEway Pharma. He holds a BA in Economics from the Hebrew University in Jerusalem, and an MBA
from the Tel-Aviv University. We believe Mr. Manor’s qualifications to serve on our Board of Directors include his extensive
experience in the life-science and pharmaceutical industry on a global scale.
Amos Bar Shalev. Mr. Bar Shalev has served as our director
since July 2008. Mr. Bar Shalev served as a director of Protalix Ltd. from 2005 through January 31, 2008, and as our director from
December 31, 2006 through January 31, 2008. Mr. Bar Shalev was not nominated for reelection at our annual meeting of shareholders
on January 31, 2008. On July 14, 2008, our Board of Directors appointed Mr. Bar Shalev to serve on the board, at which time he
was reappointed to the board of directors of Protalix Ltd. as well. Mr. Bar Shalev brings to us extensive experience in managing
technology companies. Currently, Mr. Bar Shalev serves as a director of Technorov Holdings (1993) Ltd. and manages its portfolio.
In addition, he has served on the board of directors of Aposense Ltd. (TASE: APOS), an Israeli publicly-traded company listed on
the TASE, since 2011, and served on the board of directors of Highcon Systems Ltd., a privately-held Israeli company, from 2010
through 2012. From 1997 through 2004, he was a Managing Director of TDA Capital Partners, a management company of the TGF (Templeton
Tadiran) Fund. From 2004 through 2007, he was the President of Win Buyer Ltd. He has served on the board of directors of many other
companies, including, among others, NESS Ltd. (acquired by BioNess Inc.), Idanit (acquired by Scitex Corporation Ltd.), Objet Geometrix,
Verisity, Scitex Vision (acquired by Hewlett Packard), Golden Wings Investment Company Ltd., the venture capital fund of the Israeli
Air Force Veterans Business Club, Win Buyer Ltd. and Sun Light Ltd. He received his B.Sc. in Electrical Engineering from the Technion,
Israel in 1978 and M.B.A. from the Tel Aviv University in 1981. He holds the highest award from the Israeli Air Force for technological
achievements. We believe Mr. Bar Shalev’s qualifications to serve on our Board of Directors include his years of experience
in the management of Israeli businesses.
Zeev Bronfeld. Mr. Bronfeld has served as
a director of Protalix Ltd. since 1996 and as our director since December 31, 2006. Mr. Bronfeld brings to us vast experience in
management and value building of biotechnology companies. Mr. Bronfeld is an experienced businessman who is involved in a number
of biotechnology companies. He is a co-founder of Biocell Ltd. (TASE:BCEL), an Israeli publicly traded holding company specializing
in biotechnology companies and has served as its Chief Executive Officer since 1986. Mr. Bronfeld currently serves as a director
of Biocell Ltd., Biomedix Incubator Ltd. (TASE:BMDX), D.N.A. Biomedical Solutions Ltd. (TASE:DNA), and Gefen Biomed Investments
Ltd. (TASE:GEFEN), all of which are public companies traded on the TASE. Mr. Bronfeld is also a director of each of the following
privately-held companies: EcoCycle Israel Ltd., Contipi Ltd., L.N. Innovative Technologies, A.T.I Ashkelon Industries Information
Technologies Ltd., The Trendlines Group, MOFET B’Yehuda – Industrial Research & Development in Judea Ltd., Incubator
for Management of Technological Entrepreneurship Misgav Ltd., A.Y.M.B. Holdings and Investments Ltd., TransBiodiesel Ltd., Entera
Bio Ltd., Incubator for Management of Technological Entrepreneurship Misgav Ltd., M.B.R.T. Development and Investments Ltd., Macrocure
Ltd., Nanothera Ltd., Spearhead Investment Ltd., Stimatix G.I. Ltd. and Apifix Ltd. Mr. Bronfeld received a B.A. in Economics from
the Hebrew University in 1975. We believe Mr. Bronfeld’s qualifications to serve on our Board of Directors include his years
of experience in the management of private and public Israeli companies, including life science companies.
Yodfat Harel Buchris. Mrs. Harel Buchris has
served as our director since June 2007. From 2006 to 2013, Mrs. Harel Buchris served as a Managing Director of Tamares Capital
Ltd., a private investment group with interests in real estate, technology, manufacturing, leisure and media. At Tamares Capital,
Mrs. Harel Buchris served as the Business Development Director and the head of the Israel office. Prior to joining Tamares Capital,
from 2004 to 2006, she was the Head of the Medical Desk of Orbotech, Ltd. (NASDAQ:ORBK), a company providing high-tech inspection
and imaging solutions for bare printed circuit board (PCB), flat panel display (FPD) and PCB assembly manufacturing worldwide.
Prior to that, from 1994 to 2003, she was a Managing Director of Harel-Hertz Investment House Ltd., a business investment company
with offices in Tel Aviv, Israel and Tokyo, Japan. In 2002, Harel-Hertz Investment House became the Israeli representative office
for ITX Corporation, a publicly-traded company in Japan. Mrs. Harel Buchris currently serves on the board of directors of Tamares
Capital, Tamares Hotels, Tamares Real Estate, Storewiz and Halman-Aldubi Provident Funds, Ltd. Mrs. Harel Buchris holds a B.A.
in Communications and Political Science from Bar Ilan University and an executive M.B.A. from Bradford University, Great Britain.
She has also completed programs in Directors’ Studies and Advanced Advertising and Marketing at the Israel Management Center.
We believe Mrs. Harel Buchris’ qualifications to serve on our Board of Directors include her experience in the management
of Israeli and other businesses.
Roger D. Kornberg, Ph.D. Professor Kornberg
has served as our director since February 2008. He has served as a director of Teva Pharmaceuticals (NASDAQ:TEVA, TASE:TEVA) since
2007 and of OphthaliX Inc. (OTCBB:OPLI), since 2012. He also serves as the Chief Scientist and a director of Cocrystal Discovery,
Inc., a privately-held biotechnology companies. Professor Kornberg is a member of the U.S. National Academy of Sciences and the
Winzer Professor of Medicine in the Department of Structural Biology at Stanford University, Stanford, California. He has been
a member of the faculty of Stanford University since 1972. Prior to that, he was a professor at Harvard Medical School. Professor
Kornberg is a renowned biochemist and in 2006 he was awarded the Nobel Prize in Chemistry in recognition for his studies of the
molecular basis of eukaryotic transcription, the process by which DNA is copied to RNA. Professor Kornberg is also the recipient
of several awards, including the 2001 Welch Prize, the highest award granted in the field of chemistry in the United States, and
the 2002 Leopold Mayer Prize, the highest award granted in the field of biomedical sciences from the French Academy of Sciences.
He received his B.S. in Chemistry from Harvard University in 1967 and his Ph.D. in Chemistry from Stanford University in 1972.
He holds honorary degrees from universities in Europe and Israel, including the Hebrew University in Jerusalem, where he currently
is a visiting professor. We believe Professor Kornberg’s qualifications to serve on our Board of Directors include his expertise
in chemistry and medicine and his experience in the academic arena.
Aharon Schwartz, Ph.D.
Dr. Schwartz has retired from Teva Pharmaceutical Industries in 2011 where he served in a number of positions from 1975
through 2011, the most recent being Vice President, Head of Teva Innovative Ventures from 2008. Dr. Schwartz is currently
chairman of the board of directors of a number of life science companies, including BiolineRx Ltd. (NASDAQ:BLRX, TASE:BLRX),
Yissum-the TTO of the Hebrew University of Jerusalem, DPharm Ltd. (TASE:DPRM), BioCancell Ltd. (TASE:BICL), CureTech Ltd. and
Biomas Ltd., and a member of the board of directors of Alcobra Ltd. (NASDAQ:ADHD). Dr. Schwartz received his Ph.D. in organic
chemistry in 1978 from the Weizmann Institute, his M.Sc. in organic chemistry from the Technion and a B.Sc. in chemistry and
physics from the Hebrew University of Jerusalem. Dr. Schwartz received a second Ph.D. in 2014 from the Hebrew University of
Jerusalem in the history and philosophy of science.
Independent Directors
We believe a majority of the members of our Board of Directors
are independent from management. When making determinations from time to time regarding independence, the Board of Directors will
reference the listing standards adopted by the NYSE MKT as well as the independence standards set forth in the Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated by the SEC under that Act. In particular, our Audit Committee periodically evaluates
and reports to the Board of Directors on the independence of each member of the Board. We anticipate our audit committee will analyze
whether a director is independent by evaluating, among other factors, the following:
Whether the member of the Board of Directors has any
material relationship with us, either directly, or as a partner, shareholder or officer of an organization that has a relationship
with us;
Whether the member of the Board of Directors is a
current employee of our company or any of our subsidiaries, or was an employee of our company or any of our subsidiaries within
three years preceding the date of determination;
Whether the member of the Board of Directors is, or
in the three years preceding the date of determination has been, affiliated with or employed by (i) a present internal or external
auditor of our company or any affiliate of such auditor or (ii) any former internal or external auditor of our company or any affiliate
of such auditor, which performed services for us within three years preceding the date of determination;
Whether the member of the Board of Directors is, or
in the three years preceding the date of determination has been, part of an interlocking directorate, in which any of our executive
officers serve on the Compensation Committee of another company that concurrently employs the member as an executive officer;
Whether the member of the Board of Directors receives
any compensation from us, other than fees or compensation for service as a member of the Board of Directors and any committee of
the Board of Directors and reimbursement for reasonable expenses incurred in connection with such service and for reasonable educational
expenses associated with Board of Directors or committee membership matters;
Whether an immediate family member of the member of
the Board of Directors is a current executive officer of our company or was an executive officer of our company within three years
preceding the date of determination;
Whether an immediate family member of the member of
the Board of Directors is, or in the three years preceding the date of determination has been, affiliated with or employed in a
professional capacity by (i) a present internal or external auditor of ours or any of our affiliates or (ii) any former internal
or external auditor of our company or any affiliate of ours which performed services for us within three years preceding the date
of determination; and
Whether an immediate family member of the member of
the Board of Directors is, or in the three years preceding the date of determination has been, part of an interlocking directorate,
in which any of our executive officers serve on the Compensation Committee of another company that concurrently employs the immediate
family member of the member of the Board of Directors as an executive officer.
The above list is not exhaustive and we anticipate that the
Audit Committee will consider all other factors which could assist it in its determination that a director will have no material
relationship with us that could compromise that director’s independence.
Under these standards, our Board of Directors has
determined that Messrs. Bar Shalev and Sheratzky and Mrs. Harel Buchris are considered “independent” pursuant to
the rules of the NYSE MKT and Section 10A(m)(3) of the Exchange Act. In addition, our Board of Directors has determined that
at least two of these directors are able to read and understand fundamental financial statements and have substantial
business experience that results in their financial sophistication, qualifying them for membership on our audit committee.
Our Board of Directors has also determined that Messrs. Yanai, Bar Shalev, Bronfeld and Sheratzky, Mrs. Harel Buchris and Dr.
Kornberg and Dr. Schwartz are “independent” pursuant to the rules of the NYSE MKT.
The position of chairman of the board is not held by our chief
executive officer at this time. The Board of Directors does not have a policy mandating the separation of these functions. We believe
it is in our best interest that Mr. Yanai serve as the chairman of our Board of Directors. This decision was based on Mr. Yanai’s
vast global operating experience in the life-science and pharmaceutical (at Teva) and agro-chemicals industry. He also brings a
global perspective to the Board of Directors, incorporating his industry and Board leadership experience and his distinguished
military service. Our non-management directors hold formal meetings, separate from management, at least twice per year. We have
no formal policy regarding attendance by our directors at annual shareholders meetings, although we encourage such attendance and
anticipate most of our directors will attend these meetings. Messrs. Bronfeld and Bar Shalev, Dr. Aviezer and Dr. Shaaltiel attended
our 2013 annual meeting of shareholders. Mr. Yanai was appointed to serve as Chairman of our Board of Directors after the 2013
annual meeting of shareholders.
The Board’s Role in Risk Oversight
Our Board of Directors oversees an enterprise-wide approach
to risk management, designed to support the achievement of business objectives, including organizational and strategic objectives,
to improve long-term organizational performance and enhance shareholder value. The involvement of our Board of Directors in setting
our business strategy is a key part of its assessment of management’s plans for risk management and its determination of
what constitutes an appropriate level of risk for the company. The participation of our Board of Directors in our risk oversight
process includes receiving regular reports from members of senior management on areas of material risk to our company, including
operational, financial, legal and regulatory, and strategic and reputational risks. While the full board has the ultimate oversight
responsibility for the risk management process, various committees of the board also have responsibility for risk management. For
example, financial risks, including internal controls, are overseen by the audit committee and risks that may be implicated by
our executive compensation programs are overseen by the compensation committee. Upon identification of a risk, the assigned board
committee or our full Board of Directors discuss or review risk management and risk mitigation strategies. Additional review or
reporting on enterprise risks is conducted as needed or as requested by our Board of Directors or a committee thereof.
Board and Committee Meetings
Our Board of Directors has an Audit Committee, Compensation
Committee and Nominating Committee. The following indicates the members of each committee and provides a description of the committees’
primary functions:
Audit Committee
We require that all Audit Committee
members possess the required level of financial literacy and at least one member of the Audit Committee meet the current
standard of requisite financial management expertise as required by the NYSE MKT and applicable rules and regulations of the
SEC. Messrs. Bar Shalev and Sheratzky, and Mrs. Harel Buchris have been appointed by the Board of Directors to serve on the
Audit Committee until their respective successors have been duly elected. After the 2014 Annual Meeting of Shareholders, we
anticipate that Mr. Bronfeld will join the Audit Committee.
Our Audit Committee operates under a formal
charter that governs its duties and conduct. A current copy of the Audit Committee Charter is available on our website at http://www.protalix.com.
All members of the Audit Committee are independent
from our executive officers and management.
Our independent registered public accounting
firm reports directly to the Audit Committee.
Our Audit Committee meets with management
and representatives of our registered public accounting firm prior to the filing of officers’ certifications with the SEC
to receive information concerning, among other things, effectiveness of the design or operation of our internal controls over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
Our Audit Committee has adopted a Policy for
Reporting Questionable Accounting and Auditing Practices and Policy Prohibiting Retaliation against Reporting employees to enable
confidential and anonymous reporting of improper activities to the Audit Committee.
Messrs. Bar Shalev and Sheratzky and Mrs.
Harel Buchris qualify as “audit committee financial experts” under the applicable rules of the SEC. In making the determination
as to these individuals’ status as audit committee financial experts, our Board of Directors determined they have accounting
and related financial management expertise within the meaning of the aforementioned rules, as well as the listing standards of
the NYSE MKT.
Compensation Committee
The Compensation Committee is currently comprised of Messrs.
Bar Shalev and Sheratzky and Mrs. Harel Buchris. The Compensation Committee reviews and approves the compensation of executive
officers and key employees and administers our stock incentive plan. A current copy of the Compensation Committee Charter is available
on our website at http://www.protalix.com. After the 2014 Annual Meeting of Shareholders, we
anticipate that Mr. Bronfeld will join the Compensation Committee.
Nominating Committee
The Nominating Committee, currently comprised of Messrs. Bar
Shalev and Sheratzky and Mrs. Harel Buchris, is responsible for assisting our Board of Directors in selecting nominees for election
to the Board of Directors and monitoring the composition of the Board of Directors. A current copy of the Nominating Committee
Charter is available on our website at http://www.protalix.com. Although our Board of Directors does not have a formal policy
requiring the Nominating Committee to consider the diversity of directors in its nomination process, in considering potential new
directors, the Nominating Committee will review individuals from various disciplines and backgrounds, and consider the following
qualifications: broad experience in business, finance or administration; familiarity with national business matters; familiarity
with our industry; independence; and prominence and reputation. The committee seeks nominees with a broad diversity of experience,
professions, education, skills and backgrounds with a view to having a Board of Directors that represents a diversity of views,
experiences, and backgrounds. After making such a review, the Nominating Committee submits the nomination to the full Board of
Directors for approval. After the 2014 Annual Meeting of Shareholders, we
anticipate that Mr. Bronfeld will join the Nominating Committee.
The Nominating Committee will consider any nominees submitted
by shareholders of record at the time of any such nomination in compliance with applicable rules of the SEC and our Amended and
Restated By-Laws, or the By-Laws. The Nominating Committee will determine whether any shareholder nominee meets the qualifications
for candidacy described above and in the Nominating Committee Charter. Shareholders’ nominations for election at the 2015
Annual Meeting of Shareholders must be submitted in writing to Yossi Maimon, Corporate Secretary, not less than 45 days nor more
than 75 days prior to the date on which we first mailed this proxy statement. Such written notice must include the following information:
(i) name, age, business address and residence address of the nominee; (ii) the principal occupation or employment of the nominee;
(iii) the class and number of shares of our company beneficially owned by the nominee; and (iv) any other information relating
to the nominee that would be required to be disclosed in solicitations for proxies for elections of directors pursuant to Regulation
14A of the Exchange Act. The written notice must also include the following information with respect to each shareholder delivering
such notice: (i) the name and record address of such shareholder; and (ii) the class and number of shares of our company beneficially
owned by the shareholder. Lastly, the written notice must include certain information relating to any derivative or hedging transactions
by the shareholder delivering such notice and its Shareholder Associated Persons, as defined in our By-Laws, and other arrangements
with other parties regarding our securities, as presented in detail in our By-Laws. Shareholders can mail any such recommendations,
including the criteria outlined above, to Yossi Maimon, Corporate Secretary, Protalix BioTherapeutics, Inc., 2 Snunit Street, Science
Park, P.O. Box 455, Carmiel 20100, Israel.
During the year ended December 31, 2013, there were 16 meetings
of our Board of Directors and 4 meetings of the Audit Committee (and one action by written consent). Neither the Compensation Committee
nor the Nominating Committee held any meetings during the year ended December 31, 2013, but the Nomination Committee acted by unanimous
written consent once during the same period. Our non-management directors hold meetings separate from management at least twice
per year. All directors, other than Dr. Kornberg and Mr. Sheratzky, attended at least 75% of the aggregate number of meetings of
the Board of Directors and the committees of the Board of Directors on which they served.
Under the rules of the NYSE MKT, a director of our company will
only qualify as an “independent director” if, among other things, in the opinion of our Board of Directors, that person
does not have a material relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The Board of Directors has determined that none of the non-employee directors has a relationship that would interfere
with the exercise of independent judgment in carrying out the responsibilities of a director and that each of the non-employee
directors is an “independent director” as defined under rules of the NYSE MKT. In addition, the Board of Directors
has determined that all members of the Audit Committee meet the independence requirements set forth in Rule 10A-3 under the Exchange
Act and that all members of the Compensation Committee meet the independence requirements set forth in Rule 805(c) of the NYSE
MKT Listed Company Manual.
Contacting the Board of Directors
Shareholders who wish to communicate with the Board of Directors
may do so by mailing any such communications to Yossi Maimon, Corporate Secretary, Protalix BioTherapeutics, Inc., 2 Snunit Street,
Science Park, P.O. Box 455, Carmiel 20100, Israel. All communications are distributed to the Board of Directors, as appropriate,
depending upon the facts and circumstances outlined in the communications received. For example, if any complaints regarding accounting
and/or auditing matters are received, they may be forwarded by our Corporate Secretary to the Audit Committee for review.
Policy Governing Director Attendance at Annual Meetings of
Shareholders
We have no formal policy regarding attendance by our directors
at annual shareholders meetings, although we encourage such attendance and anticipate most of our directors will attend these meetings.
Messrs. Bronfeld and Bar Shalev, Dr. Aviezer and Dr. Shaaltiel attended our 2013 annual meeting of shareholders.
Compensation of Directors
The following table sets forth information with respect to compensation
of our non-employee directors during fiscal year 2013. The fees to the directors were paid by Protalix Ltd.
Name | |
Fees Earned or
Paid in Cash ($) | | |
Total ($) | |
Zeev Bronfeld | |
| 160,000 | | |
| 160,000 | |
Amos Bar Shalev | |
| 80,000 | | |
| 80,000 | |
Yodfat Harel Buchris | |
| 80,000 | | |
| 80,000 | |
Roger D. Kornberg (1) | |
| 55,000 | | |
| 55,000 | |
Eyal Sheratzky | |
| 80,000 | | |
| 80,000 | |
Alfred Akirov (2) | |
| 53,910 | | |
| 53,910 | |
| (1) | Dr. Kornberg holds options to purchase 50,000 shares of our common stock with an exercise price equal to $3.02 per share. The
options were granted to Dr. Kornberg in February 2008, and all of the options have since vested. The options expire in February
2018. |
| (2) | Mr. Akirov resigned from our Board of Directors on September 3, 2013. |
Directors’ fees paid to each of Zeev
Bronfeld and Eyal Sheratzky are paid to the applicable director’s employer in accordance with arrangements between the director
and the employer.
Our Board of Directors will review director
compensation annually and adjust it according to then current market conditions and corporate governance guidelines.
Compensation Committee Interlocks and
Insider Participation
Our Compensation Committee currently consists
of Messrs. Bar Shalev and Sheratzky and Mrs. Harel Buchris. No member of our Compensation Committee or any executive officer of
our company or of Protalix Ltd. has a relationship that would constitute an interlocking relationship with executive officers
or directors of another entity. No Compensation Committee member is or was an officer or employee of our company or of Protalix
Ltd. Further, none of our executive officers serves on the board of directors or compensation committee of any entity that has
one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
MANAGEMENT
Our executive officers, their ages and positions as of September
26, 2014, are as follows:
Name |
|
Age |
|
Position |
David Aviezer, Ph.D., MBA (1) |
|
49 |
|
Director, President and Chief Executive Officer |
Yoseph Shaaltiel, Ph.D. |
|
61 |
|
Director and Executive VP, Research and Development |
Einat Brill Almon, Ph.D. |
|
55 |
|
Vice President, Product Development |
Yossi Maimon, CPA |
|
44 |
|
Vice President, Chief Financial Officer, Treasurer and Secretary |
Tzvi Palash |
|
58 |
|
Chief Operating Officer |
(1) Dr.
Aviezer has retired from the company. Moshe Manor is scheduled to succeed Dr. Aviezer on November 2, 2014.
David Aviezer, Ph.D., MBA. Dr. Aviezer has
served as Chief Executive Officer of Protalix Ltd. since 2002 and its director since 2005 and as our director since December 31,
2006. On December 31, 2006, he became our President and Chief Executive Officer. Dr. Aviezer has over 15 years of experience in
biotechnology management, advancing products from early-stage research up to their regulatory approval and commercialization. Prior
to joining Protalix Ltd., from 1996 to 2002, he served as General Manager of ProChon Biotech Ltd., an Israeli company focused on
orthopedic disorders. Previously, Dr. Aviezer was a visiting scientist at the Medical Research Division of American Cyanamid, a
subsidiary of Wyeth which was subsequently acquired by Pfizer (NYSE:PFE), in New York. Since 1996, Dr. Aviezer has served as an
Adjunct Lecturer at Bar Ilan University. Dr. Aviezer is the recipient of the Clore Foundation Award and the J.F. Kennedy Scientific
Award. He holds a Ph.D. in Molecular Biology and Biochemistry from the Weizmann Institute of Science, an MBA from the Bar Ilan
University Business School, an M.Sc. in Biology from the Weizmann Institute of Science and a B.Sc. in Biology from Bar Ilan University.
We believe Dr. Aviezer’s qualifications to serve on our Board of Directors include his position as our President and Chief
Executive Officer as well as his previous experience in the management of biotechnology companies.
Yoseph Shaaltiel, Ph.D. Dr. Shaaltiel founded
Protalix Ltd. in 1993 and has served as a member of our Board of Directors and as our Vice President, Research and Development
since December 31, 2006. Prior to establishing Protalix Ltd., from 1988 to 1993, Dr. Shaaltiel was a Research Associate at the
MIGAL Technological Center. He also served as Deputy Head of the Biology Department of the Biological and Chemical Center of the
Israeli Defense Forces and as a Biochemist at Makor Chemicals Ltd. Dr. Shaaltiel was a Postdoctoral Fellow at the University of
California at Berkeley and at Rutgers University in New Jersey. He has co-authored over 40 articles and abstracts on plant biochemistry
and holds seven patents. Dr. Shaaltiel received his Ph.D. in Plant Biochemistry from the Weizmann Institute of Science, an M.Sc.
in Biochemistry from the Hebrew University and a B.Sc. in Biology from the Ben Gurion University. We believe Dr. Shaaltiel’s
qualifications to serve on our Board of Directors include his role in founding our company and his continued role in the management
of our company.
Einat Brill Almon, Ph.D. Dr. Almon joined Protalix Ltd.
in December 2004, originally as a Senior Director and later as a Vice President and then Senior Vice President, Product Development,
and became our Senior Vice President, Product Development on December 31, 2006. Dr. Almon has many years of experience in the management
of life science projects and companies, including biotechnology and agrobiotech, with direct experience in clinical, device and
scientific software development, as well as a strong background and work experience in Intellectual Property. Prior to joining
Protalix Ltd., from 2001 to 2004, she served as Director of R&D and IP of Biogenics Ltd., a company that developed an autologous
platform for tissue-based protein drug delivery. Biogenics, based in Israel, is a wholly-owned subsidiary of Medgenics Inc. Dr.
Almon has trained as a biotechnology patent agent at leading IP firms in Israel. Dr. Almon holds a Ph.D. and an M.Sc. in molecular
biology of cancer research from the Weizmann Institute of Science, a B.Sc. from the Hebrew University and has carried out Post-Doctoral
research at the Hebrew University in the area of plant molecular biology.
Yossi Maimon, CPA. Mr. Maimon joined Protalix
Ltd. on October 15, 2006 as its Chief Financial Officer and became our Vice President and Chief Financial Officer on December 31,
2006. Prior to joining Protalix, from 2002 to 2006, he served as the Chief Financial Officer of Colbar LifeScience Ltd., a biomaterial
company focusing on aesthetics, where he led all of the corporate finance activities, fund raisings and legal aspects of Colbar
including the sale of Colbar to Johnson and Johnson. Mr. Maimon has a B.A. in accounting from the City University of New York and
an MBA from Tel Aviv University, and he is a Certified Public Accountant in the United States (New York State) and Israel.
Tzvi Palash. Mr. Palash has served
as Protalix Ltd.’s Chief Operating Officer since September 6, 2010. Prior to joining Protalix Ltd., from 2006 through 2010,
Mr. Palash served as a General Manager of ColBar LifeScience Ltd., a biotechnology company specializing in reconstructive medicine
and tissue engineering that was acquired by a division of Johnson & Johnson in 2006. In that position, Mr. Palash served as
a member of the Global Aesthetic Management Team at the Consumer Group of Johnson & Johnson. Prior to that, from 2001 through
2006, Mr. Palash served as the Vice President, Operations of ColBar LifeScience, and he has served in different positions at Teva.
Mr. Palash holds an M.Sc. in Biochemistry from the Hebrew University and a B.Sc. in Biology from the Tel Aviv University.
Family Relationships
There are no family relationships among directors
or executive officers of our company.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct
and Ethics that includes provisions ranging from restrictions on gifts to conflicts of interest. All of our employees and directors
are bound by this Code of Business Conduct and Ethics. Violations of our Code of Business Conduct and Ethics may be reported to
the Audit Committee.
The Code of Business Conduct and Ethics includes
provisions applicable to all of our employees, including senior financial officers and members of our Board of Directors and is
posted on our website (www.protalix.com). We intend to post amendments to or waivers from any such Code of Business Conduct and
Ethics.
Compensation Discussion and Analysis
The primary goals of the Compensation
Committee of our Board of Directors with respect to executive compensation are to attract and retain the most talented and dedicated
executives possible, to tie annual and long-term cash and stock incentives to achievement of specified performance objectives,
and to align executives’ incentives with shareholder value creation. To achieve these goals, the Compensation Committee implements
and maintains compensation plans that tie a portion of executives’ overall compensation to key strategic goals such as developments
in our clinical path, the establishment of key strategic collaborations, the build-up of our pipeline and the strengthening of
our financial position. The Compensation Committee evaluates individual executive performance with a goal of setting compensation
at levels the committee believes are comparable with executives in other companies of similar size and stage of development operating
in the biotechnology industry while taking into account our relative performance and our own strategic goals.
Elements of Compensation
Executive compensation
consists of following elements:
Base Salary. Base salaries
for our executives are established based on the scope of their responsibilities taking into account competitive market compensation
paid by other companies for similar positions. Generally, we believe that executive base salaries should be targeted near the median
of the range of salaries for executives in similar positions with similar responsibilities at comparable companies. We did not
make any changes to the compensation of our executive officers during 2013. The companies reviewed by the Compensation Committee
in making compensation recommendations to our Board of Directors in 2012 include, among others, the following companies:
| · | Biomarin Pharmaceutical Inc. |
| · | Rigel Pharmaceuticals, Inc. |
| · | Momenta Pharmaceuticals, Inc. |
The Compensation Committee intends
to continue reviewing and revising the peer group periodically to ensure that it continues to reflect companies similar to our
company in size and development stage. The Compensation Committee also reviews an executive compensation report and analysis of
publicly-traded biotechnology companies prepared by third party experts from a well-known consulting firm for additional data and
other information regarding executive compensation for comparative purposes.
Base salaries are usually reviewed
annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities,
performance and experience. The base salaries of each of our President and Chief Executive Officer, our Executive Vice President,
Research and Development, our Senior Vice President, Product Development, our Vice President and Chief Financial Officer and our
Chief Operating Officer, who we refer to collectively as the “Named Executive Officers,” are discussed herein. On July
15, 2012, our Board of Directors adopted certain recommendations of the Compensation Committee regarding the compensation of our
Named Executive Officers with no change in the base salary component.
Annual Bonus. The Compensation Committee has the
authority to award discretionary annual bonuses to our executive officers. The discretionary annual bonus awards were intended
to compensate officers for achieving financial, clinical, regulatory and operational goals and for achieving individual annual
performance objectives. For any given year, the compensation objectives vary, but relate generally to strategic factors such as
developments in our clinical path, the execution of a license agreement for the commercialization of product candidates, the establishment
of key strategic collaborations, the build-up of our pipeline and financial factors such as capital raising. Bonuses are awarded
generally based on corporate performance, with adjustments made within a range for individual performance, at the discretion of
the Compensation Committee. The Compensation Committee determines, on a discretionary basis, the size of the entire bonus pool
and the amount of the actual award to each Named Executive Officer.
The Compensation Committee selects, in its discretion, the executive
officers of our company or our subsidiary who are eligible to receive bonuses for any given year. Any bonus granted by the Compensation
Committee will generally be paid in the first quarter of the year, unless such bonus was, by its terms, made payable upon the achievement
of a specific milestone. The Compensation Committee has not fixed a minimum or maximum award for any executive officer’s
annual discretionary bonus, unless specified in the officer’s employment agreement.
Each of our executive officers is eligible for a discretionary
annual bonus under his or her employment agreement. The Compensation Committee has not fixed a minimum or a maximum amount for
any officer’s annual discretionary bonus, nor is any executive officer entitled to a minimum or maximum bonus amount under
his or her employment agreement.
In 2010, the Compensation Committee established a formal bonus
plan that included, among other matters, bonuses payable to our Named Executive Officers upon the approval of taliglucerase alfa
by the FDA. Accordingly, the following bonuses were paid in 2012 in connection with the May 2012 approval of taliglucerase alfa:
Named Executive Officer | |
Bonus Amount | |
David Aviezer, Ph.D., MBA | |
$ | 400,000 | |
Yoseph Shaaltiel, Ph.D. | |
$ | 140,000 | |
Einat Brill Almon, Ph.D. | |
$ | 140,000 | |
Yossi Maimon | |
$ | 140,000 | |
Total | |
$ | 820,000 | |
Following the adoption of the 2010 bonus plan, the Compensation
Committee elected to refrain from issuing additional bonuses to our Named Executive Officers until the FDA approved taliglucerase
alfa. On July 15, 2012, our Board of Directors adopted certain recommendations of the Compensation Committee regarding the compensation
of our Named Executive Officers, including the grant of certain incentive bonuses to be paid to them upon the achievement of a
number of designated milestones, as set forth below. In addition, our Board of Directors approved the grant of restricted stock
to our Named Executive Officers, as described below, and to other members of our management team. The bonus amounts were determined
by the Compensation Committee, in its discretion after review materials regarding peer companies, review with our legal counsel
and review of materials provided by accounting firms.
The bonuses adopted by the Board of Directors in 2012 are as
follows:
| |
Clinical
Development Milestones per Clinical Product Candidate | | |
Other
Clinical Development Milestone for Clinical Product Candidate | | |
Undisclosed
Substantial Commercial Agreement | | |
Entry
into a Substantial Transaction | | |
Entry
into a Change in Control Transaction | |
David Aviezer, Ph.D. | |
$ | 150,000 | | |
$ | 50,000 | | |
$ | 800,000 | | |
| $900,000 | | |
$ | 2,980,000 | |
Yoseph Shaaltiel, Ph.D. | |
$ | 170,000 | | |
$ | 120,000 | | |
$ | 180,000 | | |
| TBD out of $900,000 | | |
$ | 1,200,000 | |
Einat Brill Almon, Ph.D. | |
$ | 150,000 | | |
$ | 100,000 | | |
$ | 170,000 | | |
| TBD out of $900,000 | | |
$ | 1,125,000 | |
Yossi Maimon, CPA | |
$ | 35,000 | | |
$ | 10,000 | | |
$ | 450,000 | | |
| TBD out of $900,000 | | |
$ | 1,125,000 | |
Tzvi Palash | |
$ | 70,000 | | |
$ | 20,000 | | |
$ | 100,000 | | |
| TBD out of $900,000 | | |
$ | 500,000 | |
In addition to the bonuses granted to our Named Executive Officers,
additional members of our management team are entitled to certain incentive bonuses payable upon the achievement of designated
milestones. If we achieve agreed-upon advancements in the clinical development of each of certain designated product candidates
during an agreed-upon amount of time immediately following the Board of Director’s approval of the bonuses, our Named Executive
Officers will be entitled to the amounts listed in the first two columns of the table set forth above. The amounts are payable
upon achievement of the applicable milestone if, at such time, we have available an agreed-upon minimum cash balance. If we do
not have the minimum cash balance, the bonuses will be considered earned, and will be payable when we next achieve the minimum
cash balance.
The grants of restricted stock to the Named Executive Officers
in 2012 consist of 1,100,000 shares, in the aggregate, as shown in the table immediately following this paragraph. The grants were
made in accordance with the terms and conditions of our amended 2006 stock incentive plan.
Named Executive Officer | |
Number of Restricted Shares | |
David Aviezer, Ph.D. | |
| 418,000 | |
Yoseph Shaaltiel, Ph.D. | |
| 210,000 | |
Einat Brill Almon, Ph.D. | |
| 185,000 | |
Yossi Maimon, CPA | |
| 185,000 | |
Tzvi Palash | |
| 102,000 | |
The restricted shares detailed above vest in 16 equal, quarterly
increments over a four-year period, commencing upon the date of grant. In addition, each vested share is subject to a 24-month
lock-up period, commencing upon the applicable vesting date. Immediately and automatically in the event of a Corporate Transaction
or a Change in Control, all of the restricted shares listed above shall vest and the lock-up periods shall terminate, subject to
certain exceptions.
Options and Share-Based Compensation.
Our amended 2006 stock incentive plan authorizes us to grant options to purchase shares of common stock, restricted stock and other
securities to our employees, directors and consultants. Our Compensation Committee is the administrator of the stock incentive
plan. Stock option or other grants are generally made at the commencement of employment and following a significant change in job
responsibilities or to meet other special retention or performance objectives. The Compensation Committee reviews and approves
stock option and other awards to executive officers based upon a review of competitive compensation data, its assessment of individual
performance, a review of each executive’s existing long-term incentives, and retention considerations. The exercise price
of stock options granted under our amended 2006 stock incentive plan must be equal to at least 100% of the fair market value of
our common stock on the date of grant; however, in certain circumstances, grants may be made at a lower price to Israeli grantees
who are residents of the State of Israel.
Severance and Change in Control
Benefits. Pursuant to the employment agreements entered into with each of our executive officers based in Israel, the executive
officer is entitled to be insured by Protalix Ltd. under a Manager’s Policy in lieu of severance. The intention of such Manager’s
Policies is to provide the Israel-based officers with severance protection of one month’s salary for each year of employment.
In addition, stock option and other agreements with each of our Named Executive Officers, as amended, provide that all of the outstanding
options and other securities granted by us to each Named Executive Officer are subject to accelerated vesting immediately upon
a change in control of our company. As set forth above, our Board of Directors adopted certain recommendations of the Compensation
Committee on July 15, 2012, regarding the compensation of our Named Executive Officers, including cash bonuses for Named Executive
Officers if we complete a Corporate Transaction or Change in Control transaction.
Other Compensation. Consistent
with our compensation philosophy, we intend to continue to maintain our current benefits for our executive officers; however, the
Compensation Committee in its discretion may revise, amend, or add to the officer’s executive benefits if it deems it advisable.
As an additional benefit to all of our Israel-based Named Executive Officers and for most of our employees, we generally contribute
to certain funds amounts equaling a total of approximately 15% of their gross salaries for certain pension and other savings plans
for the benefit of the Named Executive Officers. In addition, in accordance with customary practice in Israel, our Israel-based
executives’ agreements require us to contribute towards their vocational studies, and to provide annual recreational allowances,
a company car and a company phone. We believe these benefits are currently equivalent with median competitive levels for comparable
companies.
Executive Compensation.
We refer to the “Summary Compensation Table” set forth in Section 11 of the Annual Report on Form 10-K for information
regarding the compensation earned during the fiscal year ended December 31, 2013 by: our President and Chief Executive Officer,
our Executive Vice President, Research and Development, our Senior Vice President, Product Development, our Vice President and
Chief Financial Officer and our Chief Operating Officer, who we refer to collectively as the “Named Executive Officers.”
Compensation Committee Report
The above report of the Compensation Committee
does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filing by us
under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Compensation Committee has reviewed and
discussed the Compensation Discussion and Analysis set forth below with our management. Based on this review and discussion, the
Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in our
Annual Report on Form 10–K and our annual proxy statement on Schedule 14A.
Respectfully submitted on March 9, 2014, by
the members of the Compensation Committee of the Board of Directors.
Yodfat Harel Buchris
Amos Bar Shalev
Eyal Sheratzky
Summary Compensation Table
The following table sets forth a summary for
the fiscal years ended December 31, 2013, 2012 and 2011, respectively, of the cash and non-cash compensation awarded, paid or accrued
by us or Protalix Ltd. to each of our President and Chief Executive Officer, our Executive Vice President, Research and Development,
our Senior Vice President, Product Development, our Vice President and Chief Financial Officer and our Chief Operating Officer,
who we refer to collectively as the “Named Executive Officers.” There were no restricted stock awards, long-term incentive
plan payouts or other compensation paid during fiscal years 2013, 2012 and 2011 by us or Protalix Ltd. to the Named Executive Officers,
except as set forth below. All of the Named Executive Officers are employees of our subsidiary, Protalix Ltd. All currency amounts
are expressed in U.S. dollars.
Name and Principal Position | |
Year | |
Salary($) | | |
Bonus
($) | | |
Stock
Award(s) ($) | | |
Option
Award(s)
($) | | |
All
Other Compensation
($)(1) | | |
Total
($) | |
David Aviezer, Ph.D., MBA | |
2013 | |
| 527,672 | | |
| 50,000 | | |
| 870,147 | | |
| 213,581 | | |
| 112,662 | | |
| 1,774,062 | |
President and | |
2012 | |
| 493,960 | | |
| 675,000 | | |
| 860,963 | | |
| 1,101,142 | | |
| 99,080 | | |
| 3,230,145 | |
Chief Executive Officer | |
2011 | |
| 531,608 | | |
| - | | |
| - | | |
| 53,578 | | |
| 113,971 | | |
| 699,157 | |
Yoseph Shaaltiel, Ph.D. | |
2013 | |
| 302,901 | | |
| 120,000 | | |
| 429,927 | | |
| 140,770 | | |
| 81,672 | | |
| 1,075,270 | |
Executive Vice President, | |
2012 | |
| 283,655 | | |
| 225,000 | | |
| 409,838 | | |
| 608,826 | | |
| 67,257 | | |
| 1,594,576 | |
Research and Development | |
2011 | |
| 305,280 | | |
| - | | |
| - | | |
| 27,830 | | |
| 80,063 | | |
| 413,173 | |
Einat Brill Almon, Ph.D. | |
2013 | |
| 261,505 | | |
| 100,000 | | |
| 378,745 | | |
| 126,208 | | |
| 66,600 | | |
| 933,058 | |
Senior Vice President, | |
2012 | |
| 244,716 | | |
| 215,000 | | |
| 361,048 | | |
| 547,846 | | |
| 67,763 | | |
| 1,436,373 | |
Product Development | |
2011 | |
| 263,357 | | |
| - | | |
| - | | |
| 32,557 | | |
| 71,074 | | |
| 366,988 | |
Yossi Maimon, CPA | |
2013 | |
| 292,096 | | |
| 110,000 | | |
| 378,745 | | |
| 126,208 | | |
| 67,739 | | |
| 974,788 | |
Vice President, | |
2012 | |
| 268,618 | | |
| 157,500 | | |
| 361,048 | | |
| 544,199 | | |
| 58,231 | | |
| 1,389,596 | |
Chief Financial Officer | |
2011 | |
| 286,220 | | |
| - | | |
| - | | |
| 18,304 | | |
| 69,290 | | |
| 373,814 | |
Tzvi Palash | |
2013 | |
| 231,668 | | |
| 20,000 | | |
| 208,822 | | |
| 72,055 | | |
| 72,105 | | |
| 604,650 | |
Chief Operating Officer | |
2012 | |
| 216,451 | | |
| 35,000 | | |
| 199,064 | | |
| 152,240 | | |
| 66,274 | | |
| 669,029 | |
| |
2011 | |
| 233,452 | | |
| - | | |
| - | | |
| 339,011 | | |
| 76,490 | | |
| 648,953 | |
________________________________
| (1) | Includes employer contributions to pension and/or insurance plans and other miscellaneous payments. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information
with respect to the Named Executive Officers concerning equity awards as of December 31, 2013.
| |
Option
Awards | | |
Stock
Awards | |
Name | |
Number
of Securities Underlying Unexercised Options Exercisable (#) | | |
Number
of Securities
Underlying Unexercised Options Unexercisable (#) | | |
Option
Exercise Price ($) | | |
Option
Expiration Date | |
Number
of Shares or Units of Stock That Have Not Vested (#) | | |
Market
Value of Shares or Units of Stock That Have Not Vested ($) | |
David Aviezer | |
| 853,563 | | |
| - | | |
| 0.972 | | |
9/10/2016 | |
| | | |
| | |
| |
| 600,000 | | |
| - | | |
| 5.00 | | |
2/7/2018 | |
| | | |
| | |
| |
| 100,000 | | |
| - | | |
| 2.65 | | |
2/25/2019 | |
| | | |
| | |
| |
| 125,000 | | |
| 125,000 | | |
| 6.90 | | |
2/25/2020 | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| |
| 287,375 | | |
| 1,117,889 | |
Yoseph Shaaltiel | |
| 122,162 | (1) | |
| - | | |
| 0.001 | | |
6/30/2016 | |
| | | |
| | |
| |
| 263,728 | | |
| - | | |
| 5.00 | | |
2/7/2018 | |
| | | |
| | |
| |
| 50,000 | | |
| - | | |
| 2.65 | | |
2/25/2019 | |
| | | |
| | |
| |
| 72,500 | | |
| 72,500 | | |
| 6.90 | | |
2/25/2020 | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| |
| 144,375 | | |
| 561,619 | |
Einat Brill Almon | |
| 311,272 | | |
| | | |
| 5.00 | | |
2/7/2018 | |
| | | |
| | |
| |
| 65,000 | | |
| 65,000 | | |
| 6.90 | | |
2/25/2020 | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| |
| 127,187 | | |
| 494,759 | |
Yossi Maimon | |
| 175,000 | | |
| | | |
| 5.00 | | |
2/7/2018 | |
| | | |
| | |
| |
| 65,000 | | |
| 65,000 | | |
| 6.90 | | |
2/25/2020 | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| |
| 127,187 | | |
| 494,759 | |
Tzvi Palash | |
| 130,000 | | |
| 30,000 | | |
| 7.55 | | |
8/29/2020 | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| |
| 70,125 | | |
| 272,786 | |
(1) Pursuant to a divorce settlement, Dr.
Shaaltiel is required to transfer 50% of these options to his former spouse.
Potential Payments upon Termination or
Change-in-Control
Each of our Named Executive Officers is entitled to be insured
by Protalix Ltd. under a Manager’s Policy in lieu of severance upon termination. The intention of such Manager’s Policies
is to provide the Israel-based officers with severance protection of one month’s salary for each year of employment. We do
not provide any change in control benefits to our Named Executive Officers except for certain cash bonuses and the acceleration
of the vesting periods for outstanding options and restricted stock, subject to certain conditions. Since as of December 31, 2013
all options held by each of Dr. Aviezer, Dr. Shaaltiel, Dr. Brill Almon, Mr. Maimon have been fully vested on such date, and the
options held by Mr. Palash had exercise price higher than the closing price on that date, if we had experienced a change of control
on December 31, 2013, the value of the acceleration of the stock options held by each of Dr. Aviezer, Dr. Shaaltiel, Dr. Brill
Almon, Mr. Maimon and Mr. Palash would be zero. Had we experienced a change of control on December 31, 2013, the value of the acceleration
of the shares of restricted stock held by each of Dr. Aviezer, Dr. Shaaltiel, Dr. Brill Almon, Mr. Maimon and Mr. Palash would
be $1,117,889, $561,619, $494,759, $494,759 and $272,786, respectively.
Employment Arrangements
David Aviezer, Ph.D., MBA. Since 2002, Dr. Aviezer served
as Protalix Ltd.’s Chief Executive Officer on a consultancy basis pursuant to a Consulting Services Agreement between Protalix
Ltd. and Agenda Biotechnology Ltd., a company wholly-owned by Dr. Aviezer. On September 11, 2006, Protalix Ltd. entered into an
employment agreement with Dr. Aviezer pursuant to which he agreed to be employed as Protalix Ltd.’s President and Chief Executive
Officer, which agreement supersedes the Consultancy Services Agreement. Dr. Aviezer currently serves as our President and Chief
Executive Officer. Dr. Aviezer’s current monthly base salary is NIS 148,000 (approximately $40,260) and he is entitled to
an annual bonus at the Board’s discretion. The monthly salary is subject to cost of living adjustments from time to time.
Dr. Aviezer is eligible under the employment agreement to receive a substantial bonus in the event of certain public offerings
or acquisition transactions, which bonus shall be at the discretion of the Board, and certain specified bonuses in the event Protalix
achieves certain specified milestones. In connection with the employment agreement, in addition to other options already held by
Dr. Aviezer granted to Dr. Aviezer options to purchase 16,000 ordinary shares of Protalix Ltd. at an exercise price equal to $59.40
per share, which we assumed as options to purchase 977,297 shares of our common stock at $0.97 per share. Such options vest quarterly
retroactively from June 1, 2006, over a four-year period. In addition, in 2008 we granted to Dr. Aviezer an option to purchase
600,000 shares of our common stock at an exercise price equal to $5.00 per share. The option vests variably over a five-year period
that commenced on January 1, 2008. In 2009, we granted Dr. Aviezer an option to purchase 100,000 shares of our common stock at
an exercise price equal to $2.65 per share. As of December 31, 2009, all of those options had fully vested. In 2010, we granted
Dr. Aviezer an option to purchase 250,000 shares of our common stock at an exercise price equal to $6.90 per share, which option
vests quarterly over a three-year period commencing upon FDA approval of taliglucerase alfa, if at all, and on July 16, 2012, we
granted Dr. Aviezer 418,000 restricted shares of common stock that vest quarterly in 16 equal increments over a four-year period.
Dr. Aviezer’s employment agreement is terminable by either party on 90 days’ written notice for any reason and we may
terminate the agreement for cause without notice. Dr. Aviezer is entitled to be insured by Protalix Ltd. under a Manager’s
Policy in lieu of severance, company contributions towards vocational studies, annual recreational allowances, a company car and
a company phone. Dr. Aviezer is entitled to 29 working days of vacation. All stock options that have not vested as of the date
of termination shall be deemed to have been forfeited.
Yoseph Shaaltiel, Ph.D. Dr. Shaaltiel founded Protalix
Ltd. in 1993 and currently serves as our Executive Vice President, Research and Development. Dr. Shaaltiel entered into an employment
agreement with Protalix Ltd. on September 1, 2001. Pursuant to the employment agreement, his current monthly base salary is NIS
85,000 (approximately $23,120) per month. The employment agreement is terminable by Protalix Ltd. on 90 days’ written notice
for any reason and we may terminate the agreement for cause without notice. In 2008 we granted to Dr. Shaaltiel an option to purchase
263,728 shares of our common stock at an exercise price equal to $5.00 per share. The option vests variably over a five-year period
that commenced on January 1, 2008. In 2009, we granted Dr. Shaaltiel an option to purchase 50,000 shares of our common stock at
an exercise price equal to $2.65 per share. As of December 31, 2009, all of those options had fully vested. In 2010, we granted
Dr. Shaaltiel an option to purchase 145,000 shares of our common stock at an exercise price equal to $6.90 per share, which option
vests quarterly over a three-year period commencing upon FDA approval of taliglucerase alfa, if at all, and on July 16, 2012, we
granted Dr. Shaaltiel 210,000 restricted shares of common stock that vest quarterly in 16 equal increments over a four-year period.
Dr. Shaaltiel is entitled to be insured by Protalix Ltd. under a Manager’s Policy in lieu of severance, company contributions
towards vocational studies, annual recreational allowances, a company car and a company phone. Dr. Shaaltiel is entitled to 29
working days of vacation.
Einat Brill Almon, Ph.D. Dr. Brill Almon joined Protalix
Ltd. on December 19, 2004 as its Vice President, Product Development, pursuant to an employment agreement effective on December
19, 2004 by and between Protalix Ltd. and Dr. Brill Almon, and currently serves as our Senior Vice President, Product Development.
Pursuant to the employment agreement, her current monthly base salary is NIS 73,500 per month (approximately $20,000). She is also
entitled to certain specified bonuses in the event that Protalix achieves certain specified clinical development milestones within
specified timelines. In connection with the employment agreement, Protalix agreed to grant to Dr. Brill Almon options to purchase
7,919 ordinary shares of Protalix Ltd. at exercise prices equal to $24.36 and $59.40 per share, which we assumed as options to
purchase 483,701 shares of our common stock at $0.40 and $0.97 per share. The options vest over four years. In addition, in 2008
we granted to Dr. Brill Almon an option to purchase 311,272 shares of our common stock at an exercise price equal to $5.00 per
share. The option vests variably over a five-year period that commenced on January 1, 2008. In 2009, we granted to Dr. Brill Almon
an option to purchase 50,000 shares of our common stock at an exercise price equal to $2.65 per share. As of December 31, 2009,
all of those options had fully vested. In 2010, we granted Dr. Brill Almon an option to purchase 130,000 shares of our common stock
at an exercise price equal to $6.90 per share, which option vests quarterly over a three-year period commencing upon FDA approval
of taliglucerase alfa, if at all, and on July 16, 2012, we granted Dr. Brill Almon 185,000 restricted shares of common stock that
vest quarterly in 16 equal increments over a four-year period. The employment agreement is terminable by either party on 60 days’
written notice for any reason and we may terminate the agreement for cause without notice. Dr. Brill Almon is entitled to be insured
by Protalix Ltd. under a Manager’s Policy in lieu of severance, company contributions towards vocational studies, annual
recreational allowances, a company car and a company phone at up to NIS 1,000 per month. Dr. Brill Almon is entitled to 29 working
days of vacation. All stock options that have not vested as of the date of termination shall be deemed to have been forfeited.
Yossi Maimon, CPA. Mr. Maimon joined Protalix Ltd. as
its Chief Financial Officer pursuant to an employment agreement effective as of October 15, 2006 by and between Protalix Ltd. and
Mr. Maimon and currently serves as our Chief Financial Officer. Pursuant to the employment agreement, his current monthly base
salary is NIS 73,500 (approximately $20,000) and Mr. Maimon is entitled to an annual discretionary bonus and additional discretionary
bonuses in the event Protalix achieves significant financial milestones, subject to the Board’s sole discretion. The monthly
salary is subject to cost of living adjustments from time to time. In connection with the employment agreement, Protalix agreed
to grant to Mr. Maimon options to purchase 10,150 ordinary shares of Protalix Ltd. at an exercise price equal to $59.40 per share,
which we assumed as options to purchase 619,972 shares of our common stock at $0.97 per share. The first 25% of such options shall
vest on the first anniversary of the grant date and the remainder shall vest quarterly in 12 equal increments. In addition, in
2008 we granted to Mr. Maimon an option to purchase 175,000 shares of our common stock at an exercise price equal to $5.00 per
share. The option vests variably over a five-year period that commenced on January 1, 2008. In 2009, we granted to Mr. Maimon an
option to purchase 50,000 shares of our common stock at an exercise price equal to $2.65 per share. As of December 31, 2009, all
of those options had fully vested. In 2010, we granted Mr. Maimon an option to purchase 130,000 shares of our common stock at an
exercise price equal to $6.90 per share, which option vests quarterly over a three-year period commencing upon FDA approval of
taliglucerase alfa, if at all, and on July 16, 2012, we granted Mr. Maimon 185,000 restricted shares of common stock that vest
quarterly in 16 equal increments over a four-year period. The employment agreement is terminable by either party on 60 days’
written notice for any reason and we may terminate the agreement for cause without notice. Mr. Maimon is entitled to be insured
by Protalix Ltd. under a Manager’s Policy in lieu of severance, company contributions towards vocational studies, annual
recreational allowances, a company car and a company phone. Mr. Maimon is entitled to 29 working days of vacation. All stock options
that have not vested as of the date of termination shall be deemed to have been forfeited.
Tzvi Palash. Mr. Palash joined Protalix Ltd. as its Chief
Operating Officer pursuant to an employment agreement effective September 6, 2010 and currently serves as our Chief Operating Officer.
Pursuant to the employment agreement, Mr. Palash’s current monthly base salary is NIS 69,000 (approximately $18,770) and
Mr. Palash is entitled to an annual discretionary bonus for performance subject to the sole discretion of our compensation committee.
The monthly salary is subject to cost of living adjustments from time to time as may be required by law. In connection with the
employment agreement, we granted to Mr. Palash options to purchase 160,000 shares of our common stock with an exercise price equal
to $7.55 per share. The first 25% of such options vested on the first anniversary of the grant date and the remainder vest quarterly
in 12 equal increments. In addition, on July 16, 2012, we granted Mr. Palash 102,000 restricted shares of common stock that vest
quarterly in 16 equal increments over a four-year period. The employment agreement is terminable by either party on 60 days’
written notice for any reason and we may terminate the agreement for cause without notice. Mr. Palash is entitled to be insured
by Protalix Ltd. under a Manager’s Policy in lieu of severance, company contributions towards vocational studies, annual
recreational allowances, a company car, a company phone, a company laptop and lodging accommodations in the Carmiel area. Mr. Palash
is entitled to 27 working days of vacation.
Amended 2006 Stock Incentive Plan
Our Board of Directors and a majority of
our shareholders approved our 2006 Stock Incentive Plan on December 14, 2006. Our shareholders approved an amendment to the
plan on June 17, 2012. Currently, there are 11,341,655 shares of our common stock reserved for issuance, in the aggregate,
under the amended 2006 Stock Incentive Plan, subject to adjustment for a stock split or any future stock dividend or other
similar change in our common stock or our capital structure.
Our amended 2006 Stock Incentive Plan provides
for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights,
collectively referred to as “awards.” Stock options granted under the amended 2006 Stock Incentive Plan may be either
incentive stock options under the provisions of Section 422 of the Internal Revenue Code, or non-qualified stock options. Incentive
stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, directors
and consultants.
The amended 2006 Stock Incentive Plan is also
designed to comply with the provisions of the Israeli Income Tax Ordinance New Version, 1961 (including as amended pursuant to
Amendment 132 thereto) (the “tax ordinance”) and is intended to enable us to grant awards to grantees who are Israeli
residents as follows: (i) awards to employees pursuant to Section 102 of the tax ordinance; and (ii) awards to non-employees pursuant
to Section 3(I) of the tax ordinance. For this purpose, “employee” refers only to employees, office holders and directors
of our company or a related entity excluding those who are considered “Controlling Shareholders” pursuant to, or otherwise
excluded by, the tax ordinance. In accordance with the terms and conditions imposed by the Tax Ordinance, grantees who receive
awards under the amended 2006 stock incentive plan may be afforded certain tax benefits in Israel as described below.
Our Board of Directors or the Compensation
Committee, referred to as the “plan administrator,” will administer our amended 2006 stock incentive plan, including
selecting the grantees, determining the number of shares to be subject to each award, determining the exercise or purchase price
of each award, and determining the vesting and exercise periods of each award.
The exercise price of stock options granted
under the 2006 stock incentive plan must be equal to at least 100% of the fair market value of our common stock on the date of
grant. If, however, incentive stock options are granted to an employee who owns stock possessing more than 10% of the voting power
of all classes of our stock or the stock of any parent or subsidiary of our company, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant date and the maximum term of these incentive stock
options must not exceed five years. The maximum term of all other awards must not exceed 10 years (or five years in the case of
an incentive stock option granted to any participant who owns stock representing more than 10% of the voting power of all classes
of our stock or the stock of any parent or subsidiary of our company). The plan administrator will determine the exercise or purchase
price (if any) of all other awards granted under the amended 2006 stock incentive plan.
Under the amended 2006 stock incentive plan,
incentive stock options and options to Israeli grantees may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of the participant
only by the participant. Other awards shall be transferable by will or by the laws of descent or distribution and to the extent
and in the manner authorized by the plan administrator by gift or pursuant to a domestic relations order to members of the participant’s
immediate family. The amended 2006 stock incentive plan permits the designation of beneficiaries by holders of awards, including
incentive stock options.
If the service of a participant in the amended
2006 stock incentive plan is terminated for any reason other than cause, the participant may exercise awards that were vested as
of the termination date for a period ending upon the earlier of 12 months from the date of termination (or such shorter or longer
period set forth in the award agreement) or the expiration date of the awards unless otherwise determined by the plan administrator.
If the service of a participant in the amended 2006 stock incentive plan is terminated for cause, the participant may exercise
awards that were vested as of the termination date for a period ending upon the earlier of 14 days from the date of termination
(or such shorter or longer period set forth in the award agreement) or the expiration date of the awards unless otherwise determined
by the plan administrator.
In the event of a corporate transaction, all
awards will terminate unless assumed by the successor corporation. Unless otherwise provided in a participant’s award agreement,
in the event of a corporate transaction and with respect to the portion of each award that is assumed or replaced, then such portion
will automatically become fully vested and exercisable immediately upon termination of a participant’s service if the participant
is terminated by the successor company or us without cause within 12 months after the corporate transaction. With respect to the
portion of each award that is not assumed or replaced, such portion will automatically become fully vested and exercisable immediately
prior to the effective date of the corporate transaction so long as the participant’s service has not been terminated prior
to such date.
In the event of a change in control, except
as otherwise provided in a participant’s award agreement, following a change in control (other than a change in control that
also is a corporate transaction) and upon the termination of a participant’s service without cause within 12 months after
a change in control, each award of such participant that is outstanding at such time will automatically become fully vested and
exercisable immediately upon the participant’s termination. In addition, the stock options and shares of restricted stock
issued to each of our Named Executive Officers are subject to accelerated vesting immediately upon a corporate transaction or a
change in control of our company, as defined in our amended 2006 stock incentive plan.
Under our amended 2006 stock incentive plan,
a corporate transaction is generally defined as:
· a
merger or consolidation in which we are not the surviving entity, except for the principal purpose of changing our company’s
state of incorporation;
· the
sale, transfer or other disposition of all or substantially all of our assets;
· the
complete liquidation or dissolution of our company;
· any
reverse merger in which we are the surviving entity but our shares of common stock outstanding immediately prior to such merger
are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or
in which securities possessing more than forty percent (40%) of the total combined voting power of our outstanding securities are
transferred to a person or persons different from those who held such securities immediately prior to such merger; or
· acquisition
in a single or series of related transactions by any person or related group of persons of beneficial ownership of securities possessing
more than fifty percent (50%) of the total combined voting power of our outstanding securities but excluding any such transaction
or series of related transactions that the plan administrator determines not to be a corporate transaction (provided however that
the plan administrator shall have no discretion in connection with a corporate transaction for the purchase of all or substantially
all of our shares unless the principal purpose of such transaction is changing our company’s state of incorporation).
Under our amended 2006 stock incentive
plan, a change of control is defined as:
· the
direct or indirect acquisition by any person or related group of persons of beneficial ownership of securities possessing more
than fifty percent (50%) of the total combined voting power of our outstanding securities pursuant to a tender or exchange offer
made directly to our shareholders and which a majority of the members of our board (who have generally been on our board for at
least 12 months) who are not affiliates or associates of the offeror do not recommend shareholders accept the offer; or
· a
change in the composition of our board over a period of 12 months or less, such that a majority of our board members ceases, by
reason of one or more contested elections for board membership, to be comprised of individuals who were previously directors of
our company.
Unless terminated sooner, the amended 2006
stock incentive plan will automatically terminate in 2016. Our Board of Directors has the authority to amend, suspend or terminate
our amended 2006 stock incentive plan. No amendment, suspension or termination of the amended 2006 stock incentive plan shall adversely
affect any rights under awards already granted to a participant. To the extent necessary to comply with applicable provisions of
federal securities laws, state corporate and securities laws, the Internal Revenue Code, the rules of any applicable stock exchange
or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein (including
the Tax Ordinance), we shall obtain shareholder approval of any such amendment to the 2006 stock incentive plan in such a manner
and to such a degree as required.
Impact of Israeli Tax Law
The awards granted to employees pursuant to
Section 102 of the Tax Ordinance under the amended 2006 stock incentive plan may be designated by us as approved options under
the capital gains alternative, or as approved options under the ordinary income tax alternative.
To qualify for these benefits, certain requirements
must be met, including registration of the options in the name of a trustee. Each option, and any shares of common stock acquired
upon the exercise of the option, must be held by the trustee for a period commencing on the date of grant and deposit into trust
with the trustee and ending 24 months thereafter.
Under the terms of the capital gains alternative,
we may not deduct expenses pertaining to the options for tax purposes.
Under the amended 2006 stock incentive plan,
we may also grant to employees options pursuant to Section 102(c) of the Tax Ordinance that are not required to be held in trust
by a trustee. This alternative, while facilitating immediate exercise of vested options and sale of the underlying shares, will
subject the optionee to the marginal income tax rate of up to 50% as well as payments to the National Insurance Institute and health
tax on the date of the sale of the shares or options. Under the 2006 stock incentive plan, we may also grant to non-employees options
pursuant to Section 3(I) of the Tax Ordinance. Under that section, the income tax on the benefit arising to the optionee upon the
exercise of options and the issuance of common stock is generally due at the time of exercise of the options.
These options shall be further subject to
the terms of the tax ruling that has been obtained by Protalix Ltd. from the Israeli tax authorities in connection with the merger.
Under the tax ruling, the options issued by us in connection with the assumption of Section 102 options previously issued by Protalix
Ltd. under the capital gains alternative shall be issued to a trustee, shall be designated under the capital gains alternative
and the issuance date of the original options shall be deemed the issuance date for the assumed options for the calculation of
the respective holding period.
Certain
relationships and related transactions
On September 14, 2006, Protalix Ltd.
entered into a collaboration and licensing agreement with Teva for the development and manufacture of two proteins using ProCellEx,
our proprietary protein expression system. Mr. Hurvitz, our former Chairman, was the chairman of Teva’s board of directors
when we entered into the agreement. Professor Kornberg, a member of our Board of Directors also previously served on Teva’s
board of directors. The agreement provides that we will collaborate with Teva on the research and development of two proteins using
ProCellEx. We and Teva identified two proteins for research and development activities under the agreement, but in 2009 both of
the projects were terminated for commercial reasons.
All related party transactions are
reviewed and approved by the Audit Committee, as required by the Audit Committee Charter.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed
to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filings with the Securities and Exchange Commission, or subject to the
liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate
it by reference into a document filed under the Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as amended.
The Audit Committee of our Board of Directors operates under
a written charter adopted by our Board of Directors, and currently consists of Amos Bar Shalev, Yodfat Harel Buchris and Eyal Sheratzky.
All members of the committee fall under the independence requirements contemplated by Rule 10A-3 under the Exchange Act.
As described more fully in its charter, the Audit Committee
provides oversight of the quality and integrity of our consolidated financial statements, internal controls and financial reporting
process, and our process to manage business and financial risks and compliance with legal, ethical and regulatory requirements.
In addition, the Audit Committee interacts directly with and evaluates the qualifications, independence and performance of the
independent auditors, Kesselman & Kesselman, and is responsible for the appointment, compensation, retention and oversight
of the work of the auditors.
Management is responsible for the preparation, presentation
and integrity of the consolidated financial statements, and evaluation of and assessment of the effectiveness of our internal control
over financial reporting. The independent auditors are responsible for performing an independent audit of the consolidated financial
statements in accordance with the standards of the Public Company Accounting Oversight Board. The Audit Committee’s responsibility
is to monitor and oversee these processes.
The Audit Committee has reviewed and discussed the audited consolidated
financial statements with our Board of Directors and management. Management has represented to the audit committee that our consolidated
financial statements were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee discussed
with Kesselman & Kesselman the matters required to be discussed by Statement of Auditing Standards No. 61, Communications
with Audit Committees. In addition, the independent auditors provided the Audit Committee with the written disclosures and
letter required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and the
Audit Committee has discussed with Kesselman & Kesselman that firm’s independence from our company.
Based on the review and discussions of the audited consolidated
financial statements and discussions with management and Kesselman & Kesselman, the Audit Committee recommended to Board of
Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2013 for filing with the SEC.
|
Respectfully submitted, |
|
|
|
Members of the Protalix BioTherapeutics, Inc. |
|
Audit Committee |
|
|
|
Amos Bar Shalev |
|
Yodfat Harel Buchris |
|
Eyal Sheratzky |
Our Board of Directors recommends that
shareholders vote “FOR” the election or re-election of all director nominees named in this “Proposal 1:
Election of Directors.”
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE
COMPENSATION
The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Dodd-Frank Act”), which was signed into law in July 2010, added Section 14A to
the Exchange Act. The Dodd-Frank Act requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding,
advisory basis, the compensation of the our named executive officers as disclosed in this proxy statement in accordance with the
compensation disclosure rules of the SEC.
We believe that the executive compensation
program for the named executive officers, as described in “Compensation Discussion and Analysis,” is based on a pay-for-performance
culture and seeks to align the interests of our named executive officers with the interests of our shareholders. We believe that
our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic
and operational goals and the achievement of increased total shareholder return, while at the same time creating a culture that
focuses executives on prudent risk management and appropriately rewards them for performance. Our executive compensation program
is also designed to be competitive with our peer companies, and seeks to enable us to attract and retain the best possible executive
talent.
We also believe that the extensive disclosure
of compensation information provided in this proxy statement provides our shareholders the information they need to make an informed
decision as they weigh the pay of the named executive officers in relation to our performance. This “Say-on-Pay” proposal
gives you the shareholder the opportunity to endorse or not endorse the compensation we paid to the named executive officers through
the resolution set forth below.
“RESOLVED, that the compensation
paid to the named executive officers of Protalix BioTherapeutics, Inc., as disclosed pursuant to Item 402 of Regulation S-K, including
the Compensation Discussion and Analysis, compensation tables and narrative discussion included in this proxy statement, is hereby
APPROVED.”
Because your vote is advisory, it will
not be binding upon our company, our Board of Directors or the Compensation Committee. The vote on this resolution is not intended
to address any specific element of compensation, but rather relates to the overall compensation of our named executive officers,
as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. Our company, our Board of
Directors, and the Compensation Committee will consider the outcome of the vote when evaluating future executive compensation arrangements
for our named executive officers.
This proposal is provided as required
pursuant to Rule 14a-21(a) of the Exchange Act.
Our Board of Directors recommends that shareholders vote
“FOR” the approval of the executive compensation as disclosed in this proxy statement and as described in this “Proposal
2: Advisory Vote on Executive Compensation.”
PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY
OF AN
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act requires that we provide our shareholders
with the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future
advisory votes on the compensation of our named executive officers as disclosed in accordance with the compensation disclosure
rules of the SEC. By voting with respect to this proposal, shareholders may indicate whether they would prefer that we conduct
future advisory votes on executive compensation once every one, two or three years. Shareholders also may, if they wish, abstain
from casting a vote on this proposal.
Our Board of Directors has determined that an annual advisory
vote on executive compensation is the most appropriate alternative for our company as it will allow our shareholders to provide
timely and direct input on our executive compensation philosophy, policies and practices as disclosed in the proxy statement each
year. Accordingly, our Board of Directors believes that an annual vote is consistent with our efforts to engage in an ongoing dialogue
with our shareholders on executive compensation and corporate governance matters and therefore recommends that you vote for a one-year
interval for the advisory vote on executive compensation.
Because your vote is advisory, it will not be binding upon our
company, our Board of Directors or the Compensation Committee. We recognize that our shareholders may have different views as to
the best approach for our company, and therefore looks forward to hearing from our shareholders as to their preferences on the
frequency of an advisory vote on executive compensation. We, our Board of Directors and the Compensation Committee will take into
account the outcome of the vote when considering the frequency of future advisory votes on executive compensation. Our Board of
Directors may decide that it is in the best interests of our shareholders to hold an advisory vote on executive compensation more
or less frequently than the frequency receiving the most votes cast by the shareholders.
Shareholders may cast a vote on the preferred voting frequency
by selecting the option of one year, two years, or three years (or abstain) when completing their proxy in response to the resolution
set forth below.
“RESOLVED, that the shareholders determine, on an advisory
basis, whether the preferred frequency of an advisory vote on the executive compensation of our named executive officers as set
forth in our proxy statement should be every year, every two years, or every three years.”
The proxy voting card provides shareholders with the opportunity
to choose among four options (holding the vote every one, two, or three years, or abstain from voting) and, therefore shareholders
will not be voting to approve or disapprove the recommendation of our Board of Directors.
Our Board of Directors recommends that shareholders vote
“FOR” the option of every year as the preferred frequency with which shareholders are provided with an advisory vote
on executive compensation as described in this “Proposal 3: Advisory Vote on the Frequency of an Advisory Vote on Executive
Compensation.”
PROPOSAL 4: AMENDMENT TO THE ARTICLES
OF INCORPORATION
TO DECREASE QUORUM REQUIREMENT
We are seeking your approval
of a proposal to amend our articles of incorporation to reduce the quorum required for shareholder meetings from a majority to
one-third (1/3) of outstanding shares entitled to vote.
Section 607.0725(5) of the
Florida Business Corporation Act (“FBCA”) provides that “[t]he articles of incorporation may provide for a greater
voting requirement or a greater or lesser quorum requirement for shareholders, or voting groups of shareholders, than is provided
by this act, but in no event shall a quorum consist of less than one-third of the shares entitled to vote.” Our articles
of incorporation, as amended, do not currently provide for a quorum consisting of less than a majority of votes entitled to be
cast on the matter by the voting group. Therefore, currently, the required quorum for a shareholder meeting is the presence, in
person or by proxy, of the holders of a majority of the outstanding shares of stock entitled to vote at the meeting.
Our
company’s shares are widely-held, with only four shareholders that beneficially own more than 5% of our shares. Our
experience over the last few years is that a significant number of our shareholders do not, either directly or through
their brokerage accounts, complete their proxies or otherwise deliver voting instructions. Accordingly, securing a quorum at
annual meetings has become a challenge despite our best efforts to solicit
participation of our shareholders, directly and with the assistance of proxy solicitors. For example, for the 2013 annual meeting, holders of only 51.9% of our then
outstanding shares of common stock were present either in person or by proxy at the meeting. If we fail to achieve a quorum
for any shareholder meeting, we will have to set a new time and location for the meeting, and new notices for the meeting
must be mailed, which may still not result in a quorum. Preparing proxy materials and the costs that accompany any proxy
solicitation, including costs related to printing and mailing proxy materials to shareholders, is a large expense. We believe
that reducing the quorum requirement to one-third of the shares entitled to vote on a proposal will markedly reduce, although
not eliminate, the risk of failing to achieve a quorum for any given matter. For the foregoing we reason, in accordance with
Section 607.0725(5) of the FBCA, we propose to amend our articles of incorporation to provide that a quorum for any
shareholder meeting be one third (1/3) rather than a majority of the shares entitled to vote.
If this proposal is adopted,
a new Article XII shall be added to our articles of incorporation. The text of the amendment will read in full as follows:
“One third (1/3) of
the shares entitled to be cast on any matter by a voting group shall constitute a quorum of that voting group for action on that
matter.”
The proposed form articles
of amendment of articles of incorporation is attached to this proxy statement as Appendix A, and includes the proposed amendment
as set forth in this Proposal 4. If the proposed amendment is adopted, it will become effective upon filing of the articles of
amendment with the Secretary of State of the State of Florida. If the proposed amendment is adopted, we will make conforming changes
to our Bylaws.
Our Board of Directors recommends that
shareholders vote “FOR” the amendment of the articles of incorporation to decrease the quorum requirement as described
in this
“Proposal 4: Amendment to the Articles of Incorporation to Decrease Quorum Requirement.”
PROPOSAL 5: AMENDMENTS TO THE PROTALIX
BIOTHERAPEUTICS, INC.
2006 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN AND
AMEND CERTAIN OTHER TERMS OF THE PLAN
General
We are asking our shareholders to approve
an amendment to our amended 2006 Stock Incentive Plan, or the Existing Plan and, as amended, the Plan, so that we can continue
to use the Plan to attract and retain key talent, encourage stock ownership by our employees, non-employee directors and consultants,
better align with governance best practices, and receive a federal income tax deduction for certain compensation paid under the
Plan. Our Board of Directors unanimously approved the Plan, subject to approval of our shareholders at the Annual Meeting. Approval
of the Plan requires the affirmative vote of the record holders of a majority of the outstanding shares of our common stock that
are present in person or by proxy at the Annual Meeting and entitled to vote on this matter.
Primary Changes
In requesting your approval of the Plan,
we propose to:
| · | Increase the number of shares of common stock reserved for issuance under the Plan by 2,500,000 shares to 13,841,655 shares; |
| · | Increase the annual per person limits on the number of shares covered by awards of stock options and stock appreciation rights
by 2,500,000 shares to 13,841,655 shares; |
| · | Increase the per person limits on the number of shares covered by awards of restricted stock and restricted stock units intended
to be “performance based compensation” by 2,500,000 shares to 13,841,655 shares; |
| · | Introduce a “fungible” share reserve whereby shares issued pursuant to awards other than options and stock appreciation
rights will count as one and one-half (1.5) shares for each share actually issued; |
| · | Provide that shares that were covered by an award but surrendered to the company due to net exercise or to satisfy tax withholding
may not be returned to the pool of unissued shares under the Plan; |
| · | Provide that shareholder approval is required for the repricing of awards, subject to limited exceptions; |
| · | Eliminate the provision that allows awards to have an exercise or purchase price below the fair market value of the underlying
stock with respect to certain grantees; and |
| · | Extend the Plan term from 2016 to December 31, 2020. |
We believe strongly that the approval this
amendment to the Plan is essential to our success. Our employees are our most valuable assets. Stock options and the other awards
permitted under the Plan are vital to our ability to attract and retain outstanding and highly skilled employees, especially in
the competitive labor markets in which we compete. These awards also are crucial to our ability to motivate employees to achieve
our goals. The proposed terms of the Plan are designed to allow us to continue to attract, retain and motivate people whose skills
and performance are critical to our success. We will continue to monitor the environment in which we operate and make changes to
our equity compensation program to help us meet our goals, including achieving long-term shareholder value.
Background on Code Section 162(m)
Approval
We are also asking our shareholders to
approve this amendment to the material terms of the Plan so that we may grant awards under the Plan that are designed to qualify
for the exception from the limits on corporate income tax deductions pursuant to Code Section 162(m). To the extent we grant
such awards and they qualify for the exception, we may deduct for federal income tax purposes compensation in excess of $1.0 million
that may be paid to certain executive officers in any single year. Compensation includes cash compensation and income arising from
the exercise of nonstatutory stock options, as a result of the grant, vesting or settlement of other types of equity awards, and
from disqualifying dispositions of incentive stock options.
Under Code Section 162(m), no deduction
is allowed in any taxable year of our company for compensation in excess of $1.0 million paid to our “covered employees.”
A “covered employee” is our chief executive officer and our three other most highly compensated officers, other than
our chief financial officer.
An exception to the $1.0 million limit
under Code Section 162(m) applies to compensation that is paid to a covered employee pursuant to a stock incentive plan approved
by shareholders and that specifies, among other things, the maximum number of shares with respect to which options and stock appreciation
rights may be granted to eligible participants under such plan during a specified period. Compensation paid pursuant to options
granted under such a plan and with an exercise price equal to the fair market value of common stock on the date of grant is deemed
to be inherently performance-based, since such awards provide value to participants only if the stock price appreciates. To the
extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation, if any option
or stock appreciation right is canceled, the canceled award shall continue to count against the maximum number of shares with respect
to which an award may be granted to a participant. The Plan provides that the maximum number of shares with respect to which options
and stock appreciation rights may be granted to a participant during a calendar year is 13,841,655 shares. The foregoing limitation
shall be adjusted proportionately by the plan administrator in the event of a stock split, reverse stock split, stock dividend,
combination or reclassification of shares or other similar change in our shares of common stock or our capital structure.
For awards of restricted stock and restricted
stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares
of common stock subject to such awards that may be granted to a participant during a calendar year is 13,841,655 shares. The foregoing
limitation shall be adjusted proportionately by the plan administrator in the event of a stock split, reverse stock split, stock
dividend, combination or reclassification of shares or other similar change in our shares or our capital structure. In order for
restricted stock and restricted stock units to qualify as performance-based compensation, the plan administrator must establish
a performance goal with respect to such award in writing not later than 90 days after the commencement of the services to which
it relates (or, if earlier, the date after which 25% of the period of service to which the performance goal relates has elapsed)
and while the outcome is substantially uncertain. In addition, the performance goal must be stated in terms of an objective formula
or standard.
The Plan includes the following performance
criteria that may be considered by the plan administrator when granting performance-based awards: (i) increase in share price,
(ii) earnings per share; (iii) total shareholder return; (iv) operating margin; (v) gross margin; (vi) return on equity; (vii)
return on assets; (viii) return on investment; (ix) operating income; (x) net operating income; (xi) pre-tax profit; (xii)
cash flow; (xiii) revenue: (xiv) expenses; (xv) earnings before interest, taxes and depreciation; (xvi) economic value added;
and (xvii) market share. The performance criteria may be applicable to our company, any parent or subsidiary of our company, and/or
any individual business units of our company or any parent or subsidiary of our company. In addition, the performance criteria
will be calculated in accordance with generally accepted accounting principles, excluding the effect (whether positive or negative)
of any change in accounting standards and any extraordinary, unusual or nonrecurring item occurring after the establishment of
the performance criteria applicable to the award.
Shareholder approval of the Plan pursuant
to this proposal will constitute shareholder approval of the material terms of the Plan, including the per person limitations on
stock awards and the performance criteria described above, for Code Section 162(m) purposes.
Our Board of Directors recommends that
shareholders vote “FOR” the adoption of the amendments to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan
described in this Proposal 5: Amendments to the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan to Increase the Number
of Authorized Shares of Common Stock Reserved for Issuance under the Plan and Amend Certain other Terms of the Plan.
A general description of the principal terms
of the Plan is set forth below. This description is qualified in its entirety by the terms of the Plan, a copy of which is attached
hereto as Appendix B.
As of December 31, 2013, 5,434,457 stock options were
outstanding under the Existing Plan with a weighted average exercise price of $3.77 and a weighted average remaining contractual life of 4.00 years, and 970,208 shares of restricted stock under the Existing Plan; no other equity awards
are outstanding. The outstanding options and restricted stock represent approximately 6.5% of our outstanding shares on
an “as exercised” basis. As of December 31, 2013, we had 215,378 shares available for issuance under the
Existing Plan.
As of September 26, 2014, the fair market value of a share of our common stock was $2.37.
As of September 26, 2014, approximately 236 employees, six directors and three consultants were eligible for awards under
the Existing Plan.
Equity Compensation Plan Information
The following table provides information as
of December 31, 2013 with respect to the shares of our common stock that may be issued under our existing equity compensation
plan.
| |
A | | |
B | | |
C | |
Plan Category | |
Number of Securities to be Issued Upon Exercise of Outstanding Options (1) | | |
Weighted Average Exercise Price of Outstanding Options | | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A) (1) | |
Equity Compensation Plans Approved by Shareholders | |
| 6,404,665 | | |
$ | 3.20 | | |
| 215,378 | |
Equity Compensation Plans Not Approved by Shareholders | |
| 631,866 | | |
$ | 10.24 | | |
| - | |
Total | |
| 7,036,531 | | |
$ | 3.83 | | |
| 215,378 | |
(1) The Existing Plan allows for the issuance of restricted
stock and restricted units. The amount under Column A includes 970,208 outstanding restricted shares as of December 31,
2013.
General Description
Purpose. The purposes of
the Plan are to attract and retain the best available personnel, to provide additional incentives to our officers, directors, employees
and consultants through ownership of our common stock, and to promote the success of our business.
Shares Reserved for Issuance under
the Plan. We currently have 11,341,655 shares of common stock reserved for issuance under the Existing Plan. If approved
by our shareholders, the total number of shares of common stock reserved for issuance under the Plan will be increased by 2,500,000
shares for a total of 13,841,655 shares. Any shares issued from and after November 10, 2014 in connection with awards other than
options or stock appreciation rights shall count as one and one-half (1.5) shares for each share issued. The number of shares of
common stock available under the Plan will be subject to adjustment in the event of a stock split, reverse stock split, stock dividend,
combination or reclassification of shares or other similar change in our shares or our capital structure. Any shares of common
stock covered by an award (or portion of an award) which is forfeited, canceled or expires (whether voluntarily or involuntarily)
are deemed not to have been issued for purposes of determining the maximum aggregate number of shares of common stock which may
be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an award will not be returned to the
Plan and will not be available for future issuance under the Plan, except that if unvested shares of common stock are forfeited,
or repurchased by us at the lower of their original purchase price or their fair market value (as defined in the Plan) at the time
of repurchase, such shares of common stock shall become available for future grant under the Plan. To the extent not prohibited
by the listing requirements of the NYSE MKT and applicable federal securities laws, state corporate and securities laws, the U.S.
Internal Revenue Code, the rules of the NYSE MKT and the rules of any non-U.S. jurisdiction applicable to awards granted to residents
therein, any shares covered by an award which are surrendered (i) in payment of the award exercise or purchase price (including
pursuant to the ‘‘net exercise’’ of an option pursuant to Section 7(b)(v) of the Plan) or (ii) in
satisfaction of tax withholding obligations incident to the exercise of an award shall be deemed not to have been issued for purposes
of determining the maximum number of shares of common stock which may be issued pursuant to all awards under the Plan, unless otherwise
determined by the plan administrator. Shares that are counted as one and one-half (1.5) shares upon issuance will be counted as
one and one-half (1.5) shares upon return.
Assuming our shareholders approve the amendment
to the Plan, during any calendar year, the maximum number of shares with respect to which options and stock appreciation rights
may be granted to a participant is 13,841,655 shares. The maximum number of shares of restricted stock and restricted stock units
that are intended to be performance-based compensation under Section 162(m) of the Code that may be awarded to a participant
in any calendar year is 13,841,655 shares. The foregoing limitations shall be adjusted proportionately by the plan administrator
in the event of a stock split, reverse stock split, stock dividend, combination or reclassification of shares or other similar
change in our shares or our capital structure, and its determination shall be final, binding and conclusive.
Administration. Our Board
of Directors or the Compensation Committee, referred to as the “plan administrator,” administers the Plan, including
selecting the grantees, determining the number of shares to be subject to each award, determining the exercise or purchase price
of each award, and determining the vesting and exercise periods of each award.
Terms and Conditions of Awards. Our
Amendment provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and dividend
equivalent rights, collectively referred to as “awards.” Stock options granted under the Plan may be either incentive
stock options under the provisions of Section 422 of the Internal Revenue Code, or non-qualified stock options. Incentive stock
options may be granted only to employees. Awards other than incentive stock options may be granted to our employees, directors
and consultants or to employees, consultants and directors of our related entities. To the extent that the aggregate fair market
value of the shares subject to options designated as incentive stock options which become exercisable for the first time by a participant
during any calendar year exceeds $100,000, such excess options shall be treated as nonqualified stock options. Each award granted
under the Plan shall be designated in an award agreement.
The Plan is also designed to comply with
the provisions of the Israeli Income Tax Ordinance New Version, 1961 (including as amended pursuant to Amendment 132 thereto),
or the tax ordinance, and is intended to enable us to grant awards to grantees who are Israeli residents as follows: (i) awards
to employees pursuant to Section 102 of the tax ordinance; and (ii) awards to non-employees pursuant to Section 3(I) of the tax
ordinance. For this purpose, “employee” refers only to employees, office holders and directors of our company or a
related entity excluding those who are considered “Controlling Shareholders” pursuant to, or otherwise excluded by,
the tax ordinance. In accordance with the terms and conditions imposed by the tax ordinance, grantees who receive awards under
the Amendment may be afforded certain tax benefits in Israel as described below.
The exercise price of stock options granted
under the Plan must be equal to at least 100% of the fair market value of our common stock on the date of grant. If, however, incentive
stock options are granted to an employee who owns stock possessing more than 10% of the voting power of all classes of our stock
or the stock of any parent or subsidiary of our company, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date and the maximum term of these incentive stock options must not exceed five
years. The maximum term of all other awards must not exceed 10 years (or 5 years in the case of an incentive stock option
granted to any participant who owns stock representing more than 10% of the voting power of all classes of our stock or the stock
of any parent or subsidiary of our company). The plan administrator will determine the exercise or purchase price (if any) of all
other awards granted under the Plan.
Under the Plan, incentive stock options
and options to Israeli grantees may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised during the lifetime of the participant only by the
participant. Other awards shall be transferable by will or by the laws of descent or distribution and, during the lifetime of the
participant, to the extent and in the manner authorized by the plan administrator by gift or pursuant to a domestic relations order
to members of the participant’s immediate family. The Plan permits the designation of beneficiaries by holders of awards,
including incentive stock options.
If the service of a participant in the
Plan is terminated for any reason other than cause, the participant may exercise awards that were vested as of the termination
date for a period ending upon the earlier of 12 months from the date of termination (or such shorter or longer period set forth
in the award agreement) or the expiration date of the awards unless otherwise determined by the plan administrator. If the service
of a participant in the Plan is terminated for cause, the participant may exercise awards that were vested as of the termination
date for a period ending upon the earlier of 14 days from the date of termination (or such shorter or longer period set forth
in the award agreement) or the expiration date of the awards unless otherwise determined by the plan administrator.
Corporate Transaction and Change
in Control. In the event of a corporate transaction, all outstanding awards will terminate unless assumed by the successor
corporation. Unless otherwise provided in a participant’s award agreement, in the event of a corporate transaction and with
respect to the portion of each award that is assumed or replaced, then such portion will automatically become fully vested and
exercisable immediately upon termination of a participant’s service if the participant is terminated by the successor company
or us without cause within 12 months after the corporate transaction. With respect to the portion of each award that is not assumed
or replaced, such portion of the award will automatically become fully vested and exercisable immediately prior to the effective
date of the corporate transaction so long as the participant’s service has not been terminated prior to such date.
In the event of a change in control, except
as otherwise provided in a participant’s award agreement, following a change in control (other than a change in control that
also is a corporate transaction) and upon the termination of a participant’s service without cause within 12 months after
a change in control, each award of such participant that is outstanding at such time will automatically become fully vested and
exercisable immediately upon the participant’s termination.
Under the Plan, a corporate transaction is generally defined
as:
• a merger or consolidation in
which we are not the surviving entity, except for the principal purpose of changing our company’s state of incorporation;
• the sale, transfer or other disposition
of all or substantially all of our assets;
• the complete liquidation or dissolution
of our company;
• any reverse merger in which we
are the surviving entity but our shares of common stock outstanding immediately prior to such merger are converted or exchanged
by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or in which securities possessing
more than forty percent (40%) of the total combined voting power of our outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger; or
• acquisition in a single or series
of related transactions by any person or related group of persons (other than by us or by an employee benefit plan sponsored by
us) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of our outstanding
securities but excluding any such transaction or series of related transactions that the plan administrator determines not to be
a corporate transaction (provided however that the plan administrator shall have no discretion in connection with a corporate transaction
for the purchase of all or substantially all of our shares unless the principal purpose of such transaction is changing our company’s
state of incorporation).
Under the Plan, a change of control is defined as:
• the direct or indirect acquisition
by any person or related group of persons of beneficial ownership of securities possessing more than fifty percent (50%) of the
total combined voting power of our outstanding securities pursuant to a tender or exchange offer made directly to our shareholders
and which a majority of the members of our Board of Directors (who have generally been on our Board of Directors for at least 12
months) who are not affiliates or associates of the offeror do not recommend shareholders accept the offer; or
• a change in the composition of
our Board of Directors over a period of 12 months or less, such that a majority of the members of our Board of Directors ceases,
by reason of one or more contested elections for board membership, to be comprised of individuals who were previously directors
of our company.
Amendment, Suspension or Termination
of the Plan. Unless terminated sooner, the Plan will automatically terminate on December 31, 2020. Our Board of Directors
has the authority to amend, suspend or terminate the Plan. No amendment, suspension or termination of the Plan shall adversely
affect any rights under awards already granted to a participant. To the extent necessary to comply with applicable provisions of
federal securities laws, state corporate and securities laws, the Internal Revenue Code, the rules of any applicable stock exchange
or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein (including
the tax ordinance), we shall obtain shareholder approval of any such amendment to the Plan in such a manner and to such a degree
as required.
Certain Federal Tax Consequences
The following summary of the U.S. federal
income tax consequences of the Plan transactions is based upon federal income tax laws in effect on the date of this Proxy Statement.
This summary does not purport to be complete, and does not discuss state, local or non-U.S. tax consequences.
Nonqualified Stock Options. The
grant of a nonqualified stock option under the Plan will not result in any U.S. federal income tax consequences to us or the participant,
if a U.S. taxpayer. Upon exercise of a nonqualified stock option, the participant is subject to income taxes at the rate applicable
to ordinary compensation income on the difference between the option exercise price and the fair market value of the shares at
the time of exercise. This income is subject to withholding for U.S. federal income and employment tax purposes. We are entitled
to an income tax deduction in the amount of the income recognized by the participant, subject to possible limitations imposed by
Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required)
and the participant’s total compensation is deemed reasonable in amount. Any gain or loss on the participant’s subsequent
disposition of the shares will receive long or short-term capital gain or loss treatment, depending on whether the shares are held
for more than one year following exercise. We do not receive a tax deduction for any such gain.
A nonqualified stock option can be considered
deferred compensation and be subject to Section 409A of the Code. A nonqualified stock option that does not meet the requirements
of Code Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties
and interest.
Incentive Stock Options. The grant
of an incentive stock option under the Plan will not result in any U.S. federal income tax consequences to us or the participant,
if a U.S. taxpayer. A participant recognizes no federal taxable income upon exercising an incentive stock option (subject to the
alternative minimum tax rules discussed below), and we receive no deduction at the time of exercise. In the event of a disposition
of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the participant has held
the shares. If the participant does not dispose of the shares within two years after the incentive stock option was granted, nor
within one year after the incentive stock option was exercised, the participant will recognize a long-term capital gain (or loss)
equal to the difference between the sale price of the shares and the exercise price. We are not entitled to any deduction under
these circumstances.
If the participant is a U.S. taxpayer and
fails to satisfy either of the foregoing holding periods (referred to as a “disqualifying disposition”), he or she
must recognize ordinary income in the year of the disposition. The amount of ordinary income generally is the lesser of (i) the
difference between the amount realized on the disposition and the exercise price or (ii) the difference between the fair market
value of the stock at the time of exercise and the exercise price. Any gain in excess of the amount taxed as ordinary income will
be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year. We are entitled,
in the year of the disqualifying disposition, to a deduction equal to the amount of ordinary income recognized by the participant,
subject to possible limitations imposed by Section 162(m) of the Code and so long as the participant’s total compensation
is deemed reasonable in amount.
The “spread” under an incentive
stock option—i.e., the difference between the fair market value of the shares at exercise and the exercise price—is
classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax. If a participant’s
alternative minimum tax liability exceeds such participant’s regular income tax liability, the participant will owe the larger
amount of taxes. In order to avoid the application of alternative minimum tax with respect to incentive stock options, the participant
must sell the shares within the calendar year in which the incentive stock options are exercised. However, such a sale of shares
within the year of exercise will constitute a disqualifying disposition, as described above.
Stock Appreciation Rights. Recipients
of stock appreciation rights, or SARs, if U.S. taxpayers, generally should not recognize income until the SAR is exercised (assuming
there is no ceiling on the value of the right). Upon exercise, the recipient will normally recognize taxable ordinary income for
U.S. federal income tax purposes equal to the amount of cash and fair market value of the shares, if any, received upon such exercise.
Recipients who are employees will be subject to withholding for federal income and employment tax purposes with respect to income
recognized upon exercise of a SAR. Recipients will recognize gain upon the disposition of any shares received on exercise of a
SAR equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with
respect to such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending
on whether the shares were held for more than one year. We will be entitled to a tax deduction to the extent and in the year that
ordinary income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code
and so long as we withhold the appropriate taxes with respect to such income (if required) and the recipient’s total compensation
is deemed reasonable in amount.
A SAR can be considered non-qualified deferred
compensation and be subject to Section 409A of the Code. A SAR that does not meet the requirements of Code Section 409A
can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest.
Restricted Stock. The grant of restricted
stock will subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the
fair market value of the shares on the date that the restrictions lapse. This income is subject to withholding for federal income
and employment tax purposes. We are entitled to an income tax deduction in the amount of the ordinary income recognized by the
recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate
taxes with respect to such income (if required) and the participant’s total compensation is deemed reasonable in amount.
Any gain or loss on the recipient’s subsequent disposition of the shares will receive long or short-term capital gain or
loss treatment depending on how long the stock has been held since the restrictions lapsed. We do not receive a tax deduction for
any such gain.
Recipients of restricted stock may make
an election under Section 83(b) of the Code, or a Section 83(b) Election, to recognize as ordinary compensation
income in the year that such restricted stock is granted, the amount equal to the spread between the amount paid for such stock
and the fair market value on the date of the issuance of the stock. If such an election is made, the recipient recognizes no further
amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or
short-term capital gain to the recipient. The Section 83(b) Election must be made within 30 days from the time the restricted
stock is issued.
Restricted Stock Units. Recipients
of restricted stock units generally should not recognize income until such units are converted into cash or shares. Upon conversion,
the recipient will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair
market value of the shares, if any, received upon such conversion. Recipients who are employees will be subject to withholding
for federal income and employment tax purposes with respect to income recognized upon conversion of the restricted stock units.
Participants will recognize gain upon the disposition of any shares received upon conversion of the restricted stock units equal
to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to
such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether
the shares were held for more than one year. We will be entitled to a tax deduction to the extent and in the year that ordinary
income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long
as we withhold the appropriate taxes with respect to such income (if required) and the recipient’s total compensation is
deemed reasonable in amount.
Restricted stock units also can be considered
non-qualified deferred compensation and be subject to Section 409A of the Code. A grant of restricted stock units that is
non-qualified deferred compensation but does not meet the requirements of Code Section 409A will result in an additional 20%
tax obligation, plus penalties and interest to such recipient.
Dividends and Dividend Equivalents.
Recipients of stock-based awards that earn dividends or dividend equivalents will recognize taxable ordinary income on any dividend
payments received with respect to unvested and/or unexercised shares subject to such awards, which income is subject to withholding
for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the income recognized
by a participant, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the
appropriate taxes with respect to such income (if required) and the individual’s total compensation is deemed reasonable
in amount.
Impact of Israeli Tax Law
The awards granted to employees pursuant to Section 102 of the
tax ordinance under the Plan may be designated by us as approved options under the capital gains alternative, or as approved options
under the ordinary income tax alternative.
To qualify for these benefits, certain requirements must be
met, including registration of the options in the name of a trustee. Each option, and any shares of common stock acquired upon
the exercise of the option, must be held by the trustee for a period commencing on the date of grant and deposit into trust with
the trustee and ending 24 months thereafter.
Under the terms of the capital gains alternative, we may not
deduct expenses pertaining to the options for tax purposes.
Under the Plan, we may also grant to employees options pursuant
to Section 102(c) of the tax ordinance that are not required to be held in trust by a trustee. This alternative, while facilitating
immediate exercise of vested options and sale of the underlying shares, will subject the optionee to the marginal income tax rate
of up to 50% as well as payments to the National Insurance Institute and health tax on the date of the sale of the shares or options.
Under the 2006 Stock Incentive Plan, we may also grant to non-employees options pursuant to Section 3(I) of the tax ordinance.
Under that section, the income tax on the benefit arising to the optionee upon the exercise of options and the issuance of common
stock is generally due at the time of exercise of the options.
These options shall be further subject to
the terms of the tax ruling that has been obtained by Protalix Ltd. from the Israeli tax authorities in connection with our merger
in 2006. Under the tax ruling, the options issued by us in connection with the assumption of Section 102 options previously issued
by Protalix Ltd. under the capital gains alternative shall be issued to a trustee, shall be designated under the capital gains
alternative and the issuance date of the original options shall be deemed the issuance date for the assumed options for the calculation
of the respective holding period.
Amended Plan Benefits
The grant of awards under the Plan, including grants
to our executive officers, is subject to the discretion of the plan administrator. Except with respect to options issued to
the Chairman of our Board of Directors and our New President and Chief Executive Officer, as set forth below, the allocation of the
new shares is not determinable at this time.
New Plan Benefits |
Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan, amended |
Name and Position | |
| Dollar Value ($)(1) | | |
Number of Units |
Shlomo Yanai Chairman of the Board | |
| 195,397 | | |
Option to Purchase 100,000 shares of common stock |
Moshe Manor | |
| 1,236,490 | | |
Option to Purchase 900,000 shares of common stock |
| (1) | The dollar values of the options listed in this table
are based on the grant date (i.e., the date of board approval) of each option grant. |
PROPOSAL 6: RATIFICATION OF APPOINTMENT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Board of Directors, upon
the recommendation of its Audit Committee, has ratified the selection of Kesselman & Kesselman to serve as our independent
registered public accounting firm for the fiscal year ending December 31, 2014. The Audit Committee of our Board of Directors is
solely responsible for selecting our independent public accountants. Although shareholder approval is not required to appoint Kesselman
& Kesselman as our independent public accountants, we believe that submitting the appointment of Kesselman & Kesselman
to our shareholders for ratification is a matter of good corporate governance. If our shareholders do not ratify the appointment,
then the appointment will be reconsidered by the Audit Committee. Even if the appointment is ratified, the Audit Committee may
engage a different independent registered public accounting firm at any time during the year if it determines that such a change
would be in the best interest of our Corporation and our shareholders. The proxy will be voted as specified, and if no specification
is made, the proxy will be cast “FOR” this proposal.
During our fiscal year ended
December 31, 2013, there were no disagreements with Kesselman & Kesselman on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which if not resolve to their satisfaction would have caused them
to make reference to the subject matter of the disagreements in connection with their opinion.
The audit report of Kesselman
& Kesselman on our consolidated financial statements for the years ended December 31, 2012 and 2013 did not contain any adverse
opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.
The Audit Committee will consider
whether the provision of any other services by Kesselman & Kesselman is compatible with maintaining the independence of Kesselman
& Kesselman. The Audit Committee has concluded that Kesselman & Kesselman is independent.
Representatives of Kesselman
& Kesselman will be present at the annual meeting and available to answer shareholders questions.
Our Board of Directors recommends that
shareholders vote “FOR” the ratification of the appointment of Kesselman & Kesselman for the fiscal year ending
December 31, 2014.
The following table sets forth fees billed to us by our independent
registered public accounting firm during the fiscal years ended December 31, 2013 and 2012 for: (i) services rendered for the audit
of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered
public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv)
all other fees for services rendered.
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Year Ended December 31, | |
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2013 | | |
2012 | |
Audit Fees | |
$ | 246,000 | | |
$ | 252,000 | |
Audit Related Fees | |
$ | 10,000 | | |
$ | 10,000 | |
Tax Fees | |
$ | 57,334 | | |
$ | 52,767 | |
All Other Fees | |
$ | 22,560 | | |
$ | 20,175 | |
Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
Prior to entering into the engagement letter with our independent
registered accountants, our Audit Committee approved the 2013 audit fees. For fiscal year 2014, our Audit Committee has approved
fees for certain permissible non-audit services to be rendered by our independent registered accounting firm.
SHAREHOLDER PROPOSALS
All shareholder proposals intended to be presented at our 2015
Annual Meeting of Shareholders must be submitted in writing to Yossi Maimon, Corporate Secretary, Protalix BioTherapeutics, Inc.,
2 Snunit Street, Science Park, P.O. Box 455, Carmiel 20100, Israel and received by us no later than June 13, 2015, and must comply
in all other respects with applicable rules and regulations of the SEC relating to such inclusion. Such notice must include, with
respect to each matter the shareholder proposes to bring before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and record
address of the shareholder proposing such business; (iii) the class and number of shares of our company which are beneficially
owned by the shareholder; and (iv) any material interest of the shareholder in such business. In addition, the notice must include
certain information relating to any derivative or hedging transactions by the shareholder delivering such notice and its Shareholder
Associated Persons, as defined in our By-Laws, and other arrangements with other parties regarding our securities, as presented
in detail in our By-Laws.
Any such proposal submitted with respect to our 2015 Annual
Meeting of Shareholders which is submitted outside the requirements of Rule 14a-8 under the Exchange Act will be considered timely
if we receive written notice of that proposal not less than 45 days nor more than 75 days prior to the date in 2014 on which we
first mailed this proxy statement in 2014; however, if the date of the annual meeting is changed by more than 30 days from the
date of the prior year’s annual meeting, the notice will be considered untimely if it is not received at least 90 days prior
to the newly announced date that we will mail our proxy statement.
ANNUAL REPORT TO SHAREHOLDERS
Our Annual Report on Form 10-K for the fiscal year ended December
31, 2013 filed with the SEC, which provides additional information about us, will be distributed to all shareholders entitled to
vote along with the proxy materials. Additional copies of our Annual Report on Form 10-K for the fiscal year ended December
31, 2013 are available on the Internet at http://www.sec.gov
and http://www.protalix.com and are also available in paper
form without charge upon written request to Investor Relations, Protalix BioTherapeutics, Inc., 2 Snunit Street, Science Park,
P.O. Box 455, Carmiel 20100, Israel.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders
sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly
referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are
shareholders of our company will be “householding” our proxy materials. A single proxy statement may be delivered to
multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once a
shareholder has received notice from its broker that it will be “householding” communications to such shareholder’s
address, “householding” will continue until such shareholder is notified otherwise or until such shareholder notifies
its broker or us that it no longer wishes to participate in “householding.” If, at any time, a shareholder no longer
wishes to participate in “householding” and would prefer to receive a separate proxy statement and annual report in
the future such shareholder may (1) notify its broker or (2) direct its written request to: Yossi Maimon, Corporate Secretary,
Protalix BioTherapeutics, Inc., 2 Snunit Street, Science Park, P.O. Box 455, Carmiel 20100, Israel, +972 (4) 988-9488, ext. 143.
Shareholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding”
of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the
address or telephone number above, a separate copy of the annual report and proxy statement to such shareholders at a shared address
to which a single copy of the documents was delivered.
OTHER MATTERS
Our Board of Directors knows of no other business to be acted
upon at the annual meeting. However, if any other business properly comes before the Annual Meeting of Shareholders, it is the
intension of the persons named in the enclosed proxy to vote on such matters in accordance with their best judgment.
The prompt return of your proxy is appreciated and will be helpful
in obtaining the necessary vote. Therefore, whether or not you expect to attend the annual meeting please sign the proxy and return
it in the enclosed envelope or vote by internet or telephone.
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BY ORDER OF THE BOARD OF DIRECTORS, |
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Yossi Maimon |
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Vice President and Chief Financial Officer and Corporate Secretary |
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Carmiel, Israel |
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September 29, 2014 |
Appendix A
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PROTALIX BIOTHERAPEUTICS, INC.
PROTALIX BIOTHERAPEUTICS, INC., a Florida
corporation (the “Corporation”), hereby adopts the following Articles of Amendment to its Articles of Incorporation
(the “Amendment”), pursuant to the provisions of Section 607.1003 of the Florida Business Corporation Act (the “Act”):
1. The Articles of Incorporation of the
Corporation are hereby amended to adopt a new Article XII, as follows:
“Article XII-Quorum
for Shareholder Meetings
One third (1/3) of the shares
entitled to be cast on any matter by a voting group shall constitute a quorum of that voting group for action on that matter.”
2. The Amendment was approved and adopted
by the Board of Directors of the Corporation at a meeting held on September 4, 2014 and by the holders of the common stock of the
Corporation at a meeting of shareholders held on November 10, 2014. The holders of the common stock of the Corporation are the
only voting group entitled to vote on the Amendment, and the vote of the holders of the shares of common stock was sufficient to
approve the Amendment under the Act and the Articles of Incorporation and Bylaws of the Corporation.
3. The Amendment shall become effective
as of the close of business on the date of the filing of the Amendment with the Secretary of State of State of Florida.
IN WITNESS WHEREOF, the undersigned has
executed these Articles of Amendment as of this __th day of November, 2014.
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PROTALIX BIOTHERAPEUTICS, INC. |
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By: |
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Name: |
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Title: |
Appendix B
PROTALIX BIOTHERAPEUTICS, INC.
2006 STOCK INCENTIVE PLAN
(As amended November 10, 2014)
1. Purposes
of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives
to Employees, Directors and Consultants and to promote the success of the Company’s business.
2. Definitions.
The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual
Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supercede the
definition contained in this Section 2.
(a) “3(I)
Option” means Award granted under Section 3(I).
(b) “102
Option” means Award granted under Section 102.
(c) “Administrator”
means the Board or any of the Committees appointed to administer the Plan.
(d) “Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under
the Exchange Act.
(e) “Applicable
Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities
laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and
the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.
(f) “Assumed”
means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the
contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity
or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of
the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the
compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments
evidencing the agreement to assume the Award.
(g) “Award”
means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit
under the Plan.
(h) “Award
Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including
any amendments thereto.
(i) “Board”
means the Board of Directors of the Company.
(j) “Cause”
means, with respect to the termination by the Company or a Related Entity of the Grantee's Continuous Service, that such termination
is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written agreement between
the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition,
is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any
act in bad faith which is materially detrimental to the Company or a Related Entity as reasonably determined in good faith by a
unanimous decision of members of the Board entitled to vote thereon; (ii) dishonesty,
intentional misconduct or material breach of any agreement with the Company or a Related Entity; (iii) commission of a crime involving
dishonesty, breach of trust, or physical or emotional harm to any person; (iv) embezzlement of funds of the Company or a Related
Entity; (v) ownership, direct or indirect (i.e., by means of a holding company or family member), of an interest in a person or
entity (other than a minority interest in a publicly traded company) in competition with the products or services of the Company
or a Related Entity, including those products or services contemplated in a plan adopted by the Board; (vi) any breach of the Grantee’s
fiduciary duties or duties of care to the Company or a Related Entity (except for conduct taken in good faith); (vii) any material
failure to carry out a reasonable and legitimate directive of the Board; or (viii)
any material breach of an Employee's undertakings of confidentiality and non competition.
(k) “Change
in Control” means a change in ownership or control of the Company effected through either of the following transactions:
(i) the
direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender
or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates
or Associates of the offeror do not recommend such stockholders accept, or
(ii) a
change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded
up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals
who are Continuing Directors.
(l) “Code”
means the Internal Revenue Code of 1986, as amended.
(m) “Committee”
means any committee composed of members of the Board appointed by the Board to administer the Plan.
(n) “Common
Stock” means the common stock of the Company.
(o) “Company”
means Protalix BioTherapeutics, Inc., a Florida corporation, or any successor entity that adopts the Plan
in connection with a Corporate Transaction.
(p) “Consultant”
means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity
as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or
such Related Entity.
(q) “Continuing
Directors” means members of the Board who either (i) have been Board members continuously for a period of at least
twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election
as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time
such election or nomination was approved by the Board.
(r) “Continuous
Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director
or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an
Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services
to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an
Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to
have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services
ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave
of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director
or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related
Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave
of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock
Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed
by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months
and one (1) day following the expiration of such three (3) month period.
(s) “Corporate
Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under
parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:
(i) a
merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Company is incorporated;
(ii) the
sale, transfer or other disposition of all or substantially all of the assets of the Company;
(iii) the
complete liquidation or dissolution of the Company;
(iv) any
reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer
followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding
immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting
power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities
immediately prior to such merger or the initial transaction culminating in such merger; or
(v) acquisition
in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored
employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any
such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction (provided
however that the Administrator shall have no discretion in connection with a Corporate Transaction for the purchase of all or substantially
all of the shares of the Company unless the principal purpose of such transaction is to change the state in which the Company is
incorporated).
(t) “Covered
Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.
(u) “Director”
means a member of the Board or the board of directors of any Related Entity.
(v) “Disability”
means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services
regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides
service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out
the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental
impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability
unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.
(w) “Dividend
Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common
Stock.
(x) “Employee”
means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control
and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.
The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment”
by the Company.
(y) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
(z) “Fair
Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If
the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation
the American Stock Exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator)
on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last
trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
(ii) If
the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities
dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer
on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be
the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were
reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source
as the Administrator deems reliable; or
(iii) In
the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof
shall be determined by the Administrator in good faith.
(aa) “Grantee”
means an Employee, Director or Consultant who receives an Award under the Plan.
(bb) “Incentive
Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422
of the Code.
(cc) “Israeli
Employee” means Employees, office holders of the Company or a Related Company (“Nosei Misra” - as such term
is defined in the Israeli Companies Law 1999) and Directors (excluding those who are considered a “Controlling Shareholder”
pursuant to Section 32(9) of the Tax Ordinance or otherwise excluded by the Tax Ordinance).
(dd) “Israeli
Grantee” means Grantees who are residents of the State of Israel or those who are deemed to be residents of the State
of Israel for the payment of tax (whether such grantee is entitled to the tax benefits under Section 102 or not).
(ee) “ITA”
means Israeli Tax Authorities.
(ff) “Non-Employee”
means Consultants or any other person who is not an Israeli Employee.
(gg) “Non-Qualified
Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
(hh) “Non-Trustee
102 Option” shall mean a 102 Option granted pursuant to Section 102(c) of the Tax Ordinance and not held in trust by
the Trustee.
(ii) “Officer”
means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(jj) “Option”
means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.
(kk) “Parent”
means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.
(ll) “Performance-Based
Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m)
of the Code.
(mm) “Plan”
means this 2006 Stock Incentive Plan.
(nn) “Related
Entity” means any Parent or Subsidiary of the Company. With respect to Israeli Grantees of 102 Options, the definition
shall further include any entity permitted under Section 102 (a) of the Tax Ordinance.
(oo) “Replaced”
means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program
of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such
Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more
favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator
and its determination shall be final, binding and conclusive.
(pp) “Restricted
Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions
on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established
by the Administrator.
(qq) “Restricted
Stock Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance
criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash,
Shares or other securities as established by the Administrator.
(rr) “Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.
(ss) “SAR”
means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured
by appreciation in the value of Common Stock.
(tt) “Section
3(I)” means section 3(I) of the Tax Ordinance as may be amended from time to time.
(uu) “Section
102” means section 102 of the Tax Ordinance as may be amended from time to time.
(vv) “Share”
means a share of the Common Stock.
(ww) “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.
(xx) “Tax
Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961 (including as amended pursuant to Amendment 132
thereto) and to the extent not specifically indicated hereunder also the rules, regulations and orders or procedures promulgated
thereunder from time to time, as amended or replaced from time to time.
(yy) “Trustee”
means any individual appointed by the Company to serve as trustee and approved by the ITA, in accordance with the provisions of
Section 102(a) of the Tax Ordinance and the regulations promulgated thereunder.
(zz) “Trustee
102 Option” means a 102 Option granted pursuant to Section 102(b) of the Tax Ordinance and held in trust by the
Trustee for the benefit of an Israeli Grantee.
3. Stock
Subject to the Plan.
(a) Subject
to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) under the Plan is 13,841,655 Shares. Notwithstanding the foregoing, any Shares issued from and after November
10, 2014 in connection with Awards other than Options and SARs shall be counted against the limit set forth herein as one
and one-half (1.5) Shares for every one (1) Share issued in connection with such Award (and shall be counted as one and one-half
(1.5) Shares for every one (1) Share returned or deemed not have been issued from the Plan pursuant to Section 3(b) below in connection
with Awards other than Options and SARs). The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired
Common Stock.
(b) Any
Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily)
shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued
under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by
the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall
become available for future grant under the Plan. Notwithstanding anything to the contrary contained herein: (i) Shares tendered
or withheld in payment of an Option exercise price shall not be returned to the Plan and shall not become available for future
issuance under the Plan; (ii) Shares withheld by the Company to satisfy any tax withholding obligation shall not be returned to
the Plan and shall not become available for future issuance under the Plan; and (iii) all Shares covered by the portion of an SAR
that is exercised (whether or not Shares are actually issued to the Grantee upon exercise of the SAR) shall be considered issued
pursuant to the Plan.
4. Administration
of the Plan.
(a) Plan
Administrator.
(i) Administration
with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions
under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise directed by the Board.
(ii) Administration
With Respect to Consultants and Other Employees. With respect to grants of Awards to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant
such Awards and may limit such authority as the Board determines from time to time.
(iii) Administration
With Respect to Covered Employees. Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify
as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case
of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall
be deemed to be references to such Committee or subcommittee.
(iv) Administration
With Respect to Israeli Grantees. With respect to grants of Awards to Israeli Grantees, the Plan shall be administered by (A)
the Board or (B) a Committee or one or more Officers designated by the Board, which Committee or Officers shall be constituted
or appointed in such a manner as to satisfy the ITA and the Applicable Laws applicable to Awards for Israeli Grantees. Once appointed,
such Committee or Officer shall continue to serve in its/his/her designated capacity until otherwise directed by the Board.
(v) Administration
Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.
(b) Powers
of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:
(i) to
select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;
(ii) to
determine whether and to what extent Awards are granted hereunder;
(iii) to
determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;
(iv) to
approve forms of Award Agreements for use under the Plan;
(v) to
determine the terms and conditions of any Award granted hereunder;
(vi) to
amend the terms of any outstanding Award granted under the Plan, provided that (A) any amendment that would adversely affect the
Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided, however,
that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be
treated as adversely affecting the rights of the Grantee, (B) the reduction of the exercise price of any Option awarded under
the Plan and the base appreciation amount of any SAR awarded under the Plan shall be subject to stockholder approval and (C) canceling
an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of
the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash shall be subject to stockholder
approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction. Notwithstanding the foregoing,
canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock, or other Award or for cash with an exercise price,
purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation
amount (as applicable) of the original Option or SAR shall not be subject to stockholder approval;
(vii) to
construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement,
granted pursuant to the Plan;
(viii) to
grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different
from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose
of the Plan; and
(ix) to
designate Awards as 102 Options (whether through a trustee or not) or 3(I) Options subject to the limitations under the ITA or
any other Applicable Law and to determine the type and route of the Trustee 102 Options.
(x) to
take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.
The express grant in the Plan of any specific
power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator
may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection
with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.
(c) Indemnification.
In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the
Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority
to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent
permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily
incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with
the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement
is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after
the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the
opportunity at the Company’s expense to defend the same.
5. Eligibility.
Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be
granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has
been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time, provided however
that Awards to Israeli Grantees under Section 102 or Section 3(I) of the Tax Ordinance shall be subject to Section 20 below.
The Company does not warrant that the
Plan will be recognized by the income tax authorities in any jurisdiction or that future changes will not be made to the provisions
of applicable laws or rules or regulations which are promulgated from time to time thereunder, or that any exemption or benefit
currently available, whether by the ITA pursuant to Section 102 or otherwise, will not be abolished.
6. Terms
and Conditions of Awards.
(a) Types
of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares,
(ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value
of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events,
or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales
or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security
or benefit, or two (2) or more of them in any combination or alternative.
(b) Designation
of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option and with respect to Israeli Grantees may be further designated
as 102 Options or 3(I) Options under the Tax Ordinance subject to the qualifications described in Section 20 below. However, notwithstanding
such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation
of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based
on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable
for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company).
For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted,
and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. In the event that the
Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be
automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
(c) Conditions
of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions,
form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of
any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination
of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin,
(v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating
income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation,
(xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities
and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result
in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. In addition, the performance
criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive
or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator,
occurring after the establishment of the performance criteria applicable to the Award intended to be performance-based compensation.
Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the
calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect
to an Award intended to be performance-based compensation.
(d) Acquisitions
and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest
in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form
of transaction.
(e) Deferral
of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that
absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator
may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or
other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures
that the Administrator deems advisable for the administration of any such deferral program.
(f) Separate
Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to
time.
(g) Individual
Limitations on Awards.
(i) Individual
Limit for Options and SARs. The maximum number of Shares with respect to which Options and SARs may be granted to any Grantee
in any calendar year shall be 13,841,655 Shares. Shares which shall not count against the limit set forth in the previous
sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization
pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall
continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For
this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated
is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing
Option or SAR and the grant of a new Option or SAR.
(ii) Individual
Limit for Restricted Stock and Restricted Stock Units. For awards of Restricted Stock and Restricted Stock Units that are intended
to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee
in any calendar year shall be 13,841,655 Shares. The foregoing limitation shall be adjusted proportionately in connection with
any change in the Company’s capitalization pursuant to Section 10, below.
(iii) Deferral.
If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash)
paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares
subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined
actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of
a specific investment (including any decrease as well as any increase in the value of an investment).
(h) Early
Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received
pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction
the Administrator determines to be appropriate.
(i) Term
of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award
shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option
granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.
(j) Transferability
of Awards. Incentive Stock Options or Options to Israeli Grantees may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime
of the Grantee, only by the Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and distribution
and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the
extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations,
and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee. Notwithstanding
the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s
death on a beneficiary designation form provided by the Administrator.
(k) Time
of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
7. Award
Exercise or Purchase Price, Consideration and Taxes.
(a) Exercise
or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows:
(i) In
the case of an Incentive Stock Option:
(A) granted
to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price
shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted
to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In
the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant.
(iii) In
the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(iv) In
the case of SARs (other than with respect to Israeli Grantees), the base appreciation amount shall not be less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.
(v) In
the case of other Awards, such price as is determined by the Administrator.
(vi) Notwithstanding
the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise
or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the
agreement to issue such Award.
(b) Consideration.
Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator
may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:
(i) cash;
(ii) check;
(iii) surrender
of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which
have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which
said Award shall be exercised;
(iv) with
respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares
and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall
provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm
in order to complete the sale transaction; or
(v) with
respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise
the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised,
multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by
the Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share (the number
of net Shares to be received shall be rounded down to the nearest whole number of Shares);
(vi) any
combination of the foregoing methods of payment.
The Administrator may at any time or from
time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by
other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares
or which otherwise restrict one or more forms of consideration.
(c) Taxes.
No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding
obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise or vesting of an Award
the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not
limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding
obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares
withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).
8. Exercise
of Award.
(a) Procedure
for Exercise; Rights as a Stockholder.
(i) Any
Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement provided however that the standard vesting schedule for Israeli Grantees
shall be as set forth in Section 20.
(ii) An
Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award
is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b).
(b) Exercise
of Award Following Termination of Continuous Service. In the event of termination of a Grantee’s Continuous Service for
any reason other than Cause, Disability or death, such Grantee may, but only within twelve (12) months from the date of such
termination (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration date
of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested
at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. To
the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion
of the Grantee’s Award within the time specified herein, the Award shall terminate.
(c) Exercise
of Award Following Termination of Continuous Service for Cause. In the event of termination of a Grantee’s Continuous
Service for Cause, such Grantee may, but only within fourteen (14) days from the date of such termination (or such longer
or shorter period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award
as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination
or such other portion of the Grantee’s Award as may be determined by the Administrator. To the extent that the Grantee’s
Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award
within the time specified herein, the Award shall terminate.
(d) Disability
of Grantee. In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such
Grantee may, but only within twelve (12) months from the date of such termination (or such longer or shorter period as specified
in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement),
exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the
Grantee’s Award as may be determined by the Administrator. To the extent that the Grantee’s Award was unvested at the
date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified
herein, the Award shall terminate.
(e) Death
of Grantee. In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in
the event of the death of the Grantee during the post-termination exercise periods following the Grantee’s termination of
Continuous Service specified in this Section 8, above, the Grantee’s estate or a person who acquired the right to exercise
the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination
or such other portion of the Grantee’s Award as may be determined by the Administrator, within twelve (12) months from the
date of death (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration of
the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award
was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance
does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.
(f) The
holder of an Option shall have none of the rights of a stockholder with respect to the Shares subject to the Option until such
shares are transferred to the holder (or the Trustee, if applicable) upon the exercise of the Option.
9. Conditions
Upon Issuance of Shares.
(a) If
at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of
an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares
pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall
be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation
to effect any registration or qualification of the Shares under federal or state laws or other Applicable Laws.
(b) As
a condition to the exercise of an Award, the Company may require the person exercising such Award make such representations and
warranties which, in the opinion of the Company, are required to ensure that such exercise, or a subsequent sale or disposition
of any Shares obtained upon such exercise, does not contravene any Applicable Law, including inter alia, representations
and warranties at the time of any such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by
any Applicable Laws.
(c) Unless
otherwise set forth in an Award Agreement, Shares issued to a Grantee or the Trustee, as applicable, shall be subject to such restrictions
as required by the appropriate securities’ law and in the event that the Company's shares shall be registered for trading
in any public market, Grantee's rights to sell the Shares may be subject to certain limitations (including a lock-up period), as
will be requested by the Company or its underwriters, and the Grantee by executing an Award Agreement unconditionally agrees and
accepts any such limitations and undertakes to further execute any agreement as may be requested by the Company or its underwriters
from time to time.
10. Adjustments
Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered
by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards
have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the
maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other
terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease
in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification
of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) any other transaction with respect to Common Stock including
a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that
conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”
In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall
also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively
“adjustments”). Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement
of rights and benefits under such Awards. In connection with the foregoing adjustments, the Administrator may, in its discretion,
prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods
of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into
shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares
subject to an Award.
11. Corporate
Transactions and Changes in Control.
(a) Termination
of Award to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding
Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection
with the Corporate Transaction.
(b) Acceleration
of Award Upon Corporate Transaction or Change in Control.
(i) Corporate
Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction and:
(A) for
the portion of each Award that is Assumed or Replaced, then such Award (if Assumed), the replacement Award (if Replaced), or the
cash incentive program (if Replaced) automatically shall become fully vested, exercisable and payable and be released from any
repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares (or other
consideration) at the time represented by such Assumed or Replaced portion of the Award, immediately upon termination of the Grantee’s
Continuous Service if such Continuous Service is terminated by the successor company or the Company without Cause within twelve
(12) months after the Corporate Transaction; and
(B) for
the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested
and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market
Value) for all of the Shares (or other consideration) at the time represented by such portion of the Award, immediately prior to
the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated
prior to such date.
(ii) Change
in Control. Except as provided otherwise in an individual Award Agreement, following a Change in Control (other than a Change
in Control which also is a Corporate Transaction) and upon the termination of the Continuous Service of a Grantee if such Continuous
Service is terminated by the Company or Related Entity without Cause within twelve (12) months after a Change in Control, each
Award of such Grantee which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and
be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately
upon the termination of such Continuous Service.
(c) Effect
of Acceleration on Incentive Stock Options. Any Incentive Stock Option accelerated under this Section 11 in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to
the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.
12. Effective
Date and Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval
by the stockholders of the Company. It shall continue in effect until December 31, 2020 unless sooner terminated. Subject to Section 17,
below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.
13. Amendment,
Suspension or Termination of the Plan.
(a) The
Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the
approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment
would lessen the stockholder approval requirements of Section 4(b)(vi) or this Section 13(a).
(b) No
Award may be granted during any suspension of the Plan or after termination of the Plan.
(c) No
suspension or termination of the Plan (including termination of the Plan under Section 11, above) shall adversely affect any
rights under Awards already granted to a Grantee.
14. Reservation
of Shares.
(a) The
Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient
to satisfy the requirements of the Plan.
(b) The
inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
15. No
Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to
the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or
any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, including but not limited
to, Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee
who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated
for Cause for the purposes of this Plan.
16. No
Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the
Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under
any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind
or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation.
The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of
1974, as amended.
17. Stockholder
Approval. The grant of Incentive Stock Options under the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution
for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior
to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the
event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options
previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.
18. Unfunded
Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant
to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any
monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The
Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make
to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account
shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and
a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets
of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes
in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
19. Construction.
Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision
of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include
the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
20. Israeli
Grantees. This Section shall apply only to Israeli Grantees and is intended to enable the Company to grant Awards under the
Plan pursuant and subject to Section 102 and Section 3(I) of the Tax Ordinance. Accordingly, the Plan is designated to comply with
the Tax Ordinance and the rules, regulations and orders or procedures promulgated thereunder from time to time, as amended or replaced
from time to time and shall be submitted to the ITA as required thereunder.
In any case of contradiction, whether explicit
or implied, between the provisions of this Section and the Plan, the provisions set out in this Section shall prevail unless the
Administrator decides otherwise to ensure compliance with the Tax Ordinance and other Applicable Laws.
(a) Eligibility.
102 Options may be granted only to Israeli Employees. Non-Employees may only be granted 3(I) Options. The grant of an Award hereunder
shall neither entitle the Grantee to participate nor disqualify the Israeli Grantee from participating in, any other grant of Awards
pursuant to the Plan or any other option or stock plan of the Company or any Related Company.
(b) Grant
of Awards in Trust
(i) Grants
Made Under Section 102.
The Company may designate 102 Options
as Trustee 102 Options or Non-Trustee 102 Options. The designation of Non-Trustee 102 Options and Trustee 102 Options shall be
subject to the terms and conditions set forth in Section 102 of the Tax Ordinance and the regulations promulgated thereunder.
(ii) Grant
of Trustee 102 Options.
(1) The grant of the Trustee 102 Options shall
be made under the Plan and shall be conditional upon the approval of the Plan by the ITA. Trustee 102 Options may be granted at
any time after the passage of thirty (30) days following the delivery by the Company to the ITA of a notice pertaining to the appointment
of the Trustee and the adoption of the Plan, unless otherwise determined by the ITA. Options which shall be granted pursuant to
Section 102 and/or any Shares issued upon exercise of such Options and/or other shares received subsequently following any realization
of rights, shall be issued to the Trustee. Each Israeli Grantee in respect of whom a Trustee 102 Option is granted and held in
trust by the Trustee shall be referred to as a “beneficial optionee” hereunder.
(2) Trustee 102 Option(s) may either be classified
as Capital Gain Option(s) or Ordinary Income Option(s):
(A) Trustee
102 Option(s) elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions
of Section 102(b)(2) shall be referred to herein as “Capital Gain Option(s)” or “CGO”.
(B) Trustee
102 Option(s) elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions
of Section 102(b)(1) shall be referred to herein as “Ordinary Income Option(s)” or “OIO”.
(3) The Company’s election of the type
of Trustee 102 Options as CGO or OIO granted to Employees (the “Election”) shall be appropriately filed with the ITA
30 days before the date of grant of a Trustee 102 Option, unless otherwise determined by the ITA. Such Election shall become effective
beginning the first date of grant of a Trustee 102 Option under this Plan and shall remain in effect until the end of the year
following the year during which the Company first granted Trustee 102 Options. The Election shall obligate the Company to grant
only the type of Trustee 102 Option it has elected, and shall apply to all Israeli Grantees who were granted Trustee 102 Options
during the period indicated herein or therein, all in accordance with the provisions of Section 102(g) of the Tax Ordinance. Notwithstanding,
such Election shall not prevent the Company from granting Non-Trustee 102 Options simultaneously.
(4) All Trustee 102 Options must be held in
trust by and issued on the name of the Trustee, as described below.
(5) With respect to Trustee 102 Options, the
provisions of the Plan and/or an Award Agreement shall be subject to the provisions of Section 102 and the ITA’s permit,
and the said provisions and permit shall be deemed an integral part of this Section and of the Award Agreement for the respective
Grantees thereof. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any
tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Award Agreement, shall be considered binding
upon the Company and the Israeli Grantee.
(iii) Issuance
to Trustee.
(1) All Trustee 102 Options granted under
the Plan and/or any Shares allocated or issued upon exercise of such Trustee 102 Options and/or other and all rights deriving from
or in connection therewith, including, without limitation, in accordance with Section 10 above or any bonus shares or stock dividends
issued in connection therewith shall be granted by the Company to the Trustee, and the Trustee shall hold each such Trustee 102
Option and the Shares issued upon exercise thereof in trust for such period of time as required by Section 102 or any regulations,
rules or orders or procedures promulgated thereunder (the “Holding Period”), for the benefit of the Grantees in respect
of whom such Trustee 102 Option was granted. All certificates representing Shares issued to the Trustee under the Plan shall be
deposited with the Trustee, and shall be held by the Trustee until such time that such Shares are released from the Trust as herein
provided.
(2) In event the requirements for Trustee
102 Options are not met for any reason whatsoever, then the Trustee 102 Options may be treated as Non-Trustee 102 Options, all
in accordance with the provisions of Section 102 and regulations promulgated thereunder.
(3) With respect to any Trustee 102 Option,
subject to the provisions of Section 102 and any rules or regulations or orders or procedures promulgated thereunder, an Israeli
Grantee shall not be entitled to sell or release from Trust the Trustee 102 Option, the Shares received upon the exercise of such
Option and/or any right deriving from or in connection therewith,
including, without limitation, in accordance with Section 10 above or any bonus shares or stock dividends issued in connection
therewith, until the later of: (i) the lapse of the Holding Period required under Section 102, and (ii) the vesting of such Options
set forth in the respective Award Agreement (such later date being hereinafter referred to as the “Release Date”).
Notwithstanding the foregoing, if such sale or release occurs during the Holding period, the provisions of Section 102 and the
rules or regulations promulgated thereunder shall apply and any expenses and/or tax consequences therefrom shall be borne by the
Israeli Grantee.
(4) Subject to the terms hereof, at any time
after the Release Date with respect to any Trustee 102 Options or Shares the following shall apply:
(A) Trustee
102 Options granted, and/or Shares or rights issued to the Trustee shall continue to be held by the Trustee, on behalf of the beneficial
optionee. From and after the Release Date, upon the written request of any beneficial optionee, the Trustee shall release from
the Trust the Trustee 102 Options granted, and/or the Shares or rights issued, on behalf of such beneficial optionee, by executing
and delivering to the Company such instrument(s) as the Company may require, giving due notice of such release to such beneficial
optionee, provided, however, that the Trustee shall not so release any such Trustee 102 Options and/or Shares and/or rights to
such beneficial optionee unless the latter, prior to, or concurrently with, such release, provides the Trustee with evidence, satisfactory
in form and substance to the Trustee, that all taxes, if any, required to be paid upon such release have, in fact, been paid.
(B) Alternatively,
from and after the Release Date, upon the written instructions of the beneficial optionee to sell any Shares and rights issued
upon exercise of Trustee 102 Options, the Trustee shall use its best efforts to effect such sale and shall transfer such Shares
to the purchaser thereof concurrently with the receipt, or after having made suitable arrangements to secure the payment, of the
purchase price in such transactions. The Trustee shall withhold from such proceeds any and all taxes required to be paid in respect
of such sale, shall remit the amount so withheld to the appropriate tax authorities and shall pay the balance thereof directly
to the beneficial optionee, reporting to such beneficial optionee and to the Company the amount so withheld and paid to said authorities.
(C) Notwithstanding
the foregoing, in the event the underwriters of securities of the Company impose restrictions on the transferability of the Shares
during a lock-up period, the beneficial optionee shall not be entitled to release from Trust the Trustee 102 Options granted and/or
the Shares issued and/or to instruct the Trustee to effect a sale of same, for as long as the restrictions are in effect. In the
event the Trustee 102 Options granted and/or the Shares issued have been released from trust the restrictions imposed on the transferability
of same shall nevertheless apply to said optionee’s Trustee 102 Options and/or Shares in the same manner. Consequently, the
Israeli Grantee shall sign any documents required in order to effect the restrictions, for as long as the restrictions are in effect.
(D) Upon
receipt of the Award, the Israeli Grantee will sign an undertaking to release the Trustee from any liability in respect of any
action or decision duly taken and bona fide executed in relation with the Plan, or any Option or Share or rights granted to same
thereunder. The Trustee may establish additional terms and conditions in connection with Awards held in trust by the Trustee.
(iv) Grant
of Non-Trustee 102 Options
(1) Awards granted pursuant to this subsection
are intended to constitute Non-Trustee 102 Options and shall be subject to the general terms and conditions of the Plan and Section
20, except for provisions of the Plan applying to Trustee 102 Awards or Options under a different tax law or regulation.
(2) With respect to Non-Trustee 102 Options,
if the Grantee ceases to be employed by or of service to the Company or a Related Company, the Grantee may be required to extend
to the Company a security or guarantee for the payment of tax due at the time of sale of Shares or other rights, all in accordance
with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.
(v) Grants
Made Under Section 3(I). Awards granted pursuant to this subsection are intended to constitute 3(I) Options and shall
be subject to the general terms and conditions of the Plan and Section 20 thereof, except for said provisions of the Plan applying
to Awards under a different tax law or regulation. The Administrator may choose to deposit the Awards granted pursuant to Section
3(I) of the Tax Ordinance with a trustee. In such event, said trustee shall hold such Option in trust, until exercised by the Grantee,
pursuant to the Company's instructions from time to time. If determined by the Administrator, the trustee shall be responsible
for withholding any taxes to which a Grantee become liable upon the exercise of Options.
(c) Award
Agreement. Without derogating from the powers of the Administrator under the Plan, the Administrator shall adopt the form of
Award Agreement for Israeli Grantees in form acceptable by the ITA and in compliance with the Tax Ordinance. The Award Agreement
shall further indicate the type of Options (102, 3(I), Trustee, Non-Trustee etc.) granted thereunder.
(d) Vesting.
Without derogating from the terms of any Award Agreement or the discretionary authority of the Administrator, the standard vesting
for Options to Israeli Grantees shall be as follows:
(i) Twenty
five percent (25%) of the Options granted under each Award Agreement shall vest on the end of the first year of Continuous Service
following the vesting commencement date determined by the Administrator and if not specified the date of the grant of an Option
(the “First Anniversary”); and
(ii) The
remaining 75% of the Options shall vest on a quarterly basis over a period of three years commencing as of the First Anniversary
in twelve (12) equal portions subject to Continuous Service of the Grantee.
(e) With
respect to all Shares (in contrast to unexercised Options) allocated or issued upon the exercise of Options by the Israeli Grantee,
the Grantee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject however to any applicable
taxation on distribution of dividends. Subject to the Tax Ordinance and any restrictions imposed by the Trustee or the ITA, during
the period in which Shares are held by the Trustee on behalf of the Israeli Grantee, the cash dividends paid with respect thereto
shall be paid directly to the Grantee after deduction of withholding tax applicable thereto.
(f) Without
derogating from anything in the Plan, to the extent permitted by Applicable Laws, any tax consequences, attributable to the Israeli
Grantee, arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event
or act (of the Company, a Related Company, the Trustee or the Grantee), hereunder, shall be borne solely by the Grantee. The Company
and/or or a Related Company and/or the Trustee shall withhold taxes according to the requirements under the Applicable Laws, rules,
and regulations, including withholding taxes at source. Furthermore, to the extent permitted by Applicable Law, the Grantee shall
agree to indemnify the Company and/or a Related Company and/or the Trustee and hold them harmless against and from any and all
liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity
to withhold, or to have withheld, any such tax from any payment made to the Grantee. The Administrator and/or the Trustee shall
not be required to release any Share certificate to a Grantee until all required payments have been fully made.
(g) The
Plan, to the extent applicable to Israeli Grantees, shall be governed by and construed and enforced in accordance with the laws
of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict
of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to Israeli Grantees.
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