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As filed with the Securities and Exchange Commission on February 7, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
APPLIED MATERIALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-1655526
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
3050 Bowers Avenue, Santa Clara, California 95054
(Address of Principal Executive Offices) (Zip Code)
Opal, Inc. Employee Stock Option Plan
and
Orbot Instruments Ltd. Employee Share Ownership and Option Plan
(Full Title of the Plan)
Joseph J. Sweeney
Applied Materials, Inc.
2881 Scott Boulevard, Santa Clara, California 95050
(Name and Address of Agent for Service)
(408) 748-5420
(Telephone Number, Including Area Code,
of Agent For Service)
copies to:
David Fox, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
Securities Registered Maximum Maximum Registration
to be Offering Aggregate Fee
Registered Price Per Offering
Share (1) Price(2)
---------- ------------- --------- ---------- ------------
Common Stock 492,321 shares(3) $11.53 $5,674,233.43 $1,719.46
(1) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(h)(1) under the
Securities Act of 1933, as amended (the "Securities Act"),
and is based on the weighted average of the exercise prices
for the options granted under the Opal, Inc. Employee Stock
Option Plan and the Orbot Instruments Ltd. Employee Share
Ownership and Option Plan (collectively, the "Plans")
rounded to the nearest whole cent.
(2) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(h)(1) under the
Securities Act.
(3) Plus such additional number of shares of Common Stock as
may be issuable pursuant to the antidilution provisions of
the Plans.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Applied Materials,
Inc. (the "Registrant") with the Securities and Exchange
Commission (the "Commission") are incorporated by reference into
this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for
the period ended October 27, 1996, filed by the
Registrant on January 24, 1997 (File No. 0-6920)
and;
(b) The description of the Registrant's Common Stock
set forth in the Registrant's Registration
Statement on Form 8-A filed on April 5, 1994 (File
No. 0-6920), including any amendment or report
filed for the purpose of updating such
information.
All documents subsequently filed by the Registrant with
the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act, prior to the filing of a post-effective
amendment to this Registration Statement which indicates that all
securities offered by this Registration Statement have been sold
or which deregisters all such securities then remaining unsold,
shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of
filing such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
registration statement to the extent that a statement contained
herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law
(the "Delaware Law") authorizes a court to award, or a
corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act. The Registrant's Certificate of Incorporation
and Bylaws provide for indemnification of the Registrant's
directors, officers, employees and other agents to the maximum
extent permitted by the Delaware Law. In addition, the
Registrant has entered into indemnification agreements with its
officers and directors.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following are filed herewith as part of this
Registration Statement:
Exhibit No. Exhibit
----------- -------
3.1 Certificate of Incorporation of the
Registrant, as amended to March 18,
1996, filed as an Exhibit to the
Registrant's Annual Report on Form
3.2 10-K for the fiscal year ended
October 27, 1996 and incorporated
herein by reference.
By-Laws of the Registrant, as amended
to December 13, 1996, filed as an
exhibit to the Registrant's Annual
Report on Form 10-K for the year
ended October 27, 1996 and
incorporated by reference herein.
5.1 Opinion of Skadden, Arps, Slate,
Meagher & Flom LLP.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Skadden, Arps, Slate,
Meagher & Flom LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (included in the
signature page of this Registration
Statement).
99.1 Opal, Inc. Employee Stock Option
Plan.
99.2 English translation of Orbot
Instruments Ltd. Employee Share
Ownership and Option Plan.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment
to this Registration Statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act of 1933");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement is
on Form S-3 or Form S-8 and the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with
or furnished to the Securities and Exchange Commission
by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for purposes of determining any liability
under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such
securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being
registered which remain unsold at the termination
of the offering.
(b) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in this
Registration Statement shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Registrant of expenses
incurred or paid by a director, officer or
controlling person of the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Santa Clara, State of California, on this 7th day of
February, 1997.
APPLIED MATERIALS, INC.
(Registrant)
By: /s/ James C. Morgan
---------------------------------
Name: James C. Morgan
Title: Chairman of the Board and
Chief Executive Officer
KNOWN TO ALL PERSONS BY THESE PRESENT, that each person
whose signature appears below constitutes and appoints James C.
Morgan, Gerald F. Taylor and Donald A. Slichter, jointly and
severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any
amendments to this Registration Statement (including post-
effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed by
the following persons (or by their designated attorney-in-fact)
in the capacities indicated on this 7th day of February, 1997.
Name Title
---- -----
/s/ James C. Morgan Chairman of the Board and Executive
-------------------------- Officer
James C. Morgan (Principal Executive Officer)
/s/ Gerald F. Taylor Senior Vice President and Chief
-------------------------- Financial Officer
Gerald F. Taylor (Principal Financial Officer)
/s/ Michael K. O'Farrell Vice President and Corporate
-------------------------- Controller
Michael K. O'Farrell (Principal Accounting Officer)
-------------------------- Director
Michael Armacost
/s/ Herbert M. Dwight, Jr. Director
--------------------------
Herbert M. Dwight, Jr.
/s/ George B. Farnsworth Director
--------------------------
George B. Farnsworth
/s/ Philip V. Gerdine Director
--------------------------
Philip V. Gerdine
/s/ Tsuyoshi Kawanishi Director
--------------------------
Tsuyoshi Kawanishi
/s/ Paul R. Low Director
--------------------------
Paul R. Low
/s/ Dan Maydan Director
--------------------------
Dan Maydan
/s/ Alfred J. Stein Director
--------------------------
Alfred J. Stein
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
----------- ---------------------- --------
3.1 Certificate of Incorporation of the
Registrant, as amended to March 18, 1996,
filed as an Exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended October 27, 1996 and
incorporated herein by reference.
3.2 By-Laws of the Registrant, as amended to
December 13, 1996, filed as an exhibit to
the Registrant's Annual Report on Form
10-K for the year ended October 27, 1996
and incorporated herein by reference.
5.1 Opinion of Skadden, Arps, Slate, Meagher 1
& Flom LLP.
23.1 Consent of Price Waterhouse LLP. 3
23.2 Consent of Skadden, Arps, Slate, Meagher
& Flom LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included in the
signature page of this Registration
Statement).
99.1 Opal, Inc. Employee Stock Option Plan. 4
99.2 English translation of Orbot Instruments 13
Ltd. Employee Share Ownership and Option
Plan.
Exhibit 5.1
February 7, 1997
Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, CA 95054
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as special counsel to Applied Materials, Inc.,
a Delaware corporation (the "Company"), in connection with the
preparation of a registration statement on Form S-8, relating to
the issuance and sale of up to 492,321 shares (the "Shares") of
the common stock of the Company, par value $.01 per share
("Common Stock"), that consist of (i) 396,089 shares of Common
Stock which have been reserved for issuance upon exercise of
stock options granted by Opal, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company, pursuant to the Opal,
Inc. Employee Stock Option Plan, as amended and restated (the
"Opal Plan"), and (ii) 96,232 shares of Common Stock which have
been reserved for issuance upon exercise of stock options granted
by Orbot Instruments Ltd., a corporation organized under the laws
of the State of Israel and a wholly-owned subsidiary of the
Company, under the Orbot Instruments Ltd. Employee Share
Ownership and Option Plan, as amended and restated (the "Orbot
Plan").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the
Securities Act of 1933 (the "Act").
In connection with this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction,
of (i) the Registration Statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange
Commission (the "Commission") on the date hereof, (ii) the Opal
Plan, (iii) the Orbot Plan, (iv) a specimen certificate
evidencing the Common Stock, (v) the Certificate of
Incorporation of the Company, as presently in effect, (vi) the
By-Laws of the Company, as presently in effect, (vii) certain
resolutions of the Board of Directors of the Company relating to,
among other things, the Shares and (viii) such other documents as
we have deemed necessary or appropriate as a basis for the
opinions set forth below.
In our examination, we have assumed the legal capacity of
all natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us
as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In
making our examination of documents executed or to be executed by
parties other than the Company, we have assumed that such parties
had or will have the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the
validity and binding effect thereof on such parties. As to any
facts material to the opinions expressed herein which we did not
independently establish or verify, we have relied upon
certificates, statements or representations of officers and other
representatives of the Company, public officials and others. In
rendering the opinion set forth below, we have assumed that the
certificates representing the Shares will be manually signed by
one of the authorized officers of the transfer agent and
registrar for the Common Stock and registered by such transfer
agent and registrar and will conform to the specimen thereof
examined by us. We express no opinion herein with respect to the
meaning, interpretation, validity, binding nature or
enforceability of the Opal Plan, the Orbot Plan and any contract,
agreement, instrument or other document entered into pursuant to
the Opal Plan or the Orbot Plan.
Members of our firm are admitted to the Bar of the State of
New York and we do not express any opinion as to the laws of any
other jurisdiction other than the Delaware General Corporation
Law.
Based upon and subject to the foregoing, we are of the
opinion that the Shares have been duly and validly authorized for
issuance and, when delivered and paid for in accordance with the
terms of the Opal Plan and the Orbot Plan, as the case may be,
and the terms of the respective option agreements entered into in
accordance with the Opal Plan and the Orbot Plan, as the case may
be, as such agreements are currently in effect, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement. In
giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of
the Act or the rules or regulations of the Commission thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated November
20, 1996, which appears on page 50 of the 1996 Annual Report to
Stockholders of Applied Materials, Inc., which is incorporated by
reference in Applied materials, Inc's Annual Report on Form 10-K
for the year ended October 27, 1996. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 22 of such Annual
Report on Form 10-K.
/s/PRICE WATERHOUSE
San Jose, California
February 6, 1997
Exhibit 99.1
OPAL INC.
EMPLOYEE STOCK OPTION PLAN
A. NAME AND PURPOSE
1. Name: This plan, as amended from time to
time, shall be known as the "Opal Inc. Employee Stock
Option Plan" (the "Plan").
2. Purpose: The purpose and intent of the
Plan is to provide incentives to employees (including
officers and directors who are employees) of Opal Inc.
(the "Company") and to employees (including officers and
directors who are employees) of Opal Technologies, Ltd.,
a wholly-owned subsidiary of the Company (the "Israeli
Company"), by providing them with opportunities to
purchase Common Shares, par value $0.01 each (the
"Shares"), of the Company, pursuant to the exercise of
options ("Options") granted under the Plan. At the
discretion of the Board of Directors of the Company (the
"Board"), Options granted under the Plan may qualify as
incentive stock options ("Incentive Stock Options") under
Section 422 of the International Revenue Code of 1986, as
amended (the "Code"), or may be Options which are not
described in Sections 422 or 423 of the Code
("Nonqualified Stock Options"). At the discretion of the
Board, Options granted under the Plan may alternatively
be subject to certain provisions applicable only to such
grantees who are, or might become, subject to the payment
of income tax in Israel ("Israeli Grantees").
B. GENERAL TERMS AND CONDITIONS OF THE PLAN
3. Administration:
3.1 The Plan will be administered by the Board
or by a committee appointed by the Board (the
"Committee"), which, if appointed, will consist of such
number of Directors of the Company as may be fixed, from
time to time, by the Board. If a Committee is not
appointed, the term "Committee", whenever used herein,
shall mean "the Board". The Board shall appoint the
members of the Committee, and may from time to time
remove members from, or add members to, the Committee and
shall fill vacancies in the Committee however caused.
3.2 The Committee shall select one of its
members as its Chairman and shall hold its meetings at
such times and places as it shall determine. Actions
taken by a majority of the members of the Committee, at a
meeting at which a majority of its members is present, or
acts reduced to or approved in writing by all members of
the Committee, shall be the valid acts of the Committee.
The Committee may appoint a Secretary, who shall keep
records of its meetings and shall make such rules and
regulations for the conduct of its business as it shall
deem advisable.
3.3 Subject to the general terms and
conditions of this Plan, the Committee shall have the
full authority in its discretion, from time to time and
at any time, to determine (a) the persons ("Grantees") to
whom Options to purchase Shares shall be granted, (b)
whether or not such Options be qualified as Incentive
Stock Options, be Nonqualified Stock Options or other
forms of Options, (c) the number of Shares to be covered
by each Option, (d) the time or times at which the same
shall be granted, (e) the price, schedule and conditions
on which such Options may be exercised and on which such
Shares shall be paid for, and/or (f) any other matter
which is necessary or desirable for, or incidental to,
the administration of the Plan. In determining the
number of Shares covered by the Option to be granted to
each Grantee, the Committee may consider, among other
things, the Grantee's salary and the duration of the
Grantee's employment by the Company or the Israeli
Company, as the case may be.
3.4 The Committee may, from time to time,
adopt such rules and regulations for carrying out the
Plan as it may deem necessary. No member of the Board or
of the Committee shall be liable for any act or
determination made in good faith with respect to the Plan
or any Option granted thereunder.
3.5 The interpretation and construction by the
Committee of any provision of the Plan or of any Option
thereunder shall be final and conclusive unless otherwise
determined by the Board.
3.6 In the event that the Company becomes
subject to the requirements of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended
("Rule 16b-3"), then, notwithstanding the provisions of
Sections 3.1 - 3.5 hereof, (a) the Committee shall
consist of two or more members of the Board or such
lesser number of members of the Board as permitted by
Rule 16b-3, and (b) none of the members of the Committee
shall receive, while serving on the Committee, or during
the one-year period preceding appointment to the
Committee, a grant or award of equity securities under
(i) the Plan or (ii) any other plan of the Company or the
Israeli Company under which the participants are entitled
to acquire shares, stock options, stock bonuses or
related rights of the Company or the Israeli Company,
other than pursuant to transactions in any such other
plan which do not disqualify a director from being a
disinterested person under Rule 16b-3. The limitations
set forth in this Section 3.6 shall automatically
incorporate any additional requirements that may in the
future be necessary for the Plan to comply with Rule 16b-
3.
4. Eligible Grantees: Subject to Section 3.6
hereof, the Committee, at its discretion, may grant
Options to any employee of the Company and to any
employee of the Israeli Company (including directors who
are employees of either the Company or the Israeli
Company). Anything in this Plan to the contrary
notwithstanding, to the extent necessary under any
applicable Israeli law, all grants of Options to Office
Holders ("Nosei Misra") - as such term is defined in the
Israeli Companies Ordinance (New Version), 1983, as
amended from time to time (the "Companies Ordinance") -
of the Israeli Company shall be authorized and
implemented only in accordance with the provisions of the
Companies Ordinance. Subject to the terms of the Plan,
the grant of an Option to a Grantee hereunder, shall
neither entitle such Grantee to participate, nor
disqualify him from participating, in any other grant of
options pursuant to this Plan or any other stock option
plan of the Company or the Israeli Company, as the case
may be.
5. Grant of Options and Issuance of Shares in
Trust: Dividend and Voting Rights:
5.1 Grant of Options and Issuance of Shares in
Trust.
(a) Subject to Section 7.1 hereof, the
effective date of the grant of an Option (the "Date of
Grant") shall be the date specified by the Committee in
its determination relating to the award of such Option.
The Committee shall promptly give the Grantee written
notice (the "Notice of Grant") of the grant of an Option.
(b) Anything herein to the contrary
notwithstanding, to the extent so determined by the
Committee, Options granted under the Plan to Israeli
Grantees shall be granted by the Company to a trustee
designated by the Board and approved by the Israeli
Commissioner of Income Tax (the "Trustee"), and the
Trustee shall hold each such Option and the Shares issued
upon exercise thereof in trust (the "Trust") for the
benefit of the Israeli Grantee in respect of whom such
Option was granted (the "Beneficial Grantee"). All
certificates representing Shares issued to the Trustee
under the Plan shall be deposited with the Trustee, and
shall be held by the Trustee until such time that such
Shares are released from the Trust as herein provided.
Thereafter, such certificate shall be deposited with an
Authorized Dealer Bank in accordance with Israel's
Currency Control Law, 1978 (the "Control Law").
(c) Anything herein to the contrary
notwithstanding, no Options or Shares granted under the
Plan to the Trustee on behalf of Israeli Grantees shall
be released from the Trust until the later of (i) two (2)
years after the Date of Grant, and (ii) the vesting of
such Shares pursuant to Section 7.3 hereof (such later
date being hereinafter referred to as the "Release
Date").
(d) Subject to the terms hereof, at any
time after the Release Date with respect to any Options
or Shares held in the Trust, the following shall apply:
(i) From and after the Release Date,
upon the written request of any Beneficial Grantee, the
Trustee shall release from the Trust the Options granted,
and/or the Shares issued, on behalf of such Beneficial
Grantee, by executing and delivering to the Company such
instrument(s) as the Company may require, giving due
notice of such release to such Beneficial Grantee,
provided, however, that the Trustee shall not so release
any such Options and/or Shares to such Beneficial Grantee
unless the latter, prior to, or concurrently with, such
release, provides the Trustee with evidence, satisfactory
in form and substance to the Trustee, that all Israeli
taxes, if any, required to be paid upon such release
have, in fact, been paid.
(ii) Alternatively, from and after
the Release Date, upon the written instructions of the
Beneficial Grantee to sell any Shares issued upon
exercise of Options, the Trustee shall use its best
efforts to effect such sale and shall transfer such
Shares to the purchaser thereof concurrently with the
receipt, or after having made suitable arrangements to
secure the payment of the proceeds, of the purchase price
in such transaction. The Trustee shall withhold from
such proceeds any and all taxes required to be paid in
respect of such sale, shall remit the amount so withheld
to the appropriate Israeli tax authorities and shall pay
the balance thereof directly to the Beneficial Grantee,
reporting to such Beneficial Grantee and to the Company
the amount so withheld and paid to said tax authorities.
5.2 Dividend and Voting Rights. All Shares
issued upon the exercise of Options granted under the
Plan shall entitle the Grantee thereof to receive
dividends with respect thereto, and to vote the same at
any meeting of the shareholders of the Company. For so
long as Shares issued to the Trustee on behalf of a
Beneficial Grantee are held in the Trust, the dividends
paid or distributed with respect thereto shall be
remitted to the Trustee for the benefit of such
Beneficial Grantee, and the Trustee shall vote all such
Shares in accordance with the instructions of such
Grantee.
6. Reserved Shares: The Company has reserved
two million two hundred and ninety thousand (2,290,000)*
authorized but unissued Shares for purposes of the Plan,
subject to adjustments as provided in Section 11 hereof.
All Shares under the Plan, in respect of which the right
hereunder of a Grantee to purchase the same shall, for
any reason, terminate, expire or otherwise cease to
exist, shall against be available for grant through
Options under the Plan.
--------------
* Number of shares eligible for issuance under the
Plan increased to 5,790,099 pursuant to vote of
Board of Directors dated December 13, 1995 (without
giving effect to 1-for-7 reverse stock split).
7. Grant of Options:
7.1 Options may be granted to Israeli
Grantees only after the passage of thirty (30) days
following the delivery by the Company to the appropriate
income tax authorities of a notice pertaining to the
appointment of the Trustee and the adoption of the Plan.
7.2 The Notice of Grant shall state,
inter alia, the number of Shares covered thereby, the
dates when the Option may be exercised, the exercise
price, and such other terms and conditions as the
Committee at its discretion may prescribe, provided that
they are consistent with this Plan. Anything herein to
the contrary notwithstanding, in the case of an Incentive
Stock Option granted to a person possessing more than ten
percent (10%) of the voting power of the Company, the
term of each Incentive Stock Option shall be for no more
than five (5) years. In addition, in the case of
Incentive Stock Options, the aggregate fair market value
(determined as of the time such Option is granted) of the
Shares with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee in any
calendar year (under this Plan and any other plans of the
Company) shall not exceed one hundred thousand dollars
($100,000).
7.3 Without derogating from the rights and
powers of the Committee under Section 7.2 hereof, unless
otherwise specified in the Plan or in the Notice of
Grant, each Option under the Plan shall be for a term of
ten (10) years, and the schedule pursuant to which such
Options shall vest, and the Grantee thereof who shall be
entitled to pay for, and acquire, the Shares, shall be
such that twenty-five percent (25%) of such Options shall
vest on the first anniversary of the Date of Grant, and
an additional two point zero eight three percent (2.083%)
of such Options shall vest at the end of each month after
the first anniversary of the Date of Grant, until all
Options are fully vested.
8. Exercise Price: The exercise price per Share
covered by each Option shall be determined by the
Committee in its sole and absolute discretion.
Notwithstanding the foregoing, (a) in the case of an
Incentive Stock Option granted to a person possessing
more than ten percent (10%) of the voting power of the
Company, the exercise price shall be not less than one
hundred ten percent (110%) of the fair market value of
the Shares on the Date of Grant and (b) in the case of an
Incentive Stock Option granted to any other person, the
exercise price shall not be less than the fair market
value of the Shares on the Date of Grant. The exercise
price shall be paid in Israeli currency, unless otherwise
specified in the Notice of Grant. To the extent that the
exercise price is payable in Israeli currency, the
appropriate amount payable shall be determined based on
the last available Representative Rate of Exchange of
U.S. dollars into Israeli currency.
9. Exercise of Options:
9.1 Options shall be exercisable pursuant to
the terms under which they were awarded and subject to
the terms and conditions of the Plan.
9.2 The exercise of an Option shall be made by
a written notice of exercise (the "Notice of Exercise")
delivered by the Grantee (or, with respect to Options
held in the Trust, by the Trustee upon receipt of written
instructions from the Beneficial Grantee) to the Company
at its principal executive office in the United States,
specifying the number of Shares to be purchased and
accompanied by the payment therefor, and containing such
other terms and conditions as the Committee shall
prescribe from time to time.
9.3 Anything herein to the contrary
notwithstanding, but without derogating from the
provisions of Section 9 hereof, if any Option has not
been exercised and the Shares covered thereby not paid
for within ten (10) years after the Date of Grant (or any
shorter period set forth in the Notice of Grant), such
Option and the right to acquire such Shares shall
terminate, all interests and rights of the Grantee in and
to the same shall ipso facto expire, and, in the event
that in connection therewith any Options are still held
in the Trust as aforesaid, the Trust with respect thereto
shall ipso facto expire and the Trustee shall thereafter
hold such Options in an unallocated pool until instructed
by the Company that some or all of such Options are again
to be held in trust for one or more Israeli Grantees.
9.4 Each payment for Shares shall be in
respect of a whole number of Shares, and shall be
effected in cash or by a cashier's check payable to the
order of the Company, or such other method of payment
acceptable to the Company. Not less than one hundred
(100) Shares may be purchased at any time upon the
exercise of an Option unless the number of Shares so
purchased constitutes the total number of Shares then
purchasable under such Option.
10. Termination of Employment:
10.1 In the event that a Grantee ceases, for
any reason, to be employed by the Company or by the
Israeli Company, as the case may be, all Options
theretofore granted to such Grantee shall terminate as
follows:
(a) If the Grantee's termination of
employment is due to such Grantee's death or "Disability"
(as hereinafter defined), such Options (to the extent
exercisable at the time of the Grantee's termination of
employment) shall be exercisable by the Grantee's legal
representative, estate or other person to whom the
Grantee's rights are transferred by will or by laws of
descent or distribution for a period of six (6) months
following such termination of employment (but in no event
after the expiration date of such Option), and shall
thereafter terminate. For purposes hereof, "Disability"
shall mean the inability, due to illness or injury, to
engage in any gainful occupation for which the individual
is suited by education, training or experience, which
condition continues for at least six (6) months.
(b) If the Grantee's termination of
employment is for any other reason, such Options (to the
extent exercisable at the time of the Grantee's
termination of employment) shall be exercisable for a
period of thirty (30) days following such termination of
employment, and shall thereafter terminate; provided,
however, that if the Grantee dies within such thirty-day
period, such Options (to the extent exercisable at the
time of the Grantee's termination of employment) shall be
exercisable by the Grantee's legal representative, estate
or other person to whom the Grantee's rights are
transferred by will or by laws of descent or distribution
for a period of six (6) months following the Grantee's
death (but in no event after the expiration date of such
Option), and shall thereafter terminate.
10.2 Notwithstanding the foregoing provisions
of Section 10.1, the Committee may provide, either at the
time an Option is granted or thereafter, that such Option
may be exercised after the periods provided for in
Section 10.1, but in no event beyond the term of the
Option.
11. Adjustment Upon Changes in Capitalization
11.1 Subject to any required action by the
shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which
have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share
of Shares covered by each such outstanding Option, shall
be proportionately adjusted for any increase or decrease
in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination
or reclassification of the Shares or the payment of a
stock dividend (bonus shares) with respect to the Shares
or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the
Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration."
Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of
Shares subject to an Option.
11.2 In the event of the proposed dissolution
or liquidation of the Company, the Committee shall notify
each Grantee at least fifteen (15) days prior to such
proposed action. To the extent it has not been
previously exercised, each Option shall terminate
immediately prior to the consummation of such proposed
action. In the event of a consolidation or the merger of
the Company with or into another corporation, then, if so
determined by the Board at such time, each Option shall
be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary
of such successor corporation.
12. Non-Transferability:
No Option shall be assignable or transferable
by the Grantee to whom granted otherwise than by will or
the laws of descent and distribution, and an Option may
be exercised during the lifetime of the Grantee only by
such Grantee or by such Grantee's guardian or legal
representative. The terms of such Option shall be
binding upon the beneficiaries, executors,
administrators, heirs and successors of such Grantee.
13. Term and Amendment of the Plan:
13.1 The Plan was authorized by the Board on
November 10, 1993, and shall expire on November 9, 2003
(except as to Options outstanding on that date), but such
expiration shall not affect the instructions contained
herein or in any applicable law with respect to the
Options and Shares outstanding at such time of
expiration. Anything herein to the contrary
notwithstanding, the Plan shall only become effective
with regard to Incentive Stock Options upon its approval
by a majority of the stockholders voting (in person or by
proxy) at the stockholders' meeting held within 12 months
of the Board's adoption of the Plan. The Committee may
grant Incentive Stock Options under the Plan prior to the
stockholders' meeting, but until stockholder approval of
the Plan is obtained, no Incentive Stock Option shall be
exercisable.
13.2 The board may at any time amend, suspend
or terminate the Plan as it deems advisable; provided
that such amendment, suspension or termination complies
with all applicable legal requirements, including any
applicable requirement that the Plan or an amendment to
the Plan be approved by the stockholders, and provided
further that, except as provided in Section 11 above, the
Board shall in no event amend the Plan in the following
respects without the consent of stockholders then
sufficient to approve the Plan in the first instance:
(i) To increase the maximum number
of Shares subject to Incentive Stock Options issued under
the Plan; or
(ii) To change the designation or
class of persons eligible to receive Incentive Stock
Options under the Plan.
13.3 In no event may any action of the
Company alter or impair the rights of a Grantee, without
his consent, under any Option previously granted to him.
14. Tax Consequences: All tax consequences arising
from the grant or exercise of any Option from the payment
for, or the subsequent disposition of, Shares covered
thereby or from any other event or act (of the Company or
the Grantee) hereunder, shall be borne solely by the
Grantee, and the Grantee shall indemnify the Company, the
Israeli Company and the Trustee and hold them harmless
against and from any and all liability for any such tax
or interest or penalty thereon, including without
limitation, liabilities relating to the necessity to
withhold, or to have withheld, any such tax from any
payment made to the Grantee.
15. Miscellaneous:
15.1 Continuance of Employment: Neither the
Plan nor the grant of any Option thereunder shall impose
any obligation on the Company or the Israeli Company, as
the case may be, to continue the employment of any
Grantee, and nothing in the Plan or in any Option granted
pursuant thereto shall confer upon any Grantee any right
to continue in the employ of the Company or the Israeli
Company, as the case may be, or restrict the right of the
Company or the Israeli Company, as the case may be, to
terminate such employment at any time.
15.2 Governing Law: The Plan and all
instruments issued thereunder, or in connection
therewith, shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware.
Regarding the Israeli Grantees, the Plan and all
instruments issued thereunder or in connection therewith,
shall be governed by, and interpreted in accordance with,
the laws of the State of Israel.
15.3 Application of Funds: The proceeds
received by the Company from the sale of Shares pursuant
to Options granted under the Plan will be used for
general corporate purposes of the Company.
15.4 Multiple Agreements: The terms of each
Option may differ from other Options granted under the
Plan at the same time, or at any other time. The
Committee may also grant more than one Option to a given
Grantee during the term of the Plan, either in addition
to, or in substitution for, one or more Options
previously granted to that Grantee. The grant of
multiple Options may be evidenced by a single Notice of
Grant or multiple Notices of Grant, as determined by the
Committee.
15.5 Non-Exclusivity of the Plan: The
adoption of the Plan by the Board shall not be construed
as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock
options otherwise than under the Plan, and such
arrangements may be either applicable generally or only
in specific cases.
15.6 Currency Control Provisions: For so
long as, and to the extent that, the Control Law shall so
require, the following provisions shall apply:
(i) From and after the Release Date,
certificates, if any, representing Shares issued
hereunder to Israeli Grantees shall be delivered to an
Authorized Dealer Bank in Israel to hold the same for the
benefit of such Israeli Grantees pursuant to the terms of
the Plan, and in conformity with the applicable
requirements of the Controller of Foreign Currency in the
Bank of Israel;
(ii) All payments of the purchase price
shall be effected by the Israeli Grantees through an
Authorized Dealer Bank; and
(iii) The proceeds of any sale by any
Israeli Grantee (or by the Trustee at the direction and
on behalf of any Israeli Grantee) of Shares which is
effected in foreign currency shall be remitted to Israel,
and deposited with an Authorized Dealer Bank, immediately
upon receipt thereof, and in all events not later than
sixty (60) days after the date on which the certificate,
if any, representing such Shares is received by the
Trustee (on behalf of such Israeli Grantee) for purposes
of sale.
Exhibit 99.2
O R B O T I N S T R U M E N T S L T D
EMPLOYEE SHARE OWNERSHIP AND OPTION PLAN
CONTENTS
C. Introduction
1. Purpose of Plan.
2. The Company seeks to benefit from the services
of key employees.
3. Plan is a continuing scheme relating to past
obligations.
4. Section 102 Income Tax Ordinance.
5. Section 102 and the Commissioner's Rules are an
integral part of Plan, but in the event of
conflict the more stringent provisions of the
Plan shall prevail.
6. Employee's liability to tax.
D. Administration of Plan
1. The Plan shall be administered by Board of
Directors.
2. Powers of Board of Directors.
E. Shares
1. Shares subject to the Plan.
2. Notices to Shareholders shall be given to
Trustee and, in shareholders' meetings he shall
cast votes in the same proportions as remainder
of Shareholders.
F. Entitlement to receive Options and/or Shares and
Waiver of Past Agreements
G. Allotment of Options and Shares to Trustee
1. Board of Directors shall appoint Trustee.
2. Application to Income Tax Commissioner shall be
made in accordance with Section 102,
Commissioner's Rules and Appendices.
3. Granting of Options, Allotment of Shares and
Delivery of Certificates shall be to Trustee
who shall hold the same at least for so long as
"Closed Period" lasts.
4. Employee shall sign requisite documents for
purposes of Section 102 and the Plan.
5. Custody of Documents.
6. Allotment of Shares and Options to Employees
direct and not by way of Trustee.
H. Agreement with Employee (Option or Share Acquisition
Agreement)
1. Period of Option - 10 years.
2. Price of Option and Exercise of Option Price.
3. Employee's foregoing Salary.
4. Date of Payment of Exercise of Option Price.
5. Option is Personal.
6. Vesting Schedule.
7. Right to Reacquire at Nominal Price.
8. Termination of Employment of Employee.
I. Exercise of the Option
1. Notice to Trustee of Employee's Wish to
Exercise Option.
2. Notice of Exercise of Option shall be sent by
Trustee to Company.
3. Share Acquisition Agreement.
J. Transfer of Shares into Employee's Name
1. At End of Closed Period Employee shall be
entitled, subject to Conditions of Plan and
payment of tax due, to require Transfer of
Shares into his name.
2. This Right is Personal.
3. If Company shall have issued shares on Stock
Exchange, provisions of Law, Rules of the Stock
Exchange and the Provisions of agreements with
the Underwriters shall apply to shares and the
Employee undertakes to abide by them.
4. Right to acquire shares passes to Employee's
heirs.
5. Notice warning of restrictions under Plan may
appear on share certificate.
6. Bonus shares to be treated as original shares.
7. Limitation on transferability of shares so long
as Company's shares are not traded on Stock
Exchange.
8. Disputes concerning termination of Restriction
Period.
K. Additional Documents
L. Tax Applicable
1. General.
2. Taxation of Employee if Section 102 of
Ordinance shall apply to Plan.
3. Taxation of Employee if Sections 2(2) and 3(I)
of Ordinance shall apply to Plan.
4. Deduction of tax at source.
5. Taxation at time of transfer of shares into
Employee's name.
6. Taxation at time of sale of Employee's shares
by Trustee.
7. Confirmation by Assessment Officer - General.
8. Indemnity to Company.
9. Employee not to be entitled to exemption from
tax under Sections 95 and 97(a) of Ordinance or
under Chapter G of Industry Encouragement
(Taxes) Law, 5729-1969.
10. Future Tax Arrangements.
11. Negotiations/litigation with Authorities.
M. Share Certificates
N. Dividends
O. Rights and/or benefits arising out of
Employer-Employee relationship and absence of
obligation to employ
P. Adjustments for Alterations in Capital Structure
Q. Amendment of Plan, Amendment of Existing Options or
Substitution thereof
R. Commencement of Plan entering into force
S. Termination Suspension or Expiry of Plan
T. Release of Trustee and Legal Adviser from liability
in respect of Plan and indemnity to them from
Employee and Company
U. Arbitration
V. Legal Adviser's Fee
W. Declaration and Undertakings of Employee
X. Miscellaneous
Y. Notices
Z. Appendices
Appendix A - Section 102 Income Tax Ordinance and Income
Tax Rules (Tax Reductions on Allotment of
Shares to Employees), 5749-1989 at date of
commencement of Plan (clause 1.5).
Appendix B - Trust Instrument under Regulation 3 of
Commissioner's Rules (Clause 5.2).
Appendix C - Notice by Company to Assessment Officer of
Allotment Plan (Clause 5.2).
Appendix D - Notice by Employee to Trustee of Exercise
of Option (Clause 7.1).
Appendix E - Notice by Trustee to Company of Exercise
of Option (Clause 7.3).
Appendix F - Power of Attorney by Employee to Legal
Adviser and to Trustee to sign documents
(Clause 9).
Appendix G - Confirmation of Employee containing
undertaking not to apply for exemption
under Sections 95 and 97(a) of Ordinance
and agreement by Employee to Trust
Instrument signed in accordance with
Commissioner's Rules between Company and
Trustee.
Appendix H - Power of Attorney to Company to conduct
negotiations or litigation with
Authorities (Clause 10.11).
O R B O T I N S T R U M E N T S L T D
EMPLOYEE SHARE OWNERSHIP AND OPTION PLAN
1. Introduction
1.1 The purpose of the Employee Share Ownership
and Option Plan (hereinafter - "the Plan") is
to enable selected employees of Orbot
Instruments Ltd. (hereinafter -- "the
Company") and employees of subsidiary
companies (or subsidiaries of subsidiaries)
to acquire shares in the Company at their
nominal value, or at a higher price, whether
at the market price or at a price which
higher or lower than the market price, as the
Company's Board of Directors shall decide
from time to time. The Plan shall not apply
to employees who have control in the Company,
as defined in Section 32(9) Income Tax
Ordinance (hereinafter -- "the Ordinance").
1.2 The Company, by means of the Plan, seeks to
continue to benefit from the services of
those at present filling positions in the
Company, to ensure the attraction of the
services of others suitable to perform senior
functions in the Company and to create
incentives for those holding senior positions
to invest maximum effort in the Company's
success. The Company is a know-how
intensive, high risk, company the value of
whose shares is dependent on the amount of
effort invested by its employees, their
initiative and creativeness. The Company,
therefore, seeks to make its success also
their success.
1.3 The Plan is a continuing scheme, relating
both to options and shares which the Company
has undertaken to grant or allot in the past,
and has not yet done so, and also to options
and shares which shall be issued or allotted,
in accordance with the Plan in the future.
1.4 The Company intends to bring the Plan within
the framework of Section 102 Income Tax
Ordinance (hereinafter -- "Section 102" or
"the Law") and Income Tax Rules (Tax Relief
on Allotment of Shares to Employees),
5749-1989 (hereinafter -- "the Commissioner's
Rules") so as to enable some, or all, of
those employees, to whom the Plan shall
apply, to enjoy the benefit of their
provisions. On the other hand, the Company
does not undertake so to do and, even if it
shall decide so to do, it does not undertake
that the Plan will receive recognition by the
Income Tax Authorities or that, even if it
should be in accordance with the present
legal provisions, there will not be future
amendments to the provisions of the Law, the
Regulations or the Commissioner's Rules,
which shall be prescribed from time to time,
and that these will not have an effect on the
taxation of some, or all, of the employees,
or that, by reason of other considerations,
the Company will prefer not to apply the said
Section 102 to some, or all, of the shares or
options vested in the employees under the
Plan. The Company, therefore, reserves the
right from time to time, in its exclusive
discretion, to apply the Plan, wholly or in
part, outside the framework of Section 102 of
the Ordinance.
1.5 If Section 102 and the Commissioner's Rules
shall apply to some, or all, of the
employees, then the provisions of Section 102
and the Commissioner's Rules, a photocopy of
which, as they are in force on the date of
the commencement of the Plan, is annexed
hereto as Appendix A, or as they shall be
amended from time to time, or, if the
Commissioner shall prescribe special
conditions in respect of the Plan or a
certain allotment under the Plan, shall
constitute an integral part of this Plan, in
so far as they relate to those employees to
whom Section 102 and the Commissioners Rules
have been applied. Wherever there shall be
any contradiction between the provisions of
the Plan and its Appendices, or their
implementation, and the provisions of the Law
and the Commissioner's Rules, the latter
shall prevail. The Plan and/or the
agreements with the employees shall be deemed
to be amended accordingly, provided that
wherever the provisions of the Plan are more
stringent on the Company, the employee or the
Trustee, so as to bring about a fuller or
higher payment of tax due, or to ensure that
the Tax Authorities will not claim the tax
due, or any payment resulting therefrom, from
the Company or the Trustee, then the
provisions of the Plan shall prevail. The
Legal Adviser, as hereinafter defined, shall
exclusively determine if the provisions of
the Plan are more stringent and that they,
therefore, apply or whether the provisions of
the Law and the Commissioner's Rules are more
stringent and that they, therefore, apply as
provided in this Subclause, and he is
empowered to resolve any contradiction
between them.
1.6 In any event, and for the avoidance of doubt,
it is hereby clarified in this Introduction
to the Plan that the employee alone shall
bear all payments and expenses, including
payments of tax, whether Israeli tax or the
tax of a foreign state, in connection with
the granting of the options, their exercise
and the allotment of shares, their
registration in his name, the distribution of
a dividend or any other right in respect of
shares and their sale, and that he will
indemnify the Company, or subsidiary company,
and the Trustee in respect of any payment,
liability (including liability in respect of
nondeduction of tax at source) or expense
caused to the Company, or subsidiary of the
Company, or to the Trustee as a consequence
thereof.
2. Administration of the Plan
2.1 The Plan shall be administered by the Board
of Directors of the Company (hereinafter --
"the Board of Directors"), whose
interpretation of the Plan, implementation
thereof and manner of administration thereof,
subject to the provisions of the Plan
granting powers of interpretation or decision
to the Legal Adviser or to the Trustee, shall
be final and binding. The Board of Directors
shall have the exclusive power to determine
questions of policy and efficiency which
shall arise on the operation of the Plan. No
director shall bear personal liability, nor
shall he be liable to an employee in respect
of a decision and/or act done regarding the
Plan and/or in connection with its operation.
Every right, power or authority vested in the
Company under the Plan is to be exercised or
implemented by the Board of Directors of the
Company, and every instruction or notice
signed by two of the members of the Board of
Directors shall be conclusive proof and
authority for every act or instruction of the
Company.
2.2 The Board of Directors shall, without
prejudice to the generality of the above
provision, have the following powers:
2.2.1 to prescribe, from time to time,
generally or in respect of each
employee individually, in its absolute
discretion, the date and manner of
granting the options and the allotment
of the shares or any part of them; to
prescribe the conditions, which need
not be identical, for each option or
share which the Company shall grant,
or undertake in respect thereof, to an
employee, including price, terms of
exercise of option and allotment of
share; the date or dates on which
some, or all, of the options, shall be
exercised; the manner of the exercise
of options; the number of shares which
may be acquired on behalf of an
employee from time to time, including
minimum number of shares in respect of
which an option shall be exercised;
the obligations of the employee to the
Company, on the performance of which
exercise of the option or the receipt
of the share or the share certificate
by the employee is dependent,
including the obligation of the
employee to sign any document which,
in the opinion of the Board of
Directors, is relevant to the interest
of the Company; to sign with the
employee or the employees an option
agreement or agreements or share
allotment agreements or any other
agreement in any form which shall be
determined between the employee and
the Company; and generally, this Plan
being a skeleton plan, the Board of
Directors may finalise any matter
connected with the allotment of
options and shares with any employee
or employees in separate agreements.
The Board of Directors is authorised
to allot, out of the shares subject to
the Plan, shares, or options for
shares, also to providers of services
to the Company, but such allotment
shall not be an entitling allotment
within the meaning of Section 102 and
the Commissioner's Rules, save to the
extent that Section 102 and the
Commissioner's Rules shall be amended,
should such amendment become possible.
2.2.2 to allot some, or all, of the options
or shares subject to the Plan, to a
trustee, whether a trustee who is
acting within the framework of Section
102, or a trustee acting outside the
framework of Section 102, for selected
employees of the Company, and to allot
the shares subject to the Plan to a
trustee, who shall be appointed by the
Board of Directors, at such time or
times as the Board of Directors shall,
in its absolute discretion, consider
fit, so that he shall hold the options
and/or shares on trust, subject to the
conditions determined by the Board of
Directors, in its absolute discretion,
and subject to the provisions of the
Law and the Regulations and subject to
the express provisions of the Plan and
its restrictions.
2.2.3 to determine, in its exclusive and
absolute discretion, who shall serve
as trustee under the Plan, and, in its
exclusive and absolute discretion to
replace the trustee in the future
and/or to appoint another who shall
serve as trustee in place of the
existing trustee, if the existing
trustee shall not be capable or
willing to fulfill this function, or
if, in the event that Section 102 of
the Ordinance shall apply to the Plan,
the approval of the trustee by the
Income Tax Commissioner shall be
revoked (all the same being done in
coordination with the Income Tax
Authorities if Section 102 of the
Ordinance shall apply to the Plan).
2.2.4 to interpret the Plan and the options
and shares vested under the Plan, to
prescribe, amend and rescind
regulations and provisions in the
Plan. Within the framework of the
exercise of its powers the Board of
Directors is authorised to correct any
defect and/or mistake, and/or lacuna
and/or contradiction in the Plan, to
the extent that the matter shall seem
to it to be necessary or beneficial to
the operation of the Plan or its
efficiency, and the Board of Directors
shall exclusively determine the need
for any requisite amendments.
2.2.5 to amend and/or substitute the Plan
under the provisions of Clause 15
hereunder.
2.2.6 to delegate its powers, relating to
the Plan, to a committee, whether the
said committee shall function as an
independent committee or whether it
shall function as a committee which is
subject to the Board of Directors, but
the committee shall not have the power
to amend and/or substitute the Plan
under the provisions of Clause 15 or
to propose to the general meeting
approval of an increase in the number
of shares subject to the Plan under
the provisions of Clause 3.1
hereunder.
2.2.7 generally to exercise its powers, to
take steps and to impose restrictions
and/or conditions in relation to the
Plan and/or the shares subject to the
options and/or the shares which shall
be allotted under the Plan, as the
Board of Directors shall, in its
absolute discretion, consider proper,
right or necessary for the benefit of
the Company, including to prescribe
that a condition for the granting of
options and/or the allotment of shares
to employees shall be the receipt of
those undertakings and agreements on
the part of the employees specified in
the Ordinance and the Commissioner's
Rules, in this Plan and in any
agreement with any of the employees
under the Plan which, as above
provided, does not have to be
identical to any other such agreement.
2.2.8 to appoint a trustee for this Plan
who, together with the Company's Legal
Adviser, Advocate Ephraim Abramson
(hereinafter -- "the Legal Adviser")
shall fulfill functions as provided in
this Plan.
2.2.9 these acts and the exercise of this
authority by the Board of Directors,
as provided in this Clause, shall be
final and binding on the employee, so
long as the shares and options are
held by the Trustee, or the tax due
thereon shall have not yet been paid.
Nothing provided in this Plan shall
prejudice the rights vested in
employees and the shares allotted to
them, or to the Trustee on their
behalf, but likewise nothing in this
Clause provided shall prejudice the
powers vested in the Company, the
Trustee or the Legal Adviser, whether
under this Plan, or under the option
agreement and/or share acquisition
agreement, or under a power of
attorney given to the Company, the
Trustee or the Legal Adviser by the
employee, to act even after the shares
shall have been vested in the employee
and the tax paid in respect thereof.
3. Shares Subject to Plan
3.1 The shares subject to the Plan shall be the
ordinary shares of the Company (hereinafter --
"the shares" or "the shares subject to the
Plan"). The maximum of shares subject to the
Plan is 3,600 ordinary shares. The Company
shall preserve the shares subject to the Plan
in its registered capital, but it may in
accordance with a resolution of the Board of
Directors, from time to time, allot some, or
all, of the shares subject to the Plan, or
options in respect thereof, to the Trustee so
that he may act in accordance with the
directions of the Board of Directors. In the
event that an option, granted in accordance
with the Plan, shall expire for any reason,
or shall run out without being fully
exercised, or in the event that shares
allotted to those entitled shall have been
reacquired from them, or the right of those
entitled to them shall have been lost, the
shares not acquired under the option, or the
acquisition of which shall not have been
completed, shall be at the disposal of the
Plan. The Company shall not increase the
maximum number of shares unless the Board of
Directors shall so resolve and the matter
shall be approved in a general meeting of the
Company's shareholders.
3.2 So long as the shares are held by the
Trustee, or registered in his name in the
Register of Members of the Company, or so
long as the share certificates are held by
the Trustee or the Legal Adviser, the Trustee
alone shall be entitled to receive any notice
to which a shareholder is entitled in respect
thereof, if he is at all so entitled, and he
shall be the one entitled to exercise any
right, or require any information or
financial, or other, report which
shareholders are entitled to receive from the
Company, or to participate in any
shareholders' meeting, and the employee shall
not be entitled to exercise such right as a
shareholder or to make any requisition or
request from the Trustee or Company in this
respect. The Trustee shall cast votes in the
general meeting in such a manner that the
practical effect is the same as if he shall
have abstained from voting. Subject to the
above provision the Trustee shall be guided
in all matters relating to voting, receipt of
information and his activity as shareholder,
by the legal opinion and considerations of
the Legal Adviser.
4. Entitlement to Receive Options and/or Shares and
Waiver of Past Agreements
4.1 The Board of Directors shall determine, from
time to time, in its exclusive and absolute
discretion, who of the Company's employees
are entitled to receive options or shares in
accordance with the Plan, and the number of
shares or options to which each of them is
entitled.
The Board of Directors shall determine if the
said shares or options shall, or shall not,
be within the framework of Section 102 and
the Commissioner's Rules.
4.2 By his signing of the agreement, provided for
in Clause 6 hereunder, the employee declares
and agrees that the Plan and the Agreement
shall prevail over any agreement, arrangement
and/or understanding, if any, that there has
been in the past, whether in writing or
orally, between him and the Company, its
directors and/or shareholders, and that any
past arrangement or undertaking, relating to
matters covered by the Plan, made with the
employee, or any promise made in the past to
him by the Company's shareholders or
directors shall be of no effect and null and
void and, in all matters relating to the
Company's options or shares, there shall
apply only the provisions of the Plan or of
the option agreement or of the share
agreement which shall be signed with him in
accordance with the Plan (Clause 6
hereunder). The employee, by signing the
option agreement or share agreement, as
provided in Clause 6, expressly waives any
right he may have had, if at all, against the
Company, its shareholders or directors in all
matters connected with the Company's options
or shares.
5. Allotment of Options and Shares to Trustee
5.1 The Board of Directors of the Company shall
appoint a trustee for the purpose of this
Plan. The trustee shall be granted all the
powers, prescribed by the Law, the
Commissioner's Rules and the Plan and he
shall act in connection with those shares or
options, which shall be allotted by
resolution of the Board of Directors. The
Trustee shall be paid by the Company such fee
as shall be fixed between him and the
Company.
5.2 If the Plan, or part of it, shall be brought
within the framework of Section 102 of the
Ordinance, the Company and the Trustee shall
apply to the Income Tax Commissioner for
approval of the Trustee, as provided in
Section 102 and the Commissioner's Rules.
The Company and the Trustee shall sign the
trust instrument, as provided in the
Commissioner's Rules, (hereinafter -- "the
Trust Instrument") and shall notify the
assessment officer, in the office in which
the Company's file is conducted, of the
allotment plan thirty days at least before it
shall be implemented as provided in the
Commissioner's Rules.
The form of trust instrument is an integral
part of the Plan and is annexed hereto as
Appendix B. The form of notice to the
assessment officer is annexed hereto, as an
integral part of the Plan, as Appendix C.
Whenever there is a contradiction between the
provisions of the Plan and the Appendices,
the provisions of Clause 1.5 above shall
apply.
5.3 The options shall be granted, and the shares,
which are subject to the Plan, shall be
allotted to the Trustee, from time to time,
in such numbers and at such time or times as
the Board of Directors shall consider
appropriate, provided always that options
shall not be granted, and shares, which are
subject to the Plan, shall not be allotted,
at a time later than the date in respect of
which the Company shall have given an
undertaking, if, and to the extent, it shall
have given such undertaking, to the
assessment officer or to the employee. Share
certificates, issued by the Company in the
name of the Trustee, shall be deposited with
him and held by him, and the shares, subject
to the provisions of any rule of law, shall
be registered in his name in the Register of
Members of the Company, throughout a minimum
period, which shall be fixed by the Board of
Directors and which shall not be less than
twenty-four months from the date of the
commencement of the Plan, as defined in
Clause 16 hereunder, or from the date on
which the options shall have been granted, or
the shares shall have been allotted, to the
Trustee, or from the date on which the
employee shall have been entitled, for the
first time, to exercise the option in regard
to each share, whichever is the latest
(hereinafter -- "the closed period"). If the
employee shall have been granted options, and
Section 102 and the Commissioner's Rules
shall apply to such grant, there shall, in
addition, be taken into account, in
calculating the closed period, the period
during which the option shall have been in
the hands of the Trustee. Subject to the
provisions of the Law and the Commissioner's
Rules, the Board of Directors is authorised
to determine any provision regarding of the
closed period.
5.4 As a condition of his entitlement to options
and/or shares under the Plan the employee
shall sign any document which, in the opinion
of the Legal Adviser, he has to sign as a
condition for the application of Section 102
of the Ordinance and the Commissioner's
Rules, and their full implementation and
payment of tax due in respect of the grant of
the options and allotment of the shares, as
provided in this Plan.
5.5 All the said documents connected with the
options and shares, which, under the Law or
under the Plan or by resolution of the Board
of Directors, do not have to be held by the
Trustee, shall be held by the Legal Adviser,
the employee and the Company.
5.6 Nothing above provided shall prejudice the
power of the Board of Directors to allot
options or shares to the Trustee outside the
framework of Section 102 and the
Commissioner's Rules, to appoint another
trustee, who is not the trustee determined by
the Company for the purpose of Section 102,
or to allot shares or options to employees
direct, and not by way of the Trustee, on
such conditions as the Board of Directors
shall prescribe.
6. Agreement with Employee (Option or Share Acquisition
Agreement)
Every employee will be required, unless the Board of
Directors shall arrange with him otherwise, to sign
an option agreement or share acquisition agreement
or other agreement, as shall be decided, from time
to time, by the Board of Directors of the Company,
in such form as shall be suggested, from time to
time, by the Legal Adviser of the Company, and
approved by its Board of Directors (hereinafter --
"option agreement" or "share acquisition agreement"
or "the agreement").
The agreements to be signed with the employees are
not required to be in identical form. The following
conditions, unless expressly prescribed otherwise in
regard to any particular option, shall apply to
every option and, with necessary modifications, the
share acquisition agreement:
6.1 The period of the option shall be for 10
(ten) years from the date of the commencement
of the Plan, as such date is defined in
Clause 16 hereunder, and at the termination
of this period, unless extended by the Board
of Directors, the option shall expire.
6.2 The option -- unless Section 102 and the
Commissioner's Rules do not apply to it and
the Board of Directors have determined
otherwise in the agreement with the employee
-- shall be issued in the name of the Trustee
on behalf of the particular employee for a
nil consideration, or at a price prescribed
by the Board of Directors, in its absolute
discretion, (hereinafter -- "the option
price"). The consideration for the shares
acquired by exercise of the option shall
likewise be determined by the Board of
Directors and it can be the market price, or
a price which is higher or lower than the
market price, of the shares, provided only
that it shall not be less than the nominal
value of the shares covered by that option
(hereinafter -- "exercise of option price").
6.3 In addition to the provisions of Clause 6.2,
and without prejudice to the same, the option
shall be granted, or the share shall be
allotted, to the employee, if the Law and the
Commissioner's Rules shall apply to the
agreement with him, in consideration of the
employee agreeing with the Company in
writing, or in accordance with the provisions
of the agreement, to forego salary.
6.4 The exercise of option price, unless
otherwise provided in the agreement, shall be
paid to the Company by the employee in
shekels on one of the following dates, as
provided in the option agreement, (I) the
date of the exercise of the option, or (II)
at the discretion of the Board of Directors,
by a deferred payment to be made at the
termination of the closed period, or (III) on
a date to be fixed from time to time by the
Board of Directors at its absolute discretion
(calls), or (IV) in accordance with any
arrangement prescribed by the Board of
Directors. If, in the option agreement, no
date shall have been prescribed the exercise
of option price shall be paid in its entirety
at the time of the exercise of the option.
In every case when an arrangement shall
prescribe that payment of the exercise of
option price shall be deferred, the deferred
payment shall be linked to the Consumer Price
Index or to a similar index or to foreign
currency, and it may also include interest,
as the Board of Directors shall determine.
6.5 The option and/or right to the option and/or
the shares are personal and, save as provided
in this Plan and Section 102 and the
Commissioner's Rules (to the extent that
these apply), are not capable of being
transferred, assigned, pledged, held as a
lien, attached or charged in any way
voluntarily or by virtue of a rule of law,
except devolution under a by will or the laws
relating to inheritance (see Clause 6.8.5.
hereunder) and no power of attorney or
instrument of transfer, whether of immediate
or future effect, shall be given in respect
of them. The option may be exercised only by
the Trustee for the employee mentioned in the
option agreement. A note or legend of the
contents of this Subclause can appear on the
face of any document granting the option,
including the option agreement, and also on
any share certificate and share acquisition
agreement.
6.6 The right to exercise the option shall be
vested in the employee, but, if Section 102
and the Commissioner's Rules apply to him, or
if the Board of Directors so resolves, the
right to exercise the option shall be vested
in the Trustee, or the shares shall be
allotted to the Trustee, in installments and
gradually throughout a period of 5 (five)
years from the date of the grant of the
option, unless a different period or periods
shall have been fixed for the employee, or if
the provisions of Clause 6.7 hereunder shall
apply to him. At the end of each of the
periods prescribed in the option agreement
for exercise of the option (vesting periods),
it shall be possible, from time to time, to
exercise the option relating to all the
shares allocated to that period, so that in
each of the 5 years the Trustee, unless
provided otherwise in the agreement with the
employee, shall be entitled to exercise the
option on behalf of the employee and at his
request in respect of one fifth of the amount
of shares specified in the agreement as being
subject to the option. In addition,
throughout each of the periods it shall be
possible to exercise the option in respect of
all, or some of, the shares allocated to any
previous period, in which the option was not
exercised in its entirety, provided that,
subject to the provisions of Subclause 6.8
hereunder, at the time of the exercise of the
option, the employee shall continue to be
employed by the Company, or a subsidiary
company in its control, without a break from
the date of the grant of the option to the
date of its exercise. After the termination
of the vesting periods, and during the
remainder of the option period, the option
may, from time to time, be exercised, in
respect of all, or some of, the shares not
yet taken up and which remain subject to the
option. The provisions of this Subclause
shall be subject to the conditions of the
option agreement, if any, prescribing a
minimum number of shares in respect of which
the option may be exercised in each notice of
exercise, and also the provisions prescribing
the number of times the Trustee may send to
the Company notices of exercise of the option
on behalf of the employee. The Board of
Directors may, at any time, shorten the
period of the vesting schedule.
6.7 The Board of Directors may prescribe that the
employees, or some of them, or a particular
employee, may be exempted from being subject
to allotments by installments, in accordance
with the vesting periods (as provided in
Clause 6.6) and shall be entitled to receive
the options or the shares, through the
Trustee, as provided in this Plan, or
directly in the name of the employee,
immediately on the signing of the agreement
or at other times, in accordance with the
Company's undertaking or obligation towards
them. If employees shall be exempted from
being subject to allotment by installments in
accordance with the vesting periods (as
provided in Clause 6.6), the Board of
Directors may prescribe in the agreement with
the employee that the Trustee, or subsidiary
or associated companies shall have the right
to reacquire the shares from that employee at
a nominal price, if the employee shall have
not observed the conditions prescribed by the
Board of Directors or shall have ceased to be
employed by the Company. The Board of
Directors shall prescribe additional
conditions for this right of reacquisition,
including appropriate arrangements in respect
of the money to be at the disposal of the
Trustee or subsidiary companies or others,
for the purposes of reacquisition, and also
arrangements regarding rights of the employee
to vote, to receive any report or information
from the Company and to receive dividends in
respect of the shares likely to be so
reacquired. The employee shall not be
entitled, for so long as the conditions so
prescribed by the Board of Managers
(including the prescribing of a minimum
period of employment as a condition for the
lapsing of the right to reacquire) shall have
not been complied with, to sell, charge or
transfer in any way the shares subject to the
right of reacquisition. To secure
performance of this obligation the share
certificate shall be deposited with the Legal
Adviser who shall release the same to the
employee only after the employee shall be
finally entitled to the shares and these
shall no longer be subject to any restrictive
condition.
6.8 Termination of Employment of Employee
6.8.1 Save for the restrictions hereunder
mentioned, in the event of the
termination of the employment of the
employee by the Company for any reason
whatsoever, whether those entitling
payment of redundancy pay
(compensation for dismissal) or those
not so entitling, the Trustee shall
have the right, on the instructions of
the employee, to exercise the option
on behalf of the said employee, as he
shall have been able to exercise it at
the end of the period of his
employment, during a period of 3
(three) months after the conclusion of
his employment. If the option shall
be in the name of the employee, the
employee shall have the right to
exercise it as above. For the purpose
of this matter conclusion of the
employment of the employee shall be
the date on which the Company or the
employee, as the case may be, gives
notice to the other in writing of
termination of the ties between them
(even if such notice specifies a
future date for the termination of
such ties, the date of conclusion of
employment shall, for the purpose of
this matter, be deemed to be the date
of the giving of the notice). At the
end of the said 3 (three) months the
option shall expire. The employee
shall notify the Trustee as provided
in Clause 7.1 hereunder if he wishes
the Trustee to exercise the option for
him.
6.8.2 In the event that the termination of
the employment of the employee shall
be the result, as determined, in its
absolute discretion, by the Board of
Directors, of a permanent absolute
disablement of the employee, or in any
other event in which the Board of
Directors shall determine, in its
absolute discretion, as a proper
period for exercising the option a
period which is more than the said 3
(three) months, the option shall be
exercisable throughout the period of
one year from the conclusion of the
employment of the particular employee
by the Company, or during such period
as prescribed by the Board of
Directors, in its absolute discretion,
in regard to those shares in respect
of which the option was exercisable at
the conclusion of the employment.
6.8.3 If Section 102 of the Ordinance and
the Commissioner's Rules shall apply
to the Plan, then, if an employee
shall have ceased to be an employee of
the Company before the expiry of two
years from the date of the entitling
allotment, as defined in the
Commissioner's Rules, save only if he
shall have ceased to work in the
Company by reason of his decease or
for other special reasons which, to
the satisfaction of the Commissioner
are not under the employee's control,
the exemption contained in Section 102
of the Ordinance shall not apply, in
accordance with the Commissioner's
Rules, to this employee. In this
event the employee shall, at his own
cost, resolve with the Income Tax
Authorities all questions connected
with taxation of the options and/or
shares and pay the tax due forthwith,
as provided in the Law and the
Commissioner's Rules, as a condition
precedent to the exercise of the
option. Without prejudice to the
obligation of the employee under this
Clause the Company and/or the Legal
Adviser may apply to the Income Tax
Authorities and clarify the question
of the liability of the employee to
income tax. The Trustee shall not be
obliged to transfer to the employee
the options or shares, or to sell the
same on his behalf, before tax shall
have been fully paid or before the
Trustee shall have received
confirmation under the Commissioner's
Rules, from the assessment officer
that the matter of tax has been
resolved.
6.8.4 The Board of Directors is authorised,
in its absolute discretion, to extend
the period for the exercise of the
option by an employee or employees for
a period which it shall prescribe and
it is authorised to make its said
agreement conditional on such
conditions as it shall find fit.
6.8.5 In the event that the employee shall
die, while still the employment of the
Company, the option shall be
exercisable at any time until the end
of the period 10 (ten) years from the
date of the commencement of the Plan,
as this date is defined in Clause 16
hereunder, and in respect of that
number of shares in respect of which
the employee shall have been able to
exercise the option on the date of his
death. The right to exercise the
option shall be that of those entitled
to the option under the will of the
employee or in accordance with the law
of inheritance (hereinafter -- "his
heir or heirs") and after he or they
shall have satisfied the Trustee that
the rights to the option have passed
to him or them.
In the event that the employee shall
have died after termination of his
employment, but before the expiry of
the option, the option shall be
exercisable by the Trustee on behalf
of the heir or heirs during the same
period during which the option shall
have been exercisable on the date of
the death of the employee, or during
one year from the date of the death of
the employee, whichever is the longer,
and in respect of that number of
shares in regard to which the option
shall have been exercisable on the
date of the termination of the
employment of the employee.
6.8.6 Notwithstanding the above provisions,
and in accordance with the provisions
of Clause 6.1 above, in no event shall
the option be exercisable after 10
(ten) years from the date of the
commencement of the Plan, as this date
is defined in Clause 16 hereunder,
unless such time has been extended by
the Board of Directors.
6.9 The employee (whether as owner of an option
or if the shares shall have been allotted for
him to the Trustee) shall have none of the
rights given to a shareholder in the Company
so long as the option shall not have been
exercised and the shares allotted and
registered in his name in the books of the
Company.
7. Exercise of the Option
7.1 An employee, wishing the Trustee to exercise
an option on his behalf, shall instruct the
Trustee in writing, in the form annexed
hereto as Appendix D, or in any other form
prescribed in the agreement with the
employee. The payment due for the exercise
of option price, as prescribed in the
agreement and the provisions of Clauses 6.2
and 6.4 above, shall be enclosed with the
notice, in the form in which it is to be
made, and there shall in addition be annexed
all the other documents which the employee is
required to sign as a condition of the
exercise of the option, as set out in the
Plan.
7.2 If Section 102 shall not apply to the option
or to the shares to which it relates, or if,
in the opinion of the Legal Adviser, it does
not apply and the options shall have been
granted direct to the employee, the employee
shall exercise the option by notice of
exercise in a form similar to that in
Appendix D, save that in place of the words
"the Trustee" shall come the words "the
employee". As a condition of the exercise of
the option the employee shall pay the tax
applicable to him (including any tax payable
by the Company in respect of its duty to
deduct tax at source), in accordance with the
directions of the Legal Adviser and the
provisions of the Plan, as a condition of the
exercise of the option.
7.3 On receipt, to the satisfaction of the Legal
Adviser, of all the documents, confirmations
and payments required from the employee as a
condition of the exercise of the option under
the Plan, the agreement and any rule of law,
the Legal Adviser shall give notice of such
to the Company, and, in the event that the
Trustee is trustee, the Trustee shall send
notice to the Company in the form annexed
hereto as Appendix E, or in any other form
prescribed in the agreement with the
employee. The Company shall allot the
shares, which are subject to the option, to
the Trustee, shall register the Trustee in
the Register of Members of the Company and
shall issue to the Trustee the share
certificate in the name of the Trustee in
respect of these shares, which certificate is
to be held by him, all as provided in this
Plan, in the Law and in the Commissioner's
Rules. If it shall have been provided in the
agreement that the Company shall grant the
options direct to the employee, and if the
tax shall have been paid and all the other
preconditions to the exercise of the option
complied with, the shares shall be issued in
the name of the employee.
7.4 If it shall have been provided in the
agreement with the employee that he shall
receive shares direct, and not options, the
conditions of the acquisition of the shares
by the employee shall be specified in the
agreement with him and the conditions of this
Plan shall apply, subject to the provisions
of the agreement with the employee, with
necessary modifications, to the share
acquisition agreement. In any case of a
dispute concerning the question of the extent
of the applications of the provisions of the
Plan to the share acquisition agreement, the
Legal Adviser shall decide.
8. Transfer of Shares into Employee's Name
8.1 Commencing from the termination of the closed
period, and provided only that the option
shall have been exercised, the shares shall
have been allotted to the Trustee and
employee shall have paid the full exercise of
option price and produced, signed by him, all
the documents he shall have been required to
produce up to that date, the employee
(subject to the provisions of this Plan, the
Law and the Commissioner's Rules, as varied
from time to time, and provided that the full
amount of tax, applicable under the Law and
the Commissioner's Rules, shall have been
paid and the Trustee shall have received the
confirmation of such from the assessment
officer, or after the Trustee shall have
transferred to the assessment officer, as
provided in the Commissioner's Rules, 30% of
the consideration on account of tax due, or
any other percentage which may be prescribed,
from time to time, in the Commissioner's
Rules or by any rule of law), shall be
entitled to apply to the Trustee for the
shares to be transferred into his name, or
alternatively that the Trustee shall, subject
to the provisions of the Articles of
Association of the Company, as they shall be
in force from time to time, concerning the
approval of the Board of Directors as a
condition of any sale of shares, sell some,
or all of, the shares in order that there
shall be available to the employee the money
necessary for payment by him of the tax and
other payments for which he is liable under
the provisions of the Plan and by law and, in
particular under Clause 10. The Legal
Adviser shall prescribe the arrangements,
including the wording of a written agreement
between the employee and the Trustee, to
ensure that the tax due shall be paid before
the consideration, or the balance of the
shares after the sale, shall be transferred
to the employee. If the employee shall not
have exercised the option, but all the
conditions of the agreement with him shall
have been complied with and the closed period
shall have ended and all tax due shall have
been paid, as confirmed by the assessment
officer, the employee may require that the
options be transferred from the name of the
Trustee into his name.
8.2 The right of the employee to receive all, or
some of, the shares from the Trustee and to
require that they be registered in his name,
as above provided, and also his right to
require the Trustee to sell shares on his
behalf and in his name, for the purpose of
financing payments due from him, and also his
right to receive the options which shall not
have been exercised, are personal rights and
may not be transferred, assigned, pledged,
serve as a lien, be attached or charged in
any other way, voluntarily or by law, save
only devolution under a will or in accordance
with the laws of inheritance, and no power of
attorney or instrument of transfer, whether
of immediate or of future effect, shall be
given in respect thereof. Any such transfer,
directly or indirectly, whether of immediate
or of future effect, shall be null and void
and the Trustee shall not act in accordance
therewith.
8.3 If the Company shall offer its shares to the
public and/or register them for trading on
any stock exchange, whether in Israel or
abroad, there shall apply to the employee and
the shares, in addition to any condition or
other restriction contained in the Plan, all
restrictions or obligations imposed by law,
whether in Israel or abroad, or by internal
directions of the stock exchange or stock
exchanges, on which the said shares shall be
traded, and also restrictions and
obligations, if any, which shall be imposed
on the Company or on its shareholders, by
agreement between the underwriter or
underwriters, or any investment bank of any
kind whatsoever, and the Company or between
them and the majority of the shareholders
(for example, a lock up agreement), such
agreement being signed at the exclusive
discretion of the Company and which shall,
for the purpose of this Plan, also bind the
employee, or restrictions which shall be
imposed at the demand of any authority, or
any agreement which there shall be between
that authority and the Company. The said
restrictions and obligations, and also any
other restriction affecting the shares under
the Plan or under the agreement between the
employee and the Company, shall hereinafter
be called "the restrictions" and the period
during which the restrictions apply shall be
called "the restriction period". The
undertaking of the employee to abide by all
the restrictions and obligations under the
said agreements or provisions shall be a
precondition to his receiving the shares and,
without derogating from the provisions of
Clause 9 hereunder and the powers of the
Legal Adviser as therein set out, the
employee shall sign any document or agreement
which, in the opinion of the Legal Adviser,
shall be necessary in order to secure
performance of his said obligations. In the
case of any dispute regarding the wording of
the agreement, or agreements, and in regard
to the scope of the restrictions the Legal
Adviser shall decide by virtue of his power
under Clause 19 hereunder.
8.4 If the employee shall die before the shares,
in respect of which the option shall have
been exercised, shall be transferred into his
name by the Trustee, the right available to
the employee to have the shares registered in
his name shall be available to the person or
persons who is, or are, the owners of that
right under the terms of his will or
according to the laws of inheritance, after
he, or they, shall have satisfied the Trustee
that the said right has indeed passed to him
or them.
8.5 On every share certificate, issued under the
Plan, the Company may inscribe a legend
clearly setting out the said restrictions and
also any restriction relating to the shares,
including restrictions on the transferability
of shares which shall be issued in the name
of the employee and which, in the opinion of
the Legal Adviser, it is necessary, for any
reason, so to inscribe a share certificate.
At the end of the restriction period it shall
be possible, as against surrender of the
share certificate to the Company, to receive
in its place a new share certificate without
such inscribed legend.
8.6 If bonus shares shall be allotted in virtue
of the shares which shall have been allotted
for the employee under this Plan, and
registered in the name of the Trustee, they
shall be allotted to the Trustee and be
registered in his name and shall be regarded,
for all purposes, including their being
subject to the Plan and to the provisions of
Section 102 of the Ordinance and the
Commissioner's Rules, as if they were the
original shares, in virtue of which they were
allotted, so long as the shares shall be
registered in the name of the Trustee. By
signing the agreement the employee confirms
that he expressly agrees to the contents of
this Clause and undertakes as required in
Rule 4(b)(2) of the Commissioner's Rules.
8.7 The transferability of the shares, after they
shall have been registered in the name of the
employee, for so long as the Company shall
not be a public company whose securities are
traded on a stock exchange, is restricted as
provided in this Plan (including as provided
in Clause 21.1 hereunder) and as provided in
the Articles of Association of the Company,
as these shall be in force from time to time,
and any agreement between the Company and the
employee.
8.8 In the event of differences of opinion
regarding the date on which the restriction
period shall terminate, they shall be
resolved by decision of the Legal Adviser in
accordance with his authority as arbitrator
under Clause 19 hereunder.
9. Additional Documents
9.1 Without derogating from the provisions of
Clauses 3.2 and 6.9 above and the other
provisions of the Plan, and any agreement
which shall be signed with the employee, for
so long as the shares and/or options shall be
registered in the name of the Trustee the
Trustee shall be the one authorised and
empowered to exercise any right, power or
authority attached to, or arising out of, the
shares and/or options and to sign any
document (including any agreement, including
an agreement as to merger of the Company or
for the acquisition or sale of its assets,
and all ancillary documents, resolution,
application, instrument, receipts and the
like), affidavit or confirmation in the name
of the employee, and on his behalf, regarding
the shares and/or options, or the rights
which they represent in the Company, as shall
seem necessary or desirable. If, in any
matter there shall have been adopted
resolutions in the Board of Directors of the
Company and/or in its general meeting, the
Trustee shall exercise his said powers and
authority at his discretion, and after
consultation with the Legal Adviser, so as to
advance and/or implement the resolution
and/or its purposes.
9.2 The Company has the right, at any time, to
require the employee, whether as a condition
of the exercise of the option, or as a
condition of the transfer of the options or
shares into his name or, if he shall be a
shareholder, after the transfer of the shares
into his name, or generally, to produce to it
any confirmation, affidavit or other document
(as set out in Clause 9.1), which the
Company, in its opinion, needs under any rule
of law, whether it be local or foreign, or
any confirmation or consent, including an
undertaking by the employee not to sell his
shares for any period, required by an
underwriter or investment bank or consultant
of the Company, for the purposes of any share
issue, whether private or public, including
any confirmation or consent which the Company
has to obtain, if at all, from its employees
by virtue of their being shareholders of a
certain class, or any confirmation,
declaration or other document which the
Company shall find necessary or desirable to
obtain for the purpose of the Company's Board
of Directors dealing more effectively with
the raising of capital, whether on a private,
or public, share issue, whether in Israel or
abroad, for the purposes of merger of the
Company with another company, whether the
Company shall be the surviving company or
not, for the purpose of the reorganisation of
the Company, as the Company shall, on
consultation with the Legal Adviser, find
necessary or desirable. The wording of any
document, which the employee shall be
required to sign, shall be as determined by
the Legal Adviser who shall draft them, in
his absolute discretion, provided that in his
opinion, in his absolute discretion, the said
raising of additional capital, merger or any
other said change shall not substantially
prejudice the investment of the employee in
the Company. Dilution of the employee's
shareholdings in the Company, resulting from
the raising of any additional capital or
merger or the exercise of any options shall
not be deemed to prejudice in any way the
employee's shareholdings. So long as the
shares and/or options shall be registered in
the name of the Trustee the Trustee shall be
authorised to sign, in the name of the
employee, and on his behalf, any such
document, as provided in Clause 9.1 above.
After the shares shall been transferred into
the name of the employee and, if the employee
shall have refused to sign any of the said
documents for the Company, the Legal Adviser
is empowered and authorised, at his
discretion, to sign, at the request of the
Company, any of the said documents in the
name, and on behalf, of the employee. If
resolutions relating to any matter shall have
been adopted by the Board of Directors and/or
in general meeting, the Legal Adviser shall
exercise his said powers, at his discretion,
in order to promote and/or implement the
resolution and/or its purposes.
9.3 To secure performance the above the employee
shall, when signing the agreement provided
for in Clause 6 above and/or the power of
attorney in Appendix F below, irrevocably
empower the Legal Adviser and/or the Trustee
as above provided, in view of the fact that
the rights of the Company and of the other
employees are dependent on the same, to sign
the said documents in his name, and the
employee shall not make any claim, or raise
any contention, against the Legal Adviser or
the Trustee in connection with such
signature. The employee will authenticate
his signature before a notary if so required
by the Company so as to give full force to
the power of attorney.
The form of irrevocable power of attorney --
unless otherwise provided in the agreement
between the Company and the employee -- is
annexed hereto as an integral part of the
Plan and marked as Appendix F. The said
power of attorney shall be interpreted in the
broadest possible way, having regard to the
provisions of this Plan, its purposes and
intent, and in accordance with the
instructions of the Legal Adviser and as he
shall, in his discretion, determine.
If the Company shall have issued its shares
to the public and they shall be traded on a
stock exchange, in Israel or abroad, the
legal force of this Clause shall lapse on the
date of the public issue, as determined by
the Legal Adviser, for the purposes of the
matter. The lapsing of the legal force of
this Clause shall not affect in any way the
validity of any document signed as above, by
virtue of the provisions of this Clause,
prior to the lapsing of the legal force of
this Clause.
10. Taxation and Other Arrangements Relating to Transfer
of Shares to Employee
10.1 General
The options which will be granted, and the
shares which will be allotted, under this
Plan shall be granted and/or allotted within
the framework of the relationship of
employee-employer. The employee shall bear
the full liability for tax, levies, fines and
other payments imposed by the Tax Authorities
(whether in Israel or abroad) and every
obligatory payment, whatever its source, in
respect of the options, the shares or a
dividend or any other benefit arising
thereout and/or obligations which shall be
incurred by the employee and/or the Company
and/or the Trustee in connection with the
Plan (including in connection with a past
promise of shares, granting of options, their
exercise, allotment of shares, their transfer
into the name of the employee, their sale by
the employee and/or by the Trustee),
including, without derogating from the
generality of the above, income tax, stamp
duty, employers' tax, capital profits tax,
value added tax and payments to National
Insurance (some of which do not apply today,
but, theoretically, could be applicable in
the future and have accordingly been included
as examples). The following provisions of
this Clause give a general explanation of the
tax position in Israel only, but this is
without prejudice to the tax obligation in
respect of any foreign tax, which shall be
fully the responsibility of the employee, as
provided in Clause 1.6 above.
10.2 Taxation of Employee if Section 102 shall
apply to the Plan
10.2.1 The Company intends to bring the Plan,
or some of the shares subject to the
Plan, within Section 102 of the
Ordinance, which provides special tax
arrangements in regard to allotment of
shares and granting of options for the
acquisition of shares by a company to
its employees. Nevertheless, the
Company does not undertake so to act
and, even if it shall decide to bring
the Plan within the framework of
Section 102, there is no guarantee
that the Income Tax Authorities will
agree that Section 102 applies to the
Plan, or that, even if they shall so
agree, they will not change their
minds and will not argue at any time,
on any ground, whether connected with
the Company or the employee or the
agreement between them or the terms of
the Plan, or whether not connected
with the Company or the employee, that
other rules of taxation apply to the
Plan or, even if Section 102 shall
have applied to the Plan, such
application has lapsed because of
noncompliance with the conditions
contained in the Section or in the
Commissioner's Rules, for any reason,
including reasons arising from acts or
omissions of the Trustee or the
Company or the Legal Adviser, or which
were caused because, or in
consequence, of them. The Company,
the Trustee and the Legal Adviser are
not, and shall not be, liable to the
employee in such matter for any reason
whatsoever because, inter alia, as
provided in this Plan, the tax
liability under the Plan falls fully
on the employee.
10.2.2 Generally, under the provisions of
Section 102 of the Ordinance and the
Commissioner's Rules, the date of
liability for tax is the date of the
transfer of the shares into the name
of the employee, or the date of the
sale of the shares by the Trustee or
the employee, whichever is the
earlier. On that date the employee
shall be deemed to have sold his
shares for a consideration as defined
in Section 88 of the Ordinance. For
this purpose the original cost will be
deemed to be only the amount which the
employee paid in cash at the time of
the allotment. The Trustee will have
to deduct at source 30% of the said
consideration, or any other percentage
determined by the assessment officer
or any other percentage as fixed from
time to time. The manner of
calculating the amount of tax shall be
as hereinafter specified in this
Clause 10, or any manner which shall
seem proper to the Trustee, who shall
consult the Legal Adviser in the
matter. The employee shall not be
entitled to the exemption from tax due
in accordance with Section 97(c) of
the Ordinance and, therefore, inter
alia, the provisions of the exemption
from tax contained in Income Tax Order
(Exemption from Tax on Capital Profit
from Sale of Shares), 5742-1981, shall
not apply to him. The Commissioner is
authorised to enact additional rules
and instructions as provided in
Section 102 of the Ordinance. The
Company does not give any undertaking
that the Plan will enjoy recognition
by the Income Tax Authorities or that,
even in the event that it shall comply
with the present provisions of the
Law, there will not be changes in the
future in the Law, in Regulations or
in Rules which shall be enacted, or as
a result of events which shall occur,
and that these will not have an effect
on the taxation of the employees.
10.3 Taxation of Employee if Sections 2(2) and
3(I) of the Ordinance shall apply to the Plan
If the provisions of Section 102 shall not
apply to the Plan, or part of it, whether
because the Company shall have decided not to
bring it within the framework of the Section
or because Section 102 shall not apply to the
Plan for whatsoever reason, then the mode of
taxation, as the Company understands the same
in connection with the options given to the
employee, correct to the date of the
commencement of the plan, is explained in a
general manner in this Clause 10.3:
10.3.1 The position of the Company, in
summary, is that the employee, so long
as the shares of the Company are not
traded on a stock exchange, will not
be made liable for tax on the granting
of the option. In accordance with the
provisions of Section 3(I) of the
Ordinance such tax shall become
payable on exercise of the option.
This position of the Company is not
necessarily accepted by the Income Tax
Authorities who may well claim that
the tax event, even in the case of a
private company, is the granting of
the option, in accordance with the
provisions of Section 2(2) of the
Ordinance, or that the question has
still not been decided, inter alia, in
the conditions in which the option
shall have been granted. On the date
of the commencement of the Plan the
Company does not have an opinion as to
what will be the position adopted by
the Tax Authorities and what will be
the implications of Section 102 and
the Commissioner's Rules on that
position. The Company has not sought
clarifications from the Tax
Authorities in any matter relating to
this question and the employee shall
not have any claim against the Company
in regard to the position adopted by
the Company.
If the position of the Company shall
not be accepted, tax will be payable,
in accordance with the provisions of
Section 2(2) of the Ordinance, at the
time of the granting of the option to
the employee. The Tax Authorities
will claim from the employee the full
amount of tax due on the benefit
received by the employee in the form
of the option granted to him. The
employee shall pay the tax also on the
exercise of the option, under Section
3(I) of the Ordinance, as mentioned in
Clause 10.3.2. There is no certainty
that the tax paid by the employee at
the stage of the granting of the
option will be taken into account in
calculating the tax to be paid by him
on the exercise of the option.
10.3.2 The tax for which the employee shall
be liable, at the time of the exercise
of the option, shall be in accordance
with Section 3(I) of the Ordinance,
namely the liability will arise in
respect of income from employment on
the difference between the value of
the shares at the time of the exercise
of the option and the consideration
which he shall have actually paid for
them, or, as provided in Section 3(I)
of the Ordinance, "the price
ordinarily paid for that property and
the price which that person paid".
The rate of tax which shall apply,
according to the position of the
Company (and, as already stated, there
is no guarantee that it will be
accepted by the Income Tax
Authorities), will be determined
according to the value of the shares
subject to the tax laws in force at
the time of the exercise.
10.3.3 At the time of the sale of the shares
which were acquired by virtue of the
exercise of the option granted in
accordance with the plan, the employee
will pay Capital Profits Tax under the
provisions of Chapter E of the
Ordinance. The position of the
Company is that, even if the
provisions of Section 102 of the
Ordinance do not apply, for the
purpose of calculating Capital Profits
Tax on the sale of the shares the Tax
Authorities will have to bring into
account the increase in the base
arising from the payment of tax under
Section 3(I) of the Ordinance and, in
the event that tax will be due in
respect of the grant of the option
under Section 2(2) of the Ordinance,
as mentioned in Clause 10.3.1, also
the increase in the base arising from
the payment of this tax as well, but
there is no provision relating to this
in the Law and there is no certainty
that this is the correct legal
position on the date of the
commencement of the Plan. Let it
further be stated that there is no
provision for revaluation of tax
payments and/or the exercise of option
price and, therefore, the owner of the
option is likely to pay tax on
inflationary profit.
10.3.4 In every case when the shares shall be
allotted to the employee at a price
which is less, in the opinion of the
Tax Authorities, than the market price
of the shares, the benefit, which is
the difference between the market
price of the shares and the price paid
by the employee, shall be fully liable
to tax. If Section 102 of the
Ordinance shall apply to the allotment
of shares, then the provisions of that
Section will be applicable.
10.3.5 There is no certainty that the
position of the Company on the
question of taxation will be accepted
by the Tax Authorities and/or by any
other appropriate authority and there
is likewise no certainty that the
Company will not change its position
as a result of legal advice received,
based on the position adopted by the
Tax Authorities or decisions of the
courts, legislation, or other sources,
or because it shall have come to the
conclusion that its position is
mistaken. The Company cannot foresee
how the court will decide in tax
matters and the factual questions
arising out of the Plan, should these
be brought before it for decision, and
also what will be the level of
liability to tax and every connected
expense which shall be imposed on the
employee in this eventuality. If the
Tax, which shall be imposed on account
of the granting of the option and/or
its exercise and/or the allotment of
the shares and/or the sale of the
shares and/or the transfer of the
shares into the name of the employee,
shall be different from that stated
above, the employee shall not be
exempted from his obligation to pay
all taxes imposed upon him, as
provided in Clause 10.1 above, and he
shall have no ground to claim against
the Company, or any of its directors,
employees or shareholders or the Legal
Adviser or the Trustee in respect
thereof, and he shall indemnify all
these against any expense or
obligation which shall be imposed, if
at all, on them.
10.4 Deduction at Source
Without prejudice to the obligation of the
employee to pay all the taxes in connection
with the option and/or the shares connected
with the option in accordance with the
provisions of Subclause 10.1 above, the
Company and/or a subsidiary company and/or the
Trustee may, in their absolute discretion,
and/or are obliged according to law, to deduct
at source, at the time of the receipt of the
option or at the time of the exercise of the
option and/or at the time of the allotment of
the shares or the sale of the shares, whether
by the employee or by the Trustee, and/or at
any other time according to any rule of law,
from all payments due to the employee (whether
from salary due to the employee or from any
payment due from any other source, including
moneys originating from a dividend, from the
consideration from the sale of shares by the
Trustee as mentioned in this Plan) the
payments of tax due to the Tax Authorities in
connection with the option and/or the shares
connected with the option under any rule of
law. The deduction at source shall be made by
decision of the Company or by the decision of
the Trustee according to the provisions of any
rule of law, as these shall be interpreted by
them in consultation with the Legal Adviser,
and the employee shall not be entitled to
dispute the decision of the Company and/or the
Trustee and/or the Legal Adviser or to raise
any claim against them, even if they shall
have erred, or been negligent, in their
considerations.
10.5 Taxation at the time of Transfer of Shares into
Name of Employee
In order to ensure that the tax due shall be paid
and that, as far as possible, the Income Tax
Authorities shall not make claims against the
employee, the Company or the Trustee in respect
of the amount of tax due, the Trustee shall,
before the shares shall have been transferred
into the name of the employee, receive from the
assessment officer a confirmation of the payment
of tax and that the shares may be transferred
into the name of the employee. The employee
shall, by arrangement with the Trustee and the
Board of Directors of the Company, and with their
prior approval, and without prejudice to the
generality of the provisions of Clause 10.7
hereunder, produce to the Trustee, if he shall be
so required by the Trustee or the Company or the
Legal Adviser, a confirmation from the assessment
officer, in a form which shall be acceptable to
the Trustee, who shall consult the Legal Adviser
in the matter, as to the amount of tax for which
he is liable in respect of the options and/or the
shares and which must be paid to the assessment
officer as a condition for the transfer of the
shares into the name of the employee. After the
Trustee shall have received from the employee the
confirmation of the assessment officer of the
amount of tax due, the employee shall transfer to
the Trustee such amount of tax due and the
Trustee shall remit the same to the assessment
officer. Alternatively, on, and in accordance
with, the demand of the Trustee, the employee
will remit direct to the assessment officer the
amount of tax due and shall provide the Trustee
with confirmation of payment from the assessment
officer in an acceptable form, which shall
release the Trustee and the Company from all
liability for payment of tax. Alternatively, and
at the option of the Trustee, in the case of the
sale of the shares by the Trustee on behalf of
the employee, the full consideration for the sale
of the shares shall be transferred from the
purchaser to the employee by way of the Trustee,
who shall deduct the tax due, remit the same to
the assessment officer and obtain his
confirmation of full payment of tax, and the
balance of the consideration shall then be
transferred to the employee.
It is hereby expressly declared that if the full
amount of tax shall not be paid, but only part of
it, whether by way of deduction of tax at source
or in any other way, the said payment shall be an
advance only in respect of the liability for tax
and the legal obligation to obtain determination
of the full liability, to report to the Tax
Authorities and to pay the full amount due is
that of the employee.
The employee shall bear all payments, levies,
fees and taxes connected with the transfer of the
shares into his name, such as stamp duty.
10.6 Taxation at the time of the Sale of Shares by
Trustee
If the Trustee shall sell some or all of the
shares on behalf of the employee, in a free sale
between a willing vendor and a willing purchaser,
the Trustee shall deduct from the consideration,
which shall have been received, 30% as provided
in Section 102(c) of the Ordinance, if Section
102 shall apply, or any other rate which has to
be deducted under any rule of law or in
accordance with the confirmation of the
assessment officer, and, in addition, sums for
payment of taxes, levies, fees and obligatory
payments of whatsoever nature and also other
expenses, which, in the opinion of the Board of
Directors or in the opinion of the Trustee, in
his absolute discretion, are required under any
rule of law, or which shall have been incurred
by, or arisen out of, the sale of the shares,
deduction of tax and transfer of the
consideration to the employee. The Trustee shall
be guided, in connection with this sale, by
instructions which the Legal Adviser, in his
absolute discretion, shall give him and the
employee shall not have any grounds of complaint
or claim against the Company, the Trustee or the
Legal Adviser in this matter. For the avoidance
of doubt, the Trustee shall not be obliged to
sell the shares on behalf of the employee before
he shall have come to arrangements, as drafted by
the Legal Adviser, which will ensure payment of
tax, transfer of the consideration by way of the
Trustee and performance of all the provisions of
the Plan.
If, at the time of the sale of the shares, the
shares shall not be traded on a stock exchange,
and provided that the Company's Board of
Directors shall have approved the sale in
accordance with the provisions of the Articles of
Association, the employee and the purchaser shall
deliver to the Trustee and to the Legal Adviser,
in a form determined by the Legal Adviser,
affidavits authenticating the price which shall
have been fixed for the shares or options, but
the Legal Adviser may, in his absolute
discretion, exempt the employee and/or the
purchaser from the requirement to provide such
affidavit. In accordance with the direction of
the Legal Adviser the Trustee may require from
the employee that the number of shares or options
being sold as aforesaid shall be sufficiently
large to cover the employee's liability to tax in
respect of the shares and/or options and in order
to serve as proof that the price fixed indeed
reflects the value of the shares. Without
prejudice to any other power vested in the Board
of Directors, under the Articles of Association
of the Company, to decline to approve, for any
reason whatsoever, the sale of the employee's
shares, the Board of Directors may, in
consultation with the Legal Adviser, prescribe
various conditions to ensure the proper payment
of tax on the sale of the shares by the employee,
if the shares shall not be traded on a stock
exchange, and the performance of these conditions
shall be a condition for the sale of the shares
by the employee.
10.7 Confirmation by Assessment Officer -- General
The Board of Directors or the Trustee may apply
to the assessment officer, or, in the event of an
employee abroad, whether of the Company or of a
subsidiary, to the foreign tax authority, at any
time, for their confirmation of the level of tax
which the Company or the employee or the Trustee
are to remit to the Tax Authorities, in the any
one of the above events, and their confirmation,
in a form acceptable to the Trustee or the
Company, that, on remittance of the said sum,
there will be no demands of whatsoever kind by
the Tax Authorities against the Company, the
subsidiary or the Trustee in regard to these
shares. The Board of Directors or the Trustee may
postpone dealing with any application by the
employee to sell shares or to transfer them into
his name (or to exercise the option, in the event
that Section 102 shall not apply) until receipt
of the confirmation of the assessment officer (or
foreign tax authority).
If the assessment officer, or any other tax
authority, shall not give the Trustee or the
Company any appropriate confirmation, the shares
shall not be transferred into the name of the
employee, notwithstanding the provisions of this
Plan.
For the avoidance of doubt, by their signing the
agreement under Clause 6 above, the Company and
the employee authorise the Trustee and the Legal
Adviser, each one separately, to apply in their
name, at any time, to the assessment officer or
the Income Tax Commission, or to any tax
authority abroad, for their confirmation relating
to any matter, as they shall see fit, arising out
of this Plan or the granting of the options or
their exercise or the allotment of the shares or
the transfer of the shares resulting from them,
or of the options, into the name of the employee
and/or a share acquisition agreement or payment
of dividends or any other benefit credited in
respect of them.
10.8 Indemnity to Company
Because there exist objective difficulties in
estimating the value of the shares in private
companies and/or in companies whose shares are
not traded on a stock exchange, a situation is
possible in which the Tax Authorities will demand
an amount which is higher than the amount
estimated, the payment of which will be required
from the employee. Hence, since the employee
alone, as provided in the Plan, is liable for
payment of the full tax consequent on his
participation in the Plan, he declares and
undertakes, by his signing the agreement, that
the Company and the Trustee shall not bear any
liability and will be indemnified by him against
any expense or loss which may be caused to them
as a result of any payment of tax by them,
including payments because of non-deduction of
tax at source, in connection with the granting of
the option, its exercise, the allotment of the
shares, the sale of the shares or the transfer of
the shares into his name, payment of dividends,
the options granted under the Plan and/or the
shares subject to the options. The employee
declares and undertakes with the company, by
signing the agreement, to pay to the tax
Authorities all the taxes which shall be due from
him.
10.9 Exemption from Tax Under Sections 95 and 97(a) of
Ordinance and under Charter G Encouragement of
Industry (Taxes) Law, 5729-1969
If Section 102 shall apply to the Plan, then, by
his signature on the agreement, the employee
gives his written confirmation, in accordance
with the Commissioner's Rules, that he undertakes
not to claim an exemption from tax under Sections
95 and 97(a) of the Ordinance or under Chapter G
of the Encouragement of Industry (Taxes) Law,
5729-1969, in respect of the transfer of the
shares before the end of the closed period and
before the tax applicable shall have been paid.
Under the provisions of the Commissioner's Rules
the exemption provided in Section 102(b) of the
Ordinance shall not apply to shares sold under
exemption from tax under Sections 95 and 97(a) of
the Ordinance or within the framework of the
exemption enjoyed by a sale of shares on the
merger of corporations. The employee will
likewise confirm in writing his agreement to the
provisions of the trust instrument signed between
the Company and the Trustee. The form of the
employee's confirmation is annexed hereto as
Appendix G.
10.10 Future Tax Arrangements
If, in the future, other arrangements shall be
introduced (whether by legislation or in other
way) under which matters of taxation relating to
the employee share ownership and option Plan
shall be arranged, in the opinion of the Board of
Directors, in its absolute discretion, in a more
convenient or efficient manner from the point of
view of the Company or its employees, than by the
arrangements described above, the Company may
apply to the Tax Authorities for the advantages
in these arrangements to apply to the Company
and/or the employee and/or the shareholders, the
options or the shares subject to the options, and
the employee shall not be entitled to raise any
demand and/or claim from or against the Company
or the Trustee in regard to such application or
as a result of it. Nothing above provided shall
oblige the Company to examine, to negotiate or to
enter into such future arrangements.
10.11 Negotiations/Litigation with Authorities
As a condition of the exercise of the option
and/or transfer of the shares into the employee's
name, the employee will sign the document,
annexed hereto as Appendix H, in which he agrees
that, in the event of negotiations and/or
litigation between the employee and the Tax
Authorities, or any other Government or
Administrative authority, including relating to
the confirmations required from the Bank of
Israel, whether confirmations which are necessary
in Israel or abroad, relating to the grant of the
option, its exercise, the allotment of the
shares, their transfer into the employee's name
and/or the sale of the shares subject to the
option, the Company, in its absolute discretion,
may decide that the negotiations and/or
litigation shall be conducted by the Company in
the name of the employee, whether the
negotiations and/or litigation relate to
additional employees or not. The said agreement
shall contain a power of attorney to the Company
for this purpose.
11. Share Certificate
On receipt of confirmation from the Company that all
payments, taxes, conditions, restrictions and documents
required from the employee as a condition for the
transfer of the shares into his name in accordance with
the Plan, have been received, and after the Legal
Adviser shall be satisfied that everything has been
done and all conditions fulfilled, the Trustee shall
deliver, at the direction of the Legal Adviser, to the
Secretary of the Company, or to any transfer agent, an
instrument of transfer of shares, in the form provided
for in the Company's Articles of Association, signed by
the Trustee, as transferor, and the employee, as
transferee, and shall instruct the Secretary, or
transfer agent, to issue a share certificate in the
name of the employee in respect of the said shares. On
the demand of the employee, the Trustee will instruct
the Secretary of the Company to register the employee
as the holder of these shares and a member of the
Company and the Secretary will register the employee as
the shareholder and member of the Company. If the share
certificates shall have been deposited with the Company
or with the Legal Adviser or the Trustee, outside the
framework of Section 102, the share certificates shall
be transferred into the name of the employee in
accordance with the agreement and on the direction of
the Legal Adviser, after all the restrictions affecting
the shares shall have been removed. The provisions of
this Clause shall apply subject to every instruction or
permit to be given, if at all, by the Bank of Israel in
respect of the deposit of share certificates with an
authorised commercial bank, and the Company, the
Trustee and the Legal Adviser shall be empowered to
make any application to, or clarify any matter with,
the Bank of Israel and they shall comply,
notwithstanding any provision in this Plan, with its
instructions and the employee shall have no cause of
complaint or demand against them in respect thereof.
12. Dividends
12.1 The ordinary shares subject to the Plan shall be
entitled to participate, equally with the other
ordinary shares, in any dividend in cash which
shall be declared and distributed.
12.2 A cash dividend shall be distributed only in
regard to those shares which were allotted in
respect of options which were exercised, or
shares allotted to the employee, up to the
determining date for the purposes of distribution
of the dividend, which shall be to the person
registered in the Register of Members as the
holder of the shares. The employee shall have no
cause of complaint against the Company, its
directors or shareholders if, for any reason,
whether dependent on the Company or on the
employee, shares shall not have been allotted to
the employee before the determining date.
12.3 A notice of the resolution of the Board of
Directors of the Company to distribute a dividend
shall be sent by registered post or facsimile, or
in any other way that will, in the opinion of the
Board of Directors, ensure its delivery to the
employee, to each of the employees, to whom
options shall have been granted and who are
entitled to exercise them by the determining
date, at least 7 days before the determining date
for the distribution of the dividend, or shall be
handed to them personally at least 48 hours
before the determining date. An employee, who is
entitled to request the Trustee to exercise an
option to acquire any shares on his behalf by the
determining date, may do so, and if he shall have
in fact done so by the determining date, the
shares allotted in respect of options which have
been exercised by the determining date shall be
entitled to participate in the distribution of
the dividend.
12.4 A dividend in respect of shares registered in the
name of the Trustee shell be paid to the Trustee,
after lawful deduction of tax, whether at the
ordinary, or at a higher, rate, whether it is
payable because of the transfer from the Company
to the employee or from the Company to the
Trustee and from the Trustee to the employee
(whether it is payable in accordance the existing
law or in accordance with the law, including the
Commissioner's Rules, as it shall be in the
future). The Trustee shall transfer the dividend
to the employees in accordance to instructions
which he shall receive from the Company or from
the Legal Adviser. Alternatively, the Company
may, on the instruction of the Trustee, pay the
dividend to the employee after deduction of
Income Tax.
12.5 Without derogating from the provisions of Clause
10.4 above, the Company or the Trustee may set
off against, and deduct at source from, any
dividend, which shall be declared and distributed
as above, any sum which the employee owes to the
Company or to the Trustee, whether under this
Plan or in any other way, and/or any sum which
the employee owes to the Income Tax Authorities
in respect of the dividend, including tax which
small be payable, if at all, on the transfer of
the dividend from the Trustee to the employee,
the options, their exercise, the allotment of the
shares, the transfer of the shares into the name
of the employee or any other matter concerning
the shares and/or options.
12.6 In all the above matters the Trustee shall
consult the Legal Adviser.
13. Rights and/or Benefits Arising out of Employee-Employer
Relationship and Absence of Obligation to Employ
13.1 No income or profit which shall accrue, or
ostensibly accrue, to the employee in respect of
the Plan shall be brought into account in any way
when calculating the entitlement of the employee
against the Company, or a subsidiary company in
its control, in respect of any social rights or
other rights or benefits arising out of the
employee-employer relationship. Without prejudice
to the generality of the above, this income shall
not be taken into account for the purpose of
calculating National Insurance payments,
directors' insurance, provident funds, further
study fund, redundancy pay, holiday pay etc. If,
under any rule of law, the Company shall have to
bring into account, in calculating these
elements, income or profit accruing substantially
or notionally to the employee, the employee shall
indemnify the Company against every expense
caused to it in this matter.
13.2 Nothing provided in this Plan shall be
interpreted as requiring the Company, or a
subsidiary company in its control, to employ the
employee and the relations between the Company
and the employee shall be conducted without
independently of this Plan. The employee shall
have no cause of complaint or claim against the
Company in respect of the termination of his
employment, if such termination on any date shall
deny him an anticipated acquisition of the
Company's shares under the agreement between him
and the Company and if the termination of his
employment by the Company shall cause him damage
because of the obligation to make early payment
of tax as provided in the Commissioner's Rules.
14. Adjustments for Alteration in Capital Structure
If alterations shall be made in the structure of the
Company's capital, including, without derogating from
the generality of this provision, alteration in the
shares subject to the Plan, or subject to the option
granted under the Plan (by way of merger,
consolidation, reorganisation, alteration of capital
structure, distribution of bonus shares, distribution
of non-cash dividend, splitting of shares, dividend on
winding up, unification of shares, exchange of shares,
alteration of structure of the Company or in any other
way), the Board of Directors shall make the appropriate
alterations in the options and/or the shares subject to
the options or in any other way, so as to reflect such
alterations. If such adjustment shall create fractions
of shares, such fractions shall be ignored for the
purpose of calculating the number of shares subject to
a particular option, in accordance with the
instructions of the Board of Directors.
All shares originating out of such alteration or
adjustment shall be deemed, for all purposes, including
their being subject to the conditions of the Plan and
the provisions of Section 102 of the Ordinance and the
Commissioner's Rules, should the same apply, and the
right to reacquisition, as provided in Clause 6.7
above, as if they were the original shares in respect
of which the alteration and adjustment shall have been
made.
15. Amendment of Plan, Amendment of Existing Options and
Substitution thereof
15.1 The Board of Directors may, from time to time,
alter and/or amend the Plan, including, without
prejudice to the generality of this provision, by
way of addition, deletion and/or alteration of
conditions and/or restrictions, creation of
conditions in regard to the right of
reacquisition, forfeiture or any other
restriction or condition, all in accordance with
the resolutions of the Board of Directors. If the
Company shall have issued its shares on a stock
exchange and the rules of the stock exchange
shall require the bringing of the alteration of
the Plan before the general meeting for approval,
every alteration shall be subject to approval of
the general meeting of the Company.
15.2 The Board of Directors may, if, in its view,
the Plan as worded is not attaining its purposes,
or its purposes are capable of being attained in
a better and more efficient manner, rescind all,
or part, of the Plan, alter it and/or substitute
for it another incentive scheme, whether of
options or of shares or of rights or of other
benefits which, in the opinion of the Board of
Directors, in its absolute discretion, correctly
reflects the balance between attaining the
purposes of the Plan on the other interests of
the Company and its employees, including taxation
considerations. If the Plan shall have been
replaced by another incentive scheme, or altered
as above provided, the options, which shall have
been granted, prior to the replacement of the
Plan, shall be exchanged for options, securities
and/or rights or other benefits in accordance
with the new scheme or, if the options shall not
be so exchanged, the provisions of the altered
plan shall apply to the agreement between the
Company and the employee, as defined in Clause 6
above, and provided that, in the opinion of the
Legal Adviser, the rights of the employees shall
not be substantially adversely affected thereby.
The employees shall cooperate with the Company
for the purposes of all matters mentioned in this
Clause.
15.3 Any alteration of the Plan, or alteration
connected with the Plan, shall bind the employees
as if it had been included in the Plan from its
very commencement. Every employee, by signing the
agreement mentioned in Clause 6 above, undertakes
to sign any document which, in the opinion of the
Legal Adviser, shall be required in order to give
full legal force to an alteration of the Plan,
provided that it does not prejudice rights which
shall have been vested in the employee. If the
employee shall have refused to sign such
document, the Board of Directors shall be
empowered to sign the same in the name of the
employee and the employee hereby authorises the
Board of Directors so to do by his signature on
the agreement mentioned in Clause 6 and he shall
have no cause of complaint and/or claim against
the Board of Directors in respect thereof. An
employee, with whom an agreement shall have been
signed, shall be entitled to receive a copy of
the updated Plan on returning the copy of the
previous Plan, which was in force in regard to
him.
15.4 If the shares of the Company shall be traded on a
stock exchange and their price on the stock
exchange during a period of 6 months shall be
lower than one half of any exercise of option
price, the Board of Directors may, with the
consent of the employee, and provided that at
that time he shall still be an employee of the
Company, cancel the option and grant to the
employee a new option. The price of the exercise
of the new option, fixed in accordance with
Clause 6.2 above, shall not be less than the
average price of the Company's shares on the
stock exchange in the 30 days immediately prior
to the date of the granting of the new option.
16. Commencement of Plan Entering into Force
The Plan shall enter into force on a date which shall
be determined by the Board of Directors. If the Board
of Directors shall decide to bring the Plan within the
framework of Section 102 of the Ordinance, shares shall
not be allotted to the Trustee on a date which is
earlier than 30 days from the date of the notice
(mentioned in Section 102 of the Ordinance and the
Commissioner's Rules) to the assessment officer of its
adoption (hereinafter and hereinbefore -- "the date of
the commencement of the Plan"). The Plan shall apply to
all the options/shares in respect of which the Company
has entered into undertakings with the employees before
the date of the commencement of the Plan.
17. Termination, Suspension or Expiry of the Plan
The Board of Directors may, at any time, suspend or
terminate the Plan and also provide that this Plan
shall apply to employees, to whom the Company has
undertaken to give options and/or shares, and provide
that a different plan shall apply to new employees. If
Plan shall not have been brought to an end before such
date, it shall expire after 10 (ten) years from the
date of the commencement of the Plan, as this term is
defined in Clause 16 above. On the expiry of the Plan
no options shall be granted under it and it will no
longer be possible to exercise options which shall have
been granted under it. Likewise options shall not be
allotted under the Plan at a time when it is not in
force or after it has been terminated or suspended and
if options shall have been granted, they will not be
exercisable. Termination or suspension shall not
prejudice employees to whom shares shall have been
allotted, or options shall have been be granted, on a
date prior to the termination or suspension of the
Plan.
18. Release of Trustee and Legal Adviser from Liability
and Indemnity
In no event shall the Trustee or the Legal Adviser be
liable to the Company and/or the employee under the
Plan and/or to a third party (including, without
prejudice to the generality of this provision, The
Income Tax Authorities and any Government, or other
administrative, authority) or a purchaser of shares
from the employee, for any act done, or which shall be
done, or for any professional opinion given, or which
shall be given, in regard to this Plan, its
implementation and anything connected with, or
resulting from, the same. The Company and the employee
undertake, by their signatures on the option agreement,
not to sue the Trustee and the Legal Adviser in any way
on any cause of action whatsoever and they expressly
agree that, if they shall sue the Trustee or the Legal
Adviser, then the Trustee or the Legal Adviser shall be
entitled, on the basis of this Clause alone, to apply
to the court to dismiss, with costs, the claim against
the Trustee or the Legal Adviser. The Company
undertakes and agrees that, if a claim shall be
instituted against the Trustee or the Legal Adviser by
a third party, they shall be entitled, without any
objection on its part, to join the Company as a third
party to any such proceedings and a judgment against
them shall be discharged by it. The Company and the
employee undertake to indemnify the Trustee and/or the
Legal Adviser against any such liability and/or in
respect of any proceedings and/or claim against the
Trustee and/or the Legal Adviser by any person or body,
including the Tax Authorities, relating to acts or
omissions in connection with this Plan.
19. Arbitration
Any dispute or difference of opinion between the
Company and the employee regarding and/or in connection
with the Plan, shall be exclusively judged and decided
by the Legal Adviser as a single arbitrator. The
arbitrator shall not be bound by the rules of evidence
or by the substantive law and shall not have to give
reasons for his decision and he shall be authorised, in
his absolute discretion, to make a compromise award.
The parties are aware that the Legal Adviser is the
legal adviser of the Company and that there is a
possibility that, for this reason, or for any other
reason arising out of his relations with the Company,
he may well find himself in a situation of conflict of
interests, but the Legal Adviser alone shall decide if
such a situation prevents him from serving as an
arbitrator or discharging any other function under the
Plan. The Company and the employee, therefore, waive
any claim in this matter. If the Legal Adviser shall
determine that it is not proper that he should serve as
arbitrator in a particular dispute, the said dispute
shall be brought before another single arbitrator who
shall be appointed by the Legal Adviser in accordance
with an arbitration agreement to be drawn up by the
Legal Adviser.
20. Legal Adviser's Fee
The Legal Adviser shall be entitled to a fee for acting
under this Plan. The Legal Adviser's fee shall be 1%
(one per centum) plus VAT of the value of the shares,
which the employee shall receive, as valued for the
purposes of the payment of Income Tax, or, if the
shares shall be traded on a stock exchange, their stock
exchange value. The fee shall be paid to the Legal
Adviser by the Company on the transfer of the shares
into the name of the employee, or on the date when the
employee or the Trustee pay the tax due, whichever is
the earlier.
21. Declarations and Undertakings by Employee
By signing the agreement the employee confirms that he
knows and accepts:
21.1 that the Company's shares are not traded on any
stock exchange, that the Company does not have
any obligation, towards him or at all, to
register its shares or options for trade on a
stock exchange or to offer in any way its shares
or the shares or options of the employee to the
public;
21.2 that, in addition to the restrictions which shall
apply under the Plan, as above specified, as they
shall be from time to time, in regard to the
transferability of the shares, which he shall
receive as a result of the exercise of the
option, there shall also apply, so long as the
Company is a private company, or a public company
whose shares are not traded on any stock
exchange, a general restriction to the effect
that the shares shall be transferred only after
receipt of the approval of the Board of Directors
of the Company, which shall be able to refuse to
approve such transfer, in its absolute discretion
(except in the case of transfer the shares to a
spouse or child or subject to an agreement signed
by all the Company's shareholders), and that, in
addition to this, there shall apply any other
restriction or alteration of any restriction in
accordance with the provisions of the Memorandum
and Articles of Association of the Company, as
these shall be in force from time to time; and
that, as a consequence of these restrictions, the
employee may well not be able to sell, or
transfer in any other way, the shares allotted to
him as a result of the exercise of the option or
the shares which shall be allotted to him under
the Plan; the employee is aware that the Company,
so long as it shall be a private company (or a
public company whose shares are not traded on a
stock exchange), has an interest in its shares
not being transferred to any outside person, in
particular because of the small number of its
shares; the refusal of the Board of Directors to
agree to the sale of the shares is likely to put
the employee in the position of his shares not
being transferred from the Trustee into his name
(in the event that Section 102 shall apply) since
the employee will not have the means to pay the
tax due;
21.3 that potential difficulties and/or inability to
exercise the option, in whole or in part, may
arise because of the restrictions and conditions
applying to it, including, inter alia, the
possibility that the option may expire as a
result of the employee leaving the Company, as
provided in the Plan, the same being possible in
regard to the shares which shall have been
allotted under the Plan;
21.4 that, because of difficulties arising out of the
provisions relating to tax, the uncertainty
inherent in them and the alterations which they
undergo from time to time, the employee would be
well advised to study the tax laws and provisions
relating to the matter and/or consult a
professional adviser who is an expert in tax
matters relevant to the Plan, the restrictions
and the risks involved in the granting of the
option and/or exercise of the option and
allotment of shares to employees or their
transfer from the Trustee into the name of the
employee, under Income Tax law and/or any other
statute or rule of law, and that any explanation
which he shall given, by the Company or on its
behalf, concerning the consequences, including
the explanation in the Plan itself, do not create
any liability on the part of the Company to
employee;
21.5 that the tax consequences of the grant of the
options and/or their exercise and/or the
allotment of shares and/or the transfer of the
same from the Trustee into the name of the
employee may well render the grant of the options
and/or their exercise and/or receipt of the
shares totally unworthwhile to the employee in
particular, so far as the matter relates to
Section 102, should the employee leave the
Company during the closed period, and that the
Company expressly does not assume any obligation
in this connection and does not make any
declaration regarding the tax consequences
connected with the grant of the options and/or
their exercise and/or the allotment of the shares
and/or their transfer into the name of the
employee and the employee, by signing the option
agreement and/or exercising the option assumes
every risk and every consequence arising
thereout;
21.6 that the Company is operating in an area in which
competition is fierce, technological changes take
place quickly and the market for clients is
limited and that, therefore, because of the many
restrictions in the Plan, if the employee shall
have to pay, under the provisions of Clause 6.2,
for the options or for their exercise, then his
investment in the shares of the Company is a high
risk and speculative investment;
21.7 that, by his signature on the agreement, the
employee confirms and undertakes that he is
acquiring the shares for the purpose of
investment, and not for the purpose of their
distribution, as this term is defined in
Securities Act 1933 in the United States of
America, and that, if the Company's shares shall
be traded in the United States of America, the
employee will not sell the shares without first
obtaining counsel's opinion that the sale of the
shares is not a breach of the said Act or the
rules enacted thereunder (including Rule 144) or
that it is exempt from the provisions of the said
Act;
21.8 that, by his signature on the agreement, the
employee waives any right of first refusal to
acquire shares in the Company, offered for sale
by other shareholders, and any right of
preemption to acquire shares which the Company is
allotting, or shall allot in the future, if such
rights exist, or shall exist, under the Articles
of Association of the Company, as these shall be
in force from time to time.
22. Miscellaneous
22.1 Any option and/or share, given to employees, is
subject to the condition that if, in the opinion
of the Legal Adviser, it is necessary, as a
condition of, and/or in connection with, the
issue of shares subject to the option and/or the
registration of the shares for trading on any
stock exchange, that certain prerequirements be
satisfied to enable such registration, or that a
prospectus be prepared or that the consent and/or
approval of any government or administrative
authority be obtained, whether in Israel or
abroad, or that the agreement of an underwriter
or underwriters to the offer of the shares to the
public be obtained, then the option, in whole or
in part, shall not be exercised and the shares
shall not be registered unless such requirements
shall be satisfied in conditions acceptable to
the Board of Directors. The Company shall be
released from any liability for its inability --
because of the absence of any such consent or
approval -- or because of its unwillingness to
comply with requirements or bear the expenses
connected therewith. Nothing contained in the
Plan shall oblige the Company to fulfill the
above mentioned prerequirements or to obtain the
above mentioned consents and agreements or to
impose on the Company an obligation to issue
shares to the public or to register for trading,
in accordance with any securities laws, the
options granted under the Plan or the shares
issued under the options or the shares allotted
to the employee, and a legend recording these
restrictions may be endorsed on each share
certificate or option agreement.
22.2 The consideration which shall be received from
the exercise of the options and/or acquisition of
the shares under the plan shall be return capital
in the hands of the Company.
22.3 Israeli Law shall apply to the Plan and all
documents thereunder, including the agreement,
and subject, should the Company's shares be
traded in the United States of America, to the
United States Securities Acts.
22.4 The Board of Directors may direct that the Plan
be translated into English and provide that the
English version shall be binding and it may
provide that any document connected with the Plan
be drawn up in the English language.
23. Notices and/or Instructions
No notice and/or instruction under the Plan shall have
legal force unless in writing and signed by the party
giving the said notice and/or instruction. Any notice
or instruction which the Company and/or Board of
Directors may, or shall, give shall, unless the
provisions of the Plan provide otherwise, be in writing
and signed by two of the members of the Board of
Directors.