TARO
PHARMACEUTICAL INDUSTRIES LTD.
NOTICE OF
EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
Haifa Bay,
Israel
August 7,
2009
Notice is
hereby given that an Extraordinary General Meeting of Shareholders (the
“Extraordinary General Meeting” or the “Meeting”) of Taro Pharmaceutical
Industries Ltd. (the “Company”) will be held on September 13, 2009, at 8:00
a.m. (Israel time), at the offices of the Company, 14 Hakitor Street, Haifa Bay,
Israel, for the following purposes:
1.
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a.
To elect Ms. Irith Hausner as a statutory external director, as defined
under Israeli law (an “External Director”), to the Board of Directors for
a three-year term.
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b.
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To
elect Mr. Yaron Saporta as an External Director to the Board of Directors
for a three-year term.
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2.
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To
ratify, confirm and approve the Company’s exemption and indemnification
undertakings (and to amend and restate the appendix thereto), as well as
to confirm and approve the Company’s providing indemnification with
respect to the Actions (as defined in the accompanying Proxy Statement) to
directors who are not controlling persons (as defined in Section 268
of the Israeli Companies Law, 5759–1999) and who served, are serving and
may in the future serve, the Company, its subsidiaries and/or affiliates
(including, Ben Zion Hod and Haim Fanairo, who served until July and
August 2009, respectively, as External
Directors); and
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3.
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To
approve undertakings to exempt from liability and to indemnify new
External Directors, upon their election to the Board of
Directors.
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Shareholders
of record at the close of business on August 13, 2009, are entitled to notice
of, and to vote at, the Meeting. All shareholders are cordially invited to
attend the Extraordinary General Meeting in person.
Shareholders
who are unable to attend the Meeting in person are requested to complete, date
and sign the enclosed form of proxy and to return it promptly in the
pre-addressed envelope provided. No postage is required if mailed in
the United States. You may also submit your proxy vote by telephone
or via the internet by following the proxy voting instructions included with the
enclosed materials. Shareholders who subsequently revoke their
proxies may vote their shares in person.
By Order
of the Board of Directors,
Barrie
Levitt, M.D.
Chairman
of the Board of Directors
TARO
PHARMACEUTICAL INDUSTRIES LTD.
14 Hakitor
Street
Haifa Bay
26110, Israel
_____________________
PROXY
STATEMENT
_____________________
This Proxy
Statement is furnished to the holders of Ordinary Shares, nominal (par) value
NIS 0.0001 each (the “Ordinary Shares”) and of Founders' Shares, nominal
(par) value NIS 0.00001, of Taro Pharmaceutical Industries Ltd. (the
“Company”) in connection with the solicitation by the Board of Directors of
proxies for use at the Extraordinary General Meeting of Shareholders (the
“Extraordinary General Meeting” or the “Meeting”), or any postponement or
adjournment thereof, pursuant to the accompanying Notice of Extraordinary
General Meeting of Shareholders. The Meeting will be held on
September 13, 2009, at 8:00 a.m. (Israel time) at the offices of the
Company, 14 Hakitor Street, Haifa Bay, Israel.
It is
proposed that, at the Meeting, the following matters be considered:
1.
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a.
To elect Ms. Irith Hausner as a statutory external director, as defined
under Israeli law (an “External Director”), to the Board of Directors for
a three-year term.
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b.
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To
elect Mr. Yaron Saporta as an External Director to the Board of Directors
for a three-year term.
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2.
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To
ratify, confirm and approve the Company’s exemption and indemnification
undertakings (and to amend and restate the appendix thereto), as well as
to confirm and approve the Company’s providing indemnification with
respect to the Actions (as defined below) to directors who are not
controlling persons (as defined in Section 268 of the Israeli
Companies Law, 5759–1999 (respectively, “controlling persons” and the
“Companies Law”)) and who served, are serving and may in the future serve,
the Company, its subsidiaries and/or affiliates (including, Ben Zion Hod
and Haim Fanairo, who served until July and August 2009, respectively, as
External Directors); and
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3.
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To
approve undertakings to exempt from liability and to indemnify new
External Directors, upon their election to the Board of
Directors.
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A form of
proxy for use at the Meeting and a return envelope for the proxy are also
enclosed. Proxy votes may also be submitted by telephone or via the
internet by following the proxy voting instructions included with the enclosed
materials. Shareholders may revoke the authority granted by their
execution of proxies at any time before the effective exercise thereof by filing
with the Company a written notice of revocation or duly executed proxy bearing a
later date, by submitting votes by telephone or internet at a later date, or by
voting in person at the Meeting.
Unless
otherwise indicated on the form of proxy, shares represented by any proxy in the
enclosed form, if the proxy is properly executed and received by the Company at
least 48 hours prior to the Meeting, will be voted in favor of all the matters
to be presented to the Meeting, as described above. The Board of Directors of
the Company is soliciting proxies for use at the Meeting.
Only
shareholders of record at the close of business on August 13, 2009, will be
entitled to vote at the Extraordinary General Meeting. Proxies are
being mailed to shareholders on or about August 13, 2009 and will be solicited
chiefly by mail; however, certain officers, directors and employees of the
Company may solicit proxies by telephone, fax or other personal contact, none of
whom will receive additional compensation therefor. The Company may
also retain one or more agents for the purpose of soliciting proxies in
connection with the Meeting. The Company will bear the cost of the solicitation
of the proxies, including postage, printing and handling, and will reimburse the
reasonable expenses of brokerage firms and others for forwarding material to
beneficial owners of Ordinary Shares.
Item 1
– ELECTION OF EXTERNAL DIRECTORS
At the
Extraordinary General Meeting, it is intended that proxies (other than those
directing the proxy holders not to vote for the listed nominees) will be voted
for the election, as External Directors of the Company, of the two nominees
named below who shall hold office for a three-year term, unless their service is
earlier terminated under any relevant provision of law or the Company’s Articles
of Association.
The list
of nominees is as follows:
a. Ms.
Irith Hausner
b. Mr.
Yaron Saporta
Under the
Companies Law, companies incorporated under the laws of the State of Israel
whose shares, inter alia, are listed for trading on a stock exchange or have
been offered to the public by a prospectus and are held by the public are
required to have at least two External Directors.
The
Companies Law further provides that a person may not be elected as an External
Director if the person or the person’s relative, partner, employer, anyone to
whom the person is subordinate, directly or indirectly, or any entity under the
person’s control has, as of the date of the person’s election to serve as an
External Director, or had, during the two years preceding that date, any
affiliation (as defined below) with:
(ii)
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any
entity controlling the Company as of the date of the election;
or
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(iii)
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any
entity controlled by the Company or under common control with the Company
as of the date of the election or during the two years preceding that
date.
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The term
“affiliation” includes an employment relationship, a commercial or professional
relationship maintained on a regular basis or control of the Company, as well as
service as an office holder (as defined below). Under the Companies
Law, “relative” is defined as a spouse, brother or sister, parent, grandparent,
child, child of such person’s spouse or the spouse of any of the
above.
The
Companies Law defines the term “office holder” as a director, general manager,
chief business manager, deputy general manager, vice-general manager, any other
person assuming the responsibilities of any of the foregoing positions without
regard to such person’s title, and any manager that reports directly to the
general manager.
The
Companies Law further provides that no person can serve as an External Director
if the person’s other positions or businesses create, or may create, a conflict
of interest with the person’s responsibilities as an External Director or may
otherwise interfere with the person’s ability to serve as an External
Director.
Until the
lapse of two years from the time in which the External Director serves as such,
a company may not engage an External Director to serve as an office holder and
cannot employ or receive professional services from such former External
Director for consideration, either directly or indirectly, including through a
corporation controlled by such former External Director.
A person
shall be qualified to serve as an External Director only if he or she possesses
accounting and financial expertise or professional competence. At
least one External Director must possess accounting and financial
expertise. Under the regulations of the Companies Law, a director has
“financial and accounting expertise” if, inter alia, he or she, based on his or
her education, experience and qualifications, is highly skilled in respect of,
and understands, business and accounting matters and financial statements, in a
manner that enables him or her to have an in-depth understanding of the
company’s financial statements and to stimulate discussion in respect of the
manner in which the financial data is presented. A director has “professional
competence” under such regulation if, inter alia, he or she has an academic
degree in either economics, business administration, accounting, law or public
administration or an academic degree in, or completion of, other higher
learning, each in an area relevant to the company’s business, or has at least an
aggregate of five years’ experience in a senior position in any one or any
combination of the following: (a) the business management of a corporation with
a substantial scope of business; (b) public office or public service; or (c) the
field of the company’s business.
The
Companies Law also provides that a shareholders’ general meeting at which the
appointment of an External Director is to be considered will not be called
unless the nominee has declared to the Company that he or she complies with the
qualifications for appointment as an External Director. Each proposed
nominee has declared to the Company that such nominee possesses the
qualifications and complies with the requirements for appointment as an External
Director under the Companies Law, that such nominee is capable of dedicating the
appropriate amount of time for the performance of such nominee’s role as an
External Director of the Company considering, inter alia, the Company’s size and
special needs and such nominee has agreed to stand for
election. Copies of the declarations of the External Directors are
available for inspection at the offices of the Company.
The
initial term of an External Director is three years and may be extended for an
additional three-year term. An External Director may be removed from
office only by the same percentage of shareholders as is required for election
or by a court, if the External Director ceases to meet the statutory
qualifications for appointment or if he or she violates his or her duty of
loyalty to the company. Each committee of a company’s board of
directors, that is empowered to exercise one of the functions of the board of
directors, is required to include at least one External Director, except for the
Audit Committee, which is required to include all the External
Directors.
Each
External Director has agreed to receive remuneration in accordance with
Section 5(f) of the Companies Regulations (Easements to Public Companies
which Shares are Listed for Trading in a Stock Exchange Outside of Israel),
5760-2000 as applied to Sections 4 and 5 of Companies Regulations (Rules
regarding Remuneration and Expenses of External Directors), 5760-2000
(“Remuneration Rules”) and as approved by the Company’s Audit Committee and
Board of Directors pursuant to Section 7a of the Remuneration
Rules. In accordance with the foregoing, each External Director will
receive an annual fee of NIS 115,400 and a fee of up to NIS 3,470 per
meeting attended, which amounts are linked to the Israeli consumer price
index. Under such regulations, the External Directors’ remuneration
must be fixed and agreed upon with the company prior to the acceptance of the
nomination.
Inasmuch
as the term of Mr. Ben Zion Hod as External Director expired in July 2009 and
that of Mr. Haim Fanairo as External Director will expire in August 2009, each
of Ms. Irith Hausner and Mr. Yaron Saporta, if elected, will serve a
three-year term commencing upon their election to the Board of
Directors.
Ms.
Hausner, an attorney, has served as Manager of the Marine and Aviation
Department of Phoenix Insurance Co. Ltd. (the “Phoenix”) since 1993 and prior
thereto, as Claims Manager in the Marine Department of the Phoenix from
1983–1993. Her experience includes six years of private law practice
from 1978–1983. Ms. Hausner served on the Company’s Board of
Directors as an External Director during the years
1998–2003. Ms. Hausner holds a Bachelor of Laws (LLB) degree
from Tel Aviv University (1978).
Mr.
Saporta, an accountant, is the managing partner of his accounting firm, Saporta,
Penn & Co. In addition, he currently serves as an internal auditor for six
corporations, three of which are public companies. His accounting and
internal audit experience includes private and public companies, as well as
government ministries. He served as the Company’s internal auditor in
the early 1990’s. Mr. Saporta holds a BA in Accounting and Economics
from the Tel Aviv University (1984), a LL.M. from Bar-Ilan University (2005),
and is certified internal auditor (international) by the US Institute of
Internal Auditors (1996).
The Board
of Directors has reviewed Ms. Hausner’s qualifications, taking into account
the parameters specified by the Companies Law and the regulations thereunder,
and has determined that she has professional competence.
The Board
of Directors has reviewed Mr. Saporta’s qualifications, taking into account the
parameters specified by the Companies Law and the regulations thereunder, and
has determined that Mr. Saporta has expertise in finance and
accounting.
The Board
of Directors will present the following Resolutions at the Extraordinary General
Meeting of Shareholders:
Resolution
1a
"RESOLVED,
to appoint Ms. Irith Hausner as an External Director of the Company for a term
of three-years, commencing upon her election to the Board of
Directors.”
Resolution
1b
"RESOLVED,
to appoint Mr. Yaron Saporta as an External Director of the Company for a term
of three-years, commencing upon his election to the Board of
Directors.”
VOTE
REQUIRED
In order
to elect, under Items 1a and 1b of this Proxy Statement, Ms. Irith
Hausner and Mr. Yaron Saporta, respectively, each to a three-year term as an
External Director, the required vote, in each case, is a majority of the votes
cast at the Meeting, whether in person or by proxy, provided that (i) that
majority includes at least one-third (1/3) of the total votes of non-controlling
shareholders or anyone voting on their behalf present at the Meeting in person
or by proxy (abstentions will not be taken into account); or (ii) the total
number of votes of the shareholders mentioned in (i) above that are voted
against the election of such nominee does not exceed one percent (1%) of the
Company’s voting rights.
Section 1
of the Securities Law, 5728-1968 (the “Securities Law”) defines "control" as
"the ability to direct the activity of a corporation, excluding an ability
deriving merely from holding an office of director or another office in the
corporation, and a person shall be presumed to control a corporation if he or
she holds half or more of a certain type of means of control of the corporation"
and “means of control” in section 1 of the Securities Law is defined as
"any one of the following: (1) the right to vote at a general meeting of a
company or a corresponding body of another corporation; or (2) the right to
appoint directors of the corporation or its general manager.”
Each
shareholder who is a controlling shareholder or acting on behalf of a
controlling shareholder and who wishes to attend the Meeting in person or by
proxy, is required to so advise the Company in writing, at or prior to the
Meeting, for purposes of voting with respect to Items 1a and
1b.
Dr. Barrie
Levitt (a director and Chairman of the Board of the Company), his daughter, Tal
Levitt (a director and Secretary of the Company) and Dr. Daniel Moros (a
director and Vice Chairman of the Company and a first cousin of Dr. Levitt)
(collectively, the “executive directors”) have indicated to the Company that
they do not believe that they are controlling shareholders.
Given the
important role played by the External Directors under the Companies Law, the
validity of their elections must be unquestioned. Accordingly,
without derogating from the foregoing or in any manner admitting that they are
controlling shareholders, the executive directors have advised the Company,
solely for purposes of this Meeting, not to count shares owned and controlled by
them (or by entities under their control) as part of the votes of the
non-controlling shareholders for purposes of Items 1a and 1b.
As a
result of the executive directors so advising the Company not to count their
shares as part of the non-controlling shareholders, the Board of Directors
reminds the shareholders that it is particularly important that they vote at the
Meeting.
The Board
of Directors also reminds the shareholders of their duty under the Companies Law
to act fairly and in good faith towards the Company, including, inter alia, in
voting shares of the Company at this Meeting.
The Board
of Directors has determined that Ms. Hausner and Mr. Saporta are fully qualified
to serve as External Directors. Accordingly, the Board of Directors
unanimously recommends a vote FOR the election of Ms.
Hausner (Item 1a) and Mr. Saporta (Item 1b) as External Directors.
Item 2 – RATIFICATION, CONFIRMATION AND
APPROVAL OF EXEMPTION AND INDEMNIFICATION UNDERTAKINGS AND AMENDMENT AND
RESTATEMENT OF THE APPENDIX THERETO, AS WELL AS CONFIRMATION AND APPROVAL OF
INDEMNIFICATION WITH RESPECT TO THE ACTIONS (AS DEFINED
BELOW)
In a
recent lawsuit filed against the Company and its directors (the “Action”)1 by a subsidiary of Sun Pharmaceuticals Industries Ltd.
("Sun"), Sun
asked the court, inter alia, to declare that the resolutions approved by the
Shareholders at the September 8, 2005 Annual General Meeting to indemnify
its officers and directors (the “2005 Resolution”), are void and
ineffective.
The
Company and its directors believe that the Action is without merit and that the
2005 Resolution was duly adopted and is fully valid and binding on the
Company. The Company and its directors also believe that the scope of
the Company’s undertaking to indemnify its directors and other office holders
pursuant to the 2005 Resolution as reflected in the Exemption and
Indemnification Agreement entered into with Company directors and other office
holders pursuant to the 2005 Resolution (the “Agreement”) encompasses any
purported or alleged liability of the directors under the Action and
another lawsuit filed by Sun in the New York State Supreme Court (the
“NY Action”) in June 2008 with respect to the merger agreement with Sun that was
terminated by the Company (the NY Action and the Action, collectively the
“Actions”).
1
OM 1410/09, filed with the Tel Aviv District Court on May 14,
2009.
Indemnification
of directors of publicly held companies is extremely important, because it
enables directors to fulfill their duties toward the company without fear of
personal liability for actions that they take in good faith, on behalf of the
company. Therefore, it is proposed, for the avoidance of
doubt and for the sake of good order, to give the greatest possible certainty to
directors who are not controlling persons (including the new External Directors)
as to their indemnification rights and, inter alia, in order to avoid
unnecessary expenses that may otherwise be required to be expended in the course
of the Action, to ratify, confirm and approve the Company’s undertaking to
exempt from liability and to indemnify the persons who are not controlling
persons and who have served (including, inter alia, Messrs. Ben Zion Hod and
Haim Fanairo, the Company’s External Directors whose terms of office expire in
July and August of 2009 and, for the avoidance of doubt, not including the
executive directors) and are serving (currently and from time to time in the
future) the Company, its subsidiaries and affiliates, as directors pursuant to
the Agreement, in the original form thereof, which is attached as Exhibit 1
to this Proxy Statement. In addition, the Company believes that
adoption of the resolutions set forth below is in the best interests of the
Company and its shareholders in order to attract and maintain highly qualified
individuals, including the new External Directors, to serve as directors of the
Company.
Pursuant
to the Agreement, the Company obligated itself, inter alia, to indemnify each of
the directors and other office holders against all monetary obligations imposed
and all reasonable litigation expenses incurred as a consequence of any act or
omission in such person’s capacity as director or other office holder of the
Company or of its subsidiaries or affiliates, provided that with respect to
monetary obligations imposed, they are imposed with respect to events which, in
the opinion of the Board of Directors, are to be expected in light of the
Company’s actual activities and that the Company’s aggregate obligations with
respect thereto do not exceed a fixed sum deemed by the Board of Directors to be
reasonable in the circumstances, all as set forth in the Agreement attached to
this Proxy Statement as Exhibit 1 and subject to law.
As
discussed above, Section 260 of the Companies Law provides that the events
as to which the Company may provide an undertaking to indemnify (such as the
Agreement) must be those events which, in the opinion of the Board of Directors,
are to be expected in light of the Company’s actual
activities. Accordingly, the Company believes that it is appropriate
periodically to update the events set forth in Appendix A to the
Agreement. No change in the overall aggregate limitation on the
indemnification to be provided by the Company under an Agreement (which is also
set forth in Appendix A) is proposed to be made. A copy of the
updated Appendix A is attached to this Proxy Statement as
Exhibit 2. The Company’s obligation to indemnify in advance as
to monetary obligations that may be imposed on a director is limited to the
events, and to the monetary limitation, set forth in
Exhibit 2. The Company and the directors are of the view that
both the current Appendix A set forth in Exhibit 1 hereto and the
updated Appendix A set forth in Exhibit 2 hereto encompass the Actions
including, inter alia,
allegations made by Sun in the Action with respect to the delay in the
preparation of the Company’s annual audited financial statements for the years
2006 and 2007.
The
Company believes that adoption of the resolutions set forth in this Proposal 2
is in keeping with the purpose and intent of the 2005 Resolution which approved
indemnification of the officers and directors of the Company “to the maximum
extent permitted by the Companies Law, as amended from time to time and the
Company’s Articles of Association, as amended from time to time…”.
For the
avoidance of doubt and for the sake of good order, nothing in any of the
following resolutions, whether or not adopted by the shareholders, or in any
Company undertaking to exempt from liability and indemnify any director or other
office holder: (a) diminishes or derogates or shall diminish or derogate in
any manner whatsoever from any right, claim, defense, demand and/or complaint of
the Company and/or its directors or other office holders; and/or (b) shall
be deemed to waive and/or limit any right, claim, defense or complaint as
aforesaid and/or constitute an admission and/or deemed admission on the part of
the Company and/or its directors or other office holders; and/or (c) shall
derogate in any way from any previous undertaking to exempt from liability and
to indemnify given by the Company to any director or other office holder,
including, inter alia, any agreement, which shall continue in full force and
effect with respect to such person, provided that the total amount of
indemnification granted to such person under the Agreement and all previous
Company undertakings to indemnify such person, shall not exceed the
indemnification amount stated in Appendix A to the Agreement set forth as
Exhibit 1 (which is identical to the amounts set forth in Exhibits 2 and 3)
to this Proxy Statement.
Pursuant
to and following Audit Committee and Board of Directors’ approval and
authorization, as required by the Companies Law, the following resolutions will
be presented at the Meeting as Proposal 2:
“RESOLVED,
to: (a) ratify, confirm and approve the Company’s undertaking to exempt
from liability and to indemnify persons who are not controlling persons who
served and are serving, currently and from time to time in the future, as
directors of the Company, its subsidiaries and affiliates (including, inter alia, Mr. Ben Zion Hod
and Mr. Haim Fanairo who served until July and August 2009, respectively, as
External Directors), pursuant to the Exemption and Indemnification Agreement
entered into pursuant to the resolution adopted by the Shareholders on
September 8, 2005, the original form of which is attached to the proxy
statement for this Meeting as Exhibit 1 (the “Agreement”); and
(b) amend and restate Appendix “A” to the Agreement to read in its entirety
as set forth in Exhibit 2 to the proxy statement for this
Meeting;
for the
avoidance of doubt, the Company’s obligation to indemnify in advance as to
monetary obligations that may be imposed on a director is limited to the events,
and to the monetary limitation, set forth in Exhibit 2.
AND BE IT
FURTHER RESOLVED, for the avoidance of doubt, that the Company’s undertaking to
exempt from liability and to indemnify the Company’s directors pursuant to the
above resolution shall include indemnification with respect to all monetary
obligations that may be imposed and/or reasonable expenses to be incurred, and
the Company shall hereby provide indemnification with respect to all reasonable
expenses incurred, on account of, or related to, the Actions, as defined in the
proxy statement for this Meeting.”
VOTE
REQUIRED
In order
to approve, under Item 2 of this Proxy Statement, the ratification,
confirmation and approval of the Company’s exemption and indemnification
undertakings (and amendment and restatement of the appendix thereto), as well as
confirmation and approval of indemnification with respect to the Actions (as
defined above) to directors identified above, the required vote is a majority of
the votes cast at the Meeting, whether in person or by proxy.
For the
reasons set out above, the Board of Directors unanimously recommends a vote
FOR Item 2
above.
Item 3
– APPROVAL OF UNDERTAKING TO EXEMPT
FROM
LIABILITY AND TO INDEMNIFY NEW EXTERNAL
DIRECTORS,
UPON THEIR ELECTION AS EXTERNAL DIRECTORS
The form
of Exemption and Indemnification Agreement to be entered into with
Ms. Hausner and Mr. Saporta, upon their election as External Directors of
the Company, attached as Exhibit 3 to this Proxy Statement, consists of the
form of Agreement attached to this Proxy Statement as Exhibit 1 (without
the original Appendix A thereto) and Exhibit 2, representing the
amended and restated Appendix A.
Pursuant
to and following Audit Committee and Board of Directors’ approval and
authorization, as required by the Companies Law, the following resolution will
be presented to the meeting as Proposal 3:
“RESOLVED,
that the Company undertake to exempt from liability and to indemnify new
External Directors in accordance with the form of Exemption and Indemnification
Agreement attached as Exhibit 3 to the proxy statement for this Meeting,
upon their election as External Directors of the Company;
for the
avoidance of doubt, the Company’s obligation to indemnify in advance as to
monetary obligations that may be imposed on a new External Director is limited
to the events, and to the monetary limitation, set forth in Appendix A to
Exhibit 3.”
VOTE
REQUIRED
In order
to approve, under Item 3 of this Proxy Statement, the undertakings to exempt
from liability and to indemnify the External Directors, the required vote, is a
majority of the votes cast at the Meeting, whether in person or by
proxy.
For the
reasons set out above, the Board of Directors unanimously recommends a vote
FOR Item 3
above.
BY ORDER
OF THE BOARD OF DIRECTORS,
Barrie
Levitt, M.D.
Chairman
of the Board of Directors
Dated: August 7,
2009
EXHIBIT
1
Exemption and
Indemnification Agreement
Date:
_______________
To:
_________________
Whereas:
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It
is in the best interest of Taro Pharmaceutical Industries Ltd. (the “Company”) to attract
and retain the most capable and talented persons as directors, officers
and/or employees and to provide them with adequate protection through
insurance, exemption and indemnification in connection with their service;
and,
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Whereas:
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You
are or have been appointed a director, officer and/or employee of the
Company or a Subsidiary (as defined below), and in order to ensure your
continuing service with the Company or a Subsidiary, as applicable, in the
most effective manner, the Company desires to provide for your exemption
and indemnification to the fullest extent permitted by law and subject to
the terms hereof,
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NOW THEREFORE, THE PARTIES AGREE AS
FOLLOWS:
1. Exemption
1.1
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Subject
only to mandatory provisions of applicable law to the contrary, the
Company hereby exempts you from your liability for any and all damage
caused or to be caused to the Company as a result of a breach of your duty
of care towards the Company.
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1.2
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This
exemption shall not be valid to the extent
that:
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1.2.1
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You
receive payment under an insurance policy with respect to such breach;
or
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1.2.2
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You
receive indemnification pursuant to the provisions of this
Agreement.
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2. Indemnification
2.1
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Subject
only to mandatory provisions of applicable law to the contrary, the
Company shall indemnify you for any obligation or expense specified in
Sections 2.1.1, 2.1.2 and 2.1.3 below, imposed on or incurred by you in
consequence of an act or omission to act in your capacity as director,
officer and/or employee of the Company (“Indemnifiable Liabilities”),
provided that the Company’s undertaking with respect to obligations
specified in Section 2.1.1 below shall be limited to the types of events
and the amount specified in Appendix “A”
hereto.
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2.1.1
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Any
monetary obligation imposed on or incurred by you in favor of another
person by a judgment, including a judgment given in settlement or an
arbitrator's award that has been approved by a
court;
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2.1.2
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All
reasonable litigation expenses, including advocates’ professional fees,
incurred by you or which you were ordered to pay by a court, in a
proceeding filed against you by the Company or on its behalf or by another
person, or in any criminal indictment in which you are acquitted, or in
any criminal indictment in which you were convicted of an offence which
does not require proof of criminal intent;
and
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2.1.3
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All
reasonable litigation expenses, including professional legal
fees, incurred by you due to an investigation or a proceeding instituted
against you by an authority competent to administer such an investigation
or proceeding that was “finalized without the filing of an indictment” (as
defined in the Companies Law – 1999) against you “without any financial
obligation imposed in lieu of criminal proceedings” (as defined in the
Companies Law – 1999), or an investigation or proceeding that was
finalized “without the filing of an indictment” against you with a
“financial obligation imposed in lieu of criminal proceedings” of an
offence which does not require proof of criminal
intent.
|
The above
shall also apply to any obligation or expense specified in Sections 2.1.1, 2.1.2
and 2.1.3 above imposed on you in consequence of your service as a director,
officer or employee of a subsidiary of the company (as defined in the Securities
Law - 1968) (“Subsidiary”) or in consequence of your service as director in an
affiliated company (“Chevra Mesunefet”) (as defined in the Securities Law -
1968) (“Affiliate”)
2.2
|
The
Company will not indemnify you for any Indemnifiable Liabilities to the
extent that you receive payment under an insurance policy or another
indemnification agreement.
|
2.3
|
If
legal proceedings that may give rise to Indemnifiable Liabilities are
initiated against you (“Legal Proceedings”), the Company will make
available to you, from time to time, the funds required to cover all
expenses and other payments in connection with the Legal
Proceedings.
|
2.4
|
If
the Company pays to you or on your behalf any amount in accordance
herewith, and it is thereafter established that you were not entitled to
indemnification from the Company with respect to such amount, you will pay
such amount to the Company upon the Company’s first request, and in
accordance with the payment terms the Company
determines.
|
2.5
|
Notices and Defence
Against Suits
|
2.5.1
|
You
shall notify the Company of any Legal Proceedings and of all possible or
threatened Legal Proceedings as soon as you become aware thereof, and
deliver to the Company, or to such person as it shall direct you, without
delay, all documents you receive in connection with such
proceedings.
|
2.5.2
|
The
Company shall be entitled to assume your defense in respect of all Legal
Proceedings and to use any attorney which the Company may choose for that
purpose (except an attorney who is reasonably unacceptable to
you).
|
2.5.3
|
You
will fully cooperate with the Company and/or its attorney in every
reasonable way as may be required, including, but not limited to, the
execution of power(s) of attorney and other documents, provided that the
Company shall cover all costs incidental
thereto.
|
EXHIBIT 1 -
page 3
2.5.4
|
If
the Company has notified you that it shall assume your defence with
respect to a Legal Proceeding, it shall not indemnify you for expenses you
incur in connection with such
proceeding.
|
2.5.5
|
The
Company shall have the right to settle or refer to arbitration any or all
Legal Proceedings.
|
2.5.6
|
Notwithstanding
the aforesaid, the Company shall not have the right to settle without your
prior written consent, which consent shall not be unreasonably withheld,
unless the settlement in question is without admission of any
responsibility or liability on your part and provides for a complete
waiver of all respective claims against
you.
|
2.5.7
|
The
Company will have no liability or obligation to indemnify you if you enter
into a settlement or initiation of arbitration proceedings without the
Company’s prior written consent, which consent shall not be unreasonably
withheld.
|
2.6
|
The
Company’s obligations hereunder shall not derogate from the Company’s
ability to indemnify you retroactively for any payment or expense as
provided in Sections 2.1.1, 2.1.2 and 2.1.3 above, without limitation to
the types of events and the amount specified in Appendix
“A”.
|
2.7.1
|
The
Company’s obligations hereunder will continue after termination of your
office/employment, provided that the cause of action of the Legal
Proceedings, which led to Indemnifiable Liabilities, is based on your
action or omission to act during your
office/employment.
|
2.7.2
|
The
Company’s obligations hereunder shall also apply to Indemnifiable
Liabilities related to Legal Proceedings the cause of action of which is
based on your action or omission to act prior to execution
hereof.
|
2.8
|
This
agreement shall be governed by and construed and enforced in accordance
with the laws of the State of
Israel.
|
Kindly
sign and return the enclosed copy of this letter to acknowledge your agreement
to the contents hereof.
Very truly
yours,
Taro
Pharmaceutical Industries Ltd.
By:
_______________________________
Name:
Title:
Accepted
and agreed to as of the date first written above:
____________________________
Name:
Title:
EXHIBIT 1 - page 4
APPENDIX
“A”
1.
|
The
Company’s obligation to indemnify you is limited to the
following:
|
1.1
|
Actions
in connection with the management of the Company’s, its Subsidiaries
and/or Affiliates’ affairs, in the ordinary course of
business.
|
1.2
|
Matters
connected with the financing of or investments by the Company and/or
Subsidiaries and/or Affiliates thereof in other entities, including
transactions entered and actions taken by you in the name of the Company
and/or a Subsidiary and/or an Affiliate thereof as a director officer
and/or employee thereof, whether before or after the investment is
made;
|
1.3
|
Actions
in connection with the merger, proposed merger, spin off or a corporate
restructuring of the Company, a Subsidiary and/or an Affiliate
thereof;
|
1.4
|
Actions
in connection with the sale or proposed sale of the operations and/or
business and/or assets, or part thereof, of the Company, a Subsidiary
and/or an Affiliate thereof;
|
1.5
|
Actions
taken in connection with labor relations and/or employment matters in the
Company, Subsidiaries and/or Affiliates thereof, and in connection with
business relations of the Company, Subsidiaries and/or Affiliates thereof,
including with employees, independent contractors, customers, suppliers
and various service providers;
|
1.6
|
Actions
taken pursuant to or in accordance with the policies and procedures of the
Company, Subsidiaries and/or Affiliates thereof, whether such policies and
procedures are published or not.
|
1.7
|
Actions
taken pursuant to or in accordance with decisions of the board of
directors or general meeting of the Company, or of its Subsidiaries or
Affiliates.
|
2.
|
The
total amount of indemnification for each case (including all matters
connected therewith), shall not exceed US$10,000,000 (in addition to any
amounts paid under an insurance
coverage).
|
EXHIBIT
2
Appendix
“A” (Updated)
1.
|
The
Company’s obligation to indemnify you is limited to the
following:
|
1.1.
|
Actions
in connection with the management of the Company's, its Subsidiaries'
and/or Affiliates' affairs, in the ordinary course of
business;
|
1.2.
|
Matters
connected with the financing of or investments by the Company and/or
Subsidiaries and/or Affiliates thereof in other entities, including
transactions entered and actions taken by you in the name of the Company
and/or a Subsidiary and/or an Affiliate thereof as a director, officer
and/or employee thereof, whether before or after the investment is
made;
|
1.3.
|
Actions
in connection with the merger, proposed merger, spin off or a corporate
restructuring of the Company, a Subsidiary and/or an Affiliate
thereof;
|
1.4.
|
Actions
in connection with the sale or proposed sale of the operations and/or
business and/or assets, or part thereof, of the Company, a Subsidiary
and/or an Affiliate thereof;
|
1.5.
|
Actions
taken in connection with labor relations and/or employment matters in the
Company, Subsidiaries and/or Affiliates thereof, and in connection with
business relations of the Company, Subsidiaries and/or Affiliates thereof,
including with employees, independent contractors, customers, suppliers
and various service providers;
|
1.6.
|
Actions
taken pursuant to or in accordance with the policies and procedures of the
Company, Subsidiaries and/or Affiliates thereof, whether such policies and
procedures are published or not;
|
1.7.
|
Actions
taken pursuant to or in accordance with decisions of the board of
directors or general meeting of the Company, or of its Subsidiaries or
Affiliates;
|
1.8.
|
Actions
in the areas of research and development, manufacture, quality control,
storage, logistics, license, labeling, marketing, distribution and sale of
products, including existing and potential generic and brand name
pharmaceutical products, of the Company, a Subsidiary and/or an Affiliate
thereof, including clinical trials and other clinical testing,
applications and reports to, and other interface with, all federal, state,
local and other regulatory authorities, whether within, or outside of, the
United States, including the United States Food and Drug Administration
and the United States Drug Enforcement Administration (“the Health
Regulatory Authorities”), in connection with
same;
|
1.9.
|
Actions
in the areas of product liability, other personal and/or bodily injury
and/or property damage to business or personal property through any act
attributed to the Company, a Subsidiary and/or an Affiliate thereof, or
their respective directors, other officeholders, employees, agents or
other persons acting or allegedly acting on behalf of any of the
foregoing, including with respect to products not manufactured but
distributed, marketed or sold by the Company, a Subsidiary and/or an
Affiliate thereof;
|
1.10.
|
Actions
with respect to any attribute of a product, including the dosage form,
strength, route of administration, quality, performance characteristics
and intended use of the pharmaceutical drug and cosmetic products
(including any ingredients thereof), and/or quality, performance
characteristics and intended use of medical devices, of the Company, a
Subsidiary or an Affiliate thereof, whether before or after approval of
such products by the Health Regulatory
Authorities;
|
1.11.
|
Actions
relating to any agreement, arrangement or transaction, including, without
limitation, sales, licenses, transfers, purchases of, and/or undertakings
with respect to, assets, rights, obligations, operating functions and
securities, between any person, including any customer, supplier,
contractor, shareholder, partner and/or investor, and the Company, a
Subsidiary and/or an Affiliate thereof, including relating to the
negotiation and/or performance and/or termination of such agreement,
arrangement or transaction, all actions and documentation ancillary
thereto, representations or inducements provided in connection therewith
or otherwise as well as compliance with
same;
|
1.12.
|
Actions
relating to any loan, credit, bond and other finance agreements and
indentures, whether secured or unsecured, and whether the indebtedness
thereunder is publicly or privately held, to which the Company and a
Subsidiary and/or an Affiliate thereof are parties, including compliance
with financial, reporting and other covenants and provisions
thereof;
|
1.13.
|
Actions
in the areas of regulatory and governmental licenses, permits, grants,
authorizations and requirements in any jurisdiction affecting the Company,
a Subsidiary and/or an Affiliate thereof, including with respect to the
areas of environment, competition, industrial safety, import, export,
health and privacy, as well as Israeli Investment Centre and Office of
Chief Scientist grants and incentives and those of any other private or
governmental investment granting
organization;
|
1.14.
|
Actions
in the area of the offering of debt and/or equity securities by the
Company and/or a shareholder to the public and/or to private investors or
the offer by the Company or a third party to purchase debt and/or equity
securities from the public and/or from private investors or other holders
pursuant to prospectuses, agreements, notices, reports, tenders and/or
other actions or proceedings, including recapitalizations, the issuance of
bonus shares and other actions related to the capital of the
Company;
|
1.15.
|
Actions
pertaining to the Company’s status as a public company and to its
securities being publicly traded, whether or not such securities are
listed for, or have been delisted from, trading on a stock exchange,
including in connection with reporting and disclosure requirements,
including with respect to providing guidance regarding future
performance;
|
1.16.
|
Actions
in connection with financial statements of the Company and/or its
Subsidiaries and/or an Affiliate thereof, whether consolidated or
unconsolidated, audited and unaudited, restated or not restated, external
and internal financial reports and reporting systems and accounting and
audit policies, including the preparation and/or approval and/or signature
and/or presentation of such financial statements and/or reports to the
General Meeting of the Company and/or to stock exchanges on which the
Company’s securities are listed and/or to government agencies, including
the United States Securities and Exchange Commission and/or the Israeli
Securities Authority;
|
EXHIBIT 2 - page
3
1.17.
|
Actions
with respect to financial and accounting controls of the Company and/or
its Subsidiaries and/or an Affiliate thereof, including significant
deficiencies and/or material weaknesses in, and/or failure to maintain
adequate, internal accounting controls, including internal controls over
financial reporting;
|
1.18.
|
Actions
in connection with any non-disclosure and/or failure to disclose or file
any type of information within the period prescribed therefor by law, the
Company’s Articles of Association or otherwise and/or any misstatement or
misrepresentation of fact (whether contained in any representation,
opinion, prospectus, financial statement, filing and/or notice) to any
third party, including income tax, value added tax, social security,
national insurance, local, municipal, environmental protection and/or
securities authorities, insurers, the Israeli tax authorities, the Israeli
Investment Centre and Office of the Chief Scientist, the Israeli Registrar
of Companies, any stock exchange on which the Company’s securities are
registered, the Company’s security holders and any other governmental
entities or other institutions, including with respect to adverse event
reporting requirements;
|
1.19.
|
Actions
in connection with intellectual property of, or licensed by or to, the
Company, a Subsidiary or an Affiliate thereof, including assertion of
rights, registration or other protection thereof, licensing, distribution
and research and development with respect thereto, including all patent
and trade mark office prosecutions and other administrative and legal
proceedings in connection with
same;
|
1.20.
|
Actions
in connection with infringement and/or invalidity of intellectual property
rights, whether of the Company, a Subsidiary or an Affiliate thereof or of
others, including correspondence and other actions in connection therewith
and all patent and trademark office oppositions and other administrative
and legal proceedings in connection with same, including vis-à-vis
counterfeiting of products;
|
1.21.
|
Actions
in connection with risk management with respect to the Company, its
Subsidiaries and/or Affiliates, including in connection with negotiation
of, and application for, insurance policies of all kinds, self-insurance
and other interest, currency and/or credit default swap and other hedging
transactions, including instances of under-or over-insurance and/or
insurer denial and/or limitation of insurance
coverage;
|
1.22.
|
Actions
in connection with the investments of funds of the Company, a Subsidiary
or an Affiliate thereof and/or of pension, profit sharing, provident
(kupat gemel), deferred compensation, severance or study funds (keren
hishtalmut) or other funds for the benefit of the employees of
any of the Company, a Subsidiary and/or an Affiliate
thereof;
|
1.23.
|
Actions
in connection with expressions, statements and decisions made, and/or
resolutions adopted, by directors and other office holders of the Company,
a Subsidiary and/or an Affiliate thereof in their capacity as such,
including within the context of meetings of the board of directors and of
any of its committees or management meetings, and claims with respect to
the effect of such statements, decisions and/or resolutions, including
claims for libel and/or slander and/or claims to invalidate any such
decisions and/or resolutions;
|
EXHIBIT 2 - page
4
1.24.
|
Actions
in connection with the use, discharge, release or disposal by the Company,
a Subsidiary and/or an Affiliate thereof, or by any employee, agent,
contractor or other person acting, or allegedly acting, on behalf of any
of the foregoing, of hazardous and other materials (including noise) that,
and/or have the potential to, harm the environment and/or to pose a danger
to public health and/or constitute any kind of nuisance, whether any such
harm, danger or nuisance is immediate or long-term, including all
administrative and legal proceedings in connection with
same;
|
1.25.
|
Actions
in connection with the payment of taxes, customs duties, social security,
national insurance and similar mandatory payments (collectively, “Taxes”)
by, or on behalf of, the Company, a Subsidiary and/or an Affiliate
thereof, including the withholding and collection from third parties,
including suppliers, employees, contractors, consultants or freelancers,
of the amount of Taxes required to be withheld or collected therefrom and
the payment of same to the proper governmental entity, including the
Israeli Tax authorities and the United States Internal Revenue
Service;
|
1.26.
|
Actions
in connection with the transfer, sale, acquisition or leasing of assets
by, or on behalf of, the Company, a Subsidiary and/or an Affiliate
thereof, including real property and/or any and all rights therein, and
all matters relating to the planning, construction, renovation and/or
maintenance thereof, including obtaining and maintaining applicable
approvals and permits;
|
1.27.
|
Actions
affecting the Company, a Subsidiary and/or an Affiliate thereof in the
areas of restrictive trade practices, anti-trust, mergers, acquisitions,
competition, including all administrative and legal proceedings regarding
same;
|
1.28.
|
Actions
surrounding the loss by the Company, a Subsidiary and/or an Affiliate
thereof of, or delays in benefiting from any, acquisition synergies,
concessions, brands, exclusivity rights, manufacturing, distribution
and/or marketing rights, including failure to meet deadlines with respect
to the marketing of products so as to establish or maintain marketing
exclusivity for such product and the closing down of any portion of the
business and/or operations of the Company, a Subsidiary and/or an
Affiliate thereof;
|
1.29.
|
Actions
surrounding the political, economic and security conditions in Israel as
such may affect the Company’s principal offices and significant
manufacturing and research and development facilities, including the
possibility of terrorist or hostile military action that materially harms
the business of the Company, a Subsidiary and/or an Affiliate
thereof.
|
1.30.
|
Actions
in connection with the Memorandum and/or Articles of Association of the
Company, a Subsidiary and/or an Affiliate
thereof;
|
EXHIBIT 2 - page
5
1.31.
|
Actions
in connection with distributions, as defined in the Israeli Companies Law,
5759-1999 (“the Companies Law”), of the Company, a Subsidiary and/or an
Affiliate thereof;
|
1.32.
|
Actions
taken by the board of directors with respect to tender offers, including
special purchase offers, as defined under the Companies Law, to
shareholders of the Company, including with respect to opinions given by
the board of directors, and/or opinions the board of directors abstains
from providing, pursuant to the Companies
Law;
|
1.33.
|
Actions,
claims and proceedings, including class actions brought with respect to
any of the foregoing events in this paragraph 1 above, whether or not
such actions, claims and proceedings are covered by insurance, including
all pending actions, claims and proceedings to which the Company, a
Subsidiary and/or an Affiliate thereof is a party and to which you are a
party or to which you become a
party;
|
1.34.
|
Any
and all references in this paragraph 1 above to (a) “Actions” or
“actions” shall be construed to include omissions and/or oral and/or
written statements (whether such actions and/or statements (and/or
omissions) occur within, and/or outside of, Israel); (b) “Actions” or
“actions” taken by the board of directors of the Company shall be
construed to include “Actions” or “actions” taken by any committee
thereof; and (c) “includes” or “including” shall be
construed as “includes without limitation” or “including without
limitation” (as applicable); and
|
1.35.
|
For
the avoidance of doubt, the foregoing events in this paragraph 1
above represent events that in the opinion of the board of
directors are to be expected in the light of the Company’s actual
activities on the date of the Exemption and Indemnification Agreement with
you to which this Appendix A forms an integral
part.
|
2.
|
The
total amount of indemnification for each case (including all matters
connected therewith), shall not exceed US $10,000,000 (in addition to
any amounts paid under an insurance
coverage).
|