EXHIBIT 10.3
DSP GROUP, INC.
1993 DIRECTOR STOCK OPTION PLAN
(Amended and Restated July 19, 1999)
(Amended and Restated July 18, 2001)
(Amended and Restated April 4, 2002)
(Amended and Restated November 25, 2002)
(Amended and Restated March 12, 2003)
1. Purposes of the Plan. The purposes of this Director Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock options."
2. Definitions. As used herein, the following definitions shall
apply:
a. "Board" shall mean the Board of Directors of the
Company.
b. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
c. "Common Stock" shall mean the Common Stock of the
Company.
d. "Company" shall mean DSP Group, Inc., a Delaware
corporation.
e. "Continuous Status as a Director" shall mean the absence
of any interruption or termination of service as a Director.
f. "Director" shall mean a member of the Board or the board
of directors of ParthusCeva, Inc.
g. "Effective Date" shall have the meaning as set forth in
Section 6 below.
h. "Employee" shall mean any person, including officers and
Directors, employed by the Company, ParthusCeva, Inc. or any Parent or
Subsidiary of either company. The payment of a Director's fee by the Company,
ParthusCeva, Inc. or any Parent or Subsidiary of either company shall not be
sufficient in and of itself to constitute "employment" by the Company.
i. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
j. "First Option" shall have the meaning as set forth in
Section 4.b.ii. below.
k. "Option" shall mean a stock option granted pursuant to
the Plan.
l. "Optioned Stock" shall mean the Common Stock subject to
an Option.
m. "Optionee" shall mean an Outside Director who receives
an Option.
n. "Outside Director" shall mean a Director who is not an
Employee.
o. "Parent" shall mean a "parent corporation,"
whether now or hereafter existing, as defined in Section 424(e) of the Code.
p. "Plan" shall mean this 1993 Director Stock Option Plan.
q. "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
r. "Spin-off Transaction" means a distribution by the
Company to its stockholders of all or any portion of the securities of any
Subsidiary of the Company.
s. "Subsequent Option" shall have the meaning as set forth
in Section 4.b.iii. below.
1
t. "Subsidiary" shall mean a "Subsidiary Corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
u. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 126-2 promulgated under the Exchange
Act.
v. "Change in Control" means a change in ownership or
control of the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person
or related group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or by a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders which a majority of the
Continuing Directors who are not Affiliates or Associates of the offeror
do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who are Continuing Directors.
w. "Continuing Directors" means members of the Board who
either (i) have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less than thirty-six
(36) months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
x. "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company
is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Company is
incorporated;
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company (including the capital
stock of the Company's subsidiary corporations) in connection with the
complete liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different
from those who held such securities immediately prior to such merger.
3. Stock Subject to the Plan. Subject to the provisions of Section
11 of the Plan, as of November 25, 2002 the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 890,875 Shares (the "Pool") of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock.
Initially, 175,000 Shares were reserved for issuance under the Plan. In
June 1999, the Plan was amended and restated to increase the number of Shares
reserved for issuance under the Plan by 100,000 shares for a total reserve of
275,000 Shares. In March 2000, the Company effected a two-for-one split of the
Company's common stock thereby increasing the number of Shares reserved for
issuance under the Plan to 550,000 Shares. In June 2002, the Plan was amended
and restated to increase the number of Shares reserved for issuance under the
Plan by 200,000 Shares for a total reserve of 750,000 Shares. As a result of the
Company's distribution of all (or substantially all) of the shares of capital
stock of Ceva, Inc. in November 2002, the number of shares reserved for issuance
under the Plan was adjusted so that 890,875 Shares are available for issuance
under the Plan.
2
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
a. Administrator. Except as otherwise required herein, the
Plan shall be administered by the Board.
b. Procedure for Grants. All grants of Options hereunder
shall be automatic and nondiscretionary and shall be made strictly in accordance
with the following provisions:
i) No person shall have any discretion to select
which Outside Directors of the Company shall be granted Options or to determine
the number of Shares to be covered by Options granted to Outside Directors of
the Company.
ii) Each person who is an Outside Director of the
Company on the Effective Date of this Plan and each Outside Director who
subsequently becomes a member of the Board of Directors shall be automatically
granted an Option to purchase 30,000 Shares (the "First Option") on the date on
which the later of the following events occurs: (A) the Effective Date of this
Plan, as determined in accordance with Section 6 hereof; or (B) the date on
which such person first becomes an Outside Director of the Company, whether
through election by the stockholders of the Company or appointment by the Board
of Directors to fill a vacancy.
iii) Additionally, beginning on January 1, 1997, each
Outside Director of the Company shall be automatically granted (i) an Option to
purchase 10,000 Shares (a "Subsequent Option"), on January 1 of each year, if on
such date, he or she shall have served on the Board for at least six (6) months
and (ii) an Option to purchase 10,000 Shares (a "Committee Option"), on January
1 of each year, for each committee of the Board on which he or she shall have
served as the chairperson for at least six (6) months on such date.
iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, in the event that a grant would cause the number of
Shares subject to outstanding Options, plus the number of shares previously
purchased upon exercise of Options to exceed the Pool, then each such automatic
grant shall be for that number of Shares determined by dividing the total number
of Shares remaining available for grant by the number of grants to be made on
the automatic grant date. Any further grants shall then be deferred until such
time, if any, as additional Shares become available for grant under the Plan
through action of the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
v) Notwithstanding the provisions of subsections
ii) and iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall have
their exercisability conditioned upon obtaining such stockholder approval of the
Plan in accordance with Section 17 hereof.
vi) The terms of any Option granted hereunder shall
be as follows:
a) The Option shall be exercisable only
while the Outside Director remains a Director of the Company or ParthusCeva,
Inc., except as set forth in Section 9 hereof.
b) The exercise price per Share shall be
100% of the fair market value (as defined in Section 8.b. hereunder) per Share
on the date of grant of the Option.
c) The Option shall vest and become
exercisable as to one-third of the Shares subject to the Option on the first
anniversary of the date of grant of the Option, and shall vest and become
exercisable as to one-third of the Shares subject to the Option at the end of
each twelve-month period thereafter, subject to the provisions set forth in
Section 9, below.
d) The Board may accelerate the unvested
portion of any Option held by any Director whose term expires prior to an Option
granted under the Plan being fully exercisable.
3
c. Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8.b. of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8.a. of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
d. Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
5. Eligibility. Options may be granted only to Outside Directors of
the Company. All Options shall be automatically granted in accordance with the
terms set forth in Section 4.b. hereof. An Outside Director who has been granted
an Option may, if he or she is otherwise eligible, be granted an additional
Option or Options in accordance with such provisions.
The Plan shall not confer upon an Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on
the date on which the Company's registration statement on Form S-1 (or any
successor form thereof) is declared effective by the Securities and Exchange
Commission (the "Effective Date"). It shall continue in effect for a term of
twenty (20) years, unless sooner terminated under Section 13 of the Plan,
subject to the limitations set forth in this Plan.
7. Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof.
8. Exercise Price and Consideration.
a. Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the fair
market value per Share on the date of grant of the Option.
b. Fair Market Value. The fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System) or, in
the event that the Common Stock is traded on the NASDAQ National Market System
or listed on a stock exchange, the fair market value per Share shall be the
closing price on such system or exchange on the date of grant of the Option, as
reported in The Wall Street Journal; provided, however, that if such market or
exchange is closed on the date of the grant of the Option then the fair market
value per Share shall be based on the most recent date on which such trading
occurred immediately prior to the date of the grant of the Option; provided,
further, that for purposes of First Options granted on the Effective Date, the
fair market value per share shall be the initial public offering price as set
forth in the final prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424 under the Securities Act of 1933, as amended.
c. Form of Consideration. The consideration to be paid for
the Share to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares having a fair market value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised (which, if acquired from the Company, shall have been held
for at least six months), delivery of a properly executed exercise notice,
together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
any combination of such methods of payment and/or any other consideration or
method of payment as shall be permitted under applicable corporate law.
9. Exercise of Option.
a. Procedure for Exercise: Rights as a Stockholder. An
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4.b. hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 17 hereof has
been obtained.
4
An option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8.c. of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
b. Termination of Status as a Director. If an Outside
Director ceases to serve as a Director, he or she may, but only within three (3)
months after the date he or she ceases to be a Director, exercise his or her
Option to the extent that he or she was entitled to exercise it at the date of
such termination Option's expiration date. Notwithstanding the foregoing, in no
event may the Option be exercised after its term set forth in Section 7 has
expired. The Board may extend the exercise period of an Option held by a
Director whose term is expiring to any date prior to the Option's expiration
date. To the extent that such Outside Director was not entitled to exercise an
Option at the date of such termination, or does not exercise such Option (which
he or she was entitled to exercise) within the time specified herein, the Option
shall terminate.
c. Disability of Optionee. Notwithstanding the provisions
of Section 9.b. above, in the event a Director is unable to continue his or her
service as a Director as a result of his or her total and permanent disability
(as defined in Section 22(e)(3) of the Internal Revenue Code), he or she may,
but only within six (6) months from the date of such termination, exercise his
or her Option to the extent he or she was entitled to exercise it at the date of
such termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
he or she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
d. Death of Optionee. In the event of the death of an
Optionee:
i) during the term of the Option who is, at the
time of his or her death, a Director and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within twelve (12) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and remained
in Continuous Status as Director for six (6) months after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired.
ii) within three (3) months after the termination of
Continuous Status as a Director, the Option may be exercised, at any time within
twelve (12) months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
10. Nontransferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised during the lifetime of an Optionee only by the Optionee or a
transferee permitted under this Section.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
a. Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have
5
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 covered by each such
outstanding Option, shall be proportionately adjusted for an increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, 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 Board, 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 prices of Shares subject to an Option.
Notwithstanding any terms of the Plan to the contrary, in the event of a
Spin-off Transaction, the Board may in its discretion and without stockholder
approval make such adjustments and take such other action as it deems
appropriate with respect to outstanding Options under the Plan, including but
not limited to adjustments to the number and kind of shares, the price per share
and the vesting periods of outstanding Options or the substitution, exchange or
grant of Options to purchase securities of the Subsidiary; provided that the
Board shall not be obligated to make any such adjustments or take any such
action hereunder.
b. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.
c. Merger or Asset Sale. In the event of a Corporate
Transaction, each Option which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and be released from any
restrictions on transfer and repurchase or forfeiture rights, immediately prior
to the specified effective date of such Corporate Transaction, for all of the
Shares at the time represented by such Option. Effective upon the consummation
of the Corporate Transaction, all outstanding Options under the Plan shall
terminate unless assumed by the successor company or its Parent. In the event of
a Change in Control (other than a Change in Control which also is a Corporate
Transaction), each Option which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and be released from any
restrictions on transfer and repurchase or forfeiture rights, immediately prior
to the specified effective date of such Change in Control, for all of the Shares
at the time represented by such Options. Each such Option shall remain
exercisable until the expiration or sooner termination of the applicable Option
term.
12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4.b. hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
a. Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act (or any other applicable law or regulation),
the Company shall obtain approval of the stockholders of the Company to Plan
amendments to the extent and in the manner required by such law or regulation.
In addition, the approval of the stockholders is required for any Plan amendment
which would permit decreasing the exercise price of any Option outstanding under
the Plan, subject to Section 11(a). Further, the approval of the Company's
stockholders is required for any Plan amendment which would change any of the
provisions of this Section 13(a). For purposes of this Section, approval of the
stockholders means, except as provided by Applicable Law, approval by the
holders of a majority of the Shares of Common Stock of the Company present or
represented by proxy (and entitled to vote) at a meeting of the Company's
stockholders.
b. Effect of Amendment or Termination. Any such amendment
or termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless
6
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Plan Approval. The Plan was adopted by the Board on November 29,
1993 and adopted by the stockholders of the Company in January 10, 1994. The
Plan was subsequently amended and restated, as approved by the Company's
stockholders in May 1996. In June 1999, the Board adopted and approved an
amendment and restatement of the Plan to increase the number of shares of common
stock reserved for issuance under the Plan, which amendment was approved by the
Company's stockholders. In July 2001, the Board adopted and approved an
amendment and restatement of the Plan to amend various terms of the Plan in
anticipation of the distribution of all (or substantially all) of the shares of
capital stock of Ceva, Inc., a Delaware corporation and a wholly-owned
subsidiary, held by the Company to the stockholders of the Company. In April
2002, the Board adopted and approved an amendment and restatement of the Plan to
increase the number of shares of common stock reserved for issuance under the
Plan and the term of the Plan, which amendments were approved by the Company's
stockholders. In November 2002, the Board adopted and approved an amendment and
restatement of the Plan to include an appendix to the Plan designed to comply
with changes in Israeli tax law effective January 1, 2003, which amendment did
not require approval by the Company's stockholders. In March 2003, the Board
adopted and approved an amendment and restatement of the Plan to amend the
appendix to the Plan in order to comply with further changes in Israeli tax law
which amendment did not require approval by the Company's stockholders.
7
DSP GROUP, INC. 1993 DIRECTOR STOCK OPTION PLAN
APPENDIX A - ISRAEL
1. GENERAL
1.1. This appendix (the "Appendix") shall apply only to Grantees who
are residents of the state of Israel or those who are deemed to
be residents of the state of Israel for the payment of tax. The
provisions specified hereunder shall form an integral part of
the 1993 Director Stock Option Plan (hereinafter: the "Plan"),
which applies to the issuance of options to purchase Common
Stock of DSP Group Inc. (hereinafter: the "Company").
1.2 This Appendix is effective with respect to Options granted as of
January 1, 2003 and shall comply with Amendment no. 132 of the
Israeli Tax Ordinance.
1.3. This Appendix is to be read as a continuation of the Plan and
only modifies Options granted to Israeli Grantees so that they
comply with the requirements set by the Israeli law in general,
and in particular with the provisions of Section 102 (as
specified herein), as may be amended or replaced from time to
time. For the avoidance of doubt, this Appendix does not add to
or modify the Plan in respect of any other category of Grantees.
1.4. The Plan and this Appendix are complimentary to each other and
shall be deemed as one. In any case of contradiction, whether
explicit or implied, between the provisions of this Appendix and
the Plan, the provisions set out in the Appendix shall prevail.
1.5. Any capitalized term not specifically defined in this Appendix
shall be construed according to the defined meaning given to it
in the Plan.
-A1
2. DEFINITIONS
2.1 "Affiliate" means any "employing company" within the meaning of
Section 102(a) of the Ordinance.
2.2 "Approved 102 Option" means an Option granted pursuant to
Section 102(b) of the Ordinance and held in trust by a Trustee
for the benefit of the Grantee.
2.3 "Capital Gain Option (CGO)" means an Approved 102 Option elected
and designated by the Company to qualify under the capital gain
tax treatment in accordance with the provisions of Section
102(b)(2) of the Ordinance.
2.4 "Controlling Stockholder" shall have the meaning ascribed to it
in Section 32(9) of the Ordinance.
2.5 "Director" means a member of the Board, but excluding any
Controlling Stockholder.
2.6 "ITA" means the Israeli Tax Authorities.
2.7 "Ordinary Income Option (OIO)" means an Approved 102 Option
elected and designated by the Company to qualify under the
ordinary income tax treatment in accordance with the provisions
of Section 102(b)(1) of the Ordinance.
2.8 "Option" means an option to purchase one or more shares of
Common Stock of the Company pursuant to the Plan.
2.9 "102 Option" means any Option granted to Directors pursuant to
Section 102 of the Ordinance.
2.10 "3(i) Option" means an Option granted pursuant to Section 3(i)
of the Ordinance to any person who is a Non-Employee.
2.11 "Ordinance" means the 1961 Israeli Income Tax Ordinance [New
Version] 1961 as now in effect or as hereafter amended.
2.12 "Section 102" means section 102 of the Ordinance and any
regulations, rules, orders or procedures promulgated thereunder
as now in effect or as hereafter amended.
2.13 "Trustee" means any individual appointed by the Company to serve
as a trustee and approved by the ITA, all in accordance with the
provisions of Section 102(a) of the Ordinance.
-A2
2.14 "Unapproved 102 Option" means an Option granted pursuant to
Section 102(c) of the Ordinance and not held in trust by a
Trustee.
3. ISSUANCE OF OPTIONS
3.1 The persons eligible for participation in the Plan as Grantees
shall be Directors of the Company or of any Affiliate; provided,
however, that (i) Directors who are not Controlling Stockholders
may only be granted 102 Options; and (ii) Directors who are
Controlling Stockholders may only be granted 3(i) Options
3.2 The Company may designate Options granted to Directors pursuant
to Section 102 as Unapproved 102 Options or Approved 102
Options.
3.3 The grant of Approved 102 Options shall be made under this
Appendix adopted by the Board, and shall be conditioned upon the
approval of this Appendix by the ITA.
3.4 Approved 102 Options may either be classified as Capital Gain
Options ("CGOs") or Ordinary Income Options ("OIOs").
3.5 No Approved 102 Options may be granted under this Appendix to
any eligible Director, unless and until, the Company's election
of the type of Approved 102 Options as CGI or OIO granted to
Directors (the "Election"), is appropriately filed with the ITA.
Such Election shall become effective beginning the first grant
date of an Approved 102 Option under this Appendix and shall
remain in effect until the end of the year following the year
during which the Company first granted Approved 102 Options. The
Election shall obligate the Company to grant only the type of
Approved 102 Option it has elected, and shall apply to all
Grantees who were granted Approved 102 Options during the period
indicated herein, all in accordance with the provisions of
Section 102(g) of the Ordinance. For the avoidance of doubt,
such Election shall not prevent the Company from granting
Unapproved 102 Options simultaneously.
3.6 All Approved 102 Options must be held in trust by a Trustee, as
described in Section 4 below.
3.7 For the avoidance of doubt, the designation of Unapproved 102
Options and Approved 102 Options shall be subject to the terms
and conditions set forth in Section 102.
3.8 With respect to Unapproved 102 Option, if the Optionee ceases to
be employed by the Company or any Affiliate, the Optionee shall
extend to the Company and/or its Affiliate a security or
guarantee for the payment of tax due at the time of sale of
Shares, all in accordance with the provisions of Section 102 and
the rules, regulation or orders promulgated thereunder.
-A3
4. TRUSTEE
4.1 Approved 102 Options which shall be granted under this Appendix
and/or any Common Stock allocated or issued upon exercise of
such Approved 102 Options and/or other Common Stock received
subsequently following any realization of rights, including
bonus shares, shall be allocated or issued to the Trustee and
held for the benefit of the Grantees for such period of time as
required by Section 102 or any regulations, rules or orders or
procedures promulgated thereunder (the "Holding Period"). In the
case the requirements for Approved 102 Options are not met, then
the Approved 102 Options shall be regarded as Unapproved 102
Options, all in accordance with the provisions of Section 102.
4.2 Notwithstanding anything to the contrary, the Trustee shall not
release any Common Stock allocated or issued upon exercise of
Approved 102 Options prior to the full payment of the Grantee 's
tax liabilities arising from Approved 102 Options which were
granted to him and/or any Common Stock allocated or issued upon
exercise of such Options.
4.3 Upon receipt of Approved 102 Options, the Grantee will sign an
undertaking to release the Trustee from any liability in respect
of any action or decision duly taken and bona fide executed in
relation with this Appendix, or any Approved 102 Option or
Ordinary Common Stock granted to him thereunder.
4.4 With respect to any Approved 102 Option, subject to the
provisions of Section 102 and any rules or regulation or orders
or procedures promulgated thereunder, an Optionee shall not sell
or release from trust any Share received upon the exercise of an
Approved 102 Option and/or any share received subsequently
following any realization of rights, including without
limitation, bonus shares, until the lapse of the Holding Period
required under Section 102 of the Ordinance. Notwithstanding the
above, if any such sale or release occurs during the Holding
Period, the sanctions under Section 102 of the Ordinance and
under any rules or regulation or orders or procedures
promulgated thereunder shall apply to and shall be borne by such
Optionee.
5. THE OPTIONS
The terms and conditions upon which the Options shall be issued and
exercised, shall be as specified in the Award Agreement to be executed
pursuant to the Plan and to this Appendix. Each Award Agreement shall
state, inter alia, the number of Common Stock to which the Option
relates, the type of Option granted thereunder (whether a CGI, OIO,
Unapproved 102 Option or a 3(i) Option), the vesting provisions and the
exercise price.
-A4
6. FAIR MARKET VALUE FOR TAX PURPOSES
Solely for the purpose of determining the tax liability pursuant to
Section 102(b)(3) of the Ordinance, if at the date of grant the
Company's Common Stock is listed on any established stock exchange or a
national market system or if the Company's Common Stock will be
registered for trading within ninety (90) days following the date of
grant of the CGOs, the fair market value of the Common Stock at the date
of grant shall be determined in accordance with the average value of the
Company's common stock on the thirty (30) trading days preceding the
date of grant or on the thirty (30) trading days following the date of
registration for trading, as the case may be.
7. EXERCISE OF OPTIONS
Options shall be exercised in accordance with the provisions of Section
9 of the Plan and when applicable, in accordance with the requirements
of Section 102.
8. ASSIGNABILITY AND SALE OF OPTIONS
8.1. Notwithstanding any other provision of the Plan, no Option or
any right with respect thereto, purchasable hereunder, whether
fully paid or not, shall be assignable, transferable or given as
collateral or any right with respect to them given to any third
party whatsoever, and during the lifetime of the Grantee each
and all of such Grantee 's rights to purchase Common Stock
hereunder shall be exercisable only by the Grantee.
Any such action made directly or indirectly, for an immediate
validation or for a future one, shall be void.
8.2 As long as Options or Common Stock purchased pursuant to thereto
are held by the Trustee on behalf of the Grantee, all rights of
the Grantee over the common stock are personal, can not be
transferred, assigned, pledged or mortgaged, other than by will
or laws of descent and distribution.
9. INTEGRATION OF SECTION 102 AND TAX ASSESSING OFFICER'S PERMIT
9.1. With regards to Approved 102 Options, the provisions of the Plan
and/or the Appendix and/or the Award Agreement shall be subject
to the provisions of Section 102 and the Tax Assessing Officer's
permit, and the said provisions and permit shall be deemed an
integral part of the Plan and of the Appendix and of the Award
Agreement.
-A5
9.2. Any provision of Section 102 and/or the said permit which is
necessary in order to receive and/or to keep any tax benefit
pursuant to Section 102, which is not expressly specified in the
Plan or the Appendix or the Award Agreement, shall be considered
binding upon the Company and the Grantees.
10. DIVIDEND
With respect to all Shares (but excluding, for avoidance of any doubt,
any unexercised Options) allocated or issued upon the exercise of
Options purchased by the Optionee and held by the Optionee or by the
Trustee, as the case may be, the Optionee shall be entitled to receive
dividends in accordance with the quantity of such Shares, subject to the
provisions of the Company's Incorporation Documents (and all amendments
thereto) and subject to any applicable taxation on distribution of
dividends, and when applicable subject to the provisions of Section 102
and the rules, regulations or orders promulgated thereunder.
11. TAX CONSEQUENCES
11.1 Any tax consequences arising from the grant or exercise of any
Option, from the payment for Common Stock covered thereby or
from any other event or act (of the Company, and/or its
Affiliates, and the Trustee or the Grantee), hereunder, shall be
borne solely by the Grantee. The Company and/or its Affiliates,
and/or the Trustee shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations,
including withholding taxes at source. Furthermore, the Grantee
shall agree to indemnify the Company and/or its Affiliates
and/or 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.
11.2 The Company and/or, when applicable, the Trustee shall not be
required to release any common stock certificate to an Grantee
until all required payments have been fully made.
12. GOVERNING LAW & JURISDICTION
This Appendix shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the
principles of conflict of laws. The competent courts of Tel-Aviv, Israel
shall have sole jurisdiction in any matters pertaining to this Appendix.
-A6