Source - RNS
RNS Number : 8994K
Frutarom Industries Limited
13 April 2018
 

Frutarom Industries Ltd.

 

(the "Company")

 

 

Hereby submitted is an immediate report on a material private offering and a non-material private offering of the Company's securities in accordance with the Securities Law, 5728-1968 (hereinafter: the "Securities Law"); the Securities Regulations (Private Offering of Securities in a Listed Company), 5760-2000 (hereinafter: "Private Offering Regulations"); and the Companies Law, 5759-1999 (hereinafter: the "Companies Law"); an immediate report in accordance with the Securities Regulations (Periodic and Immediate Reports), 5730-1970 (hereinafter: "Reports Regulations") and an outline as set forth in the Securities Regulations (Details of an Outline of an Offer of Securities to Employees), 5760-2000 (hereinafter: the "Outline Regulations")

 

for the offering of Options to Mr. Ori Yehudai, who serves as the President and Chief Executive Officer of the Company and to 52 additional employees and officeholders of the Company and of the Company's affiliated companies, in accordance with section 15B of the Securities Law and the Outline Regulations as well as according to the Private Offering Regulations and the Reports Regulations

 

hereby offered are

 

9,766 options unregistered for trade (hereinafter: the "Options") to Mr. Ori Yehudai who serves as the President and the Chief Executive Officer of the Company (hereinafter: the "President") and 52 additional employees and officeholders of the Company and the Company's affiliated companies[1] (jointly hereinafter: the "Offeree(s)"). Of the Options, 2,931 Options are hereby granted to the President, 1,276 Options are hereby granted to three other officeholders of the Company[2] (hereinafter: the "Officeholders"), and 5,559 are hereby granted to other employees who are not Officeholders. The Options are exercisable into 9,766 registered ordinary Company shares of NIS 1.00 par value each (hereinafter: the "Shares" or "Underlying Shares"), subject to the adjustments as detailed in the Plan (as defined below).

 

Assuming that all the Options will be exercised into Shares, as of the date of this outline the shares will comprise approximately 0.02% of the Company's issued and paid up share capital and approximately 0.02% of the voting rights therein and approximately 0.02% of the Company's issued and paid up share capital and the voting rights therein on a fully diluted basis, as detailed in Section 1.1 below.

 

The Options granted under this outline and report (hereinafter: the "Outline" or "Outline and Report") are offered to the Offerees free of consideration.

 

The Outline and Report are also submitted in accordance with the Private Offering Regulations with respect to a non-material private offering for 52 employees and officeholders in the Company and in the Company's related companies and with respect to a material private offering (as defined in the Private Offering Regulations) for the President (jointly hereinafter: the "Offering") and in accordance with Regulation 37A3 to the Reports Regulations with respect to the President.  Details required under the Sixth Schedule to the Reports Regulations relating to the compensation to the President (hereinafter: the "Report") are included in Chapter 6 of this Outline and Report.

 

The Offering concerning the allocation of Options to Offerees who are not the President, in accordance with the terms of this Outline and Report, was approved by the Compensation Committee on March 15, 2018 and by the Company's Board of Directors on March 19, 2018. The Offering concerning the allocation of options to Officeholders is in accordance with the Company's Compensation Policy.[3]

 

The Offering concerning the allocation of Options to the President in accordance with the terms of this Outline and Report is in accordance with the President's terms of employment and the Compensation Policy[4]. For further details regarding the President's terms of employment, see Regulation 21 to Chapter D and Note 22(3) to the Company's 2017 periodic report published by the Company on March 20, 2018.

 

The quantity of Options granted to all of the Offerees was approved by the Compensation Committee on April 9, 2018 and by the Board of Directors on April 11, 2018.

 

 

April 13, 2018

 

 

 



Table of Contents

 


Page

Chapter 1 - Introduction

4

1.1    The Offered Options

4

1.2    The Offerees and determining entitlement

5

1.3     Permits and approvals with respect to the outline

6



Chapter 2 -Details of the Offering

7

2.1    Granting the Options

7

2.2    Exercise of Options

7

2.3    The exercise procedure

7

2.4    Adjustment of rights and instructions for protecting Offerees

8

2.5    Restrictions on exercising Options - termination of employment

10

2.6    Transferability of Options and Underlying Shares

11

2.7   Taxation implications for Option allocation, their exercise into shares and sale of Underlying Shares with respect to employees who are Israeli residents

11

2.7.1 General

11

2.7.2 Taxation applicable to Options under the provisions of section 102 to the Ordinance   and minimal trust period

12

2.8    Consideration for the offered Options

13

2.9    Economic value of the Options

13

2.10  Agreements between Offerees and other shareholders

 

13

Chapter 3 - The Underlying Shares

14

3.1    Arrangements set in the Articles of Association in accordance with certain provisions in the Companies' Law

14



Chapter 4 - Details on the Company's Share Price

17

 

Chapter 5 - Reference to Financial Statements

18

 

Chapter 6 - Material Private Offering to the President and the Sixth Addendum to the Reports Regulations

19

6.1    The Options allocated according to this report and the Company's share capital

19

6.2    Information regarding the price of Company shares

20

6.3    Fair value of the Options

20

6.4    Consideration and the method by which it was determined

21

6.5    Personal interest in approval of the offer to the President

21

6.6    Required authorizations

21

6.7    Transferability of the Options and Underlying Shares

21

6.8    Agreements between the President and other shareholders

21

6.9    The date of granting Options to the President

21

6.10  Additional details under the Private Offering Regulations and regulation 37A3 and the Sixth Schedule to the Reports Regulations regarding the President

21



Chapter 7 - Miscellaneous

22

7.1    Powers of the Israel Securities Authority

22

7.2    The Company's representative

22






Chapter 1 - Introduction

 

1.1    The Offered Options

 

         The quantity of offered Options - According to this Outline and Report 9,766 Options  not registered for trade are offered without any consideration and exercisable into  9,766 shares, subject to adjustments as detailed in the Plan (as defined below).

 

         Allocation of Options - The Options based on this Outline may be allocated no earlier than the elapse of 14 business days following the submission of the Outline[5] and no later than the date of submission of the Company's 2018 annual periodic report or the date fixed for submission of such report by law, whichever earlier (hereinafter: the "Final Date for Allocation").

 

         Pursuant to a taxation ruling the Company received from the tax authorities on November 23, 2011 (hereinafter: the "Taxation Ruling"), allocation of options under section 102 of the Income Tax Ordinance [New Version] 1961 (hereinafter: the "Ordinance") is conditional upon the Underlying Shares being held in trust for at least 18 months before being transferred to the Offerees. The Options will be granted for each Offeree only if on that date he fills a position in the Company or is engaged with it under agreement, whichever the case.

 

         The Options allocated based on this Outline will be exercisable into shares which will be granted from dormant shares being held or to be held by the Company.

 

         Percentage of the Company's share capital - The shares arising from the exercise of the offered Options shall, as of the date of this Outline, comprise approximately 0.02% of the Company's issued and paid up share capital and approximately 0.02% of its voting rights, and approximately 0.02% of the Company's issued and paid up share capital and of its voting rights on a fully diluted basis (fully diluted on the assumption that all the securities convertible to Company shares are exercised into shares).

 

         Exercise price - The Options are allocated free of consideration. Each Option will be exercisable into one share in return for payment of an exercise price of NIS 113.13 per share (hereinafter: the "Exercise Price"). The Exercise Price is equal to one third of the average purchase price paid by the Company for the dormant shares (the price attributable to dormant shares held by the Company due to options which have expired is one third the average purchase price paid by the Company for acquisition of all the remaining dormant shares for the purpose of this option grant).

 

            Vesting Period - The "Vesting Period" of the Options will be as follows:

 

         (a)     1/3 of the Options will be exercisable starting April 1, 2019; subject to the provisions of section 2.5 below;

         (b)     1/3 of the Options will be exercisable starting April 1, 2020; and

         (c)     1/3 of the Options will be exercisable starting April 1, 2021.

        

         Subject to the provisions of paragraph 2.5 below, the Vesting Period will be considered as only a period in which employee-employer relations exist between the Offeree and the Company or an affiliated company, or a period in which the Offeree is an officeholder or director or a service provider for the Company or an affiliated company, as the case may be. Unless otherwise resolved by the Board of Directors, there are no employee-employer relations between an Offeree and the Company during a period in which the Offeree is on unpaid leave.

 

         Exercise period - Subject to the terms of the plan, including paragraphs 2.2 and 2.5 below, the Options will be exercisable once their Vesting Period has elapsed and up until April 1, 2024 (hereinafter: the "Exercise Period").

 

         Expiration of Options - All Options will expire at the end of the Exercise Period and will cease to provide Offerees and/or their heirs any rights at all relating to the Options, including the right to purchase the Underlying Shares (hereinafter: the "Option Expiry Date").  Furthermore, if the Options had been allocated through a trustee, the trusteeship will end on the Option Expiry Date.

 

         Instructions on acceleration - The Board of Directors may give instructions to accelerate the Vesting Periods with respect to any or all Options allocated under the Plan, or with respect to removing restrictions relating to the exercise of the Options, all subject to the provisions of law, the Taxation Ruling and the Company's Compensation Policy.

 

         In accordance with the terms of the Plan, the Plan will be implemented and administered by the Board of Directors or, subject to the provisions of the Companies Law, by the Company's Compensation Committee.

 

         For more information on the offered Options and Underlying Shares - see chapters 2 and 3 below.

 

1.2       The Offerees and determining entitlement

 

1.2.1    The Offerees are the President and 52 additional employees and Officeholders of the Company and the Company's affiliated companies. This Offering is addressed to all the Offerees in accordance with the resolutions of the Company's Compensation Committee and the Board of Directors as detailed in paragraph 1.3 below such that each Offeree is offered to receive free of consideration the number of Options specified in his allocation document.

 

1.2.2    The Offeree under the material private offering is the President. Within the framework of the material private offering the President will be allocated 2,931 Options exercisable to 2,931 ordinary Company shares of NIS 1.00 par value each. The shares resulting from the exercise of the options offered to the President shall, as of the date of this Outline, comprise approximately 0.005% of the Company's issued and paid up share capital and approximately 0.005% of its voting rights, and approximately 0.005% of the Company's issued and paid up share capital and of its voting rights on a fully diluted basis (fully diluted on the assumption that all the securities convertible to Company shares are exercised into shares).

 

            This Offering is addressed to the President as part of his terms of office and employment[6] and in accordance with the Company's Compensation Policy[7].

 

            The President is not an interested party in the meaning of this term in section 270(5)(a) to the Companies' Law, and will not become an interested party by virtue of the Offering which is the subject of this Report.

           

            To the best of the Company's knowledge, the President has personal interest in the consideration by virtue of his being the Offeree of the material private offering.   

 

1.2.3    Three of the Offerees under the non-material private offering are Officeholders of the Company[8] to whom shall be allocated in the framework of the non-material private offering 1,276 Options exercisable into 1,276 ordinary Company shares of NIS 1.00 par value each. The offering to the officeholders is in accordance with the Company's Compensation Policy.

 

1.2.4    All other Offerees under the non-material private offering are employees who are not officeholders.

 

For the sake of convenience, the President, three officeholders and the other employees shall henceforth be collectively referred to as the "Offerees".

 

1.3    Permits and approvals with respect to the Outline

 

         The Company has received all permits and approvals required by law for the offer of options under this Outline.

        

         On January 30, 2012 the Company's Board of Directors resolved to adopt an option plan for employees and officeholders of the Company and/or in its related companies, as may be amended from time to time, (hereinafter: the "Plan"). The Plan was submitted to the Israel Tax Authority on January 31, 2012.

 

         Options granted to the President pursuant to this Outline and Report relate to the deferred equity component of the annual bonus constitute in accordance with the President's terms of employment[9] and the Company's Compensation Policy.

        

         Allocation of the Options to Officeholders relates to the deferred equity component of the annual bonus in accordance with the Company's Compensation Policy.

 

         Allocation of the Options to Offerees, under the Plan in accordance with this Outline and Report, was approved by the Compensation Committee and Board of Directors on March 15, 2018 and March 19, 2018 respectively, subject to fulfillment of all procedures required by law.

 

         The Company's shares are registered for trade on the Tel Aviv Stock Exchange Ltd. (hereinafter: the "Stock Exchange").

        
The Options offered based on this Outline are not registered and will not be registered for trade on any stock exchange.

 

 

 

Chapter 2 - Details of the Offering

 

2.1    Granting the Options

 

         Following the elapse of 14 business days from the date on which this Outline is submitted[10] the Company will allocate the Options to Offerees and submit an allocation document for each Offeree to sign.

 

         The Options will be allocated to Offerees who are residents of Israel in accordance with the capital gains track prescribed in paragraph 102(B)(2) to the Ordinance and will be deposited in the hands of a trustee (hereinafter: the "Trustee").  For Offerees who are not residents of Israel the laws of their countries of residence will apply.

 

         The Company will inform the Offerees of publication of this Outline on the date of its publication or immediately thereafter by means required by law and will provide for the Offerees to view at the Company's offices during normal work hours copies of the reports referred to in this Outline and Report.

          

2.2    Exercise of Options

 

         The Options offered based on this Outline will be exercisable into shares as detailed in paragraph 1.1 above and in paragraph 2.3 below (for details regarding the Underlying Shares see Chapter 3 below).

 

         The Vesting Period and Exercise Period of the Options allocated to each Offeree will be as detailed in paragraph 1.1 above.

 

         An Offeree will be entitled to exercise the Options allocated to him in whole or in part on any business day at his discretion starting from the date on which the Options are exercisable as detailed above, and in any event no later than the Options Expiry Date.

 

         Notwithstanding the aforesaid, exercise of Options will be subject to applicable law, including with respect to the prohibition of use of inside information (see paragraph 2.6 below for additional restrictions on transferability of the Options and Underlying Shares). Furthermore, the exercise of Options may not be conducted on the record date for the distribution of bonus shares, offer by way of rights, dividend distribution, stock merge, stock split or capital reduction (each of these to be referred to as: "Company Contingency"). If the ex-date of a Company Contingency falls prior to the record date of a Company Contingency, the exercise of Options may not be conducted on such an ex-date.

 

2.3    The Exercise Procedure

 

         The exercise of Options by Offerees shall be done by giving written notice sent to the Company at its registered office (and to the Trustee, if relevant) regarding exercise of the Options, worded as prescribed by the Company from time to time, and to  include, inter alia, the number of Options that the Offeree wishes to exercise (hereinafter: "Exercise Notice"), along with payment of an amount equal to the Exercise Price multiplied by the number of exercised Options, if and inasmuch as the Offeree is required to pay this amount. The day on which the Exercise Notice arrives at the Company together with said amount shall be deemed the exercise date of the Options to which the Exercise Notice refers (hereinafter: the "Exercise Date").          

        

         The Company will manage a registry of option holders which will list the names of the option holders, their addresses and the number of options registered in their names.  All transfers of ownership of options as permitted according to paragraph 2.6 below will also be listed in the registry. 

 

         Exercise of Options will be in accordance with the specific terms by which they were allocated and subject to the conditions of the Plan, applicable law  and the Taxation Ruling, including with respect to the prohibition of use of inside information (see paragraph 2.6 below for additional restrictions on transferability of Options and Underlying Shares).

 

         An Offeree will not hold the rights of shareholders with respect to a share arising from the exercise of the Option allocated to him under the Plan as long as he has not exercised the Option into a share, paid the Exercise Price in full in accordance with the terms contained in this Outline, and such exercise has not been registered in the Company's shareholder registry. He will, however be granted protection as specified in paragraph 2.4 below.

 

         Underlying Shares shall be equal in rights to existing shares in the Company's share capital for all intents and purposes, as they would be on the Exercise Date, and shall be subject to the provisions of the Company's Articles of Association.  Underlying Shares shall be entitled to any dividend or other benefit, where the date of record for receiving such occurs on the date of the exercise of the Options or subsequently, in the name of the Offeree or the Trustee, whichever relevant.

 

2.4    Adjustment of Rights and Instructions for Protecting Offerees

 

         The adjustments to be implemented are as follows:

 

2.4.1    Bonus shares, stock split or merge - Should the Company distribute bonus shares and the date of record for their distribution (hereinafter: the "Bonus Date") occur after the allocation date of the Options but before the Exercise Date, the Exercise Price per each Option will not change, but the number of shares to which each Offeree will be entitled on the Exercise Date will increase by the number of shares to which each Offeree would have been entitled as bonus shares had he exercised the Option on the eve of the Bonus Date, and the number of reserved shares shall also increase accordingly. Adjustments similar to those prescribed in this section will be made in the event of a split (or merge) of Company shares.

 

2.4.2    Offer of rights - In the case of an offer of rights by the Company to its shareholders (including by means of an offer of convertible securities) after the allocation date of the Options but before the Exercise Date, the number of shares to which every Offeree is entitled on the Exercise Date will increase to reflect the benefit component embodied in the rights, and the number of reserved shares will increase accordingly.  The value of the benefit component embodied in said rights and the adjustment required as stated will be determined in accordance with the ratio between the share's closing price on the TASE on the last day of trading prior to the ex-date and the base price of the share "ex-rights".

 

2.4.3    Notwithstanding what is stated in paragraphs 2.4.1 and 2.4.2 above, an Offeree will not be entitled to exercise an option for a fraction of a share. The number of shares to which the Offeree is entitled when exercising an option based on the Plan will be rounded (up or down as the case may be) to the nearest whole number.

 

2.4.4    Dividend Distribution - If the Company distributes a dividend (in cash or in kind) to all of its shareholders and the date determining the right for receiving this dividend (hereinafter: the "Date of Record") falls after allocation date of the Options but before their Exercise Date, the Exercise Price of each Option not yet exercised into a Company share by the Date of Record will be reduced by the gross amount of the dividend per share distributed by the Company as long as the Exercise Price  does not fall lower than the par value of a Company share. Beyond the adjustments to the Exercise Price specified in this clause, a distribution of dividends by the Company (in cash or in kind) will not in any way affect the terms of the Options or the number of Underlying Shares and will not obligate the Company to perform any adjustment whatsoever with respect to the Options and/or Underlying Shares unless the Board of Directors resolves otherwise.

 

2.4.5   Structural change, merger and sale - In the event of a change in the Company's structure (hereinafter: "Structural Change"); a merger of the Company with or into another company whether through an exchange of shares, cash acquisition or other means (hereinafter: "Merger"); or the sale of all or the vast majority of Company assets or of the Company's issued share capital to any third party (hereinafter: "Sale") - the Board of Directors will be entitled (but not obligated), inter alia, as it may so choose and subject to law:

 

2.4.5.1        To resolve that the Options be replaced by or converted to equivalent Options in the new company following the Merger or Sale, and make changes accordingly in the Exercise Price  (if necessary) - all subject to the discretion of the Board of Directors; or

                                                                                            

2.4.5.2        To resolve that all Options be adopted by the new company so that the Options will be exercisable to the shares of the new company subject to adjustments and changes as resolved by the Board of Directors; or

 

2.4.5.3        To resolve that the Options be purchased by the new company in exchange for an amount per Option equal to the price paid per Company share as purchased by the new company, less the Exercise Price of the Option.

                 

                  Immediately following the implementation of such a Structural Change, Merger or Sale, all Company Options allocated under the Plan will expire unless they are adopted by the new company as stated in paragraph 2.4.5.2 above.

                                                  

                  For the purpose of the provisions of this paragraph, the term "new company" will refer to a company with which a Merger is performed or with which a Sale transaction is conducted, or which takes over the Company after a Structural Change or Merger.

 

2.4.6    Save in cases as set forth in this paragraph 2.4, the Company's allocation of securities of any type will not affect in any way the number of Underlying Shares or the Exercise Price, and will not obligate the Company to implement any adjustment whatsoever with respect to the Options and/or the Underlying Shares.

 

2.4.7    The allocation of Options under the Plan shall neither detract from nor affect in any manner whatsoever the Company's right to change its issued share capital or the composition thereof, to change the structure of the Company, to merge, to undergo liquidation or to sell all or part of its assets and/or its activities.

 

2.4.8    Liquidation - Unless otherwise resolved by the Board of Directors, in the event of liquidation of the Company, all Options allocated to Offerees will expire immediately prior to the liquidation of the Company.  In the said event, the Board of Directors may resolve that all or any part of the Options will expire on a particular date set in advance, and allow all or some of the Offerees to exercise the Options allocated to them, and the Board of Directors may also resolve that such an opportunity to exercise the Options will also apply with respect to Options which, according to their terms, would not have been exercisable on that stated set date, all subject to the provisions of law.

 

2.5    Restrictions on Exercising Options - termination of employment

 

2.5.1    If an Offeree who was an employee of the Company or an affiliated company on the allocation date ceases to be employed by the Company for any reason whatsoever (hereinafter: "Termination of Employment") (in this paragraph 2.5.1 - the term "Company" also includes an affiliated related company of the Company, if relevant), the Options constituting the subject of this Outline will expire as follows:

 

2.5.1.1        For the purposes of this paragraph 2.5, the day of Termination of Employment will be the date on which employee-employer relations are terminated between the Offeree and the Company (hereinafter: "Date of Termination of Employment").

 

2.5.1.2        All Options allocated to the Offeree based on this Outline whose Vesting Period has not yet ended will expire on the Date of Termination of Employment. The Options allocated to him whose Vesting Period ended by the Date of Termination of Employment can be exercised by the Offeree for ninety (90) days from the Date of Termination of Employment, unless the Board of Directors has resolved on a period longer than stated.

 

2.5.1.3        Notwithstanding the aforesaid, if the Offeree's Termination of Employment with the Company is the result of death or occupational disability (as defined below), the Options allocated to him whose Vesting Period ended by the Date of Termination of Employment will be exercisable by him or by his legal heirs (whichever relevant) up until their Expiry Date.

 

                   In this paragraph, "Occupational Disability" means the Offeree's inability to perform his job as the result of injury and/or illness for a period of at least six consecutive months.

 

2.5.1.4        Notwithstanding the aforesaid, if the Offeree is dismissed under circumstances in which he is not entitled to the severance pay as prescribed in the Severance Pay Law, 5723-1963 or the relevant foreign law applicable to the Offeree, and subject to all laws, all the Options allocated him based on this Outline will expire, including Options whose Vesting Period have ended.

 

2.5.1.5        Notwithstanding the aforesaid, if an employee ceases to be employed by the Company due to retirement according to law or by collective agreement or by written agreement with the Company, the Options allocated him whose Vesting Period has ended by the Date of Termination of Employment may be exercised by him up until their Expiry Date.

                                                                                                                                        

2.5.2    All rulings based on this paragraph, including the ruling of whether Termination of Employment occurred under circumstances of dismissal without entitlement to severance pay as stated in paragraph 2.5.1.4 above; the ruling of whether Termination of Employment occurred due to Occupational Disability as stated in paragraph 2.5.1.3 above; the ruling of whether Termination of Employment occurred due to retirement as stated in paragraph 2.5.1.5; and the ruling on whether the period during which the Offeree was on unpaid leave under  paragraph 1.1 above will be deemed within the Vesting Period and/or will be deemed Termination of Employment under this paragraph 2.5 - shall be made by the Board of Directors, at its exclusive discretion.

 

2.5.3    The Board of Directors may at any time determine, at its exclusive discretion, periods and terms different from those prescribed in this paragraph 2.5 with respect to a specific Offeree or as a rule.

 

2.5.4    Without derogating from the above provisions in paragraph 2.5 and for the avoidance of doubt, a transfer of the Offeree from the Company to an affiliated company and his employment or engagement therein following termination of his employment or engagement with the Company will not be deemed the end of employment or engagement for the purposes of this Outline.

 

2.5.5    It is hereby clarified that in no event are Options ever exercisable after the Option Expiry Date (as defined in paragraph 1.1 above).

 

2.6    Transferability of Options and Underlying Shares

 

         Unless otherwise resolved by the Board of Directors, Options allocated to an Offeree based on this Outline are neither transferable nor endorsable, under any circumstances, save for transfer to heirs by law in the event of death of the Offeree.  In the event of such aforesaid transfer to heirs, the Option terms and provisions of the Plan will be binding on the heirs.  In this paragraph, "transfer" means full transfer of ownership in the Options and Underlying Shares, as the case may be, including transfer or endorsement of any other right therein in any form or manner, and including their being mortgaged or liened.

 

         Underlying Shares will be subject to restrictions regarding their sale and/or transfer, as may be resolved by the Board of Directors from time to time, and subject to applicable law, including with regards to the prohibition of use of inside information.

 

2.7    Taxation Implications for Option Allocation, their Exercise into Shares and Sale of Underlying Shares with respect to Employees who are Israeli Residents

 

2.7.1    General

 

            The Company has elected the capital gains track provided in section 102(B)(2) to the Ordinance to apply to employees and officeholders of the Company and its affiliated companies who are entitled to such. As for Offerees who are not residents of Israel, the laws of their countries of residence shall apply.

 

            Any tax payment arising from the allocation of Options, from the exercise of Options into shares, from the payment for the purchase of the shares or from the sale/transfer of the Options and/or the shares will be applicable to the Offeree alone. The Company, its affiliated companies or the Trustee, if relevant, will deduct tax subject to the requirements of the applicable law, including tax deducted at source.

 

            The Company's obligation to allocate Underlying Shares during the exercise of the Options, or to take any other action with respect to the Options or the Underlying Shares, or with regards thereto, is subject to full compliance with any income tax, national insurance, health insurance tax or other obligatory payment (if any) which may apply, including deduction of any tax or obligatory payment required by law, and subject to the Taxation Ruling.

 

2.7.2    Taxation applicable to Options under the provisions of section 102 to the Ordinance and minimal trust period

 

2.7.2.1        Pursuant to section 102 to the Ordinance and the rules enacted thereunder, as may be modified from time to time (hereinafter: the
"Rules"), taxation of the Options and the Underlying Shares is conditional upon their being held in trust for a period prescribed under the Ordinance, as may be amended from time to time, or for another period approved by the taxation authorities (hereinafter: the "Minimal Trust Period"). However, the allocation of options under the Taxation Ruling is conditional upon the Underlying Shares being held in trust for at least 18 months before being transferred to the Offerees.

 

2.7.2.2        An Offeree will not be entitled to sell the Options and/or the Underlying Shares or to transfer such from the Trustee before the end of the Minimal Trust Period. Furthermore, rights awarded by power of the Underlying Shares, including bonus shares (in this section 2.7.2 - hereinafter: the "Rights") will be placed in the hands of the Trustee until the end of the Minimal Trust Period and shall be subject to the taxation track applicable to the shares by virtue of which they were awarded, all subject to applicable law and subject to the Taxation Ruling.

 

2.7.2.3           Notwithstanding the provisions of section 2.7.2.2 above, and subject to all other terms of the Plan and the Taxation Ruling, an Offeree may transfer the Options and/or the Underlying Shares and/or the Rights from the Trustee and sell such even before the end of the Minimal Trust Period, provided that 18 months have elapsed from the date on which they were first held by the Trustee in accordance with the provisions of the Taxation Ruling, and that the Trustee and/or the Company deducts tax at source or ensures the deduction of tax at source in accordance with the provisions of the Rules, as required under section 102 to the Ordinance and the Rules regarding failure to fulfill the Minimal Trust Period.

 

2.7.2.4        Subject to the applicable law, including section 102 to the Ordinance, voting rights in the Underlying Shares held by the Trustee will be in the hands of the Trustee.  The Trustee will not vote based on the Underlying Shares held by him on behalf of the Offeree except in accordance with an appropriate power of attorney given by the Offeree with respect to a particular vote.  It is hereby clarified that the Trustee is not required to inform the Offeree or send him any information whatsoever about any vote being taken by Company shareholders taking place or to approach the Offeree with a request for such power of attorney.

 

                  The provisions hereby contained in section 2.7 refer to the applicable law on the date of the Outline.  Provisions of law with respect to mandatory payments and tax aspect for Options granted based on this Outline may change from time to time.

 

                  The above stated does not purport to be an authorized interpretation of the provisions of law mentioned above nor an exhaustive description of all provisions of law relating to taxes which may apply with respect to the Options offered to the Offerees, and it does not come in place of legal and professional advice on the subject. As is customary in an investment decision, each Offeree who receives Options and decides to exercise them must act in accordance with the provisions of the law and consider the various tax issues and the tax consequences his investment will bear.  The Offeree should consult his professional advisors, including legal and tax advisors, taking into account his own particular circumstances.

 

2.8    Consideration for the offered Options

 

         The Options are offered to the Offerees without consideration, as set forth in paragraphs 1.1 and 1.2 above.

 

2.9    Economic value of the Options  

 

         The fair value of the Options amounts to US$ 523 thousand (US$ 157 thousand of this for the Options to be granted to the President). The fair value of the Options is calculated using a formula based on the Black-Scholes model, with the following underlying assumptions: the Exercise Price for each Option as stated in section 1.1 above, a standard deviation of 0.99%, a risk-free interest rate of 0.66%, dividend rate of return per share of 0.34%, a share price of NIS 357.70, and an annual early exit rate of 5%.

 

         The calculation of the fair value does not take into account the fact that the Options will not be registered for trade on the TASE, as specified in this Report, and it does not take into account the tax which may apply while exercising the Options or selling the Underlying Shares.

 

2.10  Agreements between Offerees and other shareholders

 

         To the best of the Company's knowledge, there are no written or oral agreements between the Offerees and any other Company shareholders or between all or some of the Offerees and themselves or between the Offerees and others with regards to the purchase or sale of the Company securities or with regards to voting rights in the Company.

 



 

Chapter 3 - The Underlying Shares

 

The Underlying Shares shall be equal in all respects to ordinary shares of the Company's share capital.  All shares of the Company's share capital are registered shares of NIS 1.00 par value[11].

 

For particulars regarding the rights accompanying the Company's shares, see the Company's Memorandum and the updated version of the Company's Articles of Association as issued in the Company's reports of December 29, 2004 and May 9, 2016 respectively as contained in this Outline and Report on the way to reference them (hereinafter: "Articles of Association" or the "Company's Articles of Association"). The Company's Memorandum and Articles of Association may be viewed at the distribution website of the Israel Securities Authority at the address: www.magna.isa.gov.il and the website of the Tel Aviv Stock Exchange at maya.tase.co.il as well as at the Company's registered offices. It should be made clear that if there are any changes occurring in the provisions of the Articles of Association regarding rights accompanying the shares, such changes shall apply to the Underlying Shares.

 

3.1    Arrangements set in the Articles of Association in accordance with certain provisions in the Companies' Law

 

3.1.1    Change in the Articles of Association: Subject to any other provision contained in the Company's Articles of Association[12], the Articles of Association or any provision thereof may be amended, cancelled or replaced at any time by an Ordinary Resolution. An Ordinary Resolution shall be deemed adopted at a General Meeting if the majority of the votes attached to the shares voted on such resolution, whether in person, by proxy or by voting card, were cast for the approval of such resolution (hereinafter: "An Ordinary Resolution").

 

3.1.2    Restricting the possibility of changing the Articles of Association: Without derogating from section 3.1.1 above, the Company has not established in its Articles of Association or an agreement any provision restricting its authority to change the Articles of Association or any of its provisions.

 

3.1.3    Transfer of authority: The Company has not provided in its Articles of Association any provision for the powers resting with the General Manager to be transferred to under the authority of the Board of Directors on any specific matter nor for any specific period of time not exceeding the period of time necessary under the circumstances.

 

The Company's Articles of Association establishes that notwithstanding the provisions of any agreement between the General Manager and the Company, the Company shall be vested with the power, exercisable by a resolution of the Board and subject to the provisions of the Companies Law, to remove the General Manager from his office or to revoke or alter his powers, authorities, rights, duties, obligations or salary.

 

The Articles of Association further establishes that the Board shall be vested with the exclusive authority to exercise all of the Company's powers which are not, by the Companies Law, these Articles or any applicable law, required to be exercised by a resolution in a General Meeting. Without derogating from the above, the management of the business of the Company shall be vested exclusively in the Board.

 

3.1.4    Appointment of Directors and the length of their terms:

 

According to the Company's Articles of Association, the Board shall consist of a number ranging between five and twenty directors (including the External Directors), until otherwise prescribed by an Ordinary Resolution.

 

Directors, other than External Directors, shall be elected at the Annual General Meeting by Ordinary Resolution and each such Director shall serve until the end of the next Annual General Meeting or General Meeting at which the Director was elected and new directors are elected and appointed to their roles, unless his role ends earlier pursuant to these Articles or the Companies Law.

 

Shareholders at a General Meeting may by an Ordinary Resolution remove from office any Director(s), other than an External Director, and may fill any vacancy, however created, in the Board.  Shareholders may remove an External Director in accordance with the provisions of the Companies Law.

 

The Directors shall at any time and from time to time have the power to appoint any other person as a Director, whether to fill a vacancy or whether in addition to those of their body, provided that the total number of Directors does not exceed the maximum number permitted under Article 31 above.  Any Director so appointed shall hold office until the end of first General Meeting convened after such appointment and may be re-elected. 

 

3.1.5    Legal quorum at General Meeting and chairman of the meeting:

 

            Two or more shareholders, present in person, by proxy or by voting card when the meeting proceeds to business, and holding shares representing in the aggregate 33 1/3% (thirty three percent and one third of a percent) or more of the total voting power attached to the shares then outstanding, shall constitute a quorum at General Meeting.

           

            If within half an hour from the time appointed for the General Meeting a quorum is not present, the General Meeting shall stand adjourned to the same day in the next week, at the same time and place, or any other time and place as the Board may designate in a notice to the shareholders. The requisite quorum at an adjourned General Meeting shall be: (a) if the original meeting was convened upon requisition by shareholders pursuant to the Companies Law - the number of shareholders holding the minimum number of voting shares necessary to make such requisition, present in person or by proxy; and (b) in any other case - one or more shareholders, present in person or by proxy, holding at least one share.

 

            At an adjourned General Meeting the only businesses to be considered shall be those matters which might have been lawfully considered at the General Meeting originally called if a requisite quorum had been present, and the only resolutions to be adopted are such types of resolutions which could have been adopted at the General Meeting originally called.

 

            The chairman of the General Meeting shall be the Chairman, if any, of the Board, or any other person appointed by the Board for such purpose, or, if the Chairman of the Board or such other person are not present within fifteen (15) minutes from the time designated for the opening of the meeting, or are unwilling to serve as its Chairman, then the shareholders present at the meeting may, by Ordinary Resolution, appoint a chairman of the meeting.  The Chairman of any General Meeting shall have no additional or casting vote.

 

3.1.6    Majority at the General Meeting:

 

            Unless otherwise required by law, all resolutions by the General Meeting will be adopted by an Ordinary Resolution.

 

3.1.7    Voting by the Board of Directors:

 

            A resolution shall be deemed adopted at a meeting of a Board, whether in person or by using a conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, if supported by a majority of the directors attending such meeting, and entitled to vote on such resolution[13]. The Chairman of the Board of Directors shall not have an additional or casting vote.

 

3.1.8    Granting exculpation:

 

            To the maximum extent permitted by law the Company may exculpate any officeholder from all or any of his or her liability to the Company for damages resulting from breach of duty of care, before or after the occurrence giving rise to such liability.

 

            Notwithstanding the above, the Company shall not exculpate from liability any officeholder concerning his responsibility for any event inasmuch as the Company is forbidden by law to grant exculpation from liability.

 

3.1.9    Merging:

 

            The Company has not undertaken in its Articles of Association or by any other agreement to avoid performing a merger in the Company or subject the performance of such merger to conditions, except for financing agreements with financing bodies which include provisions that are customary in such agreements.

 

3.1.10  Distribution:

 

            The Company has not undertaken in its Articles of Association to refrain from making a distribution under restrictions further to the provisions of the second chapter to the seventh section of the Companies Law. According to the Company's Articles of Association, the Board may from time to time declare interim or final dividend at a rate as the Board may deem fit considering the profits of the Company and as permitted by applicable law. For information about the restrictions on dividend distributions applying to the Company, see section 4.4 of the Company's periodic report for 2016 as published on March 23, 2017.

           

Chapter 4 - Details on the Company's Share Price

 

Following are details on the high and low prices at which Company shares were traded on the Tel Aviv Stock Exchange in 2016 and 2017 and during the period between January 1, 2018 and April 12, 2018 (without taking into consideration any dividend distributed during that period):

 

Price on the Tel Aviv Stock Exchange

2017

2016

(in NIS 0.01)

High

January 31, 2018

35,670

December 28, 2017

32,650

November 22, 2016

21,480

Low

February 22, 2018

30,530

February 2, 2017

19,560

June 27, 2016

17,080

 

The closing price for Company shares on the Tel Aviv Stock Exchange on April 12, 2018 (the last day of trading prior to this Outline) was NIS 357.70.


 

Chapter 5 - Reference to Financial Statements

 

The attention of Offerees is directed to the Company's periodic report, including the Company's financial statements for December 31, 2017 as published on March 20, 2018.

 

The Company also draws the attention of Offerees to the immediate reports it has issued since March 20, 2018 included here for reference as follows:

 

Date of Publication

Subject of Report

March 20, 2018

Report Regarding Approval of Purchase Plan

March 20, 2018

Report Regarding Distribution of Cash Dividend

March 20, 2018

Report on the Corporation's Liabilities

March 20, 2018

Presentation to Investors - March 2018

March 21, 2018

Amended Report Rectifying a Report Regarding Distribution of Cash Dividend

March 25, 2018

Change in Quantity of Dormant Shares

March 25, 2018       

Change in Quantity of Dormant Shares

March 27, 2018       

Change in Quantity of Dormant Shares

March 27, 2018       

Change in the Company's Securities Register and Transfer of Ownership of shares

March 29, 2018       

Outline of Offering of Securities to Employees Including a Private Offering to an Employees who is a CEO or Board Member

April 5, 2018            

Change in Quantity of Dormant Shares

April 10, 2018          

Immediate Report on the Holdings of Interested Parties and Senior Officers as at March 29, 2018

April 11, 2018          

Immediate Report - Response to publication of article



 

Chapter 6 - Material Private Offering to the President and the Sixth Schedule to the Reports Regulations

 

6.1    The Options allocated according to this report and the Company's share capital

 

         Following are details on the Company's share capital as of April 12, 2018:

 

 
 

Issued and paid up share capital

(number of shares)

Registered share capital (number of shares)
Class of shares

On the date of submitting this report

Diluted as a result of the allocation based on this report[14]

Fully diluted[15]

100,000,000

Ordinary shares of NIS 1.00 par value

59,680,493[16]

59,690,259

60,122,150



Following are, to the Company's best knowledge, details on the holdings by the President and by interested parties in the Company of the Company's shares on the date of this report, following the allocation under this report and fully diluted:


Quantity and ownership percentage in capital and voting prior to the allocation of Options

Post allocation equity and voting shares and percentage stake - assuming exercise of the offered shares [17]

Post allocation equity and voting shares and percentage stake - fully diluted[18]


Number of shares

%

capital

% voting

Number of shares

%

Capital

% voting

Number of shares

%

capital

% voting

Frutarom Industries

Ltd. [19]

143,063

0.24%

0.00%

133,297

0.24%

0.00%

-

0.00%

0.00%

ICC Industries Inc.[20]

21,358,034

35.79%

35.87%

21,358,034

35.78%

35.87%

21,358,034

35.52%

35.52%

John and Maya Farber[21]

48,888

0.08%

0.08%

48,888

0.08%

0.08%

48,888

0.08%

0.08%

FMR LLC[22]

4,399,355

7.27%

7.29%

4,399,355

7.27%

7.29%

4,399,355

7.22%

7.22%

Ori Yehudai [23]

482,162

0.81%

0.81%

485,093

0.81%

0.81%

670,736

1.12%

1.12%

Hans Abderhalden [24]

17,434

0.03%

0.03%

17,434

0.03%

0.03%

17,434

0.03%

0.03%

Public

32,291,557

55.78%

55.92%

33,298,392

55.79%

55.92%

33,876,277

56.03%

56.03%

Total

59,680,493

100.00%

100.00%

59,690,259

100%

100%

60,122,150

100%

100%

 

 

 

6.2    Information regarding the price of Company shares

 

         Please see Chapter 4 above.

 

6.3    Fair value of the Options

 

         Please see paragraph 2.9 above.



 

6.4    Consideration and the method by which it was determined

 

         Please see paragraphs 1.1 and 2.8 above.

 

         The Offering concerning the allocation of Options to the President according to this Outline and Report is in accordance with the President's terms of office and employment[25] and the Compensation Policy[26].

 

6.5    Personal interest in approval of the offer to the President 

 

         The President has a personal interest in the offer by virtue of his being an Offeree.

 

6.6    Required authorizations

 

         Please see paragraph 1.3 above.

 

6.7    Transferability of the Options and Underlying Shares

 

On this matter see section 2.6 above.

 

6.8    Agreements between the President and other shareholders

 

         To the best of the Company's knowledge, no agreements exist either in writing or orally between the President and any other Company shareholder or between the President and others with respect to the purchase or sale of the Company's securities or with respect to voting rights in the Company.

 

6.9    The date of granting Options to the President

 

         Subject to the provisions of paragraphs 1.1 to 1.3 above, the Options will be granted to the President not before 14 business days following the filing of the Outline[27] have elapsed, and no later than the date of filing of the Company's periodic report for 2018 or the date set by law for filing that report, whichever comes earlier.

 

6.10  Additional details under the Private Offering Regulations and regulation 37A3 and the Sixth Schedule to the Reports Regulations regarding the President

 

         For details regarding the main terms of office and overall compensations to which the President is entitled under the Sixth Amendment to the Reports Regulations, see Regulation 21 to Chapter D to the Company's 2017 periodic report published by the Company on March 20, 2018.

        

         For details regarding the President's holdings of Company shares at the time of this Report, see paragraph 6.1 above.

 

         The fair value of the benefit to the President under this Offer is as specified in paragraph 2.9 above.

               



 

Chapter 7 - Miscellaneous

 

7.1    Powers of the Israel Securities Authority

 

         The Israel Securities Authority, including an employee of the Authority who it has authorized to do so, may instruct the Company within 14 business days from the date of submission of this Outline and Report to provide an explanation, details, information and documents concerning this Outline and Report and to instruct the Company on a correction to this Outline and Report by the date it sets. Should the Authority have ordered a correction to the Outline and Report, it may order a delay in the date of the start of the period for allotting the securities to a date falling no sooner than 3 business days and no later than 14 business days from the date of publication of the correction to this Outline and Report. The correction to this Outline and Report and the postponement of the start of the period for allotting the securities as per such provision shall be performed in accordance with the provisions set in the Outline.

 

  7.2  The Company's representative

 

                  The Company's representative in matters concerning this Outline and Report is Mr. Guy Gill, Vice President - Finance, of 2 Hamenofim Street, Herzliya (the Company's offices), tel: +(972) 9-960-3800 , fax: +(972) 9-960-3826.

 

 

 

 

 

Date: April 13, 2018

 

Sincerely yours,

 

Frutarom Industries Ltd.

 

 

Signatory on behalf of the Corporation:

 

 

 

Mr. Guy Gill,

Vice President - Finance



[1]     21 of the Offerees are foreign Offerees on whom the tax regulations of their country of residence will apply. The Israeli Offerees are employed by fully-owned subsidiaries of the Company.

[2]     To the Executive Vice President& CFO; to the Executive Vice President, Global Supply Chain and Operations; and to the Vice President Finance.

[3]     For information on the Company's previous compensation policy under which the options are granted to the officeholders and to the President according to the conditions of this Outline and Report, as approved by the General Meeting of Company shareholders in January 2014 and amended by the General Meeting in May 2016, see the Company's immediate report from December 29, 2013 and the Company's immediate report from March 31, 2016 (hereinafter collectively: the "Compensation Policy"). For information on the new compensation policy for Company officeholders as approved by the General Meeting of Company shareholders in January 2017, see the Company's report from November 29, 2016.

[4]     See footnote 3 above.

[5]     If the Israel Securities Authority should order a change to this Outline and Immediate Report, the date of allocation of the Options based on this Outline and Immediate Report may be postponed. For further information, see section 7.1 below.

[6]     For additional information on the President's terms of office and employment see Regulation 21 to Chapter D and Note 22(3) to the Company's 2017 periodic report published by the Company on March 20, 2018.

[7]     See footnote 3 above.

[8]     See footnote 2 above.

[9]     See footnote 6 above.

[10]    If the Israel Securities Authority should order a change to this Outline and Immediate Report, the date of allocation of the Options based on this Outline and Immediate Report may be postponed. For further information, see section 7.1 below.

[11]    The provisions of the Company's Articles of Association are subject to the Securities Law, including section 46B to the Securities Law which states that the share capital of a company whose shares are being registered for trading for the first time may only consist of one type of share. So long as the Company's securities are registered for trading, no bearer shares will be issued and the shares will be paid up in full. Also, as long as the Company's shares are listed for trading on the Tel Aviv Stock Exchange, all shares of the Company's offered share capital shall be registered in the Company's shareholder registry in the name of the Nominee Company.

[12]    As of this date the Company's Articles of Association have not established a majority which is not a simple majority.        

[13]    For information on how written resolutions are passed, see section 29(c) of the Company's Articles of Association.

[14]    Assuming the exercise of all the Options granted to the Offerees under this report.

[15]    Assuming the exercise of all convertible securities to Company shares.

[16]    Including 143,063 dormant shares.

[17]    Assuming the exercise of all the Options granted to the Offerees under this report alone.

[18]    Assuming the exercise of all convertible securities to Company shares, including all options granted to Offerees under this report.

[19]    The Company holds the shares for its employees for the purpose of option plans for the employees

[20]    The above holding is executed through subsidiaries of ICC Industries Inc. The principal owners of ICC Industries Inc. are Dr. John J. Farber, who also serves as Chairman of the Company's Board of Directors, and Mrs. Maya Farber, his wife, who serves as a director of the Company. Sandra Farber, their daughter, serves as a director of the Company and holds 6.86% of the issued and paid up shares of ICC Industries Inc.

[21]    See footnote 19 above.

[22]    The report was received by the Company from Fidelity Worldwide Investment on behalf of FMR LLC, TASE registration number 777000368 which identified itself as the parent company of investment management companies (hereinafter collectively: "Fidelity"), whereby bodies under Fidelity management are the ones who purchased the Company's shares.

[23]    Mr. Ori Yehudai serves as Company President and its Chief Executive Officer and is an Offeree under this report. As of the date of this report Mr. Ori Yehudai holds 185,643 options exercisable into 185,643 regular shares of the Company.

[24]    Mr. Hans Abderhalden serves as a director of the Company.

[25]    See footnote 6 above.

[26]    See footnote 7 above.

[27]    If the Israel Securities Authority should order a change to this Outline and Immediate Report, the date of allocation of the Options based on this Outline and Immediate Report may be postponed, in accordance with its instructions. For further information see section 7.1 below.


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