RADA Electronic Industries: Approval of Transaction Bonus Payment to Mr. Dubi Sella – Form 6-K


Approval of the transaction bonus payment to Mr. Dubi Sella

As previously announced, on June 21, 2022, RADA Electronic Industries Ltd. (the “Company”) has entered into the agreement and plan of merger (the “Merger Agreement”) with Leonardo DRS, Inc., a Delaware corporation (“DRS”). For further details regarding the merger agreement and the transactions contemplated by it (the “Merger”), see the proxy statement provided to the Securities Exchange Commission Israel Securities Authority and the Tel Aviv Stock Exchange (“TASE”) ) on Form 6-K dated September 14. 2022.

At the extraordinary meeting of shareholders of the Company, held on October 19, 2022 (the “October EGM”), the shareholders of the Company approved the Merger and several other proposals. One of the proposals submitted to the October EGM was the approval of the payment of a transaction bonus to Mr. Dubi Sella, the Chairman and Chief Executive Officer of the Company (the “CEO”), in the amount of $2,000,000, subject to the closing of the merger (the “CEO Deal Bonus”).

In their initial deliberations, the company’s audit and compensation committee and board of directors discussed Mr. Sella’s contribution to the proposed merger, noting that the proposed CEO transaction bonus was not consistent with the company’s compensation policy for office holders that was in effect. at the time. They noted that the Company’s compensation policy did not provide sufficient tools to compensate an office holder for a substantial contribution to a material transaction that required significant management resources, contribution, support and ongoing involvement. Following their review, the Company’s Audit and Compensation Committee and Board of Directors have approved and recommended that shareholders approve payment of the CEO Transaction Bonus within 30 days of the closing of the merger and have determined that this resolution is in favor of the Company. The payment of the CEO Transaction Bonus was not approved by the required majority of the Company’s shareholders at the October EGM.

Israel’s Companies Law of 1999 (the “Israeli Companies Law”) allows a company’s compensation committee and board of directors to approve the terms of employment of a chief executive despite the objection of shareholders to the terms of employment in particular circumstances, based on detailed reasoning, after reviewing the proposed terms of employment and taking into account, among other things, the objection of shareholders. Based on the provisions of Israeli Companies Law, after the October EGM, the Company’s Audit and Remuneration Committee and subsequently the Company’s Board of Directors met to deliberate payment of the CEO transaction bonus. In their deliberations, the Company’s Audit Committee and Board of Directors discussed, among other matters, the Company’s shareholders’ objection to the October EGM and the following considerations:

During his tenure as CEO of the company (since November 2016), Mr. Sella has built the company into a leading global company. This transition translates, among other things, into a fundraising of more than 100 million dollars, a positive change in management, a substantial increase in the number of employees from just over 80 employees in 2016 to more than 340 currently employed and the adoption of a unique business model in the defense market known as “RADA-Inside”, which has increased annual revenues from approximately $13 million in 2016 to over $117 million in 2021. Mr. Sella was determined to be instrumental in the company’s exceptional 1,000% increase in stock value since 2016.

Mr. Sella has been an employee of the Company in various managerial positions for approximately 20 years (since 2003), possesses the knowledge, skills, education, expertise, experience and qualities required for the exercise of the position of CEO and has successfully served as CEO for over five years. Mr. Sella’s contribution to the Company and his significant influence on its performance, growth, achievements and the achievement of its short and long-term objectives are essential for the Company. Mr. Sella has overseen and significantly influenced the ongoing operations of the company and its success in managing the challenges and crises that have arisen since his appointment as CEO and through the execution of the merger agreement .

Mr. Sella was instrumental in moving the merger forward, beginning with the search for potential business combination candidates and continuing through the due diligence, negotiations and pre-sales process. -fence for obtaining various permits and approvals. The Merger project was approved by more than 99% of the Company’s shareholders who voted at the October EGM. Mr. Sella is one of the key employees whom DRS has asked to continue his employment with the Company following the completion of the Merger. Mr. Sella is also expected to become a member of the Board of Directors of the Company following completion of the Merger.

The Company’s shares began trading on the NASDAQ stock market in 1985 and on the TASE in early 2021. The most relevant business environment for the Company is the US market. Therefore, the proposed bonus should be assessed against executive compensation terms of comparable US companies.

The results of the shareholder vote in connection with the payment of the CEO Transaction Bonus at the October EGM reflect the support of a substantial part of the Company’s shareholders (46.2% of the shares voted in favor and 53.8 % voted against). In addition, discussions held by representatives of the Audit and Remuneration Committee and of the Board of Directors with representatives of the Company’s public shareholders and with institutional investors show that these entities voted on the basis of considerations general, uniform and inflexible policies included in their internal voting policies, which policies failed to take into account the fact that the majority of the Company’s operations take place in the United States market, and did not give appropriate weight to the specific circumstances of the Company and the Merger and to the contribution of the CEO and the importance of maintaining his employment within the Company.

Israel’s corporate law specifically grants a corporation’s compensation committee and board of directors the right to override the resolution of the corporation’s shareholders and final authority to determine the terms and conditions of employment of executives, including including the general manager.

In light of the foregoing, the members of the Audit and Compensation Committee and the Board of Directors have determined that the CEO Transaction Bonus is reasonable and fair in the circumstances, and have determined unanimously to ratify and approve the payment of the CEO transaction bonus after and subject to the completion of the Merger.

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Rada Electronic Industries Limited published this content on October 31, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on October 31, 2022 8:47:50 PM UTC.

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Analyst Recommendations for RADA ELECTRONIC INDUSTRIES LTD.

2022 sales 112 million

Net income 2022 5.39 million

Net debt 2022

PER 2022 ratio 105x
2022 return
Capitalization 557M
557M
capi. / Sales 2022 4.97x
capi. / Sales 2023 3.61x
# of employees 308
Floating 88.4%

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Evolution of the income statement

Sale

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Medium consensus TO BUY
Number of analysts 4
Last closing price $11.20
Average target price $14.00
Average Spread / Target 25.0%


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