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CELLCOM ISRAEL LTD.

 

NOTICE OF THE 2017 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

Notice is hereby given that the 2017 Annual General Meeting of Shareholders (the “Meeting”) of Cellcom Israel Ltd. (the “Company”) will be held on Wednesday, November 29, 2017, at 4:00 p.m. (Israel time), at the offices of the Company, 10 Hagavish Street, Netanya, Israel, for the following purposes:

 

(1-3)

re-election of Mauricio Wior, Shlomo Waxe and Ephraim Kunda as directors;

 

(4)

amendment of the Company’s Compensation Policy;

 

(5)

approval of Annual Cash Bonus formula for the Company's CEO;

 

(6)

approval of Special Cash Bonus for the Company's CEO;

 

(7)

reappointment of Somekh Chaikin, a member of KPMG International as our independent auditors; and

 

(8)

consideration of our audited financial statements for the year ended December 31, 2016.

 

Shareholders of record at the close of business on Monday, October 30, 2017 (the “Record Date”) are entitled to notice of, and to vote at, the Meeting. All shareholders are cordially invited to attend the Meeting in person.

 

Proxies are being mailed to shareholders registered with our U.S. transfer agent (including those who hold shares via participants of the Depository Trust Company other than the TASE Clearinghouse). 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.

 

If a shareholder’s shares are held through a member of the Tel Aviv Stock Exchange ("TASE") for trading thereon, such shareholder may vote in person or via proxy at the meeting or by delivering or mailing (via registered mail) his, her or its completed Hebrew written ballot (in the form filed by the Company via the MAGNA online platform ("MAGNA") of the Israel Securities Authority ("ISA")) to the offices of the Company at the address set forth above, Attention: Liat Menahemi Stadler, VP Legal and Corporate Secretary. Voting at the meeting or by way of a written ballot requires a proof of ownership (ishur baalut), as of the Record Date, issued by that TASE member.  Alternatively, shares held via a TASE member may be voted electronically via the ISA's electronic voting system, up to six hours before the time fixed for the Meeting. Shareholders should receive instructions about electronic voting from the TASE member through which they hold their shares.

 

Shareholders who attend the Meeting may revoke their proxies and vote their shares in person.

 

Joint holders of shares should take note that, pursuant to Article 31(d) of the Articles of Association of the Company, the vote of the most senior of such joint holders who tenders a vote, in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s).  For this purpose, seniority will be determined by the order in which the names stand in the Company’s Register of Members.

 

 

Dated:  October 19, 2017

 

CELLCOM ISRAEL LTD.

10 Hagavish Street

Netanya, Israel

 

PROXY STATEMENT

 

This Proxy Statement is furnished to the holders of Ordinary Shares, par value NIS 0.01 per share (the “Ordinary Shares”), of Cellcom Israel Ltd. (the “Company”) in connection with the solicitation by the Board of Directors of proxies for use at the 2017 Annual General Meeting of Shareholders (the “Meeting”), or at any adjournment thereof, pursuant to the accompanying Notice of the 2017 Annual General Meeting of Shareholders. The Meeting will be held on Wednesday,  November 29, 2017, at 4:00 p.m. (Israel time), at the offices of the Company, 10 Hagavish Street, Netanya, Israel.

 

The agenda of the Meeting will be as follows:

 

(1-3)

re-election of Mauricio Wior, Shlomo Waxe and Ephraim Kunda as directors;

 

(4)

amendment of the Company’s Compensation Policy;

 

(5)

approval of Annual Cash Bonus formula for the Company's CEO;

 

(6)

approval of Special Cash Bonus for the Company's CEO;

 

(7)

reappointment of Somekh Chaikin, a member of KPMG International as our independent auditors; and

 

(8)

consideration of our audited financial statements for the year ended December 31, 2016.

 

The Company currently is not aware of any other matters that will come before the Meeting.  If any other matters properly come before the Meeting, the persons designated as proxies may vote in accordance with their judgment on such matters. As more fully described in the Proxy Statement, shareholders may present proposals for consideration at the Meeting by submitting their proposals to the Company no later than October 26, 2017.

 

A form of proxy for use at the Meeting is enclosed. Unless otherwise indicated on the form of proxy, Ordinary Shares represented by any proxy in the enclosed form will be voted in favor of all the matters to be presented at the Meeting, as described above. To be valid, a proxy must be properly executed and received by the Company not less than 72 hours prior to the time scheduled for the Meeting, unless a shorter period is determined by the chairman of the Meeting.

 

If a shareholder’s shares are held through a TASE member for trading thereon, such shareholder may vote in person or via proxy at the meeting or by delivering or mailing (via registered mail) his, her or its completed Hebrew written ballot (in the form filed by the Company via MAGNA) to the offices of the Company at the address set forth above, Attention: Liat Menahemi Stadler, VP Legal and Corporate Secretary. Voting at the meeting or by way of a written ballot requires a proof of ownership (ishur baalut), as of the Record Date, issued by that TASE member. Alternatively, shares held via a TASE member may be voted electronically via the ISA's electronic voting system, up to six hours before the time fixed for the Meeting. Shareholders should receive instructions about electronic voting from the TASE member through which they hold their shares.

 

Shareholders may revoke the authority granted by their execution of proxies by delivering to the Company a written notice of revocation or duly executed proxy bearing a later date, provided such revocation notice or later-dated proxy is received prior to the above deadline, or by voting in person at the Meeting. On all matters considered at the Meeting, abstentions and broker non-votes will be treated as neither a vote “for” nor “against” the matter, although they will be counted in determining whether a quorum is present.

 

Proxies for use at the Meeting are being solicited by the Board of Directors of the Company.  Only shareholders of record at the close of business on Monday, October 30, 2017 (the "Record Date") will be entitled to vote at the Meeting. Proxies are being mailed to shareholders registered with our U.S. transfer agent (including those who hold shares via participants of the Depository Trust Company other than the TASE Clearinghouse) on or about November 2, 2017 and will be solicited mainly by mail. However, certain officers, directors, employees and agents of the Company, none of whom will receive additional compensation therefor, may solicit proxies by telephone, e-mail or other personal contact.  The Company will bear the cost for 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.

 

On September 30, 2017, 100,641,612 Ordinary Shares were outstanding. Subject to the voting restrictions described below, each Ordinary Share is entitled to one vote upon each of the matters to be presented at the Meeting. Two or more shareholders holding in the aggregate at least one-third of the outstanding voting power in the Company, present in person or by proxy and entitled to vote, will constitute a quorum at the Meeting.

Voting Restrictions under our Telecommunications Licenses

 

We provide our cellular services under a non-exclusive general license granted to us by the Ministry of Communications of the State of Israel.  We also hold several other licenses for the provision of certain telecommunications services. According to our licenses, investors are prohibited from acquiring or transferring (alone or together with relatives or with other parties who collaborate on a regular basis) our Ordinary Shares, directly or indirectly (including by way of creating a pledge which if foreclosed, would result in the transfer of shares), in one transaction or a series of transactions, if such acquisition or transfer will result in a holding or transfer of 10% or more of any of our means of control, or from transferring any of our means of control if as a result of such transfer control over our Company will be transferred from one party to another, without the prior approval of the Ministry of Communications. In addition, according to our licenses, if you hold more than 5% of our means of control, you may not (i) hold, directly or indirectly, more than 5% of the means of control in Bezeq – The Israeli Telecommunications Corporation Ltd., or Bezeq, which is the incumbent landline operator in Israel, or in another cellular operator in Israel (subject to certain exceptions), (ii) serve as an office holder of one of our competitors, other than in specific circumstances and subject to the approval of the Ministry of Communications, or (iii) be party to any arrangement whatsoever with Bezeq or another cellular operator that is intended or is likely to restrict or harm competition in Israel in the field of cellular services, cellular handsets or other services provided through the cellular network. For more details relating to these restrictions, please see “Item 4.B – Business Overview – Government Regulations – Cellular Segment - Our Cellular License”  of our Annual Report for 2016 on Form 20-F, filed with the U.S. Securities and Exchange Commission (the "SEC") on March 20, 2017, or our 2016 Annual Report, and our principal license, a convenience English translation of which is an exhibit to our Annual Reports. The holding and transfer restrictions under our licenses are posted on our website at http://investors.cellcom.co.il under “Investor Relations – Corporate Governance - Legal & Corporate.”

 

As required under our license, our Articles of Association provide that any holdings of our Ordinary Shares that contravene the holding or transfer restrictions contained in our licenses will not entitle the holder thereof to voting rights. In addition, our licenses and our Articles of Association require that as a condition to voting by any shareholders, in person or by proxy, at any meeting of our shareholders, such shareholder must certify whether or not his, her or its holdings of our Ordinary Shares contravene any of the restrictions contained in our licenses.

 

The enclosed form of proxy includes a box to mark to confirm that your holdings of our Ordinary Shares do not contravene any of the holding or transfer restrictions set forth in our licenses.  If you do not mark this box, your vote will not be counted.  If only a portion of your holdings of Ordinary Shares so contravenes, you may be entitled to vote the portion that does not contravene. In that case, please contact the Company's VP Legal at +972-52-998-9595 for instructions on how to vote your non-contravening Ordinary Shares or, if you hold your shares in "street name", you may ask the representative managing your account to contact the Company on your behalf.

 

Currency

 

Our financial statements are denominated in New Israeli Shekels ("NIS"). On September 30, 2017, the representative rate of exchange published by the Bank of Israel was NIS 3.529 to US$ 1.00.

 

Share Ownership

 

Unless specified otherwise, the following table sets forth information regarding beneficial ownership of our shares as of September 30, 2017, by each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of our outstanding shares.

 

In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes any shares issuable pursuant to options that are exercisable within 60 days of September 30, 2017. Any shares issuable pursuant to options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person. The percentage of beneficial ownership for the following table is based on 100,641,612 ordinary shares outstanding as of September 30, 2017. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, our major shareholders do not have different voting rights and the persons named in the table have sole voting and investment power with respect to all ordinary shares held by them.

 

		Shares Beneficially Owned
Name of Beneficial Owner		Number				Percent
Koor Industries  Ltd., or Koor*			45,926,502				45.65	%
Psagot Investment House Ltd.**			7,111,029				7.07	%
Clal Insurance Enterprises Holdings Ltd., or Clal***			5,095,543				5.06	%
Directors and executive officers as a group (17 persons)****			1,306,647				1.3	%

*

In September 2017, our shares held by Discount Investment Corporation Ltd., or DIC (as well as DIC's holdings in a wholly owned subsidiary which also holds our shares (namely, DIC Communication and Technology Ltd., or DICC, an Israeli company)), were transferred to Koor.  Koor is a private company, wholly owned by DIC.  DIC, a public Israeli company traded on the Tel Aviv Stock Exchange, is owned 70.76% by IDB Development Corporation Ltd., or IDB.

 

Koor's holdings include 30,325,647 ordinary shares held by Koor directly, 12,188,355 ordinary shares held by DICC, a wholly-owned subsidiary of Koor, and 3,412,500 ordinary shares (representing approximately 3.39% of our issued and outstanding shares) held by a few shareholders whose voting rights are vested in Koor. Does not include (1) the holdings of Clal, which is a subsidiary of IDB, noted separately in the table, and (2) 624,175 ordinary shares (representing approximately 0.62 % of our issued and outstanding shares) held as of that date for members of the public through, among others, provident funds, mutual funds, pension funds, insurance policies and unaffiliated third-party client accounts, which are managed by subsidiaries of DIC. DIC has directly appointed one director in our company pursuant to our cellular license and our articles of association.

 

Approximately 70.65% of DIC's outstanding shares have been pledged by IDB as collateral to secure its TASE-listed debentures issued in November 2016.

 

Based on the foregoing, DIC (by reason of its control of Koor), IDB (by reason of its control of DIC), companies controlled by Eduardo Elsztain (as described above), and Eduardo Elsztain may be deemed to share with Koor the power to vote and dispose of our shares beneficially owned by Koor. Each of these entities (other than DIC and Koor) and persons disclaims beneficial ownership of such shares, and all of these entities and persons disclaim beneficial ownership of our shares held under management of subsidiaries of IDB for others.

 

According to the Concentration Law, IDB and DIC may not retain control over our company beyond December 2019 so long as we are a third layer company in their pyramidal structure.  IDB has announced that after reviewing possible ways to deal with this restriction, IDB has entered into a term sheet for the sale of its holdings in DIC to a private company controlled by IDB's controlling shareholder, subject to the fulfilment of certain conditions and approvals, by December 2017. There can be no assurance of how or when this would occur, if at all. For information about the Concentration Law, see our 2016 Annual Report under "Item 3.D - legislation in Israel affecting corporate conglomerates could adversely affect us."

 

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

 

For information relating to the compensation of our five most highly compensated office holders with respect to the year ended December 31, 2016, please see "Item 6. Directors, Senior Management and Employees – B. Compensation – Executive Officer and Director Compensation" in our 2016 Annual Report.

 

AGENDA OF THE 2017 ANNUAL GENERAL MEETING

 

Items 1 - 3 – Re-election of Directors

 

Our Board of Directors is currently comprised of six directors - Ami Erel (Chairman), Mauricio Wior (Vice Chairman), Shlomo Waxe, Ephraim Kunda, Ronit Baytel and Joseph Barnea.

 

At the Meeting, the shareholders will be asked to re-elect each of Mauricio Wior, Shlomo Waxe and Ephraim Kunda to our Board of Directors to serve until the next Annual General Meeting or their earlier resignation or removal from this office.

 

Mr. Mauricio Wior was appointed as a member of our Board of Directors and Vice Chairman by our Board of Directors as of January 2017 and until our 2017 annual meeting of shareholders.

 

Mr. Shlomo Waxe and Mr. Efraim Kunda have been designated as "independent directors" under the Israeli Companies Law, 1999 (the "Companies Law"). Mr. Shlomo Waxe is currently serving his twelfth year as a director. Our Audit Committee and our Board of Directors have recommended the re-election of Mr. Waxe as an independent director for an additional term until our next annual general meeting of shareholders due to Mr. Waxe's expertise and extensive and in-depth knowledge and familiarity with the communications field (both its technical and regulatory aspects), his business experience (as summarized below) and his knowledge of the Company.  In light of Mr. Waxe's significant contributions to the Company over the past eleven years, specifically with regards to major decisions made by the Company regarding its technological capabilities as well as the day-to-day technological aspects of our operation, the Audit Committee and Board of Directors believe that Mr. Waxe's continued service as a director is in the best interests of the Company.

 

Mr. Shlomo Waxe and Mr. Efraim Kunda qualify as “independent directors” under the rules of the U.S. Sarbanes-Oxley Act of 2002 (the "Sarbanex-Oxley Act") applicable to audit committee members and under the rules of the New York Stock Exchange. These nominees have been approved by our Board of Directors.

 

If elected, each nominee will be entitled to remuneration equal to that paid to our external directors, in accordance with the regulations promulgated under the Companies Law, as approved by the Company's compensation committee, board of directors and shareholders in January 2017. Specifically, each of our external directors is paid the maximum amount of compensation payable to an external director of a dual-listed company under the applicable law and regulations, which is in the amount of NIS 134,180 per year and NIS 4,035 per meeting which such external director attends (including meetings of committees of the Board of Directors), adjusted for changes in the Israeli Consumer Price Index for October 2015. In addition, if elected, each nominee will be entitled to the same insurance, indemnification and exculpation arrangements as currently in effect for the Company’s directors based on the Company's compensation policy, as approved by the Company's compensation committee, board of directors and shareholders in January 2017.

 

Our statutory external directors, Ronit Baytel and Joseph Barnea, were reelected in June 2017 for an additional term until the Company's 2018 Annual General Meeting.

 

Our cellular license (as amended in January 2017) requires that at least 10% of our directors will be appointed and removed by shareholders who are Israeli citizens and Israeli residents from among our founding shareholders. If our Board of Directors is comprised of 14 directors or less, these Israeli shareholders will appoint one director, and if our Board of Directors is comprised of between 15 and 24 directors, these Israeli shareholders will appoint two directors. Our Articles of Association provide that DIC, as our founding shareholder, is responsible for complying with the requirement under our cellular license that Israeli citizens and residents from among our founding shareholders hold at least a certain percentage of our outstanding shares, and that so long as DIC so complies, it will be entitled to appoint and remove these directors. Accordingly, as its appointee to our Board of Directors, DIC designated Ami Erel, our Chairman, in September 2014, for an indefinite period, and his appointment as our director does not require approval of the shareholders at the Meeting.

 

 

 A brief biography of each nominee is set forth below:

 

Mauricio Wior has served as our Vice Chairman of our Board of Directors since January 2017. Mr. Wior has served as Deputy Chairman of the Board of Directors of Shufersal Ltd. and of Israir Aviation and Tourism Ltd. since 2016, a member of the board of directors of IRSA Inversiones y Representaciones Sociedad Anónima, IDB's controlling shareholder, since 2006, a member of the board of directors of Banco Hipotecario in Argentina, a substitute director in DIC, the Company's controlling shareholder, since 2014 and a member of the board of directors of additional private companies in Argentina. From 1990 to 2005, Mr. Wior served as the Chairman and CEO of cellular operators in Argentina, Uruguay, Chile, Ecuador, Peru and Venezuela, and as a senior executive of BellSouth Telecommunications, LLC. Mr. Wior holds a B.A in finance and accounting and an M.B.A. in business management, both from Tel Aviv University.

Shlomo Waxe has served as a member of our Board of Directors since 2006.  Mr. Waxe served as Director General of the Israel Association of Electronics and Software Industries from 2006 to 2016.  From 2002 to 2005, he worked in the field of communications management and consultancy.  From 1999 to 2001, he served as Chief Executive Officer of Zeevi Communications Ltd.  From 1997 to 1999, he served as a consultant to cellular communications projects in Sao Paulo, Brazil and in Northeast Brazil.  From 1993 to 1997, he served as the Director General of Israel’s Ministry of Communications.  From 1990 to 1993, he served as commanding officer of the signal, electronics and computer corps of the Israel Defense Forces and he is a retired brigadier general. Mr. Waxe also serves as a member of the boards of directors of C. Mer Industries Ltd. and until 2009, served as a board member of Shrem, Fudim – Technologies Ltd. and until May 2012, served as a board member of Tambour Ltd. Mr. Waxe holds a B.A. in political science from the University of Haifa.

Ephraim Kunda has served as a member of our Board of Directors since 2010. Mr. Kunda is an Israeli businessman and is the owner and managing director of a private consulting company that provides economic consultancy and business mediation services. From 2007 to 2010, Mr. Kunda has served as the Chairman of the board of directors and since 2010 as a member of the board of directors of Ravad Ltd., a public real estate investment company.  From 2003 to 2007, Mr. Kunda served as an external director of Property and Building Corporation Ltd., a public real estate company that is a member of the IDB group. Mr. Kunda holds a B.A. in economics from Tel Aviv University.

 

 

The affirmative vote of the holders of a majority of the voting power in the Company present at the Meeting, in person or by proxy, and voting on the matter, is required for the approval of the re-election of the directors set forth above.

 

 

It is proposed that at the Meeting the following resolutions be adopted:

 

1. "RESOLVED, that Mauricio Wior be re-elected to the Board of Directors of the Company, effective immediately until the Company's 2018 Annual General Meeting."

 

2. "RESOLVED, that Shlomo Waxe be re-elected to the Board of Directors of the Company, effective immediately until the Company's 2018 Annual General Meeting."

 

3. "RESOLVED, that Ephraim Kunda be re-elected to the Board of Directors of the Company, effective immediately until the Company's 2018 Annual General Meeting."

 

The Board of Directors recommends a vote FOR approval of the proposed resolutions.

 

 

Item 4 - Amendment of the Company’s Compensation Policy

 

 According to the Israeli Companies Law, or the Companies Law, a public company must adopt a compensation policy, recommended by the compensation committee and approved by the board of directors and the shareholders, in that order. The Company's Compensation Policy for Executive Officers and Directors, or the Compensation Policy, was so approved in January 2017.

 

In general, all office holders’ terms of compensation – including fixed remuneration, bonuses, equity compensation, retirement or termination payments, indemnification, liability insurance and the grant of an exemption from liability – must comply with the company's compensation policy.

 

In addition, the compensation terms of directors, the chief executive officer, and any employee or service provider who is considered a controlling shareholder, generally must be approved separately by the compensation committee, the board of directors and the shareholders of the company (by a special majority), in that order. The compensation terms of other officers require the approval of the compensation committee and the board of directors.

 

In October 2017, our Board of Directors approved, following the recommendation of our Compensation Committee, amendments to the Compensation Policy. Under the amendments and subject to further approvals required by law (as detailed above), the Company may (1) provide its executive officers a special cash bonus for outstanding achievements or efforts, such as the accomplishment of a special business endeavor in relation to a unique or extraordinary business activity or other special circumstances, in advancement of the Company's goals; and/ or (2) pay the statutory director's fee to a director nominated or appointed by our controlling shareholder, who does not hold an active role in the Company, directly to such director as an alternative to paying such fee to our controlling shareholder under our management agreement with our controlling shareholder, if such agreement is in effect. The amended Compensation Policy is attached hereto as Appendix A. The words proposed to be added are highlighted in boldface font and underlined and the words proposed to be deleted are indicated by strikethrough.

 

At the Meeting, shareholders will be asked to approve the amended Compensation Policy, attached hereto as Appendix A, for a period of three years commencing on the date of the Meeting.

 

 

The approval of the amended Compensation Policy requires the affirmative vote of the holders of a majority of the voting power in the Company present, in person or by proxy, and voting on the matter, provided that either (i) at least a majority of the shares of non-controlling shareholders and shareholders who do not have a personal interest in the approval of the amended Compensation Policy voted at the meeting vote in favor of the approval of the amended Compensation Policy; or  (ii) the total number of shares among the shareholders described in clause (i) above voted against the approval of the amended Compensation Policy does not exceed 2% of the aggregate voting rights in the Company. Koor is deemed to be a controlling shareholder of the Company. According to the Companies Law, a “personal interest” of a shareholder (i) includes a personal interest of any members of the shareholder’s family (or spouses thereof) or a personal interest of a company with respect to which the shareholder (or such family member) serves as a director or the CEO, owns at least 5% of the shares or has the right to appoint a director or the CEO and (ii) excludes an interest arising solely from the ownership of our Ordinary Shares.  Our officers and directors are deemed to have a personal interest in this matter. To avoid confusion, in the form of proxy card, we refer to such a personal interest as a "personal benefit or other interest".

 

 

It is proposed that at the Meeting the following resolution be adopted:

 

“RESOLVED, that the Company’s amended Compensation Policy, attached as Appendix A to this proxy statement, is hereby approved for a period of three years commencing on the date of the Meeting.”

 

The Board of Directors recommends a vote FOR approval of the proposed resolution.

 

 

Item 5 – Approval of Annual Cash Bonus formula for the Company's CEO

 

Under the Company's Compensation Policy, the Annual Cash Bonus payout for the Company's executive officers is determined based on actual performance of the Company and the executive officer in question (after elimination of material one-time and reevaluation influences), in each of the performance objectives set for each executive officer, measured based on a performance matrix. The Compensation Policy sets the following objectives and weights for the Company's Chief Executive Officer: corporate performance objectives – 80% of the overall performance score, and qualitative individual performance objectives – up to 20%.

 

To date, Mr. Nir Sztern, our CEO's annual cash bonus payout was in accordance with his employment agreement, which preceded the initial adoption of our Compensation Policy and entitled  Mr. Sztern  to an annual bonus equal to nine months' salary, which increased or decreased in proportion to our annual EBITDA, with a minimum of six months' salary and a maximum of 15 months' salary, linked to the Israeli CPI, in respect of which no social benefits were paid or accrued. Mr. Sztern's annual bonus for 2016 amounted to approximately NIS 1.04 million. As of 2017, Mr. Stern shall be entitled to an annual target bonus of 10 monthly salaries, which shall increase or decrease (with no minimum bonus guaranteed) in proportion to his performance score in comparison to the combined performance target, as outlined in our Compensation Policy (attached hereto as Appendix A) and subject to the approval of the proposed CEO Annual Cash Bonus Formula. For additional information about Mr. Sztern's compensation package, see Item 6 below.

 

In October 2017, the Company's Board of Directors approved, following the approval of the Company's Compensation Committee, an Annual Cash Bonus formula for our CEO under the Compensation Policy, commencing as of 2017, setting the corporate performance objective to be the Company's EBITDA target for the relevant year and its weight out of the overall performance score to be 80%, while the weight of the individual performance objectives will be 20%.  The annual individual performance objectives and the extent to which they were satisfied by the CEO each year will be determined by the Company's Compensation Committee and Board of Directors (the "CEO's Annual Cash Bonus Formula").

 

At the Meeting, shareholders will be asked to approve the CEO's Annual Cash Bonus Formula commencing as of 2017 and until resolved otherwise.

 

 

The approval of the CEO's Annual Cash Bonus Formula requires the affirmative vote of the holders of a majority of the voting power in the Company present, in person or by proxy, and voting on the matter, provided that either (i) at least a majority of the shares of non-controlling shareholders and shareholders who do not have a personal interest in the approval of the CEO's Annual Cash Bonus Formula voted at the meeting vote in favor of the approval of the CEO's Annual Cash Bonus Formula; or  (ii) the total number of shares among the shareholders described in clause (i) above voted against the approval of the CEO's Annual Cash Bonus Formula does not exceed 2% of the aggregate voting rights in the Company. Koor is deemed to be a controlling shareholder of the Company, and our CEO has a personal interest in this proposal. For information regarding personal interests under the Companies Law and related voting procedures, please see Item 4 above, under the caption "Required Approval".

 

 

It is proposed that at the Meeting the following resolution be adopted:

 

“RESOLVED, that the CEO's Annual Cash Bonus Formula commencing as of 2017, is hereby approved.”

 

The Board of Directors recommends a vote FOR approval of the proposed resolution.

 

 

Item 6 - Approval of Special Cash Bonus for the Company's CEO

 

In April 2017, the network sharing agreement the Company entered with Electra Consumer Products Ltd., or Electra (and applied to Golan Telecom, when owned by Electra), in January 2017, came into effect upon the consummation of Electra's acquisition of Golan. This agreement was the beneficial result of protracted and relentless efforts to secure such a long-term agreement and revenues to the Company, commencing with preventing Golan from transferring its business to another operator, through facilitating the purchase of Golan's share capital by a third party, negotiating and entering a network sharing agreement with Marathon 018 Xfone Ltd. and another with Electra, which simultaneously entered an agreement to purchase Golan's share capital, overcoming obstacles and obtaining the regulators' approvals.

 

Under the Golan network sharing agreement, the Company is entitled to payments exceeding NIS 2 billion over the next 10 years. In recognition of the Company's CEO Mr. Sztern's central role in pursuing and obtaining this agreement and securing such payments to benefit the Company and increase its value, in recognition of the special and continued efforts of Mr. Sztern in leading the Company through challenges and fierce competition in all aspects of its operation, in maintaining its leading position in the cellular market and substantially increase its stake in the landline market, specifically in the wholesale landline market and TV services, and strengthening its position as a leading communications group, in October 2017  Board of Directors approved, following the approval of the Company's Compensation Committee, a special cash bonus to Mr. Sztern, in the amount of NIS 1,100,000 (the "Special Cash Bonus"), subject to the proposed amendment to our Compensation Policy (as described in Item 4 above), and after confirming that such Special Cash Bonus, as well as Mr. Sztern's total compensation package, subject to the approval of the proposed CEO Annual Cash Bonus Formula (as described in Item 5 above), is in accordance with our amended Compensation Policy. In approving the aforesaid, our Compensation Committee and Board of Directors reviewed peer group analysis of special bonus payments granted to other CEOs and concluded that Mr. Sztern's proposed Special Cash Bonus is reasonable.

 

 

At the Meeting, shareholders will be asked to approve the Special Cash Bonus for the Company's CEO.

 

 

The approval of the Special Cash Bonus for the Company's CEO requires the affirmative vote of the holders of a majority of the voting power in the Company present, in person or by proxy, and voting on the matter, provided that either (i) at least a majority of the shares of non-controlling shareholders and shareholders who do not have a personal interest in the approval of the Special Cash Bonus for the Company's CEO voted at the meeting vote in favor of the approval of the Special Cash Bonus for the Company's CEO; or  (ii) the total number of shares among the shareholders described in clause (i) above voted against the approval of the Special Cash Bonus for the Company's CEO does not exceed 2% of the aggregate voting rights in the Company. Koor is deemed to be a controlling shareholder of the Company, and our CEO has a personal interest in this proposal. For information regarding personal interests under the Companies Law and related voting procedures, please see Item 4 above, under the caption "Required Approval".

 

 

It is proposed that at the Meeting the following resolution be adopted:

 

“RESOLVED, that the Special Cash Bonus for the Company's CEO, is hereby approved.”

 

The Board of Directors recommends a vote FOR approval of the proposed resolution.

 

 

Item 7 – Re-appointment of Independent Auditors

 

In 2016, our Annual General Meeting of shareholders appointed Somekh Chaikin, a member of KPMG International, and Keselman & Keselman, a member of PricewaterhouseCoopers International Limited, both independent certified public accountants in Israel, as our joint independent auditors until the 2017 Annual General Meeting. As previously reported, in July 2017 Keselman & Keselman concluded serving as the Company’s joint independent registered public accounting firm. At the Meeting, pursuant to the recommendation of our audit committee, the shareholders will be asked to approve the re-appointment of Somekh Chaikin as our independent auditor until the 2018 Annual General Meeting.

 

A representative of the Somekh Chaikin will be present at the Meeting and will be available to respond to appropriate questions from the shareholders.

 

In accordance with our Articles of Association and as contemplated by the U.S. Sarbanes-Oxley Act, our board of directors has delegated to our audit committee the authority to fix the fees paid to our independent auditors. Such fees paid to our independent auditors for the past fiscal year are disclosed under Item 16C of our 2016 Annual Report and we will report them to the shareholders at the Meeting, as well.

 

 

The affirmative vote of the holders of a majority of the voting power in the Company present at the Meeting, in person or by proxy, and voting on the matter is required for the approval of the proposed resolution in this matter.

 

 

It is proposed that at the Meeting the following resolution be adopted:

 

“RESOLVED, that Somekh Chaikin be re-appointed as the independent auditor of the Company until the Company's 2018 Annual General Meeting.”

 

The Board of Directors recommends a vote FOR approval of the proposed resolution.

 

Item 8 - Consideration of the 2016 Financial Statements

 

Our audited financial statements for the year ended December 31, 2016 are included in our 2016 Annual Report. You may read and copy this report without charge at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549.  Copies of such material may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates.  Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.  Our SEC reports are also available to the public on the SEC's website at http://www.sec.govand on our website at http://investors.ircellcom.co.il/sec.cfm. These reports are not a part of this Proxy Statement.  We will hold a discussion with respect to the financial statements at the Meeting.

 

PROPOSALS OF SHAREHOLDERS

 

Any shareholder of the Company who intends to present a proposal at the 2017 Annual General Meeting of Shareholders must satisfy the requirements of the Companies Law. Under the Companies Law, only shareholders who severally or jointly hold at least 1% of the Company’s outstanding voting rights are entitled to request that the Board of Directors include a proposal in a shareholders meeting, provided that such proposal is appropriate for consideration by shareholders at such meeting. Such shareholders may present proposals for consideration at the Meeting by submitting their proposals in writing to our VP Legal and Corporate Secretary at the following address: Cellcom Israel Ltd., 10 Hagavish Street, Netanya 4250708, Israel, Attn.: Liat Menahemi Stadler, VP Legal and Corporate Secretary. For a shareholder proposal to be considered for inclusion in the Meeting, our VP Legal and Corporate Secretary must receive the written proposal no later than October 26, 2017. If our Board of Directors determines that a shareholder proposal is duly and timely received and is appropriate for inclusion in the agenda of the Meeting, we will publish a revised agenda for the Meeting no later than November 2, 2017.

POSITION STATEMENTS

In accordance with the Companies Law and regulations promulgated thereunder, any shareholder of the Company may submit to the Company a position statement on its behalf, expressing its position on an agenda item for the Meeting to 10 Hagavish Street, Netanya 4250708, Israel, Attn.: Liat Menahemi Stadler, VP Legal and Corporate Secretary no later than November 19, 2017 . Any position statement received will be filed on a Current Report on Form 6-K with the SEC and the ISA.

By Order of the Board of Directors,   Liat Menahemi Stadler VP Legal and Corporate Secretary

 

Dated: October 19, 2017

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Exemption from liability and liability insurance policy. Our articles of association allow us to exempt in advance a director and executive officer, or office holders, from liability to the company, in whole or in part, for a breach of his or her duty of care (except in connection with distributions) and we may enter into a contract for insurance against liability of any of our office holders with respect to certain breaches of his/her duties and certain financial liabilities and litigation expenses.

 

We maintain a liability insurance policy for the benefit of our office holders. Our directors and executive officers' coverage will not exceed US$100 million per claim in the aggregate, and additional reasonable expenses in connection with defending lawsuits, and the premium will not exceed US$ 1 million per annum in any renewal or extension or substitution of the policy and the deductible will not exceed US$ 0.5 million per claim. Any such renewal or extension or substitution of the liability insurance policy for the benefit of our office holders (including those who are or are related to controlling shareholders or in respect of whom our controlling shareholders have a personal interest, who shall be insured under identical terms) does not require a separate approval of the Company's shareholders, in addition to the approval of this compensation policy (which in itself requires approval once every three years) if our compensation committee resolves that such renewal or extension or substitution upholds the limitations set above.

 

Indemnification. Our articles of association provide that we may indemnify our office holders against certain financial liability and litigation expenses. We have undertaken to indemnify our office holders for certain events listed in the indemnification letters given to them. Excluding reasonable litigation expenses, as noted above, the aggregate amount payable to all directors and officers and other employees who may have been or will be given such indemnification letters is limited to the amounts we receive from our insurance policy plus 30% of our shareholders’ equity as of December 31, 2001, or NIS 486 million, and to be adjusted by the Israeli CPI. The approval of the compensation policy by our shareholders shall not be considered as approval of the indemnification amount to the Company's office holders (over the amounts received from the Company's insurance policy).

 

The above exemption, indemnification and insurance coverage, are subject to the limitations set in the Companies Law.