SOL-GEL TECHNOLOGIES LTD.
7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650, Israel
+972-8-931-3433
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 1, 2025
Dear Sol-Gel Technologies Ltd. Shareholders:
We cordially invite you to attend a Special Meeting of Shareholders, or the Meeting, of Sol-Gel Technologies Ltd., or the Company, to be held at 9:00 a.m. Eastern Time (4:00 p.m.
Israel time) on Tuesday, April 1, 2025 at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 919 Third Avenue, Floor 38, New York, NY 10022.
The Meeting is being called for the following purposes:
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(1)
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To approve a reverse share split of the Company’s ordinary shares, NIS 0.1 par value each (“Ordinary Shares”), at a ratio within a range of 2 for 1 to
10 for 1, which final ratio is to be determined by our Board of Directors, to be effective on a date to be determined by our Board of Directors within 12 months of the Meeting, and to approve the amendment of our Articles of Association
accordingly; and
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(2)
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To approve the renewal of an updated version of the Compensation Policy for the Company’s officers and directors for an additional three-year period in accordance with the requirements of
the Israeli Companies Law, 5759-1999, or the Companies Law.
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The Company is currently unaware of any other matters that may be raised at the Meeting. Should any other matters be properly raised at the Meeting, the persons designated as
proxies shall vote according to their own judgment on those matters.
Our Board of Directors recommends that you vote in favor of each of the above proposals, which are described in the attached Proxy Statement.
Shareholders of record at the close of business on Wednesday, February 19, 2025 are entitled to notice of and to vote at the Meeting.
Whether or not you plan to attend the Meeting, it is important that your shares be represented and voted at the Meeting. Accordingly, after reading the Notice of Special Meeting of
Shareholders and accompanying Proxy Statement, please mark, date, sign and mail the enclosed proxy or voting instruction form as promptly as possible. If voting by mail, the proxy must be received by Broadridge Financial Solutions, Inc. (“Broadridge”) or at our registered office not later than 11:59 p.m. Eastern Time on Monday, March 31, 2025 (6:59 a.m. Israel time on Tuesday, April 1, 2025), or such later deadline as may be indicated on the voting
instruction form or as the Chairman of the Meeting may determine to be validly included in the tally of Ordinary Shares voted at the Meeting. Detailed proxy voting instructions are provided both in the Proxy Statement and on the enclosed proxy card
and voting instruction form. Proxies may also be executed electronically via www.proxyvote.com by utilizing the control number sent to you. Shareholders who hold their shares in street name may be able to utilize the control number sent to them to
submit their voting instruction to their brokers, trustees or nominees by other means, if so indicated on their voting instruction form. An electronic copy of the enclosed proxy materials will also be available for viewing at http://ir.sol-gel.com/.
Sol-Gel Technologies Ltd.
SOL-GEL TECHNOLOGIES LTD.
7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650, Israel
+972-8-931-3433
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished in connection with the solicitation of proxies on behalf of the Board of Directors, or the Board, of Sol-Gel Technologies Ltd., which we
refer to as Sol-Gel or the Company, to be voted at a Special Meeting of Shareholders, or the Meeting, and at any adjournment thereof, pursuant to the accompanying Notice of Special Meeting of Shareholders. The Meeting will be held at 9:00 a.m.
Eastern Time (4:00 p.m. Israel time) on Tuesday, April 1, 2025 at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 919 Third Avenue, Floor 38, New York, NY 10022.
You are entitled to receive notice of, and to vote at, the Meeting, if you hold Ordinary Shares as of the close of business on Wednesday, February 19, 2025, the record date for the
Meeting. You can vote your shares by attending the Meeting or by following the instructions under “How You Can Vote” below. Our Board urges you to vote your shares so that they will be counted at the Meeting or at any postponements or adjournments of
the Meeting.
Agenda Items
The Meeting is being called for the following purposes:
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(1)
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To approve a reverse share split of the Company’s ordinary shares, NIS 0.1 par value each (“Ordinary Shares”), at a ratio within a range of 2 for 1 to
10 for 1, which final ratio is to be determined by our Board, to be effective on a date to be determined by our Board within 12 months of the meeting, and to approve the amendment of our Articles of
Association accordingly; and
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(2)
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To approve the renewal of an updated version of the Compensation Policy for the Company’s officers and directors for an additional three-year period in accordance with the requirements of
the Israeli Companies Law, 5759-1999, or the Companies Law.
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The Company is currently unaware of any other matters that will come before the Meeting. Should any other matters be properly presented at the Meeting, the persons designated as
proxies shall vote according to their own judgment on those matters.
Board Recommendation
Our Board recommends that you vote “FOR” each of the above
proposals.
Quorum
On Tuesday, February 18, 2025, we had 27,857,620 Ordinary Shares issued and outstanding. Each ordinary share outstanding as of the close of business on the record date, Wednesday,
February 19, 2025, is entitled to one vote upon each of the proposals to be presented at the Meeting. Under our Articles of Association, the Meeting will be properly convened if at least two shareholders attend the Meeting in person or sign and
return proxies, provided that they hold shares representing thirty three and one-third (33.33%) or more of our voting power. If a quorum is not present within half an hour from the time scheduled for the Meeting, the Meeting will be adjourned for one
week (to the same day, time and place), or to a day, time and place determined by the Board (which may be earlier or later than said time). At such adjourned meeting, the presence of any number of shareholders in person or by proxy (regardless of the
voting power represented by their shares) will constitute a quorum for the business which the original Special Meeting was called.
Vote Required for Approval of the Proposals
The affirmative vote of the holders of a majority of the voting power represented at the Meeting in person or by proxy and voting thereon (which excludes abstentions) is necessary
for the approval of each of the proposals. Apart from for the purpose of determining a quorum, broker non-votes will not be counted as present and are not entitled to vote.
In addition, the approval of proposal 2 requires that either of the following two voting requirements be met as part of the approval by an ordinary majority of shares present and
voting thereon:
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approval by a majority of the votes of shareholders who are not controlling shareholders and who do not have a personal interest in the approval of the proposal that are voted at the Meeting,
excluding abstentions; or
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the total number of shares held by non-controlling shareholders or anyone on their behalf who do not have a personal interest in the proposal (as described in the previous bullet-point) that
is voted against the proposal does not exceed two percent (2%) of the aggregate voting rights in our Company.
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For purposes of proposal 2, a “controlling shareholder” is any shareholder that has the ability to direct the Company’s activities (other than by means of being a director or other
office holder of the Company). A person is presumed to be a controlling shareholder if the person holds or controls, alone or together with others, one-half or more of any one of the “means of control” of the Company. “Means of control” is defined as
any one of the following: (i) the right to vote at a general meeting of the Company or (ii) the right to appoint directors of the Company or its chief executive officer.
A “personal interest” of a shareholder, for purposes of proposal 2, is (1) a shareholder’s personal interest in the approval of an act or a transaction of the Company, including
(i) the personal interest of any of his or her relatives (which includes for these purposes foregoing shareholder’s spouse, siblings, parents, grandparents, descendants, and spouse’s descendants, siblings, and parents, and the spouse of any of the
foregoing); (ii) a personal interest of a corporation in which a shareholder or any of his/her aforementioned relatives serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the
right to appoint a director or chief executive officer; and (iii) a personal interest of an individual voting via a power of attorney given by a third party (even if the empowering shareholder has no personal interest), and the vote of an
attorney-in-fact shall be considered a personal interest vote if the empowering shareholder has a personal interest, and all with no regard as to whether the attorney-in-fact has voting discretion or not, but (2) excludes a personal interest arising
solely from the fact of holding shares in the Company. A personal interest excludes a personal interest that does not derive from relationship with a controlling shareholder.
A controlling shareholder and a shareholder that has a personal interest are qualified to participate in the vote on each of the proposals; however, the vote of such
shareholders may not be counted towards the majority requirement described in the first bullet point above and will not count towards the 2% threshold described in the second bullet point above for the purposes of proposal 2.
If you believe that you, or a related party of yours, is a controlling shareholder or has such a personal interest and you wish to participate in the vote for
or against proposal 2, you should not vote by means of the enclosed proxy card or voting instruction form, or online at www.proxy.com, and you should instead contact our Vice President & General Counsel Tami Fishman Jutkowitz, at
tami.fishman@sol-gel.com, who will instruct you how to submit your vote or voting instructions. In that case, your vote will be counted towards or against the ordinary majority required for the approval of proposal 2, but will not be counted towards
or against the special majority required for approval of that proposal. If you hold your shares in “street name” (i.e., shares that are held through a bank, broker or other nominee) and believe that you are a controlling shareholder or possess a
personal interest in the approval of proposal 2, you may also contact the representative managing your account, who could then contact our Vice President & General Counsel on your behalf.
How You Can Vote
You can vote your shares by attending the Meeting or by completing and signing a proxy card or voting instruction form. If you are a shareholder of record, that is, your shares
are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, these proxy materials are being sent directly to you. The form of proxy card that has been sent to you can be completed, signed and returned in
the envelope that was enclosed with it, or executed electronically via www.proxyvote.com by utilizing the control number sent to you. This provides the primary means for authorizing the voting of your Ordinary Shares without attending the
Meeting in person. You may change your mind and cancel your proxy card by sending us written notice, by signing and returning a proxy card with a later date, or by voting in person or by proxy at the Meeting. We will not be able to count a proxy card
unless we receive it at our principal executive offices at 7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650, Israel, or Broadridge receives it in the enclosed envelope, not later than 11:59 p.m. Eastern Time on Monday, March 31, 2025
(6:59 a.m. Israel time on Tuesday, April 1, 2025), or such shorter period prior to the Meeting as the Chairman of the Meeting may determine.
If your Ordinary Shares are held in a brokerage account or by a trustee or nominee, you are considered to be the beneficial owner of shares held in “street name,” and these
proxy materials are being forwarded to you together with a voting instruction form by the broker, trustee or nominee or an agent hired by the broker, trustee or nominee. Please follow the instructions provided by your broker, trustee or nominee to
direct them how to vote your shares. Shareholders who hold their shares in street name may be able to utilize the control number appearing on their voting instruction form to submit their voting instruction to their brokers, trustees or nominees by
other means, if so indicated on their voting instruction form. All votes should be submitted by 11:59 p.m. Eastern Time on Monday, March 31, 2025 (6:59 a.m. Israel time on Tuesday, April 1, 2025), or such later deadline as may be indicated on the
voting instruction form, in order to be counted towards the tally of Ordinary Shares voted at the Meeting (unless the Chairman of the Meeting extends that deadline). Alternatively, if you wish to attend the Meeting and vote in person, you must obtain
a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Meeting.
If you provide specific instructions (by marking a box) with regard to the proposals, your shares will be voted as you instruct. If you sign and return your proxy card without
giving specific instructions with respect to a particular proposal, your shares may be voted in favor of the proposal, in accordance with the recommendation of the Board and to the extent permitted by law. However, if you are a beneficial owner of
shares and do not specify how you want to vote on your voting instruction form, your broker will not be permitted to instruct the depositary to cast a vote with respect to that proposal (commonly referred to as a “broker non-vote”). In that
circumstance, the shares held by you will be included in determining the presence of a quorum at the Meeting, but are not considered “present” for the purpose of voting on the relevant proposal. Such shares have no impact on the outcome of the voting
on such proposal. If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how your shares should be voted so that you thereby participate in the voting on
these important matters. In all cases, you must remember to contact the Company if you are a controlling shareholder or have a personal interest in the approval of proposal 2. If you sign and return your proxy card or voting instruction form, the
persons named as proxies will vote in their discretion on any other matters that properly come before the Meeting.
Who Can Vote
You are entitled to receive notice of the Meeting and to vote at the Meeting if you are a shareholder of record at the close of business on Wednesday, February 19, 2025. You are
also entitled to notice of the Meeting and to vote at the Meeting if you held Ordinary Shares through a bank, broker or other nominee that is one of our shareholders of record at the close of business on Wednesday, February 19, 2025, or which appear
in the participant listing of a securities depository on that date.
Revocation of a Proxy
Shareholders may revoke the authority granted by their execution of proxies at any time before the effective exercise thereof by filing with us a written notice of revocation or
duly executed proxy bearing a later date, or by voting in person at the Meeting.
Solicitation of Proxies
Proxies are being distributed to shareholders on or about Monday, February 26, 2025. Certain officers, directors, employees, and agents of the Company, none of whom will receive
additional compensation therefor, may solicit proxies by telephone, email, or other personal contact. We 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 shares.
Voting Results
The final voting results will be tallied by the Company’s Corporate Controller based on the information provided by the Company’s transfer agent or otherwise, and the overall
results of the Meeting will be published following the Meeting in a report on Form 6-K that will be furnished to the U.S. Securities and Exchange Commission, or the SEC.
Availability of Proxy Materials
Copies of the proxy card, the notice of the Meeting and this Proxy Statement are available at the “Investor Relations” portion of our Company’s website, http://ir.sol-gel.com/.
The contents of that website are not a part of this Proxy Statement.
APPROVAL OF A REVERSE SHARE SPLIT OF THE COMPANY’S ORDINARY SHARES
AND AMENDMENT TO THE ARTICLES OF ASSOCIATION ACCORDINGLY
Background Purpose and Effect of the Reverse Share Split
Our Board has recommended that our shareholders approve a reverse share split of the Ordinary Shares at a ratio in the range of 2 for 1 to 10 for 1 (the “Ratio Range”), which final ratio (the “Final Ratio”) is to be determined by the Board (the “Reverse Share Split”) to be effective on
a date to be determined by our Board and to amend our Articles of Association accordingly, including reducing our authorized share capital by a corresponding proportion (the “Authorized Share Reduction”, and
together with the Reverse Share Split, the “Reverse Share Split Proposal”).
On May 21, 2024, we received written notification (the “Listing Qualification Notice”) from the Listing Qualifications Department of the
Nasdaq Stock Market LLC’s (the “Nasdaq”) stating that we are not in compliance with the requirement to maintain a minimum bid price of $1.00 per share, as set forth in Rule 5450(a)(1) of the Nasdaq Listing
Rules (the “Minimum Bid Price Requirement”). In the Listing Qualification Notice, we were provided with a grace period of 180 days, or until November 18, 2024, to meet the minimum bid price requirement under
the Nasdaq Listing Rules. On November 19, 2024, we received a letter from Nasdaq granting us an extension for an additional 180 calendar day period, or until May 19, 2025 (the “Extension Period”) to regain
compliance. We can regain compliance if, by the end of the Extension Period, the closing bid price of our Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days. If we cannot demonstrate compliance by the end of the
Extension Period, our Ordinary Shares will likely be delisted from trading on the Nasdaq Capital Market. The proposed Reverse Share Split is intended to adjust the bid price of our Ordinary Shares in the event the bid price of our Ordinary Shares
does not otherwise demonstrate compliance during the abovementioned timeframe. If the Reverse Share Split is authorized by our shareholders, our Board will have the discretion, within 12 months following the date of the Meeting, to either implement
the Reverse Share Split at a ratio within the Ratio Range approved by the shareholders or to effect no Reverse Share Split at all.
The Board believes that the continued listing of the Ordinary Shares on the Nasdaq is beneficial for our shareholders and that the anticipated increased market price of the
Ordinary Share that may result from the Reverse Share Split may enhance our ability to regain compliance with the Nasdaq’s minimum share price requirements for continued listing.
In the event that our shareholders do not approve the Reverse Share Split and the corresponding amendments to our and we do not otherwise regain compliance with the minimum bid
price requirements in the requisite time period, our Ordinary Shares will likely be delisted from trading on the Nasdaq Capital Market. Delisting could also negatively impact our ability to secure additional financing and the liquidity of our
Ordinary Shares.
We are therefore seeking approval of the shareholders to approve a reverse share split of our Ordinary Shares within the Ratio Range, to be effected at the discretion of, and at
such ratio and at such date as shall be determined by the Board, and subject to and upon such determination, to amend our Articles of Association accordingly. The purpose of seeking shareholder approval of a reverse share split of our Ordinary
Shares within the Ratio Range (rather than a fixed exchange ratio) is to provide the Board with the flexibility to set the ratio in accordance with then current market conditions. If the Reverse Share Split is approved by our shareholders, then
the Board will have the authority to decide whether to implement the Reverse Share Split, the effective date of such Reverse Share Split, if any, and determine the exact ratio for the Reverse Share Split within the Ratio Range. Following such
determination, if any, by our Board to implement the Reverse Share Split, we will issue a press release or submit a Form 6-K with the SEC announcing the effective date of the Reverse Share Split and will amend our Articles accordingly to effect
such Reverse Share Split. No further action on the part of shareholders would be required to either implement or abandon the Reverse Share Split and the corresponding changes to the Articles of Association.
The affirmative vote of at least a majority of the voting power represented at the General Meeting, in person or by proxy and voting thereon is required to adopt this proposal.
The Reverse Share Split Proposal is not being proposed in response to any effort of which we are aware to accumulate shares of our outstanding Ordinary Shares or obtain control
of the Company.
Material Effects of Reverse Share Split Proposal
The Board believes that the Reverse Share Split will increase the price level of our Ordinary Shares in order to, among other things, enhance our ability to regain compliance
with the minimum share price requirements for continued listing on the Nasdaq. The Board cannot predict, however, the effect of the Reverse Share Split upon the market price for the Ordinary Share, and the history of similar reverse share splits
for companies in like circumstances is varied. The market price per share of the Ordinary Shares after the Reverse Share Split may not rise in proportion to the reduction in the number of Ordinary Shares outstanding resulting from the Reverse Share
Split, or remain at an increased level for any period, which would reduce our market capitalization. Also, there is no assurance that the market price per Ordinary Share would not decline below the anticipated share price following the Reverse
Share Split or that the trading price would remain above the threshold required for continued listing on the Nasdaq. The market price of the Ordinary Shares may also be based on our performance and other factors, some of which are unrelated to the
number of shares outstanding, the effect of which the Board cannot predict. In addition, the fewer number of Ordinary Shares that will be available to trade will possibly cause the trading market of the Ordinary Share to become less liquid, which
could have an adverse effect on the price of the Ordinary Share.
The Reverse Share Split will affect all of our shareholders uniformly and will not affect any shareholder’s percentage ownership interests or proportionate voting power, except
to the extent that the Reverse Share Split results in any shareholders owning a fractional share. No fractional shares will be issued in connection with the Reverse Share Split (see below under “Fractional Shares”).
The principal effect of the Reverse Share Split will be that the number of Ordinary Shares issued and outstanding will be reduced from the amount of Ordinary Shares issued and outstanding immediately prior to the Effective Date by the Ratio Range
of 2 for 1 to 10 for 1 shares, depending on the Final Ratio chosen by the Board.
The Reverse Share Split will also affect the outstanding options, warrants, restricted share units and other convertible securities (if any) (collectively, the “Outstanding Equity Rights”). Generally, the plans and other documents pertaining to our Outstanding Equity Rights include provisions providing for adjustments in the
event of a reverse share split in order to maintain the same economic effect. Specifically, and without derogating from the generality of the aforesaid, the exercise price and/or purchase price, as the case may be, and the number of Company Shares
issuable pursuant to Outstanding Equity Rights will be adjusted pursuant to the terms of such instruments in connection with the Reverse Share Split.
The Reverse Share Split may result in some shareholders owning “odd lots” of less than 100 Ordinary Shares. Odd lot shares may be more difficult to sell, and brokerage
commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even multiples of 100 shares.
Authorized Share Reduction
In connection with the Reverse Share Split, the Board also believes it is in the best interests of our shareholders to decrease, in proportion to the Final Ratio, the share
capital that we are authorized to issue. The Board believes that effecting the Authorized Share Reduction in connection with the Reverse Share Split will maintain alignment with market expectations regarding the authorized share capital in
comparison to the number of shares issued or reserved for issuance and ensure that we do not have what some shareholders might view as an unreasonably high number of authorized Ordinary Shares that are unissued or reserved for issuance following
the Reverse Share Split.
We are currently authorized under our Articles of Association to issue up to a total of 50,000,000 Ordinary Shares. If the Board decides to implement the Reverse Share Split,
then the Reverse Share Split will be implemented along with the Authorized Share Reduction upon the Effective Date, resulting in the total authorized share capital of the Company being reduced in accordance with the Final Ratio and proportionate to
the Reverse Share Split from the current total of 50,000,000 Ordinary Shares to between 25,000,000 and 5,000,000 Ordinary Shares.
Procedure for Effecting Reverse Share Split and Authorized Share Reduction
If the Reverse Share Split Proposal is approved by our shareholders, and the Board determines it is in our best interests of the Company and the best interests of our
shareholders to effect the Reverse Share Split and the Authorized Share Reduction, then each block of 2 to 10 (depending on the Final Ratio) ordinary shares issued and outstanding will be reclassified and changed into one fully paid and
nonassessable ordinary share of the Company. In addition, the number of authorized Ordinary Shares that we may issue will be proportionately decreased in accordance with the Final Ratio.
As soon as practicable after the Effective Date, shareholders will be notified that the Reverse Share Split has been effected. Equiniti Trust Company, LLC, our transfer agent and
registrar, will act as exchange agent for purposes of implementing the exchange. Shareholders whose Ordinary Shares are held by a brokerage firm, bank or other similar organization do not need to take any action with respect to the exchange. These
Ordinary Shares will automatically reflect the new quantity of Ordinary Shares based on the Reverse Share Split. However, these brokerage firms, banks or other similar organizations may have different procedures for processing the Reverse Share
Split, and shareholders whose shares are held by a brokerage firm, bank or other similar organization are encouraged to contact their brokerage firm, bank or other similar organization. Certain registered holders of our Ordinary Shares hold some or
all of their respective shares electronically in book-entry form with the transfer agent. These shareholders do not have share certificates evidencing their ownership of our Ordinary Shares. Shareholders who hold shares electronically in book-entry
form with the transfer agent will not need to take action to receive whole shares of post-Reverse Share Split Ordinary Shares because the exchange will be automatic. Following the Reverse Share Split, our Ordinary Shares would continue to be listed
on the Nasdaq under the symbols “SLGL”.
No fractional shares will be issued as a result of the Reverse Share Split. The treatment of any fractional shares shall be determined by the Board, at its sole discretion, and
in accordance with our Articles of Association. The treatment determined by the Board shall be communicated to the public together with all information regarding the Reverse Share Split and Authorized Share Reduction, if implemented.
No appraisal rights are available under the Companies Law or under our Articles of Association to any shareholders who dissents from the proposal to approve Reverse Share Split
Proposal, and we do not intend to independently provide shareholders with any such right.
Material U.S. Federal Income Tax Considerations For U.S. Holders
The following is a summary of the material U.S. federal income tax consequences of the Reverse Share Split to U.S. Holders (as defined below) of our Ordinary Shares. This
summary does not purport to be a complete discussion of all of the possible U.S. federal income tax consequences. Further, it does not address the impact of the Medicare surtax on certain net investment income or the alternative minimum tax, U.S.
federal estate or gift tax laws, any state, local or foreign income or other tax consequences or any tax treaties. Also, it does not address the tax consequences to holders that are subject to special tax rules, such as (i) persons who are not U.S.
Holders; (ii) banks, insurance companies, or other financial institutions; (iii) regulated investment companies; (iv) tax-qualified retirement plans; (v) dealers in securities and foreign currencies; (vi) persons whose functional currency is not
the U.S. dollar; (vii) traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes; (viii) persons deemed to sell our Ordinary Shares under the constructive sale provisions of the Internal Revenue
Code of 1986, as amended, or the Code; (ix) persons that acquired our Ordinary Shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; (x) persons that hold our Ordinary Shares
as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction; (xi) persons that own, directly, indirectly or constructively, at any time,
Ordinary Shares representing 5% or more of our voting power or value; (xii) certain former citizens or long-term residents of the United States; and (xiii) tax-exempt entities or governmental organizations.
As used herein, the term “U.S. Holder” means a beneficial owner of our Ordinary Shares that is (i) an individual citizen or resident of the United States, (ii) a corporation
(or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an
estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust if (x) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are
authorized to control all substantial decisions of the trust, or (y) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
The discussion is based on the Code, U.S. Treasury Regulations, administrative rulings and judicial authority as of the date hereof, all of which are subject to change or
differing interpretations, possibly with retroactive effect. In addition, this discussion assumes that the Ordinary Shares prior to the Reverse Share Split, or the Old Shares, were, and the Ordinary Shares after the Reverse Share Split, or the New
Shares, will be, held as a “capital asset,” as defined within the meaning of Section 1221 of the Code (i.e., generally, property held for investment). The tax treatment of a U.S. Holder may vary depending upon the particular facts and circumstances
of such U.S. Holder. Each shareholder is urged to consult with such shareholder’s own tax advisor with respect to the tax consequences of the Reverse Share Split.
If a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Ordinary Shares, the U.S.
federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our Ordinary Shares, and partners in such partnerships, should consult
their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Share Split.
We have not sought and will not seek any ruling from the Internal Revenue Service, or the IRS, or an opinion from counsel, with respect to the U.S. federal income tax
consequences of the Reverse Share Split. Our view regarding the tax consequences of the Reverse Share Split is not binding on the IRS or the courts. Moreover, there can be no assurance that the IRS or a court will agree with such statements and
conclusions.
The Reverse Share Split is intended to constitute a “recapitalization” for U.S. federal income tax purposes. Therefore, subject to the discussion regarding passive foreign
investment company, or PFIC, status below, no gain or loss should be recognized by a U.S. Holder upon such U.S. Holder’s exchange (or deemed exchange) of Old Shares for New Shares pursuant to the Reverse Share Split. The aggregate tax basis of the
New Shares received (or deemed received) in the Reverse Share Split should be the same as the U.S. Holder’s aggregate tax basis in the Old Shares exchanged (or deemed exchanged) therefor. The U.S. Holder’s holding period for the New Shares should
include the period during which the U.S. Holder held the Old Shares surrendered (or deemed surrendered) in the Reverse Share Split. U.S. Holders that hold Ordinary Shares acquired on different dates and at different prices should consult their tax
advisors regarding identifying the bases and holding periods of the particular Ordinary Shares they hold after the Reverse Share Split.
Pursuant to Section 1291(f) of the Code, to the extent provided in U.S. Treasury Regulations, if a U.S. person transfers stock in a PFIC in a transaction that does not result
in full recognition of gain, then any unrecognized gain is required to be recognized notwithstanding any nonrecognition provision in the Code. The U.S. Treasury has issued proposed U.S. Treasury Regulations under Section 1291(f) of the Code, but
they have not been finalized. The IRS could take the position that Section 1291(f) of the Code is effective even in the absence of finalized U.S. Treasury Regulations, or the U.S. Treasury Regulations could be finalized with retroactive effect.
Accordingly, no assurances can be provided as to the potential applicability of Section 1291(f) of the Code to the Reverse Share Split.
We believe that the Company was a PFIC for the taxable year ended December 31, 2023, and although we have not yet determined whether we were a PFIC for the taxable year ending
December 31, 2024, or in any subsequent year, the Company’s operating results for such years may cause it to be a PFIC. Accordingly, there can be no assurance with respect to the Company’s status as a PFIC for the taxable year ending December 31,
2024, or any subsequent taxable year. If the Company is treated as a PFIC with respect to a U.S. Holder and Section 1291(f) applies to the U.S. Holder’s exchange (or deemed exchange) of Old Shares for New Shares pursuant to the Reverse Share Split,
the U.S. Holder may be required to recognize any gain realized on such transfer, in which case such gain generally would be subject to the “excess distribution” rules under Section 1291 of the Code. U.S. Holders should consult their own tax
advisors regarding the U.S. federal income tax consequences of the Reverse Share Split if the Company were treated as a PFIC.
Each shareholder should consult with his, her or its own tax advisor with respect to all of the potential tax consequences to such shareholder of the Reverse Share Split,
including the applicability and effect of any state, local, and non-U.S. tax laws, as well as U.S. federal tax laws and any applicable tax treaties.
Certain Israeli Tax Consequences
The following discussion summarizing certain Israeli income tax consequences of the Reverse Split is based on the Israeli Income Tax Ordinance [New Version], 1961, as amended
(the “Ordinance”), and the policy of the Israel Tax Authority (“ITA”) as currently in effect and is for general information only. The Ordinance and ITA policy are
subject to change retroactively as well as prospectively. This summary does not purport to be a complete discussion of all the possible Israeli income tax consequences and is included for general information only. Further, it does not address the
tax treatment of any fractional shares that may result from the Reverse Split. Shareholders are urged to consult their own tax advisors to determine the particular consequences to them of the Reverse Split.
Generally, a reverse share split could be viewed for Israeli tax purposes as a sale of the ordinary shares held by each shareholder prior to the Reverse Split (the “Old Shares”), with the consideration being the new ordinary shares received in the Reverse Split (the “New Shares”). Such sale (or deemed sale) of ordinary shares will
generally be viewed as a capital gain taxable event for Israeli tax purposes and will result in the recognition of capital gain or capital loss for Israeli income tax purposes, unless an applicable exemption is provided in Israeli tax law or under
an applicable treaty for the prevention of double taxation that exists between the State of Israel and the country of residence of the shareholder.
However, Income Tax Ruling 15/07 issued by the ITA provides that if certain requirements are met, a reverse split would not be viewed as a capital gain taxable event and the
aggregate tax basis of the New Shares received (or deemed received) in the Reverse Split will be the same as the shareholder’s aggregate tax basis in the Old Shares exchanged (or deemed exchanged) therefor. The shareholder’s holding period for the
New Shares will include the period during which the shareholder held the Old Shares surrendered (or deemed surrendered) in the Reverse Split. The main requirements of the foregoing ruling are as follows: (i) the Reverse Split shall apply the same
conversion ratio for all Company shares and for all Company’s shareholders; (ii) as a result of the Reverse Split there will be no change in the shareholders’ rights (including voting rights and rights for profits); (iii) the Reverse Split shall
not include any consideration, compensation or other economic benefit (whether by cash or by cash equivalents) paid or accrued to the shareholders or to the Company; (iv) the economic value of all of the issued shares shall not be affected by the
Reverse Split; and (v) the Reverse Split will not effect any change other than the number of issued shares. We believe that the Reverse Split meet the above requirements and accordingly, that the Reverse Split should not be viewed as a capital
gain taxable event. Nevertheless, our view regarding the tax consequences of the Reverse Split is not binding on the ITA or the courts. Accordingly, each shareholder should consult with his, her or its own tax advisor with respect to all the
potential Israeli tax consequences applicable to such shareholder in connection with the Reverse Split.
THE FOREGOING DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL ISRAELI TAX CONSEQUENCES TO THE COMPANY’S SHAREHOLDERS RELATING TO THE
REVERSE SHARE SPLIT. THIS SUMMARY DOES NOT DISCUSS ALL THE ASPECTS OF ISRAELI TAX LAW THAT MAY BE RELEVANT TO A PARTICULAR PERSON IN LIGHT OF ITS, HIS OR HER PERSONAL CIRCUMSTANCES. THE DISCUSSION SHOULD NOT BE CONSTRUED AS LEGAL OR PROFESSIONAL
TAX ADVICE AND DOES NOT COVER ALL POSSIBLE TAX CONSIDERATIONS, AND EACH SHAREHOLDER IS URGED TO CONSULT ITS TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE SHARE SPLIT TO SUCH SHAREHOLDER.
At the Meeting, it is proposed that the following resolution be adopted:
“RESOLVED, to approve a reverse share split of the Company’s Ordinary Shares at a ratio within a range of 2 for 1 to 10 for
1, which final ratio is to be determined by our Board of Directors, to be effective on a date to be determined by our Board of Directors within 12 months of the Meeting, and to approve the amendment of our Articles of Association accordingly.”
The affirmative vote of the holders of a majority of the voting power represented at the Meeting in person or by proxy and voting thereon (excluding abstentions) is required to
adopt the proposed resolution.
The Board recommends that the shareholders vote “FOR” the proposed resolution.
PROPOSAL NO. 2
APPROVAL OF RENEWED COMPENSATION POLICY FOR A PERIOD OF THREE YEARS
Under the Companies Law, the terms of employment and service of officers and directors of public companies, such as the Company, must be determined in accordance with a
directors and officers compensation policy. The compensation policy must be reviewed and approved by (i) the compensation committee, (ii) the board of directors and (iii) the shareholders of the Company (except in limited circumstances set forth in
the Companies Law) every three years, and in the case of a company that initially offers shares to the public, five years after such company became publicly traded and thereafter every three years. Our shareholders last approved the adoption of our
current Compensation Policy (the “Compensation Policy”) on June 23, 2022.
The Compensation Policy principles were designed, inter alia, to grant proper, fair and well-considered compensation to officers and directors, in alignment with our long-term
best interests and overall organizational strategy. Part of the rationale is that the Compensation Policy should encourage a sense of identification with the Company and its objectives on the part of its officers and directors. Additionally, the
Compensation Policy intends, inter alia, to allow us to preserve and recruit senior executives with specific professional knowledge and unique expertise and with the ability to lead us to business success and to face the challenges we are
confronting and to grant rational, appropriate and fair compensation to officers and directors, while taking into consideration their duties and areas of responsibilities, and giving focus on the contribution of the officers and directors to achieve
the Company objectives and performance maximization.
Our Compensation Committee and Board reviewed our Compensation Policy during the period leading up to the convening of the Meeting. Based on that review, the Compensation
Committee and the Board each determined that it would like to maintain, for an additional three years, the existing provisions of the Compensation Policy, as previously approved by our shareholders as part of the current Compensation Policy, subject
to certain modifications which are discussed below.
Following the recommendation of the Compensation Committee, the Board approved amendments to the current Compensation Policy and recommended its approval by the shareholders
in substantially the form attached hereto as Appendix A (marked to show changes from the current Compensation Policy) (the “Renewed Compensation Policy”). The general description of the proposed amendments to the Compensation Policy described below is qualified in its entirety by reference to the
full text of the proposed Renewed Compensation Policy attached hereto.
As a result of the determination by our Compensation and Board referred to above, the terms of the Renewed Compensation Policy generally remain substantially similar to the
current Compensation Policy, subject to changes described below adopted in view of current market practices and in order to conform with current regulatory guidance relating to compensation policies.
The key proposed substantive updates to our current Compensation Policy, which are reflected in the updated Compensation Policy, are summarized as follows:
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The Renewed Compensation Policy retains the principle that the total fixed and variable compensation (including equity
based compensation) payable to the Company CEO shall not exceed NIS 5 million per year limit but removes the limits on the maximum monthly base salary of the CEO and other officers. In determining base salary of its officers, the Company is
to utilize as a reference, comparative market data and practices. These changes will provide the Company additional flexibility in structuring the compensation arrangements with the Company CEO and other executives in order to attract and
retain the best possible candidates in a competitive market.
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The Renewed Compensation Policy does not contain a cap of 30 days’ vacation per annum. In addition, the Renewed Compensation Policy provides that other types of benefits, namely medical insurance, monthly remuneration for a study fund
("Keren Hishtalmut"), pension and savings and disability insurance, will be determined with reference to practice in peer group companies, among others.
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In order to grant additional flexibility to the Company to attract and retain officers, the Renewed Compensation Policy provides that in the event of relocation
and/or repatriation of an officer to another geography, such officer may receive other similar, comparable or such customary benefits as applicable in the relevant jurisdiction in which such officer is employed or additional payments
benefits to reflect adjustments in the cost of living due to relocation/repatriation.
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The Renewed Compensation Policy provides that the limits on equity-based compensation for each officer and director during a fiscal year and the requirement for
vesting periods for equity-based incentives to officers and directors shall not apply to bonuses paid in equity in lieu of cash.
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The Renewed Compensation Policy provides that the requirement that all equity-based incentives granted to officers will have vesting periods of at least three years
applies unless determined otherwise in a specific award agreement or specific compensation plan.
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The Renewed Compensation Policy clarifies that the prior notice which may be granted in case of termination of Executive Officers may or may not be provided in addition to other payments or benefits provided and related to retirement or
termination.
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The Renewed Compensation Policy provides that upon termination of employment and in accordance with applicable law, the Company may grant Executive Officers a non-compete grant as an incentive to refrain from competing for a defined
period of time which would be capped at 12 times the Executive Officer’s monthly base salary.
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The Renewed Compensation Policy removes the limits on the premium and deductible amounts that may be paid in respect of directors’ and officers’ liability insurances policies.
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It is proposed that the following resolutions be adopted at the Meeting:
“RESOLVED that, the Renewed Compensation Policy for the Company’s directors
and officers, in the form attached hereto as Appendix A, for a term of three years from approval by this General Meeting, be, and is hereby approved.”
The affirmative vote of the holders of a majority of the voting power represented at the Meeting in person or by proxy and voting thereon (excluding abstentions) is required to adopt the proposed
resolution. In addition, the approval of the proposal requires that either of the following two voting requirements be met:
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approval by a majority of the votes of shareholders who are not controlling shareholders and who do not have a personal interest in the approval of the proposal that is voted at the Meeting,
excluding abstentions; or
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the total number of shares held by non-controlling shareholders or anyone on their behalf who do not have a personal interest in the proposal (as described in the previous bullet-point) that
is voted against the proposal does not exceed two percent (2%) of the aggregate voting rights in our Company.
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The Compensation Committee and Board recommend that the shareholders vote “FOR” the proposed resolution.
OTHER MATTERS
Our Board does not intend to bring any matters before the Meeting other than those specifically set forth in the Notice of Special Meeting of Shareholders and knows of no matters
to be brought before the Meeting by others. If any other matters properly come before the Meeting, it is the intention of the persons named in the accompanying proxy to vote such proxy in accordance with their judgment and based on the recommendation
of the Board.
ADDITIONAL INFORMATION
The Company’s annual report on Form 20-F, filed with the SEC on March 13, 2024, is available for viewing and downloading on the SEC’s website at www.sec.gov as well as
under the Investor Relations section of the Company’s website at http://ir.sol-gel.com.
The Company is subject to the information reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) applicable to
foreign private issuers. The Company fulfills these requirements by filing reports with the SEC. The Company’s SEC filings are also available to the public on the SEC’s website at www.sec.gov. As a foreign private issuer, the Company is exempt
from the rules under the Exchange Act related to the furnishing and content of proxy statements. The circulation of this Proxy Statement should not be taken as an admission that the Company is subject to those proxy rules.
Ness Ziona, Israel
February 18, 2025
APPENDIX A
COMPENSATION POLICY
SOL-GEL TECHNOLOGIES LTD.
Compensation Policy for Executive Officers and Directors
ADOPTED: July 26 2023April 1 2025
