ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
DIRECTORS AND SENIOR MANAGEMENT
On April 15, 2003, the Company will hold its Annual General Meeting of
Shareholders (the "ANNUAL GENERAL MEETING"). At the Annual General Meeting, the
Company's shareholders will be asked to elect nine directors, two of whom are
external directors in accordance with Israeli law, as set forth below. Two of
the directors that are nominated for election, Mr. Gat and Mr. Levinberg, serve
as directors at present.
On April 15, 2003, the resignations of our Chief Executive Officer and
our President will become effective. Following this election at the Annual
General Meeting. our newly elected board of directors is expected to appoint a
new Chief Executive Officer and President.
Below is a description of (i) our directors and officers as of April
15, 2003, prior to the Annual General Meeting, and (ii) the nominees for the
board of directors at the Annual General Meeting.
I. DIRECTORS AND EXECUTIVE OFFICERS AND KEY EXECUTIVES OF OUR SUBSIDIARIES
PRIOR TO THE ANNUAL GENERAL MEETING:
NAME AGE POSITION
---- --- --------
Yoel Gat(1)(2)................ 51 Chief Executive Officer and Chairman of the board of directors, until April 15, 2003
Amiram Levinberg(1)(2)(3)..... 47 President until April 15, 2003, and Director
Shlomo Tirosh(4).............. 57 Director
Lori Kaufmann(1)(4)........... 43 Director
Erez Antebi(5)................ 43 Chief Operating Officer
Gideon Kaplan................. 47 Vice President, Technology
Yoav Leibovitch............... 44 Vice President, Finance and Administration and Chief Financial Officer
Joshua Levinberg.............. 48 Senior Vice President, Business Development
William I. Weisel............. 49 Vice President and General Counsel
Nick Supron................... 47 President and Chief Executive Officer, Spacenet
David R. Shiff................ 45 Vice President, Sales and Marketing, Spacenet
Samer Salameh................. 38 Chairman of the board of directors and Chief Executive OffICEr, rStar Corporation
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(1) Member of the Stock Option Committee.
(2) Member of the Compensation Committee.
(3) Served as Chief Operating Officer until May 2002.
(4) Member of the Audit Committee.
(5) As of May 2002.
YOEL GAT is a co-founder of Gilat and has been Gilat's Chief Executive
Officer since Gilat's inception until his resignation on April 15, 2003. Mr. Gat
has been a director since Gilat's inception and, since July 1995, has served as
the Chairman of the board of directors. Mr. Gat is a member of the Stock Option
and Compensation Committees of the board of directors. Until July 1995, Mr. Gat
also served as the President of Gilat. From 1974 to 1987, Mr. Gat served in the
Israel Defense Forces. In his last position in service, Mr. Gat was a senior
electronics engineer in the Israel Ministry of Defense. Mr. Gat is a two-time
winner of the Israel Defense Award (1979 and 1988), Israel's most prestigious
research and development award. Mr. Gat also served as the Chairman of the MOST
Consortium and is a director of rStar Corporationand StarBand. Mr. Gat holds a
B.Sc. (Electrical Engineering and Electronics) from the Technion -- Israel
Institute of Technology and a master's degree in management science from the
Recanati Graduate School of Business Administration of Tel Aviv University,
where he concentrated on information systems.
AMIRAM LEVINBERG is a co-founder of Gilat and has been Gilat's
President from July 1995 until his resignation on April 15, 2003. Mr. Levinberg
has been a director since Gilat's inception. Until October 2002, Mr. Levinberg
also served as the Company's Chief Operations Officer. Mr. Levinberg is a member
of the Stock Option
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and Compensation Committees of the board of directors. Until July 1995, he
served as Vice President of Engineering. In this capacity, he supervised the
development of Gilat's OneWay and Skystar Advantage VSATs. From 1977 to 1987,
Mr. Levinberg served in a research and development unit of the Israel Defense
Forces, where he managed a large research and development project. He was
awarded the Israel Defense Award in 1988. Mr. Levinberg holds a B.Sc.
(Electrical Engineering and Electronics) and a M.Sc. (Digital Communications)
from the Technion -- Israel Institute of Technology.
SHLOMO TIROSH is a co-founder of Gilat and has been a member of the
board of directors from its inception until April 15, 2003, serving as Chairman
of the board of directors until July 1995. Mr. Tirosh was a member of the Audit
Committee of the Board until April 15, 2003. Since July 1990, Mr. Tirosh has
been serving as Chairman of the Board and President of Mentergy, and from 1990
to 2001 as Chief Executive Officer of Mentergy. From 1964 to 1987, Mr. Tirosh
served in the Israel Defense Forces, where he held a variety of professional and
field command positions (retiring with the rank of colonel). From 1980 to 1985,
he headed a large research and development unit and, from 1985 to 1987, he
managed a large-scale technology project for the Israel Ministry of Defense. In
1988, he received the Israel Defense Award. Mr. Tirosh holds a B.A. (summa cum
laude) (Economics) from Bar-Ilan University.
LORI KAUFMANN has been a director of Gilat from November 2000 to April
15, 2003, and until that date was a member of the Audit, Compensation and Stock
Option Committees. Ms. Kaufmann has been an independent consultant in Israel and
the United States since 1993. From October 1998 to October 2000, Ms. Kaufmann
was vice president of MainXchange, an Internet-based financial services company.
In 1991, Ms. Kaufmann co-founded HK Associates, an Israeli marketing and
management-consulting firm that served many of Israel's leading high technology
companies, including, in 1991, Gilat. Ms. Kaufmann was employed by HK Associates
until 1993. From 1989 to 1990, Ms. Kaufmann was a senior economist at Israel
Chemicals Ltd., an Israeli chemicals firm. Ms. Kaufmann holds a B.A (magna cum
laude) (International Relations) from Princeton University and a MBA from
Harvard Business School.
EREZ ANTEBI has served as Gilat's Chief Operating Officer since October
2002. From the beginning of 1998 until being appointed Gilat's Chief Operating
Officer, Mr. Antebi served as Gilat's Vice President, General Manager for Asia,
Africa and Pacific Rim. From September 1994 until the beginning of 1998, he
served as Vice President and General Manager of Gilat Inc. Mr. Antebi joined
Gilat in May 1991 as product manager for the Skystar Advantage VSAT product.
From August 1993 until August 1994, he served as Vice President of Engineering
and Program Management of Gilat Inc. Prior to joining Gilat, Mr. Antebi worked
for a private importing business from 1989 to 1991, after having served as
marketing manager for high frequency radio communications for Tadiran Limited, a
defense electronics and telecommunications company, from 1987 to 1989, and as a
radar systems development engineer at Rafael, the research and development and
manufacturing arm of the Israel Defense Forces, from 1981 to 1987. Mr. Antebi
holds a B.Sc. and an M.Sc. Electrical Engineering from the Technion -- Israel
Institute of Technology.
GIDEON KAPLAN joined Gilat in 1989 as Vice President of Technology.
From late 1987 to mid-1989, Mr. Kaplan was employed as a research engineer with
Qualcomm, Inc., a mobile satellite communications and cellular radio company.
From 1978 to 1987, Mr. Kaplan served in a research and development unit of the
Israel Defense Forces and received the Israel Defense Award in 1984. Mr. Kaplan
holds a B.Sc., a M.Sc. and a Ph.D. (Electrical Engineering) from the Technion --
Israel Institute of Technology.
YOAV LEIBOVITCH joined Gilat in early 1991 as Vice President of Finance
and Administration and Chief Financial Officer. Since joining Gilat, Mr.
Leibovitch has also served as acting Chief Financial Officer of Gilat Inc. From
1989 to 1990, Mr. Leibovitch worked in the United States at Doubleday Books and
Music Clubs as special advisor for new business development. From 1985 to 1989,
he was the Financial Officer of a partnership among Bertelsmann, A.G., a large
German media and communications company; Clal Corporation, a major Israeli
industrial holding company; and Yediot Aharonot, an Israeli daily newspaper. Mr.
Leibovitch holds a B.A. (Economics and Accounting) and a M.B.A. (Finance and
Banking) from the Hebrew University of Jerusalem. Mr. Leibovitch is a Certified
Public Accountant in Israel.
JOSHUA LEVINBERG is a co-founder of Gilat and, since June 1999, serves
as Senior Vice President for Business Development of Gilat, having previously
served in that position from 1994 to April 1998. At that time, Mr. Levinberg
became Chief Executive Officer of GTH LA Antilles, the parent company of Global
Village Telecom
66
(GVT), until June 1999. From 1989 until September 1994, he served as Executive
Vice President and General Manager of Gilat Satellite Networks, Inc. From 1987
until the formation of Gilat Satellite Networks, Inc. in 1989, Mr. Levinberg was
Vice President of Business Development of Gilat. From 1985 to 1987, Mr.
Levinberg held various positions, including Manager of System Development and
Marketing Manager at the Israeli subsidiary of DSP Group Inc., a U.S. company
specializing in digital signal processing. From 1979 to 1985, he worked in the
Communications Engineering Department of Elrisa Ltd., a manufacturer of
sophisticated weapons and communications systems. Mr. Levinberg serves as
chairman of the board of directors of Satlynx S.A. Mr. Levinberg holds a B.Sc.
(Electrical Engineering and Electronics) from the Tel Aviv University. Amiram
Levinberg, and Joshua Levinberg are brothers.
WILLIAM I. WEISEL joined Gilat on December 18, 2001 as Vice President
and General Counsel. Prior to joining Gilat, Mr. Weisel was the Legal Affairs
Director, Israel for ADC Telecommunications Israel Ltd (April 1999-December
2001), Corporate Legal Counsel of Scitex Corporation Ltd (January 1995-March
1999), Legal Counsel for the logistics department of Scitex Corporation Ltd
(October 1992-December 1994), was in private business in Israel (November
1987-September 1992), and an associate with the Law Offices of Shraga Biran
(November 1986-November 1987). Prior to immigrating to Israel in April 1986, Mr.
Weisel was an associate with Jeffer, Mangels, Butler & Marmaro from March 1982,
and with Freeman, Freeman, Freeman & Hernand from January 1980 in Los Angeles,
California. Mr. Weisel holds a J.D. degree from Loyola Law School of Los Angeles
(1979) and a B.A., magnum cum laude from the University of California, Los
Angeles in political science (1976). He is licensed to practice law in, and is a
member of the Bars of the State of California and Israel.
NICK SUPRON joined Spacenet in January 2001 as President and Chief
Executive Officer. Prior to joining Spacenet and since 1999, Mr. Supron was a
private investor and management consultant. Between 1984 and 1999, he served in
various positions with Gtech Corporation, commencing as a senior corporate
consultant to the CEO and culminating as Senior Vice President of worldwide
operations. From 1982 to 1984, Mr. Supron was a Senior Corporate Consultant for
Tenneco Oil Company and he served as a senior project manager engineer between
1978 and 1980 for Brown & Root. Mr. Supron holds a MBA from Harvard Business
School and a BSME from the Rice University in Houston.
DAVID R. SHIFF joined Spacenet in December 1998 as Vice President of
Sales and Marketing. Prior to joining Spacenet, Mr. Shiff spent 15 years with
Hughes Network Systems, a division of Hughes Electronics. During his tenure at
Hughes, Mr. Shiff held a succession of business development, sales and sales
management positions. He served as Assistant Vice President, North American
Sales, for the Satellite Networks Division of Hughes Network Systems for the two
years immediately prior to joining Spacenet. Mr. Shiff holds a degree in
Mechanical Engineering from the University of Wisconsin.
SAMER SALAMEH joined rStar in November 2002, as Chief Executive Officer
and Chairman of the board of directors. Mr. Salameh most recently served as
President and Chief Executive Officer of Telmex North America Ventures, where he
managed a portfolio of companies. From 1997 to 2000, he served as Chairman and
Chief Executive Officer of Prodigy Communications Corp. where he led efforts to
take the company public in 1999, grew revenues from $20 million to over $300
million in two years, and transformed the company into one of the nation's
largest consumer DSL Internet service providers. Mr. Salameh has a Masters in
Administration in International Business from The Fletcher School, Tufts
University and a B.Sc. (Management and Economics) from Polytechnic University.
II NOMINEES TO THE BOARD AT THE ANNUAL GENERAL MEETING:
NAME AGE POSITION
Shlomo Rodav (1).............. 54 Director
Yoel Gat(2) .................. 51 Director
Amiram Levinberg(3) .......... 47 Director
Gideon Chitayat(4)............ 64 Director
Meir Shamir................... 52 Director
Doron Steiger ................ 45 Director
Shalom Shally Tshuva(5)....... 36 Director
Linda E. Harnevo.............. 48 External Director
David Milgrom................. 45 External Director
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(1) Mr. Rodav is expected to be appointed as the Chairman of the board of
directors. In addition to the traditional duties of the Chairman of the
board, which duties include convening and managing the annual
shareholders' meetings and meetings of the Company's board of
directors, Mr. Rodav, as Active Chairman, will have an overall
executory role in carrying out the decisions of the Company's board of
directors. Mr. Rodav will be responsible for supervising Company
management. He will also supervise and manage the implementation of the
Company's strategic development programs.
(2) Mr. Gat serves until April 15, 2003, as Gilat's Chief Executive Officer
and Chairman of the board of directors, and a member of the Stock
Option Committee and of the Compensation Committee of Gilat. Mr. Gat's
background information is set forth in Section I (A) above.
(3) Mr. Levinberg serves until April 15, 2003, as Gilat's President and
director, and a member of the Stock Option Committee and of the
Compensation Committee of Gilat. Mr. Levinberg's background information
is set forth in Section I (A) above.
(4) Mr. Chitayat currently serves on the board of directors of Bank
Hapoalim B.M. and of its subsidiary, Hapoalim U.S. Holding. Bank
Hapoalim B.M. is a principal shareholder and a creditor of Gilat.
Pursuant to the amendment of Articles 38 and 39 of our Articles of
Association which will be proposed at the Annual General Meeting, Bank
Hapoalim B.M. is expected to have the right to appoint a director to
our board of directors. Mr. Chitayat was nominated to be elected at the
Annual General Meeting at the request of Bank Hapoalim B.M.
(5) Mr. Tshuva currently serves as the Managing Director of Foresight
Technology Investments and Consulting Ltd. Foresight's major
shareholder, which holds 70% of its shares, is Discount Capital
Markets, a wholly owned subsidiary of Israel Discount Bank Ltd. which
is a principal shareholder and a creditor of Gilat. Pursuant to the
amendment of Articles 38 and 39 of our Articles of Association which
will be proposed at the Annual General Meeting, Israel Discount Bank
Ltd. is expected to have the right to appoint a director to our board
of directors. Mr. Tshuva was nominated to be elected at the Annual
General Meeting at the request of Israel Discount Bank Ltd.
SHLOMO RODAV is the indirect owner, director, chairman and/or Chief
Executive Officer of numerous companies in the investment, environment,
infrastructure, food, hi-tech and other areas. Mr. Rodav has served as a
director since 1996 of Israel Coldstorage & Supply Co. Ltd., a public company,
and in an array of private companies including Torrel Investments Ltd. and
Torrel-Crown (Israel) Ltd., Metzad Ateret Ltd., Waste Management (W.M.) Israel
Ltd., Nymphaea A.A. Ltd., Tapoogan Industries Ltd., Jaf-Ora Ltd., Jafora-Tabori
Ltd. and others. Mr. Rodav served in the past as a director in numerous other
companies, including, among others, Extent and Cellonet for which a receiver has
been appointed. Mr. Rodav holds an MBA from Columbia University and a B.A. from
the Tel Aviv University.
GIDEON CHITAYAT has served as the President and Chief Executive Officer
of General Management and Business Strategy Consultant (GMBS) Ltd. since 1985.
Mr. Chitayat serves and served in the past as a consultant to Chief Executive
Officers and to Chairmen of boards of directors of several leading Israeli
companies and entities in diversified fields in Israel, and his main area of
consultancy is competitive strategy. Among those companies and entities are Teva
Pharmaceutical Industries Ltd., Amdocs Israel, Bank Mizrahi Ltd., Pele-Phone
Cellular Communication Ltd., Ackerstein Ltd., Israel Railways, El-Op Electro
Optics Industries Ltd., Israel Electric Corporation Ltd., Bank Leumi Le-Israel
B.M., Osem Food Corporation Ltd. and Israel Chemicals Ltd. Mr. Chitayat
currently serves on the board of directors of Bank Hapoalim B.M. and Mishkan
Mortgages Bank, both of which are public companies, as well as of Israel
Aircraft Industries and Hapoalim U.S. Holding. Mr. Chitayat served in the past
on the boards of directors of many leading public and private companies and
entities, including Cellcom Israel Ltd., Africa-Israel Investment Company and
its subsidiaries, Oil Refineries Ltd., Ihud Insurance Ltd., Tadiran Consumer and
Electric Products Ltd., Migdal Insurance Company, Bezeq - Israel Telephone
Corporation and others. Mr. Chitayat holds a Ph.D. and an M.A. in Business and
Applied Economics from the Wharton School of the University of Pennsylvania, and
a MBA (with honors) and B.A. (Economics) from the Hebrew University in
Jerusalem. Mr. Chitayat was Senior Adjunct Professor at the Recanati Graduate
School of Business Administration in the Tel Aviv University and held numerous
academic positions in the past, including at the Wharton School of the
University of Pennsylvania, at the Jerusalem School of Business Administration
of the Hebrew University in Jerusalem and at Harvard Business School. Mr.
Chitayat has published numerous articles and a book on corporate, boards of
directors and business issues.
MEIR SHAMIR founded Mivtach Shamir Holdings Ltd., which invests
extensively in Israeli and foreign companies, and has served as its Chairman and
Chief Executive Officer since 1992. Mr. Shamir serves as a director in several
public companies, including Lipman Electronics Engineering Ltd. and Wizcom
Technologies Ltd. in the field of electronics, the venture capital firm
Technoplus Ventures Ltd., Mivtach Shamir Finance Ltd. in the area of
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finance and pension funds, and Digal Investment and Holdings Ltd. in real
estate. In addition, Mr. Shamir is the owner of and serves as a director in
numerous private companies. Mr. Shamir holds a B.A. (Management and Economics)
from Bar-Ilan University.
DORON STEIGER has been the Chief Executive Officer and has served as a
director since 1998 of Dirad Holdings Ltd., a company owned by Mr. Steiger, and
has been the Managing Director of Dirad Investments Ltd. since 1999 and of Dirad
Technologies Management (2000) Ltd. since 2000. These companies are engaged in
consultancy and investments. Mr. Steiger has served since 2001 as a director of
Taagid Hamichzur Ltd., engaged in collection and recycling, and as the Chairman
of the board of directors of Newlog Ltd., which is the result of a merger of
several subsidiaries of Zim Israel Maritime Company Ltd., Israel's major
maritime freight company. Mr. Steiger has recently been appointed as a director
of Leadertech Ltd., pursuant to an agreement with Leadertech Ltd., which
appointment is pending and contingent upon a shareholders' approval. Leadertech
Ltd. is a public venture capital firm. Mr. Steiger is also serving as a director
of several start-up, R&D and financing companies in the hi-tech field. Mr.
Steiger was the Chief Executive Officer of Israel Corporation Ltd. from April
1997 to March 1998. Mr. Steiger holds an MBA and a B.A. (Economics) from the Tel
Aviv University.
SHALOM SHALLY TSHUVA has been the Managing Director of Foresight
Technology Investments and Consulting Ltd. since 1994. Mr. Tshuva also has
served as a director, since 1999, of the investment firms Forstech Holdings
(1999) Ltd. and Hadar Tshuva Holdings (1999) Ltd. Mr. Tshuva served as a
director in Taya-Net Ltd., for which company a liquidator was appointed by the
court in 2001. Mr. Tshuva holds a MBA (Finance) and a B.Sc. (Mathematics and
Computer Science) from the Tel Aviv University.
LINDA E. HARNEVO is the founder and General Manager of the technology
solutions company RedZebra Ltd., and has served on its board of directors. Ms.
Harnevo has also recently founded Global Medical Networks, which is engaged in
the field of mobile medical information, and serves on its board of directors.
Ms. Harnevo has recently been appointed as a director of Lipman Electronics
Engineering Ltd., a public company in the field of electronics. Ms. Harnevo
holds a Ph.D and an M.Sc. from the Weizmann Institute and a B.Sc. from Bar-Ilan
University.
DAVID MILGROM currently serves as the Chief Executive Officer of Gmul
Investment Ltd., dealing mainly with investments in high-tech, real-estate and
infrastructure, and will serve as the Chief Executive Officer of The Israel
Credit Insurance Company Ltd. as of May 1, 2003. From 1997 to 2000 Mr. Milgrom
served as the Budget Director in the Israeli Ministry of Finance and was
responsible for Israel's budget preparation and structural reforms in the
Israeli economy. Mr. Milgrom was the Chief Financial Officer of Pele-Phone
Cellular Communication Ltd. Mr. Milgrom serves as an external director in the
investment committee of Menora, a public company which is one of the largest
insurance companies in Israel. His term of office in Menora will expire on 2005.
Mr. Milgrom holds a MBA and a B.A. (Economics and Political Science) from the
Hebrew University in Jerusalem.
COMPENSATION OF DIRECTORS AND OFFICERS
The following table sets forth the aggregate compensation paid to or
accrued on behalf of all of our directors and officers as a group for the year
ended December 31, 2002:
SALARIES, FEES, DIRECTORS' FEES, PENSION, RETIREMENT AND SIMILAR
COMMISSIONS AND BONUSES BENEFITS
All directors and officers as a group (29 $6,105,600 $1,744,634
persons)
MANAGEMENT EMPLOYMENT AGREEMENTS
Yoel Gat and Amiram Levinberg, two of our co-founders, are currently
employed under employment agreements renewable annually on December 31 of each
year. The employment agreements are subject to earlier termination by each
officer upon 60 days' notice to us. The agreements provide, amongst other
things, for an adjustment to the annual bonuses payable to Messrs. Gat and
Levinberg under their employment agreements and Mr. Gat's agreement provides for
a personal annual allowance benefit of $150,000 to cover personal expenses
related to
69
extended stays in the United States expected to result from the integration of
Spacenet. Among other provisions, such agreements contain non-competition and
confidentiality provisions. Both Mr. Gat and Mr. Levinberg have resigned,
effective on April 15, 2003. The terms of their resignation are still under
negotiation.
BOARD COMPENSATION
By a resolution adopted in 1996 by our board of directors and
shareholders, the directors of Gilat who are not executive officers receive
annual compensation of $10,000 for their services on the board of directors or
any committee of the board of directors. In addition, by resolution of our board
of directors and shareholders which was adopted in November 2001, each current
and future non-employee director shall receive options to purchase 20,000 of our
ordinary shares. All of the non-management directors are reimbursed for their
expenses for each board of directors meeting attended.
We expect the Compensation Committee, following its institution by our
new board of directors, to recommend a change in the compensation of our
directors. Such a recommendation will be brought to the approval of the
shareholders at the next general meeting of our shareholders.
BOARD COMPOSITION AND PRACTICES
Our Articles of Association provide that our directors, except for the
external directors, shall be elected at the annual general meeting of our
shareholders by the vote of the holders of a majority of the voting power
represented at such meeting in person or by proxy. The elected directors are to
serve until the next annual meeting of the shareholders, unless any office is
vacated earlier under any relevant provisions of our Articles of Association.
Our Articles of Association further provide that our board of directors shall
consist of such number of directors that is not less than two nor more than
fourteen, as shall be determined from time to time by our shareholders at the
general meeting.
Pursuant to an amendment to our Articles of Association which we expect
will be adopted at the Annual General Meeting scheduled for April 15, 2003, our
board of directors shall consist of not less than five and not more than nine
directors as shall be determined from time to time by a majority vote at the
general meeting of our shareholders. Unless resolved otherwise by our
shareholders, our board of directors will be comprised of (i) nine directors, if
four directors are appointed by beneficial owners of 7% or more of our issued
and outstanding ordinary shares (as set forth below), or (ii) seven directors,
if fewer than four directors are so appointed by beneficial owners of 7% or more
of our ordinary shares.
Pursuant to the proposed amendment to our Articles of Association, each
beneficial owner of 7% or more of our issued and outstanding ordinary shares
will be entitled to appoint, at each annual general meeting of our shareholders,
one member to our board of directors, provided that a total of not more than
four directors are so appointed. In the event that more than four qualifying
beneficial owners notify us that they desire to appoint a member to our board of
directors, only the four shareholders beneficially owning the greatest number of
shares shall each be entitled to appoint a member to our board of directors. So
long as our ordinary shares are listed for trading on Nasdaq, we may require
that any such appointed director qualify as an "independent director" as
provided for in the Nasdaq rules then in effect. Our board of directors will
have the right to remove any such appointed director when the beneficial
ownership of the shareholder who appointed such director falls below 7% of our
ordinary shares.
Under the proposed amendment, a majority of the voting power at the
annual general meeting of our shareholders will elect the remaining members of
the board of directors, including external directors as required under the
Companies Law. At any annual general meeting at which directors are appointed
pursuant to the preceding paragraph, the calculation of the vote of any
beneficial owner who appointed a director pursuant to the preceding paragraph
shall not take into consideration, for the purpose of electing the remaining
directors, ordinary shares constituting 7% of our issued and outstanding
ordinary shares held by such appointing beneficial owner.
Under the proposed amendment, each of our directors (except external
directors) shall serve, subject to early resignation or vacation of office in
certain circumstances as set forth in our Articles of Association, until the
adjournment of the next annual general meeting of our shareholders next
following the general meeting in which such director was elected. The holders of
a majority of the voting power represented at a general meeting of our
shareholders in person or by proxy will be entitled to (i) remove any
director(s), other than external directors and
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directors appointed by beneficial holders of 7% or more of our issued and
outstanding ordinary shares as set forth above, (ii) elect directors instead of
directors so removed, or (iii) fill any vacancy, however created, in the board
of directors. Our board of directors may also appoint additional directors,
whether to fill a vacancy or to expand the board of directors, who will serve
until the next general meeting of our shareholders following such appointment.
Our Articles of Association further provide that the board of directors
may delegate all of its powers to committees of the board of directors as it
deems appropriate, subject to the provisions of applicable law.
We expect our board of directors to agree to appoint Mr. Robert
Bednarek as an observer to the board of directors. In such capacity, Mr.
Bednarek will be invited to participate in every meeting of the board of
directors and given the opportunity to express his views on the matters
discussed, but will not have any voting rights at the meetings. Mr. Bednarek
will have the same access to the Company's books and records as the directors of
the Company and will be subject to customary confidentiality and non-disclosure
undertakings. Mr. Bednarek served as a director of Gilat from April 2002 to
September 2002. Mr. Bednarek is the Executive Vice President Corporate
Development and a member of the Executive Committee of SES GLOBAL S.A., the
parent company of SES Americom Inc. which is a principal shareholder of Gilat
and a major supplier of satellite transponder capacity to Gilat. Mr. Bednarek
previously was the Executive Vice-President and Chief Technology Officer of
PanAmSat Corporation and holds a B.Sc. (Engineering) from the University of
Florida.
ALTERNATE DIRECTORS
Our Articles of Association provide that a director may appoint, by
written notice to us and subject to the consent of the board of directors, any
person qualified to serve as a director to serve as an alternate director
(provided such person does not already serve as a director or an alternate
director). An alternate director shall have all of the rights and obligations of
the director appointing him or her, except the power to appoint an alternate
(unless otherwise specifically provided for in the appointment of such
alternate). An alternate director may not act at any meeting at which the
director appointing him or her is present. Unless the time period or scope of
any such appointment is limited by the appointing director, such appointment is
effective for all purposes and for an indefinite time, but will expire upon the
expiration of term or vacation of office of the appointing director. Currently,
no alternate directors have been appointed.
EXTERNAL DIRECTORS
Under the Companies Law, public companies are required to elect two
external directors who must meet specified standards of independence. Companies
that are registered under the laws of Israel and whose shares are listed for
trading on a stock exchange outside of Israel, such as Gilat, are treated as
public companies with respect to the external directors requirement. External
directors may not have during the 2 years preceding their appointment, directly
or indirectly through a relative, partner, employer or controlled entity, any
affiliation with (i) the public company, (ii) those of its shareholders who are
controlling shareholders at the time of appointment, or (iii) any entity
controlled by the company or by its controlling shareholders. The term
"affiliation" includes an employment relationship, a business or professional
relational maintained on a regular basis, control and services as an office
holder. No person can serve as an external director if the person's other
positions or business creates or may create conflicts of interest with the
person's responsibilities as an external director. Until the lapse of two years
from termination of office, a company may not engage an external director as an
employee or otherwise.
External directors serve for a three-year term, which may be renewed
for only one additional three-year term. External directors can be removed from
office only by the court or by the same special percentage of shareholders that
can elect them, and then only if the external directors cease to meet the
statutory qualifications with respect to their appointment or if they violate
their fiduciary duty to the company. The court may additionally remove external
directors from office if they were convicted of certain offenses by a
non-Israeli court or are permanently unable to fulfill their position. If, when
an external director is elected, all members of the board of directors of a
company are of one gender, the external director to be elected must be of the
other gender.
If delegated any authority of the board of directors, any committee of
the board of directors must include at least one external director. An external
director is entitled to compensation as provided in regulations adopted under
the Companies Law and is otherwise prohibited from receiving any other
compensation, directly or indirectly, in connection with such service.
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The Companies Law requires external directors to submit to the company,
prior to the date of the notice of the general meeting convened to elect the
external directors, a declaration stating their compliance with the requirements
imposed by Companies Law for the office of external director.
The election of external directors requires the affirmative vote of a
majority of our ordinary shares voted on in person or by proxy at a meeting of
the shareholders, provided that such majority includes at least one-third of the
votes of the non-controlling shareholders of the company who are voting on this
matter at the meeting. This approval requirement need not be met if the
aggregate shareholdings of those non-controlling shareholders who vote against
the election of the external directors represent one percent or less of all the
voting power of the company. "Controlling" for the purpose of this provision
means the ability to direct the acts of the company. Any person holding one half
or more of the voting power of the company or of the right to appoint directors
or the Chief Executive Officer is presumed to have control of the company.
The nominees for external directors at the Annual General Meeting
scheduled for April 15, 2003, are Ms. Linda E. Harnevo and Mr. David Milgrom.
AUDIT COMMITTEE
The Companies Law provides that publicly traded companies must appoint
an audit committee. The responsibilities of the audit committee include
identifying irregularities in the management of the company's business and
approving related party transactions as required by law. An audit committee must
consist of at least three members, and include all of the company's external
directors. However, the chairman of the board of directors, any director
employed by the company or providing services to the company on a regular basis,
any controlling shareholder and any relative of a controlling shareholder may
not be a member of the audit committee. An audit committee may not approve an
action or a transaction with an officer or director, a transaction in which an
officer or director has a personal interest, a transaction with a controlling
shareholder and certain other transactions specified in the Companies Law,
unless at the time of approval two external directors are serving as members of
the audit committee and at least one of the external directors was present at
the meeting in which an approval was granted.
Pursuant to the current listing requirements of the Nasdaq National
Market, we are required to establish an audit committee, at least a majority of
whose members are independent of management. Pursuant to the Sarbanes-Oaxley Act
of 2002, the Securities and Exchange Commission (the "SEC") has issued new rules
which would, among other things, require Nasdaq to impose independence
requirements on each member of the audit committee. Nasdaq has proposed rules
that would comply with the SEC's requirements and which are expected to be
applicable to us in 2004.
The proposed requirements would implement two basic criteria for
determining independence: (i) audit committee members would be barred from
accepting any consulting, advisory or other compensatory fee from the issuer or
an affiliate of the issuer, other than in the member's capacity as a member of
the board of directors and any board committee, and (ii) audit committee members
of an issuer that is not an investment company may not be an "affiliated person"
of the issuer or any subsidiary of the issuer apart from his or her capacity as
a member of the board and any board committee.
The SEC has proposed to define "affiliate" for non-investment companies
as "a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified." The term "control" is proposed to be consistent with the other
definitions of this term under the Securities Exchange Act of 1934, as "the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise." A safe harbor has been proposed by the
SEC, under which a person who is not an executive officer, director or 10%
shareholder of the issuer would be deemed not to have control of the issuer.
Under the final rules adopted by the SEC, an issuer is required to
disclose in its annual report, beginning with the annual report for 2003,
whether or not such issuer has at least one audit committee financial expert. If
it does, the issuer must disclose the name of the expert. If not, the issuer
must disclose why it does not have an audit committee financial expert.
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Presently, our audit committee consists of Ms. Kaufman and Mr. Tirosh.
As of April 15, 2003, we expect our new board of directors to appoint the
expected external directors, Mr. Milgrom and Ms. Harnevo, to serve on our audit
committee, together with one of the remaining independent directors. We believe
that this appointment will comply with the requirements of the Companies Law and
with the proposed SEC rules, and that Mr. Milgrom is qualified to serve as the
audit committee's financial expert, as required by the SEC.
INDEPENDENT DIRECTORS
Pursuant to the current listing requirements of the Nasdaq National
Market, we are required to have at least two independent directors on our board
of directors. Under rules proposed by Nasdaq, the majority of the members of the
board directors will need to be independent. These proposals have not yet been
approved by the SEC.
An "independent director" for these purposes has been proposed to mean
a person other than an officer or employee of a company or its subsidiaries or
any other individual having a relationship, which, in the opinion of the
company's board of directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.
The following persons are not considered independent under the proposed
rules:
(a) a director who is or was employed by the company or by
any parent or subsidiary of the company within the last three
years;
(b) a director who accepts or has family member (by blood,
marriage or adoption or has the same residence) who accepts
any payments from the company or any of its affiliates in
excess of $60,000 during the current fiscal year or any of the
past three fiscal years, other than compensation for board
service, compensation paid to family members who are employees
(other than executive officers of the company, its parent
company or its subsidiaries) or benefits under a qualified
plan or non-discretionary compensation;
(c) a director who is a family member of an individual who
is, or within the past three years was, employed by the
company or by any parent or subsidiary of the company as an
executive officer;
(d) a director who is a partner in, or a controlling
shareholder or an executive officer of, any organization to
which the company made, or from which the company received,
payments (other than those arising solely from investments in
the company's securities) that exceed 5% of the recipient's
consolidated gross revenues for that year, or $200,000,
whichever is more, in the current fiscal year or any of the
past three fiscal years;
(e) a director of the listed company who is employed as an
executive officer of another entity where any of the executive
officers of the listed company serve on the compensation
committee of such other entity, or if such relationship
existed within the last three years; or
(f) a director who was a partner or employee of the
company's outside auditor, and worked on the company's audit,
within the last three years.
This independence requirement does not apply to a company of which more
than 50% of the voting power is held by an individual, a group or another
company.
Of the nominees for directors at the Annual General Meeting, we believe
that Mr. Milgrom, Ms. Harnevo Mr. Shamir, Mr. Steiger and Mr. Radav will comply
with the independence standards set forth above.
ADVISORY BOARD
We have authorized an Advisory Board to be composed of senior members
of the business and technology community with expertise in areas of our
business, who will be expected to advise and assist us in determining and
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implementing our strategic course of action, as well as in fostering contacts
with potential customers for our products. There are currently no appointees to
the Advisory Board.
EMPLOYEES
As of December 31, 2002, we had approximately 909 full-time employees,
including 111 employees in administration and finance, 100 employees in
marketing and sales, 180 employees in engineering, research and development and
322 employees in manufacturing, operations and technical support. Of these
employees, 395 employees were based in our facilities in Israel, 300 were
employed in the United States, and 213 in Asia, the Far East and other parts of
the world.
We also utilize temporary employees, as necessary, to supplement our
manufacturing and other capabilities. We believe that our relations with our
employees are satisfactory.
We and our employees are not parties to any collective bargaining
agreements. However, certain provisions of the collective bargaining agreements
between the Histadrut (General Federation of Labor in Israel) ("Histadrut") and
the Coordination Bureau of Economic Organizations (including the Manufacturers'
Association of Israel) are applicable to all Israeli employees by order (the
"Extension Order") of the Israeli Ministry of Labor and Welfare. These
provisions principally concern the length of the work day and the work week,
minimum wages for workers, contributions to a pension fund, insurance for
work-related accidents, procedures for dismissing employees, determination of
severance pay and other conditions of employment. Furthermore, pursuant to such
provisions, the wages of most of our employees are automatically adjusted based
on changes in the Israeli CPI. The amount and frequency of these adjustments are
modified from time to time.
Israeli law generally requires severance pay upon the retirement or
death of an employee or termination of employment without due cause. Our ongoing
severance obligations are partially funded by making monthly payments to
approved severance funds or insurance policies, with the remainder accrued as a
long-term liability in our financial statements. In addition, Israeli employees
and employers are required to pay specified sums to the National Insurance
Institute, which is similar to the U.S. Social Security Administration. Since
January 1, 1995, such amounts also include payments for national health
insurance. The payments to the National Insurance Institute are approximately
14.6% of wages (up to a specified amount), of which the employee contributes
approximately 66% and the employer contributes approximately 34%. The majority
of our permanent employees are covered by life and pension insurance policies
providing customary benefits to employees, including retirement and severance
benefits. For Israeli employees, we contribute 13.33% to 15.83% (depending on
the employee) of base wages to such plans and the permanent employees contribute
5% of base wages.
SHARE OWNERSHIP
See table under Item 7: "Major Shareholders and Related Party
Transactions" below.
STOCK OPTION PLANS
In January 1993, we adopted the Stock Option Plan (Incentive and
Restricted Stock Options) (the "1993 ISO/RSO Plan") and Section 102
Option/Restricted Stock Purchase Plan (the "1993 Section 102 Plan")
(collectively, the "1993 Plans"). The 1993 Plans provide for the granting of
options and/or rights to purchase (in the case of the 1993 Section 102 Plan) up
to an aggregate of 318,500 ordinary shares to our officers, directors, key
employees or consultants or any of our subsidiaries.
In June 1995, we adopted the following plans, referred to together as
the "1995 Plans":
(i) the 1995 Stock Option Plan (Incentive and Restricted Stock Options)
(the "1995 ISO/RSO Plan"), which currently provides for the granting of
incentive and restricted stock options for the purchase of up to 3,940,000
ordinary shares (increased by 3,820,000 as a result of several resolutions of
the board of directors, which were approved by the shareholders);
(ii) the 1995 Section 102 Stock Option/Stock Purchase Plan (the "1995
Section 102 Plan"), which provides for the granting of options to purchase up to
5,920,000 ordinary shares (increased by 4,300,000 as a result of resolutions of
the Board in November 1999, May 2000 and March 2001); and
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(iii) the 1995 Advisory Board Stock Option Plan (the "1995 Advisory
Board Plan"), which provides for the granting of options to purchase up to
150,000 ordinary shares.
The purpose of the 1993 Plans and 1995 Plans is to enable us to attract
and retain qualified persons as employees, officers, directors, consultants and
advisors and to motivate such persons by providing them with an equity
participation in Gilat. In addition, the 1993 and 1995 ISO/RSO Plans are
designed to afford qualified optionees certain tax benefits available under the
United States Internal Revenue Code of 1986, as amended (the "Code"). The 1993
and 1995 Section 102 Plans are designed to afford qualified optionees certain
tax benefits under the Israel Income Tax Ordinance. The 1995 Advisory Board Plan
is designed to allow for the granting of options to members of the Advisory
Board. The 1993 Plans will expire on January 27, 2003 and the 1995 Plans will
expire on June 29, 2005 (ten years after their adoption), unless terminated
earlier by the board of directors.
Each of the 1993 Plans and the 1995 Plans is administered by a Stock
Option Committee appointed by the Board. The Stock Option Committee (comprised
of Messrs. Gat, Levinberg and Ms. Kaufmann) has broad discretion, subject to
certain limitations, to determine the persons entitled to receive options or
rights to purchase under the 1993 Plans and 1995 Plans, the terms and conditions
on which options or rights to purchase are granted and the number of shares
subject thereto. The Stock Option Committee also has discretion to determine the
nature of the consideration to be paid upon the exercise of an option and/or
right to purchase granted under the 1993 Plans and the 1995 Plans. Such
consideration generally may consist of cash or, at the discretion of the Board,
cash and a recourse promissory note.
Stock options issued as incentive stock options pursuant to both the
1993 and 1995 ISO/RSO Plans will only be granted to the employees of Gilat or
its subsidiaries. The exercise price of incentive stock options issued pursuant
to both the 1993 and 1995 ISO/RSO Plans must be at least equal to the fair
market value of the ordinary shares as of the date of the grant (and, in the
case of optionees who own more than 10% of the voting stock, the exercise price
must equal at least 110% of the fair market value of the ordinary shares as of
the date of the grant). The exercise price of restricted stock options issued
pursuant to the 1993 and 1995 ISO/RSO Plans and the 1995 Advisory Board Plan
must not be less than the lower of (i) 50% of the book value of the ordinary
shares as of the end of the fiscal year immediately preceding the date of such
grant or (ii) 50% of the fair market value per share of ordinary shares as of
the date of the grant. The price per share under options awarded pursuant to the
1993 and 1995 Section 102 Plans may be any price determined by the Stock Option
Committee.
Options are exercisable and restrictions on disposition of shares lapse
according to the terms of the individual agreements under which such options
were granted or shares issued. Ordinary shares as to which the rights associated
with such shares have not vested will be held by a trustee designated by us.
In April 2001, Gilat initiated a voluntary stock option exchange
program for its employees (the "Option Exchange Program"). Under the program,
employees of Gilat and its subsidiaries who were granted options under Gilat's
stock option plans were given the opportunity to cancel outstanding stock
options previously granted to them in exchange for an equal number of new
options to be granted at a future date pursuant to the terms of Gilat's Plans.
The exercise price of these new options is equal to the fair market value of
Gilat's ordinary shares as reported by Nasdaq on the date the options were
granted. In November 2001, the Company granted the new options under the Option
Exchange Program. Options for a total of 6,443,668 ordinary shares were tendered
for cancellation and were cancelled as of May 24, 2001.
In November 2001, the Board and Shareholders of Gilat approved the
allocation of an option for 20,000 shares for each current and future
non-employee director.
As of December 31, 2002, we granted options to purchase a total of
299,198 ordinary shares under the 1993 Plans and 8,490,955 ordinary shares under
the 1995 Plans The exercise prices for such options vary from $0.39 to $159.875
and all such options expire at various times from November 2003 to February
2013. As of December 31, 2002, options under the plans for a total of 870,381
shares have been exercised.
In May 1999, the Board approved the establishment of a new stock option
plan under Section 102 of the Israel Income Tax Ordinance with 500,000 ordinary
shares to be reserved for issuance. Management was directed to prepare the plan
and obtain the necessary regulatory approvals. The plan was approved by the
shareholders at the
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1999 annual meeting, but the request for regulatory approval was withdrawn and
there are no current plans to activate the plan in the near future.
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