2003 Proxy (April 21) redlined
SCHEDULE 14A INFORMATION
Amendment No. 2 to Proxy Statement Pursuant To Section 14(a) Of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement. [ ] Confidential, for use of the
Commission only (as permitted
by Rule 14a-6(e)(2)).
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to ss.240.14a-12
CLICKSOFTWARE TECHNOLOGIES LTD.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CLICKSOFTWARE TECHNOLOGIES LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 2003
April 29, 2003
To the shareholders of ClickSoftware Technologies Ltd.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
ClickSoftware Technologies Ltd., an Israeli company, referred to in this
document as the Company, for the years 2002 and 2003 will be held on Wednesday,
May 28, 2003 at 11:00 a.m., local time at the offices of the Company at 34
Habarzel Street, Tel Aviv, Israel for the following purposes:
1. To elect the following: James W. Thanos as a Class I director; Roni
Einav and Gil Weiser as class II directors; Moshe BenBassat and Eddy
Shalev as class III directors; and Naomi Atsmon and Dan Falk as
external directors, who will join Dr. Israel Borovich as external
directors;
2. To ratify the appointment of Brightman Almagor & Co., a member of
Deloitte Touche Tohmatsu, as independent accountants for the Company
for the year ending December 31, 2003, and to authorize the audit
committee of the board of directors to determine, and the board of
directors to ratify, their compensation;
3. To ratify and approve a grant of stock options to certain members of
the Company's board of directors;
4. To ratify and approve grants of cash compensation to certain members
of the Company's board of directors;
5. To approve the adoption of the 2003 Israeli Share Option Plan in the
form attached hereto as Annex A;
6. To ratify and approve the execution of a revised employment agreement
with Moshe BenBassat, the Company's Chairman and Chief Executive
Officer substantially in the form attached hereto as Annex B;
7. To approve an amendment to the Company's Articles of Association
permitting the Company to exempt a director or officer for damages
resulting from breach of his or her duty of care toward the Company;
8. To approve the issuance to current and future directors of the Company
of a letter of indemnification, insurance and exemption substantially
in the form attached hereto as Annex C; and
9. To receive and consider the directors' report and the audited
financial statements for each of the years ended December 31, 2001 and
December 31, 2002.
The foregoing matters are more fully described in the proxy statement
accompanying this notice.
Only shareholders of record at the close of business on April 21, 2003
are entitled to receive notice of and vote at the annual meeting of
shareholders.
All shareholders are cordially invited to attend the annual meeting in
person. However, to assure your representation at the annual meeting, you are
urged to mark, sign, date and return the enclosed proxy as promptly as possible
in the postage-prepaid envelope for that purpose. All proxies must be received
at least 48 hours prior to the meeting to be validly included in the tally of
shares voted at the meeting. Your shares will be voted in accordance with the
instructions you have given. Any shareholder attending the Annual Meeting may
vote in person even if he or she has previously returned a proxy. Please note,
however, that if your shares are held of record by a broker, bank or other
nominee and you wish to attend and vote in person at the annual meeting, you
must obtain from the record holder a proxy issued in your name.
BY ORDER OF THE BOARD OF DIRECTORS
MOSHE BENBASSAT
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
Tel Aviv, Israel
April 29, 2003
2
- --------------------------------------------------------------------------------
IMPORTANT: YOUR VOTE IS IMPORTANT. IN ORDER TO ENSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
3
CLICKSOFTWARE TECHNOLOGIES LTD.
34 HABARZEL STREET
TEL AVIV, ISRAEL
-------------
PROXY STATEMENT
-------------
The enclosed proxy is solicited on behalf of the board of directors of
ClickSoftware Technologies Ltd., referred to in this document as the Company,
for use at the annual meeting of shareholders for the years 2002 and 2003,
referred to in this document as the annual meeting, to be held on Wednesday, May
28, 2003 at 4:00 p.m., local time, or at any adjournment thereof, for the
purposes set forth herein and in the accompanying notice of the annual meeting.
The annual meeting will be held at the offices of the Company at 34 Habarzel
Street, Tel Aviv, Israel. The telephone number at that location is
972-3-765-9422.
These proxy solicitation materials were mailed on or about April 29,
2003 to all shareholders of record entitled to vote at the annual meeting.
RECORD DATE; OUTSTANDING SHARES; PROCEDURAL MATTERS
Shareholders of record as of the close of business on April 21, 2003
referred to in this document as the record date, are entitled to notice of and
to vote at the annual meeting. At the record date, [ ] of the Company's ordinary
shares, referred to in this document as ordinary shares, were issued and
outstanding. For information regarding holders of more than 5% of the
outstanding ordinary shares, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT." The closing sale price of the Company's ordinary shares
as reported on the Nasdaq National SmallCap Market on April 21, 2003 was [ ] per
share.
Proxies properly executed, duly returned to the Company and not revoked
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted FOR each proposition for
which the board of directors recommends a vote FOR. No matters other than those
referred to in this proxy statement will be brought before the annual meeting.
Each shareholder is entitled to one vote for each ordinary share held
on all matters presented at the meeting. The required quorum for the transaction
of business at the annual meeting shall be two or more shareholders present in
person or by proxy, holding or representing in the aggregate at least
thirty-three percent (33%) of the total voting rights in the Company. Shares
that are voted in person or by proxy "FOR" or "AGAINST," referred to in this
document as votes cast, are treated as being present at the meeting for purposes
of establishing a quorum and are also treated as voted at the annual meeting
with respect to such matters. Broker non-votes and shares that are voted in
person or by proxy "ABSTAIN" will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but such
non-votes and abstentions will not be counted for purposes of determining the
number of votes cast with respect to the particular proposal on which a broker
or shareholder has expressly not voted. Thus, a broker non-vote or an abstention
will not affect the outcome of the voting on a proposal.
The Company will bear the cost of soliciting proxies for the annual
meeting. The Company will ask banks, brokerage houses, fiduciaries and
custodians holding ordinary shares in their names for others to send proxy
materials to and obtain proxies from the beneficial owners of such ordinary
shares, and the Company may also reimburse them for their reasonable expenses in
doing so. In addition to soliciting proxies by mail, the Company and its
directors, officers and employees may also solicit proxies personally, by
telephone or by other appropriate means. No additional compensation will be paid
to directors, officers or employees for such services.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at the above address, written notice of revocation or a duly
executed proxy bearing a later date, or by attending the meeting and voting in
person (attendance at the meeting will not, by itself, revoke a proxy).
4
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders may submit proper proposals for inclusion in the Company's
agenda at the next annual meeting of its shareholders by submitting their
proposals in writing to the secretary of the Company in a timely manner.
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's 2004 Annual Meeting and that shareholders
desire to have included in the Company's proxy materials relating to such
meeting must be received by the Company no later than December 31, 2003, which
is 120 calendar days prior to the anniversary of the date of this proxy
statement, and must be in compliance with applicable laws and regulations in
order to be considered for possible inclusion in the proxy statement and form of
proxy for that meeting.
PROPOSAL NO. 1
ELECTION OF SEVEN DIRECTORS
The Company's Articles of Association currently provide for a board of
directors of not less than two members nor more than eleven members. There are
currently six members on the Company's board. The Company has a classified board
of directors as set forth in the following table:
NAME OF DIRECTOR AND CLASS YEAR IN WHICH TERM EXPIRES AGE
Roni Einav, Class II 2002 58
Nathan Gantcher, Class II 2002 62
Moshe BenBassat, Class III 2003 55
Eddy Shalev, Class III 2003 55
James W. Thanos, Class III 2003 54
Israel Borovich, External Director 2004 61
These directors were elected to serve until the annual meetings in 2002
for the class II directors, 2003 for the class III directors, and 2004 for the
external director, as defined below.
Janet Schinderman resigned as an external directors on September 4,
2002. Nathan Gantcher will not be seeking re-election for another term.
There are no family relationships among any directors or executive
officers of the Company.
Under the Israeli Companies Law, 1999, Israeli companies whose shares
have been offered to the public in or outside of Israel (such as the Company)
are required to appoint two people to serve as external directors on the board
of directors of the company. The Companies Law provides that a person may not be
appointed as an external director if the person or the person's relative,
partner, employer or any entity controlled by that person has at the date of
appointment, or has had at any time during the two years preceding that date,
any affiliation with the company, any entity controlling the company or any
entity controlled by the company or by this controlling entity. The term
"affiliation" includes:
o an employment relationship;
o business or professional relationship maintained on a
regular basis;
o control; or
o service as an officer.
No person can serve as an external director if the person's position or
other business creates, or may create, conflicts of interest with the person's
responsibilities as an external director or if such position or other business
may impair such director's ability to serve as an external director. No person
who is a director in one company can serve as an external director in another
company, if at that time a director of the other company serves as an external
director in the first company. The Companies Law further provides that when, at
the time of appointment of an
5
external director, all members of the board of directors of the company are of
one gender, then the external director appointed shall be of the other gender.
NOMINEE FOR CLASS I DIRECTOR
The Company proposes that James W. Thanos be elected as a class I
director to hold office until the annual meeting of shareholders of the Company
to be held in 2004 or until his successor has been duly elected, according to
the provisions of the Companies Law and the regulations thereunder. Mr. Thanos
is currently serving as a Class III director.
Certain information about Mr. Thanos is set forth below.
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ----------------------------------------------------- ------- ----------------
JAMES W. THANOS 54 May 2000
James W. Thanos has served as a director of
ClickSoftware since May 2000. From October 1999 to
June 2002, Mr. Thanos served as Executive Vice
President, Worldwide Field Operations of BroadVision,
Inc. From March 1998 to June 2002, Mr. Thanos served
as BroadVision's Vice President and General Manager,
Americas. Prior to working for BroadVision, Mr.
Thanos served as Senior Vice President of Worldwide
sales at Aurum Software Inc. Mr. Thanos holds a
Bachelor of Arts degree in International Relations
and a Bachelor of Arts degree in Behavioral Sciences
from Johns Hopkins University.
VOTE REQUIRED
JAMES W. THANOS IS TO BE ELECTED AS A CLASS I DIRECTOR BY A SIMPLE
MAJORITY OF VOTES CAST (NOT INCLUDING ABSTENTIONS).
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF JAMES W. THANOS AS A CLASS I DIRECTOR TO
HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI COMPANIES LAW.
NOMINEES FOR CLASS II DIRECTOR
The Company proposes that Roni Einav be re-elected as a class II
director, and Gil Weiser be elected as an additional class II director, each to
hold office until the annual meeting of shareholders of the Company to be held
in 2005 or until his successor has been duly elected, according to the
provisions of the Companies Law and the regulations thereunder.
Certain information about Messrs. Einav and Weiser is set forth below.
6
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ----------------------------------------------------- ------- ----------------
RONI EINAV 58 April 2000
Roni Einav has served as a director of the Company
since April 2000. From 1983 to April 1999, Mr. Einav
served as Chairman of the Board of Directors of New
Dimension Software, Ltd., a software company that he
founded. Mr. Einav has also played a role in founding
over ten additional Israeli high-tech companies
including the following: Liraz Systems Ltd., which
owns Level 8 Systems, Inc.; Jacada Ltd.; Ultimate
Distribution Systems, Inc.; CreditView; CePost Ltd.;
CeDimension; ComDa Ltd.; and Einav Systems, Inc. Mr.
Einav is a Major in the Israeli Defense Forces and
serves in the Systems Analysis Division. Mr. Einav
holds a Bachelor of Science degree in Management and
Industrial Engineering as well as a Master of Science
degree in Operations Research from the Technion
Institute.
GIL WEISER
Gil Weiser has been active in the high tech 61 Not applicable
environment for the past thirty years, with
experience ranging from design engineering to
management of international companies, as well as
community and public activities, from serving the
Shevach/Mofet High School to chairing the Haifa
University Executive Board. Mr. Weiser is chairman or
director of the following companies: Fundtech, BBP,
Tescom, Regisoft, VKB and Safebit. Mr. Weiser
currently sits on the board of the Tel Aviv Stock
Exchange. From January to December 2002, he was the
Acting Vice Chairman for ORAMA, an international
investment banking group in New York and Tel Aviv.
From 1976 to 2000, he served as Chief Executive
Officer of the following companies: Digital Israel
(1976-1993), Fibronics Corp. (1993-1995) and HP
Israel (1995-2000). Mr. Weiser was the Vice Chairman
of the Israel Management Center, heading the
multi-national forum, and is a member of the Israel
High-Tech Association Executive Committee. Mr. Weiser
holds a Bachelor of Science degree in Electrical
Engineering from the Technion Institute and a Master
of Science degree in Electronics and Computers from
the University of Minnesota in Minneapolis.
VOTE REQUIRED
RONI EINAV AND GIL WEISER ARE TO BE ELECTED AS CLASS II DIRECTORS BY A
SIMPLE MAJORITY OF VOTES CAST (NOT INCLUDING ABSTENTIONS).
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE RE-ELECTION OF RONI EINAV AND THE ELECTION OF GIL
WEISER AS CLASS II DIRECTORS TO HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI
COMPANIES LAW.
NOMINEES FOR CLASS III DIRECTORS
The Company proposes that Moshe BenBassat and Eddy Shalev be re-elected
as class III directors to hold office until the annual meeting of shareholders
of the Company to be held in 2006 or until their successors have been duly
elected, according to the provisions of the Companies Law and the regulations
thereunder.
Certain information about these three nominees is set forth below.
7
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ----------------------------------------------------- ------- ----------------
MOSHE BENBASSAT 55 1979
Moshe BenBassat co-founded the Company and has served
as its Chairman and Chief Executive Officer since its
inception. From 1987 to 1999, Dr. BenBassat served as
a professor of Information Systems at the Faculty of
Management of Tel Aviv University. Dr. BenBassat has
also held academic positions at the University of
Southern California and the University of California
at Los Angeles. From 1996 to January 1999, Dr.
BenBassat also served as a board member of Tadiran
Telecommunications Inc., a telecommunications
company. From 1990 to 1996, Dr. BenBassat served as a
board member of Tadiran Electronic Systems Ltd., a
defense electronics company. Dr. BenBassat holds
Bachelor of Science, Master of Science and Doctor of
Philosophy degrees in Mathematics and Statistics from
Tel Aviv University.
EDDY SHALEV
Eddy Shalev has served as a director of the Company 55 April 1997
since April 1997. Mr. Shalev is the Managing General
Partner of Genesis Partners I and Genesis Partners
II, two venture capital funds with $350 million under
management. Genesis I has been an investor in the
Company since 1997. Mr. Shalev holds a Master of
Science degree in Management Information Systems from
Tel Aviv University.
VOTE REQUIRED
MOSHE BENBASSAT AND EDDY SHALEV ARE TO BE ELECTED AS CLASS III
DIRECTORS BY A SIMPLE MAJORITY OF VOTES CAST (NOT INCLUDING ABSTENTIONS).
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF MOSHE BENBASSAT AND EDDY SHALEV TO ACT
AS CLASS III DIRECTORS TO HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI COMPANIES
LAW.
NOMINEES FOR EXTERNAL DIRECTORS
The Company proposes that Dan Falk and Naomi Atsmon be appointed as
external directors until the annual meeting of the shareholders of the Company
to be held in the 2006 or until their successors have been duly elected and
qualified, according to the provisions of the Companies Law and the regulations
thereunder. Dan Falk and Naomi Atsmon may be re-elected for additional
three-year terms. Dan Falk and Naomi Atsmon will serve as external directors in
addition to Israel Borovich, the Company's current external director, whose term
expires in 2004.
Certain information about these two nominees is set forth below.
8
NAME, PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
- ----------------------------------------------------- ------- ----------------
DAN FALK
Mr. Falk serves as the chairman of the board of 58 Not applicable
directors of Atara Technology Ventures Ltd., an
Israeli company engaged in investment in advanced
technology enterprises. He is also a member of the
boards of directors of Orbotech Ltd., Nice System
Ltd., Orad Ltd, Netafim, Dor Chemicals Ltd, Attunity
Ltd., Visionix Ltd., Ramdor Ltd., Medcon Ltd. and
Advanced Vision Technology Ltd., all of which are
Israeli companies. From July 1999 to November 2000,
he served as President and Chief Operating Officer of
Sapiens International Corporation N.V., a Netherlands
Antilles company engaged in the development of
software solutions for large-scale, cross-platform
systems. He was Executive Vice President of Orbotech
from August 1995 to July 1999, and between June 1994
and August 1995 served as its Executive Vice
President and Chief Financial Officer. From October
1992 until June 1994, he was Vice President and Chief
Financial Officer of Orbotech. He was Director of
Finance and Chief Financial Officer of Orbot Systems,
predecessor of Orbotech Ltd., from 1985 until 1992.
He received a Master of Business Administration
degree in 1973 from the Hebrew University School of
Business and had 15 years experience in finance and
banking, including senior positions at Israel
Discount Bank Ltd., prior to joining Orbot.
NAOMI ATSMON 50 Not applicable
Ms. Atsmon was with Amdocs Ltd. from 1986 until the
end of 2002. From 1997 until 2002, she served as a
division President, managing large scale billing
projects for telephone companies in North America and
Europe, with overall responsibility for the profit
and loss statement of the division. From 1994 until
1997, Ms. Atsmon served as a Vice President at Amdocs
Ltd. From 1991 until 1994, she was a director for
Amdocs Ltd. in charge of software development and
customer relations with one of the largest telephone
companies in the U.S. Prior to joining Amdocs Ltd.,
Ms. Atsmon was a project manager at Bank Hapoalim, in
charge of a large financial project for the bank
controller. During 1976-1981, Ms. Atsmon was a system
analyst with Agrexco Ltd. Ms. Atsmon serves as a
board member of Jacada Ltd. Ms. Atsmon holds a
Bachelor of Science degree in Management & Industrial
Engineering from the Technion Institute, and studied
business administration at Tel-Aviv University.
VOTE REQUIRED
DAN FALK AND NAOMI ATSMON ARE TO BE ELECTED AS EXTERNAL DIRECTORS BY A
SIMPLE MAJORITY OF VOTES CAST (NOT INCLUDING ABSTENTIONS) PROVIDED THAT EITHER:
- A MAJORITY OF THE VOTES CAST, INCLUDING AT LEAST ONE-THIRD OF
THE SHARES HELD BY NON-CONTROLLING SHAREHOLDERS VOTED AT THE
MEETING, VOTE IN FAVOR OF THE ELECTION OF FALK AND ATSMON, OR
- THE TOTAL NUMBER OF SHARES HELD BY NON-CONTROLLING
SHAREHOLDERS WHO VOTE AGAINST THE ELECTION OF FALK AND ATSMON
DOES NOT EXCEED ONE PERCENT OF THE COMPANY'S AGGREGATE VOTING
RIGHTS.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF DAN FALK AND NAOMI ATSMON TO ACT AS
EXTERNAL DIRECTORS TO HOLD OFFICE IN ACCORDANCE WITH THE ISRAELI COMPANIES LAW.
9
DIRECTORS NOT STANDING FOR ELECTION
Certain information about the members of the Board of Directors who are
not standing for election at the annual meeting of shareholders for 2002 and
2003 is set forth below.
DR. ISRAEL BOROVICH has served as a director of the Company since July
1997 and as an External Director according to the Israeli Companies Law since
July 2001. Dr. Borovich has served as President of Arkia Israeli Airlines and
Knafaim-Arkia Holdings Ltd. since 1988. Dr. Borovich also serves as a director
of Knafaim-Arkia Holdings, Ltd., Maman-Cargo Terminals & Handling Ltd., Issta
Lines Israel Students Travel Company Ltd., Ogen Investments, Ltd., Granit
Hacarmel investments, Ltd. and Vulcan Batteries Ltd. Dr. Borovich holds Bachelor
of Science, Master of Science and Doctor of Philosophy degrees in Industrial
Engineering from the Polytechnic Institute in Brooklyn.
BOARD MEETINGS AND COMMITTEES
The board of directors of the Company held four meetings during 2001
and four meetings during 2002. The board has a compensation committee and an
audit committee, but does not have a nominating committee or any committee
performing a similar function. Israel Borovich did not attend three, or 37.5%,
of the eight meetings of the board of directors and the audit committee in 2001.
See "Director Compensation" for information on the compensation of non-employee
directors.
The compensation committee was formed on February 10, 2000 and during
2001 and 2002 was comprised of two non-employee directors: Israel Borovich and
Eddy Shalev. Mr. James Thanos was elected to serve on the compensation committee
on March 31, 2003. The compensation committee makes recommendations to the board
of directors regarding the Company's executive compensation policies and
administers the Company's stock option plans and employee stock purchase plan.
The compensation committee did not meet in 2001 and met once in 2002.
The audit committee was formed on February 10, 2000 and, during 2001
and 2002, consisted of at most three non-employee directors: Israel Borovich,
Nathan Gantcher and Eddy Shalev. The audit committee held four meetings during
2001 and five meetings during 2002.
The audit committee operates pursuant to a written charter, referred to
in this document as the audit committee charter, that was adopted by the board
of directors on January 30, 2001 and attached to the Company's definitive proxy
statement for its annual meeting held on September 7, 2001. Under the provisions
of the audit committee charter, the purpose and responsibilities of the audit
committee include: (1) making recommendations to the board of directors
concerning the appointment and, where appropriate, replacement of independent
auditors; (2) reviewing the scope of the audit and related fees; (3) reviewing
audit findings and recommendations with independent auditors to determine the
adequacy and effectiveness of internal controls; (4) reviewing the
appropriateness of accounting principles and financial disclosure practices with
independent auditors and the Company's financial management; (5) reviewing
related party transactions for potential conflicts of interest; and (6)
reviewing the Company's quarterly and annual financial statements prior to
filing with the Securities and Exchange Commission, or SEC. The audit committee
met four times in 2001 and five times in 2002. See "Audit Committee Report."
As of the date of this proxy statement, the audit committee currently
consists of Dr. Israel Borovich, Eddy Shalev and Nathan Gantcher. Nathan
Gantcher is not standing for reelection to the board of directors, and Eddy
Shalev will not serve on the audit committee following the annual meeting of
shareholders. Naomi Atsmon, Dan Falk and Gil Weiser, if elected as members of
the board of directors, will be appointed to the audit committee, and will serve
together with Dr. Israel Borovich on the audit committee. Each of Naomi Atsmon,
Dan Falk, Gil Weiser and Israel Borovich is "independent," as such term is
defined under Rule 4200, as amended, of the listing standards of the National
Association of Securities Dealers.
DIRECTOR COMPENSATION
Our directors currently do not receive cash for services they provide
as directors. However, if elected and subject to shareholder ratification and
approval at this annual meeting, certain of the Company's non-employee
directors, Naomi Atsmon, Israel Borovich, Roni Einav, Dan Falk, James W. Thanos,
and Gil Weiser will receive the
10
annual and per meeting fixed participation fees for the category of companies to
which the Company belongs under the regulations under the Companies Law as
promulgated from time to time (approximately NIS 15,910 annually and NIS 1,010
for each meeting in which they participate). See Proposal 5 for additional
information.
With respect to equity compensation, in February 2001, Mr. Einav, Mr.
Thanos and Dr. Borovich were granted options to purchase 30,000 Ordinary Shares
at an exercise price of $1.69 per share under the Company's Amended and Restated
2000 Share Option Plan, referred to in this document as the plan. On May28,
2003, following the annual meeting and in accordance with the plan (or the 2003
Israeli Share Option Plan, as applicable, if approved by the shareholders at the
annual meeting), if reelected, Mr. Einav, Mr. Thanos and Dr. Borovich will each
receive an automatic grant of options to purchase 15,000 ordinary shares, 7,500
with respect to 2002 and 7,500 with respect to 2003. The exercise price will be
the fair market value per share of the ordinary shares on the date of grant,
generally determined with reference to the closing sale price for the ordinary
shares (or the closing bid if no sales were reported) on the last market trading
day prior to grant. The options granted in February 2001 vested monthly over a
period of twenty-four (24) months commencing from the date of grant. The options
to be granted in May 2003 shall vest as to 100% of the underlying stock on the
first anniversary of the date of grant, provided that Mr. Einav, Mr. Thanos and
Dr. Borovich each continues to serve as a director on such date. Also under the
plan (or the 2003 Israeli Share Option Plan), on May28, 2003, if elected as a
member of the board of directors, Gil Weiser will receive an automatic grant of
options to purchase 30,000 ordinary shares following the annual meeting. The
exercise price will be the fair market value per share of the ordinary shares on
the date of grant, generally determined with reference to the closing sale price
for the ordinary shares (or the closing bid if no sales were reported) on the
last market trading day prior to grant. These options vest as to 25% of the
underlying stock on the first anniversary of the date of grant and as to an
additional 25% of the underlying stock on each anniversary of the date of grant
thereafter.
If elected as members of the board of directors and subject to
shareholder approval, Naomi Atsmon and Dan Falk will each receive options to
purchase 30,000 ordinary shares following the annual meeting. The exercise price
will be the fair market value per share of the ordinary shares on the date of
grant, generally determined with reference to the closing sale price for the
ordinary shares (or the closing bid if no sales were reported) on the last
market trading day prior to grant. These options vest as to 25% of the
underlying stock on the first anniversary of the date of grant and as to an
additional 25% of the underlying stock on each anniversary of the date of grant
thereafter. See Proposal 4 for additional information.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
1. The audit committee has recommended the appointment of Brightman
Almagor & Co., a member firm of Deloitte Touche Tohmatsu, independent
accountants, referred to in this document as Brightman Almagor, as the Company's
independent accountants for the year ending December 31, 2003, and the
affirmative vote of the holders of a majority of the votes cast at the Annual
Meeting is required to implement the audit committee's recommendation. The
remuneration of the auditors shall be determined by the audit committee
according to the nature and volume of their services and then ratified by the
full board of directors.
2. Brightman Almagor has been the Company's independent accountant
since December 31, 2002. Luboshitz Kasierer & Co., an affiliate member firm of
Ernst & Young International, formerly a member firm of Arthur Andersen LLP and
referred to in this document as Luboshitz Kasierer, were the Company's
independent accountants until December 31, 2002. On December 31, 2002, at a
special meeting and pursuant to a recommendation from the audit committee, the
shareholders approved the termination of Luboshitz Kasierer and the appointment
of Brightman Almagor & Co. as the Company's independent accountants.
3. As the Company announced on October 21, 2002, during the third
quarter of 2002, the audit committee, with the assistance of outside advisors,
conducted a review of the Company's financial statements for 2000 and 2001 and
for the first six months of 2002. Upon the conclusion of this review, the
Company determined to restate its historical financial statements for these
periods and the audit committee decided to recommend to the Company's
shareholders that they dismiss Luboshitz Kasierer as the Company's auditors and
engage Brightman Almagor as the Company's new auditors.
11
4. Luboshitz Kasierer's reports on the Company's consolidated financial
statements for 2001 and 2002, the two fiscal years prior to its termination, did
not contain an adverse opinion or disclaimer of opinion, nor were they qualified
or modified as to uncertainty, audit scope or accounting principles.
5. Additionally, except to the extent discussed below, during the two
fiscal years prior to the termination of Luboshitz Kasierer and through the date
of such termination, there were no disagreements between the Company and
Luboshitz Kasierer on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope procedure which, if not
resolved to Luboshitz Kasierer's satisfaction, would have caused Luboshitz
Kasierer to make reference to the subject matter of the disagreement in
connection with its reports. Furthermore, there were no reportable events, as
listed in Item 304(a)(1)(v) of Regulation S-K.
6. During fiscal year 2001, the Company entered into an agreement to
sell certain receivables to a bank. As a result of the sale, the Company's
management believed that it was appropriate to reduce accounts receivable in the
Company's financial statements and to increase cash to reflect proceeds of the
sale. Because the language in the agreement with the bank provided the bank with
recourse to the Company in the event the receivables could not be collected,
Luboshitz Kasierer recommended that the receivables sold continue to be recorded
as receivables and not cash. Following discussions between the Company's
management and audit committee and Luboshitz Kasierer in connection with the
audit of the Company's financial statements for the year ended December 31,
2001, the Company accepted the recommendation of Luboshitz Kasierer. The Company
has authorized Luboshitz Kasierer to respond fully to the inquiries of Brightman
Almagor concerning the subject matter of this disagreement.
7. Further, during 2000 and 2001, the Company's two most recent fiscal
years prior to the termination of Luboshitz Kasierer and through the date of
such termination, except as provided below, the Company did not consult
Brightman Almagor with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.
8. Brightman Almagor and another independent advisor were retained by
the audit committee as outside advisors. Brightman Almagor was specifically
retained for the following services: (i) to perform a special internal corporate
investigation regarding software revenue recognition by the Company and the
Company's United Kingdom subsidiary in the years 2000 and 2001, (ii) to review
the work of the other advisor retained by the audit committee regarding the
United States subsidiary of the Company, on the same issues, and (iii) to submit
to the audit committee Brightman Almagor's recommendations following such work.
The results of the work done by the outside advisors pointed out what was
perceived to be erroneous accounting treatment of revenue recognition in certain
situations. Following receipt of the results of the investigations made by the
Audit Committee, with the assistance of the outside advisors, the Company made
the determination to restate its historical financial statements for the years
2000, 2001 and the first six months of 2002.
9. Luboshitz Kasierer was consulted regarding the revenue recognition
issues raised in the investigation mentioned above. Luboshitz Kasierer presented
its views to the audit committee that the recognition of revenue in the
financial statements for 2000 and 2001 and for the first six months of 2002 was
proper in light of the Company's historical sales experience.
10. The Company provided Brightman Almagor with a copy of the foregoing
disclosure and with an opportunity to furnish the Company with a letter
addressed to the Commission containing any new information, clarification of the
Company's expression of Brightman Almagor views, or the respects in which
Brightman Almagor does not agree with the statements made herein. Brightman
Almagor indicated that it concurs with the foregoing disclosure and that such a
letter is not required.
Prior to the special meeting of shareholders held on December 31, 2002,
the Company provided Luboshitz Kasierer a copy of proposed disclosure regarding
the foregoing matters. The disclosure provided to Luboshitz Kasierer, and later
filed on December 5, 2002 as a section of the Company's proxy statement entitled
"Appointment of Independent Accountants," was substantially in the form of
paragraphs 1-10 above. Luboshitz Kasierer's response to such disclosure is set
forth below.
RESPONSE OF LUBOSHITZ KASIERER. "We have read the statements made by
the Company in the section `Appointment of Independent Accountants' of this
Proxy Statement, which we understand will be filed with
12
the Securities and Exchange Commission as part of the Company's proxy statement
for the special meeting of the Company's shareholders to be held on December 31,
2002 (the "Proxy Statement"), and have the following comments regarding the
statements made in the paragraphs numbered 3 through 9 above, which are made
pursuant to the requirements of Section 304(a) of Regulation S-K and are
substantially similar to the statements made by the Company in Item 4, Changes
in Registrant's Certifying Accountant, of its Form 8-K, dated October 7, 2002
filed October 28, 2002, as amended by the Company's Form 8-K/A, dated November
7, 2002 filed November 13, 2002:
1. We are not in a position to agree or disagree with the
Company's statements made in paragraphs 3, 7 and 8 above.
2. We disagree with the statements made in paragraph 9 above. We
were informed by the Audit Committee of Brightman Almagor's
investigation, and we advised the Audit Committee that, in our
opinion, based on management representations to us and the
audit work conducted by us, the consolidated balance sheets of
the Company and its subsidiaries as of December 31, 2000 and
2001, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the years
ended December 31, 2000 and 2001, as initially filed publicly
by the Company, presented fairly, in all material respects,
the consolidated financial position of the Company and its
subsidiaries as of December 31, 2000 and 2001, and the
consolidated results of operations, changes in shareholders'
equity and cash flows for the years ended December 31, 2000
and 2001, in conformity with generally accepted accounting
principles in the United States ("GAAP"). We have also advised
the Audit Committee that, based on management representations
to us and our review, we were not aware of any material
modifications that should have been made to the Company's
financial statements for the first six months of 2002 in order
for them to be in conformity with GAAP at the time they were
filed publicly by the Company.
We are not required or have no basis to agree or disagree with
any of the other statements contained in the Proxy Statement."
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" APPOINTMENT OF BRIGHTMAN ALMAGOR AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS AND AUTHORIZE THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS TO DETERMINE, AND THE BOARD OF DIRECTORS TO RATIFY, THEIR
COMPENSATION.
AUDIT COMMITTEE REPORT
In connection with the issuance of the Company's Annual Report on Form
10-K, the Audit Committee of the Board of Directors of the Company:
1. Reviewed and discussed the Company's audited financial
statements for the years ended December 31, 2001 and 2002 with
Company management.
2. Met with Brightman Almagor, the Company's independent auditors
to review the audited financial statements and to discuss with
the auditors all matters required to be discussed by the
Auditing Standards Board Statement of Auditing Standards (SAS)
No. 61, as amended.
13
3. Requested, obtained from and discussed with the independent
auditors written disclosures and a letter required by
Independent Standards Board (ISB) Standard No. 1, as amended,
that the auditors were in all respects independent.
AUDIT FEES. Luboshitz Kasierer billed to the Company an aggregate of
approximately $57,000 for professional services rendered by Luboshitz Kasierer
in connection with its audit of the Company's financial statements for the
fiscal year ended December 31, 2001 and its review of the Company's financial
statement included in quarterly reports on Form 10-Q during fiscal year 2001.
Luboshitz Kasierer billed to the Company an aggregate of approximately $17,000
for professional services rendered by Luboshitz Kasierer in connection with its
audit of the Company's financial statements for fiscal year 2002 and its review
of the Company's financial statements included in quarterly reports on Form 10-Q
during fiscal year 2002.
Brightman Almagor billed to the Company an aggregate of approximately
$32,000 for professional services rendered by Brightman Almagor in connection
with its audit of the Company's financial statements for the fiscal year ended
December 31, 2002 and its review of the Company's financial statement included
in quarterly reports on Form 10-Q during fiscal year 2002. Brightman Almagor
also billed the Company an aggregate of $40,000 for professional services
rendered by Brightman Almagor in connection with the reaudit of the financial
statements for 1999, 2000 and 2001 and for the first six months of 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION. During fiscal
years 2001 and 2002, neither Brightman Almagor nor Luboshitz Kasierer billed for
any professional services for financial information systems design or
implementation as described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation
S-X (17 CFR ss. 210.2-01(c)(4)(ii)).
ALL OTHER FEES. Brightman Almagor billed the Company an aggregate of
approximately $50,000 for special investigation. Luboshitz Kasierer billed the
Company an aggregate of approximately $38,000 for tax consulting services
rendered in 2001. Luboshitz Kasierer did not bill the Company for tax consulting
services rendered in 2002.
The audit committee considered the services rendered by Brightman
Almagor & Co. during fiscal year 2002 that were not related to Brightman
Almagor's audit of the Company and determined that such services were compatible
with such auditor's independence. The audit committee also considered the
services rendered by Luboshitz Kasierer during fiscal year 2002 that were not
related to Luboshitz Kasierer's audit of the Company and determined that such
services were compatible with such auditor's independence.
As a result of the above-referenced review and discussions with the
Company's management and independent auditors, the audit committee recommended
to the board of directors that the audited financial statements for the fiscal
year 2002 be accepted and included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 for filing with the SEC.
Respectfully Submitted by the 2002 Audit Committee
of the Board of Directors:
Eddy Shalev - Chairman of the Audit Committee
Israel Borovich
Nathan Gantcher
14
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF GRANT OF STOCK OPTIONS
TO MEMBERS OF THE BOARD OF DIRECTORS
BACKGROUND
Regulations under the Israeli Companies Law also govern the option
consideration to be received by Naomi Atsmon and Dan Falk if they are elected as
external directors at this annual meeting. In accordance with these regulations,
following recommendation and approval by the audit committee, the board of
directors has approved the grant to each of Ms. Atsmon and Mr. Falk, subject to
shareholder approval and their election as members of the board of directors at
this meeting, of options to purchase 30,000 ordinary shares following the annual
meeting. The exercise price will be the fair market value per share of the
ordinary shares on the date of grant, generally determined with reference to the
closing sale price for the ordinary shares (or the closing bid if no sales were
reported) on the last market trading day prior to grant. These options will vest
as to 25% of the underlying stock on the first anniversary of the date of grant
and as to an additional 25% of the underlying stock on each anniversary of the
date of grant thereafter.
On March 31, 2003, following the recommendation of and approval by the
audit committee, the board of directors approved the grant of an option to
purchase 250,000 ordinary shares to Moshe BenBassat, the Company's Chairman of
the Board and Chief Executive Officer, subject to shareholder approval and
effective following the annual meeting. The exercise price will be the fair
market value per share of the ordinary shares on the date of grant, determined
with reference to the closing sale price for the ordinary shares (or the closing
bid if no sales were reported) on the last market trading day prior to grant.
This option will vest as to 58,000 shares of the underlying stock on the date of
grant, and the remaining will vest monthly in equal amounts over a period of 24
months commencing on the date of grant.
PROPOSAL
IT IS HEREBY PROPOSED TO RATIFY AND APPROVE THE STOCK OPTION GRANTS AS
SPECIFIED BELOW FOR THE APPLICABLE NUMBER OF ORDINARY SHARES ON THE TERMS
SPECIFIED ABOVE:
ORDINARY SHARES
REPRESENTED BY
NAME OPTIONS
- ---- -------
Naomi Atsmon 30,000
Dan Falk 30,000
Moshe BenBassat 250,000
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF THE GRANT OF STOCK OPTIONS AS SET FORTH ABOVE.
15
PROPOSAL NO. 4
RATIFICATION AND APPROVAL OF GRANT OF CASH COMPENSATION
TO MEMBERS OF THE BOARD OF DIRECTORS
BACKGROUND
Regulations under the Israeli Companies Law govern the compensation
paid by the Company to its external directors. In addition, all compensation
paid to directors is subject to approval of shareholders.
In accordance with these regulations, on December 5, 2002, the board of
directors adopted a resolution, subject to shareholder approval, and following
the recommendation and approval by the audit committee, approving a cash
compensation arrangement for outside directors (the Company's external directors
and all other directors, other than directors that are employees of the Company
and directors that beneficially own, or otherwise represent a shareholder that
beneficially owns, 5% or more of the outstanding shares of the Company). Under
this arrangement, outside directors will receive the fixed annual and per
meeting participation fees provided in the regulations under the Companies Law
that are payable by the Company to its external directors. The fixed fees shall
be based upon the "fixed amounts" set forth in the second and third supplements
to the Israeli Companies Regulations (Rules for Compensation and Expenses of
External Directors), as amended, updated and adjusted from time to time,
referred to in this document as the regulations. Based on the category to which
the Company belongs, under the regulations, the current participation fees
payable by the Company to its external directors equal NIS 15,910 for the annual
fee and NIS 1,010 for the per meeting participation fees. Such amounts may be
updated from time to time as provided in the regulations.
PROPOSAL
IT IS HEREBY PROPOSED TO RATIFY AND APPROVE THE PAYMENT BY THE COMPANY
TO EACH OF ITS CURRENT AND FUTURE OUTSIDE DIRECTORS (I.E., THE COMPANY'S
EXTERNAL DIRECTORS AND ALL OTHER DIRECTORS, OTHER THAN DIRECTORS THAT ARE
EMPLOYEES OF THE COMPANY AND DIRECTORS THAT BENEFICIALLY OWN, OR OTHERWISE
REPRESENT A SHAREHOLDER THAT BENEFICIALLY OWNS, 5% OR MORE OF THE OUTSTANDING
SHARES OF THE COMPANY) THE ANNUAL AND PER MEETING PARTICIPATION FIXED FEES
(CURRENTLY NIS 15,910 AS AN ANNUAL FEE AND NIS 1,010 FOR A MEETING PARTICIPATION
FEE) FOR THE CATEGORY OF COMPANIES TO WHICH THE COMPANY BELONGS, UNDER THE
REGULATIONS UNDER THE COMPANIES LAW FROM TIME TO TIME.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
The Company's board of directors unanimously recommends voting "FOR"
the approval of the grant of cash compensation as set forth above.
PROPOSAL NO. 5
APPROVAL OF ADOPTION OF 2003 ISRAELI SHARE OPTION PLAN
We are asking our shareholders to approve our 2003 Israeli Share Option
Plan (the "2003 Israeli Plan" or the "Plan") so that we can use it to achieve
the Company's goals and also receive favorable tax treatment for the employees,
consultants, directors and other service providers that receive options granted
thereunder. Our Board of Directors has approved the 2003 Israeli Plan, subject
to approval from our shareholders at the annual meeting.
The maximum aggregate number of Shares that may be subject to options
and sold under the 2003 Israeli Plan and the Company's Amended and Restated 2000
Share Option Plan (the "2000 Plan"), is 3,000,000 Shares, subject to increase
pursuant to Section 3 of the 2000 Plan (which provides for an annual increase to
be added to the number of Shares on the first day of the Company's fiscal year
equal to the lesser of (i) 5% of the outstanding shares
16
on such date, (ii) 1,250,000 Shares or (iii) a lesser amount determined by the
Board). No stock options will be granted under the 2003 Israeli Plan until the
annual meeting.
We believe strongly that the approval of the 2003 Israeli Plan is
essential to our continued success. Our employees are our most valuable asset.
Stock options such as those provided under the 2003 Israeli Plan are vital to
our ability to attract and retain outstanding and highly skilled individuals in
the extremely competitive labor markets in which we must compete. Such stock
option awards also are crucial to our ability to motivate employees to achieve
the Company's goals.
SUMMARY OF THE 2003 ISRAELI PLAN
The following paragraphs provide a summary of the principal features of
the 2003 Israeli Plan and its operation. The following summary is qualified in
its entirety by reference to the Plan as set forth in Annex A.
BACKGROUND AND PURPOSE OF THE PLAN
The Plan is intended to attract, motivate, and retain employees,
consultants, directors and other service providers who provide significant
services to us.
ADMINISTRATION OF THE PLAN
Our Board of Directors or a committee appointed by our Board of
Directors (the "Committee") administers the Plan. Subject to the terms of the
Plan, the Committee will have the power to recommend to our Board of Directors,
and our Board of Directors will have the power and authority to select the
employees and consultants who will receive stock option awards and determine the
terms and conditions of stock option awards (for example, the exercise price and
vesting schedule). The Committee will have full power and authority to interpret
the provisions of the Plan and outstanding options granted thereunder.
If a stock option expires or is cancelled without having been fully
exercised or vested, the shares covered by such option will be returned to the
available pool of the Company's ordinary shares (the "Shares") reserved for
issuance under the 2000 Plan. Also, if we experience a share dividend,
recapitalization or other change in our capital structure, the number, class and
kind of shares available for issuance under the Plan, and the outstanding stock
option awards, may be adjusted as appropriate to reflect the share dividend or
other change.
ELIGIBILITY TO RECEIVE AWARDS
Our Board of Directors, upon the recommendation of the Committee,
selects the employees and consultants who will be granted discretionary stock
option awards under the Plan. The actual number of individuals who will receive
a stock option award under the Plan cannot be determined in advance because our
Board of Directors has the discretion to select the participants. Instead, under
the Plan, the Company's external directors and all other directors other than
employees of the Company or controlling shareholders ("Qualified Outside
Directors") are automatically granted options to purchase a pre-determined
number of Shares.
STOCK OPTIONS
A stock option is the right to acquire Shares at a fixed exercise price
for a fixed period of time. Under the Plan, our Board of Directors may grant
options that qualify for favorable tax treatment under Israeli tax law. Our
Board of Directors will determine the number of Shares covered by each option.
The exercise price of the Shares subject to each option is set by the
Board of Directors in its discretion in accordance with applicable law.
An option granted under the Plan cannot generally be exercised until it
becomes vested. Our Board of Directors establishes the vesting schedule of each
option at the time of grant. Options become exercisable at the times and on the
terms established by our Board of Directors. Options granted under the Plan
expire at the times established by our Board of Directors.
17
The exercise price of each option granted under the Plan must be paid
in full at the time of exercise. Our Board of Directors also may permit payment
through the tender of Shares that are already owned by the participant, or by
any combination of cash and Shares. The participant must pay any taxes the
Company is required to withhold at the time of exercise.
QUALIFIED OUTSIDE DIRECTOR STOCK OPTIONS
Under the Plan, Qualified Outside Directors will receive annual,
automatic, non-discretionary grants of stock options.
Each new Qualified Outside Director (other than external directors)
will receive an option to purchase 30,000 Shares as of the date he or she first
becomes a Qualified Outside Director (the "First Option"). Following each annual
meeting of shareholders of the Company thereafter, each Qualified Outside
Director (including external directors) will receive an additional option to
purchase 7,500 Shares (the "Subsequent Option"), provided that he or she remains
an eligible Qualified Outside Director and has served as a director for at least
the preceding six months.
The First Option vests as to 25% of the underlying Shares on each
anniversary of the applicable grant date (assuming that the grantee remains a
Qualified Outside Director on each scheduled vesting date). The Subsequent
Options vest as to 100% of the underlying Shares on the anniversary of the
applicable grant date (assuming that the grantee remains a Qualified Outside
Director on such date).
CHANGE OF CONTROL
In the event of a merger, acquisition or reorganization by or with one
or more entities, in which the Company is not the surviving entity, or a sale of
all or substantially all of the assets of the Company, the successor corporation
will either assume or provide a substitute stock option award for each
outstanding stock option. In the event the successor corporation refuses to
assume or provide a substitute stock option award, the Committee will provide at
least 15 days notice that the option will immediately vest and become
exercisable as to all of the Shares subject to such award and that such award
will terminate upon the expiration of such notice period.
STOCK OPTION AWARDS TO BE GRANTED TO CERTAIN INDIVIDUALS AND GROUPS
The number of stock option awards that an employee or consultant may
receive under the Plan is in the discretion of the Committee and therefore
cannot be determined in advance. The following table sets forth (a) the
aggregate number of Shares subject to options granted under the Amended and
Restated 2000 Share Option Plan during the last fiscal year and (b) the average
per share exercise price of such options.
- ----------------------------------------- -------------------------------------- --------------------------------------
NAME OF INDIVIDUAL OR GROUP NUMBER OF OPTIONS GRANTED WEIGHTED AVERAGE PER SHARE EXERCISE
PRICE
- ----------------------------------------- -------------------------------------- --------------------------------------
All executive officers, as a group 48,000 $1.40
- ----------------------------------------- -------------------------------------- --------------------------------------
All directors who are not executive 0 0
officers, as a group
- ----------------------------------------- -------------------------------------- --------------------------------------
All employees who are not executive 465,500 $1.35
officers, as a group
- ----------------------------------------- -------------------------------------- --------------------------------------
18
LIMITED TRANSFERABILITY OF STOCK OPTIONS
Stock options granted under the Plan generally may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the applicable laws of descent and distribution.
ISRAELI INCOME TAX ASPECTS
The following is a brief summary of certain of the Israeli income tax.
Consequences of certain transactions under the 2000 Plan based on Israeli income
tax laws currently in effect. The discussion is based on new legislation yet to
be subject to judicial or administrative interpretation, and there can be no
assurance that the views expressed herein will accord with any such
interpretation in the future. This discussion is not intended and does not cover
all possible tax considerations.
TAX CONSEQUENCES TO PARTICIPANTS. In general: (i) no income is
recognized by an optionee at the time an Option is granted or at the time of
exercise of the option; and (ii) at the time the shares are sold, ordinary
income (subject to maximum tax rate of 50% plus additional social service
payments ("Bituach Leumi")) will be recognized by the optionee in an amount
equal to the difference between the price paid by a third party for the Shares
and the exercise price paid by the optionee.
Special provisions under Section 102(b)(2) to the Israeli tax code. If
the Company elects to offer Options to its employees (and non employee
directors) via an "Approved Capital Election" and so long as: (i) the program is
filed with the Israeli tax authorities; (ii) the Options are granted to
employees of the Company or its subsidiary; (iii) the employee does not hold
more than 10% of the means of control in the employer company; (iv) options (or
shares upon exercise of options) are held by an approved nominee for a period of
not less then two years commencing at the beginning of the consecutive tax year
(ordinarily January 1st); (v) the Company uses the Approved Capital Election for
a consecutive time frame of one year beginning of the consecutive tax year when
the first Approved Capital Election was made; and (vi) additional technical
reporting and filling demands are met,
then:
(i) No income will be recognized by an employee optionee at the
time an Option is granted or at the time of exercise of the
Option by the nominee,
(ii) At the time the shares are sold (or forwarded to the employee
from the nominee) the gain equal to the difference between the
price paid by a third party for the Shares (or their market
fair value, if forwarded to employee) and the exercise price
paid by employee optionee will be treated as capital gain
(subject to a tax rate of 25%) plus no Bituach Leumi; and
(iii) According to Section 102(b)(3), if the exercise price is less
than the fair market value at the time of issuance of the
options, the difference would be regarded as ordinary income
(subject to a maximum rate of 50% plus Bituach Leumi) to be
paid at the time of the sale of the shares (or at the time the
shares are forwarded to the employee to the nominee).
Special rules may apply if the optionee relocates his residence from Israel.
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY. Ordinarily, the benefit
to an optionee from an option grant (regular income or capital gains, as
described above) is regarded as a taxable expense to the employer only up to the
difference between the exercise price and the share fair market price at the
time the Options were granted, if any, and only if the company recognized such
expenses according to common accounting practice. In addition, (i) generally, at
the time of the sale of the shares, the employing company will be required to
pay employers Bituach Leumi, and to deduct at source and forward to the Israeli
tax authorities income tax and Bituach Leumi on behalf of the employee on the
full amount of the ordinary income; and (ii) if the Company elects to offer
Options to its employees (and non employee directors) via an "Approved Capital
Election", the Company will have to pay employers Bituach Leumi, and deduct at
source and forward to the Israeli tax authorities income tax and Bituach Leumi,
only if the exercise price is less than the fair market value at the time of
issuance of the options (and only
19
with respect to such amount). The Company will be required to issue tax approved
option grants through the Approved Capital Election for a consecutive time frame
of one year beginning of the consecutive tax year when the first Approved
Capital Election was made.
If shares are issued by a company other than the employer company (such
as by its parent company), then the taxable expense to the employer company is
capped at the amount paid by the employer company to the issuing company as
reimbursement for the issuance of the securities to the employee.
AMENDMENT AND TERMINATION OF THE PLAN
The Board generally may amend or terminate the Plan at any time and for
any reason.
SUMMARY
We believe strongly that the approval of the Plan is essential to our
continued success. Awards such as those provided under the Plan constitute an
important incentive for key employees and other service providers of the Company
and help us to attract, retain and motivate people whose skills and performance
are critical to our success. Our employees are our most valuable asset. We
strongly believe that the Plan is essential for us to compete for talent in the
very difficult labor markets in which we operate.
PROPOSAL
IT IS HEREBY PROPOSED TO APPROVE THE ADOPTION OF THE 2003 ISRAELI SHARE
OPTION PLAN AS ATTACHED ON ANNEX A.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF THE ADOPTION OF THE 2003 SHARE OPTION PLAN AS ATTACHED ON ANNEX
A.
PROPOSAL NO. 6
RATIFICATION AND APPROVAL OF EMPLOYMENT
AGREEMENT WITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Israeli Companies Law requires shareholders to approve the
compensation paid by the Company to its directors. We are asking our
shareholders to ratify and approve the execution of a revised employment
agreement with Moshe BenBassat, our Chairman and Chief Executive Officer.
Under the terms of the revised employment agreement, the base salary
and bonus provisions remain the same. The provisions relating to certain of Mr.
BenBassat's employee benefits (Sections 3 and 4 of the agreement) have been
revised. Mr. BenBassat has also agreed to a 14.5% reduction in his base salary
to $192,375. The base salary shall be returned to the amount set forth in the
employment agreement upon the request of Mr. BenBassat. The revised employment
agreement will be substantially in the form attached hereto as Annex B.
PROPOSAL
IT IS HEREBY PROPOSED TO RATIFY AND APPROVE THE EXECUTION OF A REVISED
EMPLOYMENT AGREEMENT WITH MOSHE BENBASSAT, THE COMPANY'S CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS ANNEX B.
20
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF THE EXECUTION OF THE REVISED EMPLOYMENT AGREEMENT AS ATTACHED AS
ANNEX B.
PROPOSAL NO. 7
AMENDMENT TO THE ARTICLES OF ASSOCIATION
The Company has proposed amending the Company's Articles of Association
to permit the Company to prospectively exempt directors and officers for damages
resulting from a breach of the duty of care toward the Company. In granting
prospective exemptions, a company agrees not to pursue legal action against
directors and officers for liability incurred by that company as a result of the
directors' and officers' future acts and omissions constituting a breach of the
duty of care toward the company.
As described in Proposal 8 below, the Company believes that granting
satisfactory letters of exemption and indemnification to its directors and
officers is of critical importance in retaining and attracting such directors
and officers. (The indemnification provisions of the proposed letter are further
discussed in Proposal 8 below.) In order for a company to grant any exemption,
indemnification or insurance to directors and officers, the Israeli Companies
Law requires that the Articles of Association authorize such grant. However,
existing Section 98 of the Company's Articles of Association refers only to
insurance and indemnification, and does not contain any reference to or
allowance for exemption. Existing Section 98 states as follows:
The Company may, to the maximum extent permitted by the
Companies Law:
(a) enter into a contract for the insurance of the
liability, in whole or in part, of any of its
Officers,
(b) may indemnify an Officer of the Company post factum;
and
(c) may indemnify an Officer of the Company in advance
for the following events:
(i) judgment approved by court (provided that
the Company approved the compromise in
advance) or an arbitrator's award approved
by court (provided that it was given
pursuant to arbitration agreed to by the
Company in advance), for an act or omission
performed by an Officer in his capacity as
an Officer; and
(ii) reasonable legal expenses, including
attorneys' fees, expended by or charged to
an Officer or adjudicated against an Officer
by a court in a proceeding commenced against
an Officer by the Company or on its behalf
or by another person, or in a criminal
charge from which an Officer was acquitted,
or in a criminal charge that does not
require intent, in which an Officer was
convicted, all for an act or omission
performed in his capacity as an Officer.
Such indemnity shall apply in certain foreseeable events and
up to a feasible amount under the circumstances, as determined
by the Board of Directors.
Accordingly, the Company is submitting for shareholder approval an
amendment to the Articles of Association which allows also for grants by the
Company of an exemption to its directors and officers from prospective liability
for damages resulting from a breach of the duty of care toward the Company.
Without the amendment to the Articles of Association, the proposed letters of
exemption and indemnification discussed in Proposal 8 below cannot be issued in
the proposed form.
Pursuant to the Israeli Companies Law, in exercising their duty of care
towards a company, directors and officers must exercise the same degree of care
as a reasonable officer or director in the same position would exercise
21
under the same circumstances, including using reasonable means to
obtain information regarding the business consequences of the decision made by
such officer or director or of the act performed by him in his capacity as a
director or officer. Failure to exercise the same degree of care as a reasonable
officer or director would exercise under the same circumstances constitutes a
breach of the duty of care.
Pursuant to the Israeli Companies Law, the Company may not exempt its
directors and officers from liability for damages resulting from a reckless or
intentional breach of the duty of care. The Company is not aware of any specific
liability contemplated at this time for any director's or officer's breach of
the duty of care to the Company.
PROPOSAL
IT IS HEREBY PROPOSED TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES
OF ASSOCIATION BY ADDING A NEW CLAUSE (D) TO SECTION 98, WHICH SHALL READ AS
FOLLOWS:
(D) EXEMPT AN OFFICER PROSPECTIVELY FROM LIABILITY, IN WHOLE
OR IN PART, FOR DAMAGE RESULTING FROM A BREACH OF HIS OR HER
DUTY OF CARE TOWARD THE COMPANY.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S ARTICLES OF ASSOCIATION.
PROPOSAL NO. 8
INDEMNIFICATION OF DIRECTORS
In light of the increased focus on directors' liability, the Company
understands from existing directors and potential new directors that the receipt
of satisfactory letters of exemption and indemnification are of critical
importance and will influence their decision whether to continue to serve on, or
to agree to join, the Company's board. Accordingly, the Company determined to
review current indemnification provisions and amend such provisions to provide
directors adequate exemption and indemnification protection. As discussed in
Proposal 7 above, the Company currently provides indemnification protection to
directors and officers of the Company, but has not been authorized to grant any
exemptions of liability. The Company is not aware of any intent of an existing
or proposed director to seek exemption or indemnification.
The Company intends to issue to its directors letters of exemption and
indemnification, in the form attached hereto as Annex C. With regard to
indemnification, in the proposed letter, the Company would agree to indemnify,
both retroactively and prospectively, each of its directors, to the maximum
extent permitted by law, for the following:
1. any financial obligation imposed by a judgment of the court or a court
approved arbitrator's award in favor of a third party resulting from an
act or omission performed by a director in his or her capacity as a
director of the Company, and
2. reasonable costs and expenses (including legal and other expenses)
expended by a director in connection with a proceeding commenced
against such director for an act or omission performed in his or her
capacity as a director of the Company.
Pursuant to the proposed letter of exemption and indemnification, the
Company would agree to indemnify its directors and officers, in connection with
the following specified events:
1. The issuance of securities, including without limitation, the offering
of securities to the public pursuant to a prospectus or circular, a
private placement or any other manner of securities offering, and any
undertakings, representations and warranties or other obligations
related to such issuance.
2. The filing or furnishing, or omission to file or furnish, of any
information, report, material or document pursuant to the law, rules
and regulations of the US Securities and Exchange Commission or of any
securities regulator or stock exchange to which the Company is subject,
and the compliance with any applicable laws, rules or regulations
related to the Company's status as a public company.
22
3. The borrowing or other receipt of funds or other financing transaction
or arrangement of the Company, or any such proposed action.
4. The negotiation, execution, delivery and performance of commercial
agreements on behalf of the Company, and any anticompetitive acts or
acts of commercial wrongdoing.
5. A merger, sale, acquisition or other business combination or similar
transaction of the Company or affiliates.
6. Any action with respect to the employment of employees or engagement of
consultants by the Company.
7. Any action with respect to the intellectual property of the Company or
of any other person, and its protection.
8. Any action related to an obligation of the Company to obtain regulatory
or other governmental licenses, permits or authorizations in any
jurisdiction.
9. Approval of corporate actions, including the approval of the acts of
the Company's management, their guidance and their supervision.
In accordance with the limitations prescribed by Israeli law, the
proposed letter of exemption and indemnification provides that the Company's
indemnification obligations shall not apply to a director's breach of fiduciary
duty (unless the director was acting in good faith with reasonable cause to
assume that such act would not prejudice the interests of the Company), a
director's breach of a duty of care committed intentionally or recklessly, an
intentional act aimed at deriving unlawful personal gain, or a fine or monetary
penalty imposed for an offense. The aggregate amount of the indemnification may
not exceed $20 million, for all persons and all events to be indemnified.
In addition, pursuant to the proposed letter of exemption and
indemnification, the Company would agree to exempt each of its directors from
any liability to the Company for damages caused by a director's breach of the
duty of care to the Company (which exemption is conditioned upon the
shareholders' approval of the amendment to the Company's articles of association
as discussed in Proposal 7 above) and also would agree to maintain directors'
and officers' liability insurance in an amount not less than US$10,000,000.
The Israeli Companies Law requires shareholder approval for the letters
to be issued to the directors.
PROPOSAL
IT IS HEREBY PROPOSED TO RATIFY AND APPROVE THE ISSUANCE OF LETTERS OF
EXEMPTION AND INDEMNIFICATION TO CURRENT AND FUTURE DIRECTORS OF THE COMPANY
SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS ANNEX C.
VOTE REQUIRED
The approval of this proposal requires the affirmative vote of a
majority of the votes cast on the proposal at the annual meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF LETTERS OF EXEMPTION AND INDEMNIFICATION AS SET FORTH ABOVE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Company's ordinary shares as of March 28, 2003 for:
23
o the Company's Chief Executive Officer and its four other most
highly compensated executive officers who were serving during
and at the end of 2002, referred to collectively as the named
executive officers;
o each of the Company's directors;
o each person or group known by the Company to beneficially own
more than 5% of its outstanding ordinary shares; and
o all of the Company's executive officers and directors as a
group.
Beneficial ownership of ordinary shares is determined in accordance
with the rules of the SEC and generally includes any ordinary shares over which
a person exercises sole or shared voting or investment powers, or of which a
person has a right to acquire ownership at any time within 60 days of March 28,
2003. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in this table have sole voting and investment
power with respect to all ordinary shares held by them. Applicable percentage
ownership in the following table is based on 26,373,249 shares outstanding as of
March 28, 2003.
Unless otherwise indicated below, the address of each of the principal
shareholders is c/o ClickSoftware Technologies Ltd., 34 Habarzel Street, Tel
Aviv, Israel.
ORDINARY SHARES
BENEFICIALLY OWNED
-----------------------------
NAME AND ADDRESS NUMBER PERCENT
- -------------------------------------------------------------------------------- ------------- -------------
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Moshe BenBassat (1).................................................... 5,318,595 19.8%
Shimon Rojany (2).................................................... 513,551 1.9%
David Schapiro (3).................................................... 272,941 1.0%
Corey Leibow (4).................................................... 202,312 *
Hannan Carmeli (5).................................................... 133,617 *
Amit Bendov (6) ................................................... 230,691 *
Shmuel Arvatz (7) ................................................... - *
Nathan Gantcher (8).................................................... 118,542 *
Israel Borovich (9).................................................... 45,000 *
Roni Einav (10)................................................... 41,563 *
James Thanos (11)................................................... 50,000 *
Eddy Shalev (12)...................................................
c/o Genesis Partners
50 Dizengoff Street
Tel-Aviv 64332, Israel ............................................ 2,871,270 10.9%
Entities affiliated with Genesis Partners (12)
50 Dizengoff Street
Tel-Aviv 64332, Israel............................................. 2,871,270 10.9%
Entities affiliated with Oak Investments Partners (13)
525 University Avenue, Suite 1300
Palo Alto, CA 94301............................................... 4,724,025 17.9%
Liberty Wanger Asset Management (14)
227 West Monroe Street, Suite 3000
Chicago, IL 60606-5016............................................. 1,660,000 6.3%
All executive officers and directors as a group (14 persons)........... 9,798,082 36.7%
24
- -------------------------
* Less than one percent.
(1) Includes 2,246,887 shares held by Dr. BenBassat's spouse, Idit BenBassat.
Also includes options to purchase 496,392 ordinary shares exercisable
within 60 days of March 28, 2003 held by Dr. BenBassat.
(2) Includes options to purchase 158,906 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Rojany. Mr. Rojany was a Named Executive
Officer in 2002, but was replaced as Chief Financial Officer of the Company
effective October 20, 2002.
(3) Includes options to purchase 272,941 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Schapiro. (4) Includes options to
purchase 169,312 ordinary shares exercisable within 60 days of March 28,
2003 held by Mr. Leibow, our
Chief Operating Officer until December 31, 2002.
(4) Includes options to purchase 169,312 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Leibow, our Chief Operating Officer
until December 31, 2002.
(5) Includes options to purchase 125,465 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Carmeli.
(6) Includes options to purchase 222,878 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Bendov.
(7) Mr. Arvatz was appointed as Chief Financial Officer effective October 20,
2002. The Company has agreed to grant Mr. Arvatz an option to purchase
260,000 ordinary shares.
(8) Includes options to purchase 68,542 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Gantcher.
(9) Includes options to purchase 45,000 ordinary shares exercisable within 60
days of March 28, 2003 held by Dr. Borovich.
(10) Includes options to purchase 41,563 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Einav.
(11) Includes options to purchase 45,000 ordinary shares exercisable within 60
days of March 28, 2003 held by Mr. Thanos.
(12) Includes ordinary shares held by Genesis Partners I L.P. and Genesis
Partners I (Cayman) L.P. Eddy Shalev is a managing general partner of
Genesis Partners I, L.P. and Genesis Partners I (Cayman) L.P. Mr. Shalev
disclaims beneficial ownership of these shares, except for his proportional
interest therein, if any.
(13) Includes 4,616,320 ordinary shares held by Oak Investment Partners VI, L.P.
and 107,705 ordinary shares held by Oak VI Affiliates Fund, L.P., as
reported on Schedule 13-G filed with the SEC for fiscal 2001.
(14) As reported on Schedule 13-G filed with the SEC for fiscal 2002.
EXECUTIVE OFFICER COMPENSATION
COMPENSATION ARRANGEMENTS
The Company has entered into employment agreements with Moshe
BenBassat, its Chief Executive Officer and Shmuel Arvatz, its Chief Financial
Officer. The agreements provide that the executives' employment relationships
are "at-will" and may be terminated at any time by either the Company or the
executive with or without cause and following three months notice to Mr. Arvatz.
The agreements provide that in the event the executive is terminated by the
Company without cause, the executive shall be entitled to severance payments in
amounts equal to twelve months of annual base salary as of the date of
termination for Dr. BenBassat and three months of the annual base salary as of
the date of termination for Mr. Arvatz. Dr. BenBassat is entitled to full
acceleration of option vesting in the event of a change in control, and Mr.
Arvatz is entitled on his promised options to 50% vesting or 100% vesting,
depending on the conditions of a change of control. The executive's right to
receive the benefits set forth above will immediately terminate if the executive
competes with the Company during the six or twelve months following termination
of employment with the Company.
25
COMPENSATION COMMITTEE
The compensation committee is currently comprised of Israel Borovich,
Eddy Shalev and James W. Thanos. Dr. Borovich and Messrs. Shalev and Thanos have
been and will be independent, non-employee members of the board of directors. No
interlocking relationship exists between the Company's board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has such an interlocking relationship existed in the
past. The compensation committee is responsible for setting and administering
the policies governing annual compensation of executive officers, considers
their performance and makes recommendations regarding their cash compensation
and stock options to the full board of directors. The compensation committee
expects, pursuant to its charter, to periodically review the approach to
executive compensation and make changes as competitive conditions and other
circumstances warrant.
COMPENSATION PHILOSOPHY
In reviewing the compensation for upcoming year 2003, the committee
addressed two distinct areas in order to meet the needs of the Company as it
continues to grow and mature. The Committee recognizes that in order for the
Company to develop new products and scale the business, the ability to attract,
retain and reward executive officers who will be able to operate effectively in
a high growth complex environment is vital. In that regard, the Company must
offer compensation that (a) is competitive in the industry; (b) motivates
executive officers to achieve the Company's strategic business objectives; and
(c) aligns the interests of executive officers with the long-term interests of
shareholders.
The Company currently uses salary, a management incentive plan and
stock options to meet these requirements. For incentive-based compensation, the
compensation committee considers the desirability of structuring such
compensation arrangements so as to qualify for deductibility under Section
162(m) of the Internal Revenue Code. As the compensation committee applies this
compensation philosophy in determining appropriate executive compensation levels
and other compensation factors, the compensation committee reaches its decisions
with a view towards the Company's overall performance.
COMPENSATION
The following table sets forth all compensation received for services
rendered to the Company and the Company's subsidiaries in all capacities during
the last three years by the named executive officers:
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------------------------- --------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION ($)
- ------------------------------------- ------ --------- ------- ------------ ------------ ------------------
Moshe BenBassat................... 2000 225,000 239,709 110,214 (1) - -
CEO 2001 222,188 22,500 120,148 (1) - -
2002 209,297 - 121,838 (1) - -
Shimon Rojany..................... 2000 185,833 68,083 11,945 (2) 30,000 -
Former CFO 2001 211,542 10,000 14,646 (2) 79,000 -
2002 199,500 - 16,040 (2) 10,000 -
Corey Leibow...................... 2000 27,865 - 491 (2) 275,000 -
Former COO 2001 203,438 34,000 10,189 (2) 24,000 -
2002 179,922 - 13,306 (2) 10,000
David Schapiro.................... 2000 131,858 14,714 29,006 (3) 30,000 -
26
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------------------------- --------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION ($)
- ------------------------------------- ------ --------- ------- ------------ ------------ ------------------
Executive V.P., 2001 128,538 - 39,744 (3) 20,000 -
Markets and Products 2002 111,378 - 24,905 (3) 10,000 -
Hannan Carmeli.................... 2000 102,625 12,175 28,370 (3) 18,000 -
Executive V.P., 2001 116,411 - 31,132 (3) 25,000
Professional Services 2002 105,488 - 14,967 (3) 10,000
Amit Bendov....................... 2000 105,000 19,350 8,782 (2) 14,400 -
SR. V.P Product 2001 122,775 9,000 9,462 (2) 20,000 -
Marketing 2002 123,473 - 9,677 (2) 8,000 -
(1) Other compensation to Dr. BenBassat includes $75,000 housing allowance.
(2) Executive disability insurance.
(3) Contributions to employee benefit programs.
OPTION GRANTS IN 2002
The following table sets forth information concerning grants of stock
options to each of the Named Executive Officers during 2002. All such options
were granted under the Company's various option plans approved during 2002, and
generally vest over four years.
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
OPTIONS GRANTED IN 2002 PRICE ($/SH) DATE PRESENT VALUE (1)
----------------- --------------- ------------ ---------- -----------------
Moshe BenBassat.............. - 0.00% - - -
Shmuel Arvatz................ - 0.00% - - -
Shimon Rojany (former CFO)... 10,000 1.59% $ 1.4 8/3/12 $12,788
Corey Leibow (former COO)... 10,000 1.59% $ 1.4 8/3/12 $12,788
David Schapiro............... 10,000 1.59% $ 1.4 8/3/12 $12,788
Hannan Carmeli............... 10,000 1.59% $ 1.4 8/3/12 $12,788
Amit BenDov.................. 8,000 1.27% $ 1.4 8/3/12 $10,231
- -----------------------
(1) Computed using the Black-Scholes option pricing model. Full vesting of
options is two years from grant date. Assumes the average expected life of the
option is between 5 years, a volatility of 149%, an annual dividend yield of
0.0% and a risk-free interest rate of 4%.
27
AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised by the named executive officers in 2002, and exercisable and
unexercisable stock options held by each of the named executive officers as of
December 31, 2002.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AS OF IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2002 DECEMBER 31, 2002 (1)
ACQUIRED ON VALUE ------------------------------ ------------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ---------- ------------- --------------- ------------- ---------------
Moshe BenBassat............ - - 496,392 - - -
Shmuel Arvatz.............. - - - - - -
Shimon Rojany(former CFO).. - - 158,906 - - -
Corey Leibow (former COO).. - - 169,312 - - -
David Schapiro............. - - 267,437 20,562 - -
Hannan Carmeli............. 4,950 $5,280 123,632 9,367 - -
Amit Bendov................ - - 220,414 9,172 - -
- ------------------------
(1) Based upon the closing price of the Ordinary Shares on December 31, 2002 of
$0.19, less the exercise price per share.
EQUITY COMPENSATION PLAN INFORMATION (AS OF DECEMBER 31, 2002)
(a) (b) (c)
PLAN CATEGORY NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, UNDER EQUITY COMPENSATION PLANS
WARRANTS AND RIGHTS WARRANTS AND RIGHTS (EXCLUDING SECURITIES REFLECTED IN
COLUMN (A))
Equity
compensation plans
approved by
security holders 3,558,477 $2.15 2,147,618
Equity
compensation plans
not approved by
security holders 0 N/A 0
Total 3,558,477 $2.15 2,147,618
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the compensation committee is currently comprised of
three non-employee directors: Israel Borovich, Eddy Shalev and James Thanos.
Following the annual meeting, if re-elected to the board of directors, Dr.
Borovich and Messrs. Shalev and Thanos will again serve on the Compensation
Committee. No member of the compensation committee is or was formerly an officer
or an employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's board of
directors, nor has such interlocking relationship existed in the past.
28
PERFORMANCE GRAPH
The following graph compares the quarterly share price of the Company's
common stock with the index return of the NASDAQ National Market and the NASDAQ
IKX Index of Computer Stocks for the period from June 23, 2000 (the date on
which the Company's common stock began trading on the NASDAQ) through December
31, 2002. The Company has paid no dividends on its common stock. Historical
stock price performance should not be relied upon as indicative of future stock
price performance:
Measurement date CKSW NASDX NASD:Computer
- ---------------- -------- ----------- ---------------
6/23/2000 $7.35 $3,685.30 $2,265.36
6/30/2000 $7.00 $3,763.79 $2,343.97
12/29/2000 $1.75 $2,341.70 $1,294.97
6/29/2001 $1.34 $1,830.19 $1,083.72
12/31/2001 $1.27 $1,577.05 $980.48
6/28/2002 $0.42 $1,053.57 $681.94
12/31/2002 $0.18 $1,015.26 $622.40
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Idit BenBassat, Gilia BenBassat and Avner BenBassat, employees of the Company
during 2001 and 2002, are the wife, daughter and son, respectively, of Moshe
BenBassat, our Chairman and Chief Executive Officer. During 2002, the Company
made payments of $58,923, $48,969 and $62,350, respectively, to each of Idit
BenBassat, Gilia BenBassat and Avner BenBassat for services provided as an
employee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of filings under Section 16(a) of
the Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that during
2002 all Section 16 filing requirements were met, except that Ms. Schinderman
filed one late report on Form 3 to report her initial holdings and all directors
and officers filed annual statements on Form 5 for 2002 one day late.
BY ORDER OF THE BOARD OF DIRECTORS
MOSHE BENBASSAT
Chairman of the Board of Directors and
Chief Executive Office
Tel Aviv, Israel
April 29, 2003
29
ANNEX A
CLICKSOFTWARE TECHNOLOGIES LTD.
THE 2003 ISRAELI SHARE OPTION PLAN
(*IN COMPLIANCE WITH AMENDMENT NO. 132 OF THE ISRAELI TAX ORDINANCE, 2002)
30
TABLE OF CONTENTS
1. PURPOSE OF THE ISOP.............................................................................................A-2
2. DEFINITIONS.....................................................................................................A-2
3. ADMINISTRATION OF THE ISOP......................................................................................A-5
4. DESIGNATION OF PARTICIPANTS.....................................................................................A-7
5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102..................................................................A-7
6. TRUSTEE.........................................................................................................A-8
7. SHARES AVAILABLE FOR ISSUANCE UNDER THE ISOP....................................................................A-9
8. EXERCISE PRICE.................................................................................................A-10
9. ADJUSTMENTS....................................................................................................A-11
10. TERM AND EXERCISE OF OPTIONS...................................................................................A-12
11. VESTING OF OPTIONS.............................................................................................A-14
12. PURCHASE FOR INVESTMENT........................................................................................A-14
13. DIVIDENDS......................................................................................................A-14
14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS..............................................................A-15
15. EFFECTIVE DATE AND DURATION OF THE ISOP........................................................................A-15
16. AMENDMENTS OR TERMINATION......................................................................................A-15
17. GOVERNMENT REGULATIONS.........................................................................................A-16
18. CONTINUANCE OF EMPLOYMENT......................................................................................A-16
19. GOVERNING LAW & JURISDICTION...................................................................................A-16
20. TAX CONSEQUENCES...............................................................................................A-16
21. NON-EXCLUSIVITY OF THE ISOP....................................................................................A-17
22. MULTIPLE AGREEMENTS............................................................................................A-17
This plan, as amended from time to time, shall be known as the ClickSoftware
Technologies Ltd 2003 Israeli Share Option Plan (the "ISOP").
31
1. PURPOSE OF THE ISOP
The ISOP is intended to provide an incentive to retain in the employ of
the Company and its Affiliates (as defined below) persons of training,
experience, and ability; to attract new employees, directors, consultants,
service providers and any other entity which the Board shall decide their
services are considered valuable to the Company; to encourage the sense of
proprietorship of such persons; and to stimulate the active interest of such
persons in the development and financial success of the Company by providing
them with opportunities to purchase shares in the Company, pursuant to the ISOP.
2. DEFINITIONS
For purposes of the ISOP and related documents, including the Option
Agreement, the following definitions shall apply:
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 Optionee.
2.3 "BOARD" means the Board of Directors of the Company.
2.4 "CAPITAL GAIN OPTION (CGO)" as defined in Section 5.4 below.
2.5 "CAUSE" means (i) conviction of any felony involving moral turpitude or
adversely affecting the Company or its Affiliates; (ii) embezzlement of
funds of the Company or its Affiliates; (iii) any breach of the
Optionee's fiduciary duties or duties of care of the Company or its
Affiliates; including without limitation disclosure of confidential
information of the Company or its Affiliates; and (iv) any conduct
(other than conduct in good faith) reasonably determined by the Board
to be materially detrimental to the Company or its Affiliates.
2.6 "CHAIRMAN" means the chairman of the Committee.
2.7 "CODE" means the United States Internal Revenue Code of 1986, as now in
effect or as hereafter amended.
2.8 "COMMITTEE" means a share option compensation committee of the Board,
designated from time to time by the resolution of the Board.
2.9 "COMPANY" means ClickSoftware Technologies Ltd., an Israeli company.
2.10 "COMPANIES LAW" means the Israeli Companies Law 5759-1999.
2.11 "CONTROLLING SHAREHOLDER" shall have the meaning ascribed to it in
Section 32(9) of the Ordinance.
2.12 "DATE OF GRANT" means the date of grant of an Option, as determined by
the Board or authorized Committee and set forth in the Optionee's
Option Agreement.
A-2
2.13 EMPLOYEE" means a person who is employed by the Company or its
Affiliates, including an individual who serves as a director or an
office holder of the Company or its Affiliates, but excluding a
Controlling Shareholder.
2.14 "EXERCISE PRICE" means the price for each Share subject to an Option.
2.15 "EXPIRATION DATE" means the date upon which an Option shall expire, as
set forth in Section 10.2 of the ISOP.
2.16 "FAIR MARKET VALUE" means as of any date, the value of a Share
determined as follows:
(i) If the Shares are listed on any established stock exchange
or a national market system, including without limitation the
NASDAQ National Market system, or the NASDAQ SmallCap Market
of the NASDAQ Stock Market, the Fair Market Value shall be the
closing sales price for such Shares (or the closing bid, if no
sales were reported), as quoted on such exchange or system for
the last market trading day prior to time of determination, as
reported in the Wall Street Journal, or such other source as
the Board deems reliable.
Without derogating from the above, 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 shares
are listed on any established stock exchange or a national
market system or if the Company's shares will be registered
for trading within ninety (90) days following the Date of
Grant, the Fair Market Value of a Share at the Date of Grant
shall be determined in accordance with the average value of
the Company's shares 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; (ii)
If the Shares are regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market
Value shall be the mean between the high bid and low asked
prices for the Shares on the last market trading day prior to
the day of determination, or
(iii) In the absence of an established market for the Shares,
the Fair Market Value thereof shall be determined in good
faith by the Board.
2.17 "ISOP" means this 2003 Israeli Share Option Plan.
2.18 "ITA" means the Israeli Tax Authorities.
2.19 "NON-EMPLOYEE" means a consultant, adviser, service provider,
Controlling Shareholder or any other person who is not an Employee.
2.20 "ORDINARY INCOME OPTION (OIO)" as defined in Section 5.5 below.
2.21 "OPTION" means an option to purchase one or more Shares of the Company
pursuant to the ISOP.
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2.22 "102 OPTION" means any Option granted to Employees pursuant to Section
102 of the Ordinance.
2.23 "3(I) OPTION" means an Option granted pursuant to Section 3(i) of the
Ordinance to any person who is a Non- Employee.
2.24 "OPTIONEE" means a person who receives or holds an Option under the
ISOP.
2.25 "OPTION AGREEMENT" means the share option agreement between the Company
and an Optionee that sets out the terms and conditions of an Option.
The Option Agreement is subject to the terms and conditions of this
ISOP.
2.26 "ORDINANCE" means the 1961 Israeli Income Tax Ordinance [New Version]
1961 as now in effect or as hereafter amended.
2.27 "OPTION EXCHANGE PROGRAM" means a program whereby outstanding Options
are surrendered or cancelled in exchange for Options of the same type
(which may have a lower exercise price or purchase price), of a
different type and/or cash.
2.28 SECTION 102" means section 102 of the Ordinance as now in effect or as
hereafter amended.
2.29 "SHARES" means the ordinary shares, NIS 0.02 par value each, of the
Company.
2.30 "SUCCESSOR COMPANY" means any entity the Company is merged into or is
acquired by, in which the Company is not the surviving entity.
2.31 "TRANSACTION" means (i) merger, acquisition or reorganization of the
Company by or with one or more other entities, in which the Company is
not the surviving entity, or (ii) a sale of all or substantially all of
the assets of the Company.
2.32 "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.
2.33 "UNAPPROVED 102 OPTION" means an Option granted pursuant to Section
102(c) of the Ordinance and not held in trust by a Trustee.
2.34 "VESTED OPTION" means any Option, which has already been vested
according to the Vesting Dates.
2.35 "VESTING DATES" means, as determined by the Board or by the Committee,
the date as of which the Optionee shall be entitled to exercise the
Options or part of the Options, as set forth in section 11 of the ISOP.
3. ADMINISTRATION OF THE ISOP
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3.1 The Board shall have the power to administer the ISOP either directly
or upon the recommendation of the Committee, all as provided by
applicable law and in the Company's Articles of Association.
Notwithstanding the above, the Board shall automatically have residual
authority: (i) if no Committee shall be constituted; (ii) if such
Committee shall cease to operate for any reason; or (iii) with respect
to the rights not delegated by the Board to the Committee.
3.2 The Committee shall select one of its members as its Chairman and shall
hold its meetings at such times and places as the Chairman shall
determine. The Committee 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 The Committee shall have the power to recommend to the Board and the
Board shall have the full power and authority to: (i) designate
participants; (ii) determine the terms and provisions of the respective
Option Agreements, including, but not limited to, the number of Options
to be granted to each Optionee, the number of Shares to be covered by
each Option, provisions concerning the time and the extent to which the
Options may be exercised and the nature and duration of restrictions as
to the transferability or restrictions constituting substantial risk of
forfeiture and to cancel or suspend awards, as necessary; (iii)
determine the Fair Market Value of the Shares covered by each Option;
(iv) determine the Exercise Price of the Option; (v) make an election
as to the type of Approved 102 Option; (vi) designate the type of
Options; (vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Shares
covered by such Option shall have declined since the date the Option
was granted; and (viii) to institute an Option Exchange Program.
The Committee shall have full power and authority to: (i) alter any
restrictions and conditions of any Options or Shares subject to any
Options (ii) interpret the provisions and supervise the administration
of the ISOP; (iii) accelerate the right of an Optionee to exercise in
whole or in part, any previously granted Option; (iv) prescribe, amend
and rescind rules and regulations relating to the ISOP; and (v) make
all other determinations deemed necessary or advisable for the
administration of the ISOP.
3.4 Unless otherwise permitted by law, the Committee shall not be entitled
to grant Options to the Optionees. However, the Committee will be
authorized to issue Shares underlying Options which have been granted
by the Board and duly exercised pursuant to the provisions herein in
accordance with section 112(a)(5) of the Companies Law.
3.5 The interpretation and construction by the Committee of any provision
of the ISOP or of any Option Agreement thereunder shall be final and
conclusive unless otherwise determined by the Board.
3.6 FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors (as
defined below) shall be automatically granted Options each year in
accordance with the following provisions, and only to the extent an
Outside Director elects to receive an automatic grant of Options under
this plan, and not under section 13 of the Company's Amended and
Restated 2000 Share Option Plan.
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(a) All Options granted pursuant to this Section shall be 102
Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the ISOP.
(b) Each Outside Director, who is appointed as a director of the
Company after January 1, 2003, and except for Outside
Directors who are designated as external directors in
accordance with the Companies Law, is automatically granted an
option to purchase thirty thousand (30,000) shares (the "First
Option"), upon the date such individual first becomes a
director, whether through election by the shareholders of the
Company or by appointment by the Board in order to fill a
vacancy (the "Anniversary Date"); provided, however, that an
inside director who ceases to be an inside director but who
remains a director shall not receive a First Option.
Each Outside Director, including Outside Directors who are
designated as external directors in accordance with the
Companies Law, is automatically granted an option to purchase
seven thousand five hundred (7,500) shares (the "Subsequent
Option") following each annual meeting of the shareholders of
the Company, beginning with the annual general meeting with
respect to 2002 and 2003, if on such date he or she shall have
served on the Board for at least the preceding six (6) months.
(c) The terms of each First Option granted pursuant to this
Section shall be as follows:
(i) the term of the First Option shall be ten (10) years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of
the First Option.
(iii) the First Option shall vest as to 25% of the Shares
subject to the First Option on each anniversary of
its date of grant provided that the Optionee
continues to serve as a director on such date.
(d) The terms of each Subsequent Option granted pursuant to this
Section shall be as follows:
(i) the term of the Subsequent Option shall be ten (10)
years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of
the Subsequent Option.
(iii) the Subsequent Option shall vest as to 100% of the
Shares subject to the Subsequent Option on the
anniversary of its date of grant provided that the
Optionee continues to serve as a director on such
date.
For the purpose of this Section 3.6 an "OUTSIDE DIRECTOR" shall mean
the Company's external directors and all other directors other than employees of
the company.
4. DESIGNATION OF PARTICIPANTS
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4.1 The persons eligible for participation in the ISOP as Optionees shall
include any Employees and Non-Employees of the Company or of any
Affiliate; provided, however, that (i) Employees may only be granted
102 Options; (ii) Non-Employees may only be granted 3(i) Options; and
(iii) Controlling Shareholders may only be granted 3(i) Options.
4.2 The grant of an Option hereunder shall neither entitle the Optionee to
participate nor disqualify the Optionee from participating in, any
other grant of Options pursuant to the ISOP or any other option or
share plan of the Company or any of its Affiliates.
4.3 Anything in the ISOP to the contrary notwithstanding, all grants of
Options to directors and office holders shall be authorized and
implemented in accordance with the provisions of the Companies Law or
any successor act or regulation, as in effect from time to time.
5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102
5.1 The Company may designate Options granted to Employees pursuant to
Section 102 as Unapproved 102 Options or Approved 102 Options.
5.2 The grant of Approved 102 Options shall be conditioned upon the
approval of this ISOP by the ITA as required by Section 102.
5.3 Approved 102 Options may either be classified as Capital Gain Options
("CGOS") or Ordinary Income Options ("OIOS").
5.4 Approved 102 Options elected and designated by the Company to qualify
under the capital gain tax treatment in accordance with the provisions
of Section 102(b)(2) shall be referred to herein as CGOS.
5.5 Approved 102 Options elected and designated by the Company to qualify
under the ordinary income tax treatment in accordance with the
provisions of Section 102(b)(1) shall be referred to herein as OIOS.
5.6 The Company's election to designate Approved 102 Options as CGOs or
OIOs (the "ELECTION"), shall be appropriately filed with the ITA before
the Date of Grant of an Approved 102 Option. Such Election shall become
effective beginning the first Date of Grant of an Approved 102 Option
under this ISOP 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 Optionees
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.
5.7 All Approved 102 Options must be held in trust by a Trustee, as
described in Section 6 below.
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5.8 The designation of Unapproved 102 Options and Approved 102 Options
shall be subject to the terms and conditions set forth in Section 102
of the Ordinance and the regulations promulgated thereunder.
5.9 With regards to Approved 102 Options, the provisions of the ISOP and
the Option 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 ISOP and of the Option
Agreement. Any provision of Section 102 or the said permit which is
necessary in order to receive or to keep any tax benefit pursuant to
Section 102, which is not expressly specified in the ISOP or the Option
Agreement, shall be considered binding upon the Company and the
Optionees.
6. TRUSTEE
6.1 Approved 102 Options which shall be granted under the ISOP, Shares
allocated or issued upon exercise of such Approved 102 Options, and any
rights distributed with respect to Approved 102 Options or such Shares,
including without limitation bonus shares, shall be allocated or issued
to the Trustee and held for the benefit of the Optionees 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 may be treated as Unapproved 102 Options, all
in accordance with the provisions of Section 102 and regulations
promulgated thereunder.
6.2 Notwithstanding anything to the contrary, the Trustee shall not release
any Shares allocated or issued upon exercise of Approved 102 Options
prior to the full payment of the Optionee's tax liabilities arising
from Approved 102 Options which were granted to him and any Shares
allocated or issued upon exercise of such Options.
6.3 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 be entitled to sell or
release from trust any Share received upon the exercise of an Approved
102 Option or any share received subsequently following any realization
of any rights distributed, 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.
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6.4 Upon receipt of Approved 102 Option, the Optionee 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
the ISOP, or any Approved 102 Option or Share granted to him
thereunder.
7. SHARES AVAILABLE FOR ISSUANCE UNDER THE ISOP; RESTRICTION THEREON
7.1 The maximum aggregate number of Shares that may be subject to option
and sold under the ISOP and the Company's Amended and Restated 2000
Share Option Plan (the "2000 PLAN" and, together, the "EQUITY PLANS"),
is 3,000,000 Shares (the "COMMON RESERVE"), subject to (a) adjustment
as set forth in Section 9 below and (b) increase pursuant to Section 3
of the 2000 Plan. To the extent options or other awards covering Shares
have been or are issued under any Equity Plan, the Common Reserve shall
be appropriately reduced by the number of Shares subject to such
awards. The Shares may be authorized but unissued, or reacquired. The
number of Shares that are subject to Options or other rights
outstanding at any time under the ISOP shall not exceed the number of
Shares that then remain available for issuance under the Equity Plans.
The Company, during the term of the ISOP, shall at all times reserve
and keep available sufficient Shares to satisfy the requirements of the
ISOP.
7.2 In the event that any outstanding Option or other right for any reason
expires or is canceled or otherwise terminated, the Shares allocable to
the unexercised portion of such Option or other right shall again be
available for the purposes of the Equity Plans (unless any such Equity
Plan has terminated) and shall be added back to the Common Reserve. In
the event that Shares issued under the ISOP are reacquired by the
Company pursuant to any forfeiture provision, right of repurchase or
right of first refusal, such Shares shall again be available for the
purposes of the Equity Plans and shall be returned to the Common
Reserve, except that the aggregate number of Shares which may be issued
upon the exercise of Options shall in no event exceed 3,000,000
(subject to adjustment pursuant to Section 9 below and Section 3 of the
2000 Plan).
7.3 Each Option granted pursuant to the ISOP shall be evidenced by a
written Option Agreement between the Company and the Optionee, in such
form as the Board or the Committee shall from time to time approve.
Each Option Agreement shall state, among other matters, the number of
Shares to which the Option relates, the type of Option granted
thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i)
Option), the Vesting Dates, the Exercise Price per Share, the
Expiration Date and such other terms and conditions as the Committee or
the Board in its discretion may prescribe, provided that they are
consistent with this ISOP.
8. EXERCISE PRICE
8.1 The Exercise Price of each Share subject to an Option shall be
determined by the Board in its sole and absolute discretion in
accordance with applicable law, subject to any guidelines as may be
determined by the Committee from time to time. Each Option Agreement
will contain the Exercise Price determined for each Optionee.
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8.2 The Exercise Price shall be payable upon the exercise of an Option in
the following acceptable forms of payment:
(i) cash, check or wire transfer;
(ii) or at the discretion of the Board, through delivery of Shares
(including other Shares subject to the Options being
exercised) having a Fair Market Value equal as of the date of
exercise to the Exercise Price of the Shares purchased and
acquired upon exercise of the Option, or through a different
form of cashless exercise program through a third party broker
as approved by the Board;
(iii) at the discretion of the Board, any combination of the methods
of payment permitted by any paragraph of this Section 8.2.
8.3 The Exercise Price shall be denominated in the currency of the primary
economic environment of either the Company or the Optionee (that is,
the functional currency of the Company or the currency in which the
Optionee is paid) as determined by the Company.
9. ADJUSTMENTS
Upon the occurrence of any of the following described events,
Optionee's rights to purchase Shares under the ISOP shall be adjusted as
hereafter provided:
9.1 In the event of a Transaction, the unexercised Options then outstanding
under the ISOP shall be assumed or substituted for options to purchase
an appropriate number of shares of each class of shares or other
securities of the Successor Company (or a parent or subsidiary of the
Successor Company) as were distributed to the shareholders of the
Company in connection and with respect to the Transaction. In the case
of such assumption or substitution of Options, appropriate adjustments
shall be made to the Exercise Price and the number of Options, so as to
reflect such action and the vesting schedule and Expiration Date set
forth in the Option Agreements shall remain unchanged unless otherwise
determined by the Committee or the Board, in their sole discretion.
9.2 In the event that the Successor Company (or parent or subsidiary of the
Successor Company) refuses to assume or substitute for the Options, the
holders of unexercised Options shall fully vest in and have the right
to exercise the Options as to all of the optioned Shares, including
Shares as to which it would not otherwise be vested or exercisable. If
an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a Transaction, the Company shall notify
the Optionee in writing or electronically that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option shall terminate upon the expiration of such
period.
With respect to Options granted to an Outside Director pursuant to
Section 3.6 that are assumed or substituted for, if following such
assumption or substitution the Optionee's status as a director of the
Company or a director of the Successor Company, as applicable, is
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terminated other than upon a voluntary resignation by the Optionee,
then the Optionee shall fully vest in and have the right to exercise
the Option as to all of the optioned Shares, including Shares as to
which it would not otherwise be vested or exercisable.
9.3 For the purposes of section 9.1 above, an Option shall be considered
assumed or substituted if, following the Transaction, the Option
confers the right to purchase or receive, for each Share underlying an
Option immediately prior to the Transaction, the consideration (whether
shares, options, cash, or other securities or property) received in the
Transaction by holders of shares held on the effective date of the
Transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares); provided, however, that if such
consideration received in the Transaction is not solely ordinary shares
(or their equivalent) of the Successor Company or its parent or
subsidiary, the Committee may, with the consent of the Successor
Company, provide for the consideration to be received upon the exercise
of the Option to be solely ordinary shares (or their equivalent) of the
Successor Company or its parent or subsidiary equal in Fair Market
Value to the per Share consideration received by holders of a majority
of the outstanding shares in the Transaction; and provided further that
the Committee may determine, in its discretion, that in lieu of such
assumption or substitution of Options for options of the Successor
Company or its parent or subsidiary, such Options will be substituted
for any other type of asset or property including cash which is fair
under the circumstances.
9.4 In the event of the proposed dissolution or liquidation of the Company,
the Company shall notify each holder of unexercised Options as soon as
practicable prior to the effective date of such proposed transaction.
The Company in its discretion may provide for a holder of unexercised
Options to have the right to exercise his or her Option until fifteen
(15) days prior to such transaction as to all of the optioned Shares,
including Shares as to which the Option would not otherwise be
exercisable. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such
proposed action.
9.5 If the outstanding shares of the Company shall at any time be changed
or exchanged by declaration of a share dividend (bonus shares), share
split, combination or exchange of shares, recapitalization, or any
other like event by or of the Company, and as often as the same shall
occur, then the number, class and kind of the Shares subject to the
ISOP or subject to any Options therefore granted, and the Exercise
Price, shall be appropriately and equitably adjusted so as to maintain
the proportionate number of Shares without changing the aggregate
Exercise Price, provided, however, that no adjustment shall be made by
reason of the distribution of subscription rights (rights offering) on
outstanding shares. Upon happening of any of the foregoing, the class
and aggregate number of Shares issuable pursuant to the ISOP (as set
forth in Section 7 hereof), in respect of which Options have not yet
been exercised, shall be appropriately adjusted, all as will be
determined by the Board whose determination shall be final.
10. TERM AND EXERCISE OF OPTIONS
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10.1 Options shall be exercised by the Optionee by giving written notice to
the Company and to any third party designated by the Company (the
"REPRESENTATIVE"), in such form and method as may be determined by the
Company and when applicable, by the Trustee in accordance with the
requirements of Section 102, which exercise shall be effective upon
receipt of such notice by the Company and/or the Representative and the
payment of the Exercise Price at the Company's or the Representative's
principal office. The notice shall specify the number of Shares with
respect to which the Option is being exercised.
10.2 Options, to the extent not previously exercised, shall terminate
forthwith upon the earlier of: (i) the date set forth in the Option
Agreement; and (ii) the expiration of any extended period in any of the
events set forth in section 10.4 below.
10.3 The Options may be exercised by the Optionee in whole at any time or in
part from time to time, to the extent that the Options become vested
and exercisable, prior to the Expiration Date, and provided that,
subject to the provisions of section 10.4 below, the Optionee is
employed by or providing services to the Company or any of its
Affiliates, at all times during the period beginning with the granting
of the Option and ending upon the date of exercise.
10.4 Unless otherwise determined in the Optionee's Option Agreement, all
Options shall terminate upon termination of employment or service by an
Optionee with the Company or its Affiliates. Notwithstanding the
foregoing, an Option may be exercised after the date of termination of
Optionee's employment or service with the Company or any Affiliates for
an additional period of time beyond the date of such termination, but
only with respect to the number of Vested Options at the time of such
termination, if:
(i) termination is without Cause, in which event any Vested Option
still in force and unexpired may be exercised within a period
of ninety (90) days after the date of such termination; or-
(ii) termination is the result of death or disability of the
Optionee, in which event any Vested Option still in force and
unexpired may be exercised within a period of twelve (12)
months after the date of such termination; or -
(iii) prior to the date of such termination, the Committee shall
authorize an extension of the terms of all or part of the
Vested Options beyond the date of such termination for a
period not to exceed the period during which the Options by
their terms would otherwise have been exercisable.
For avoidance of any doubt, if termination of employment or
service is for Cause, any outstanding unexercised Option (whether
vested or non-vested), will immediately expire and terminate, and the
Optionee shall not have any right in connection to such outstanding
Options.
10.5 Optionees shall not have any of the rights or privileges of
shareholders of the Company in respect of any Shares purchasable upon
the exercise of any Option, nor shall they be deemed to be a class of
shareholders or creditors of the Company for purpose of the operation
of sections 350 and 351 of the Companies Law or any successor to such
section, until
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registration of the Optionee as holder of such Shares in the Company's
register of shareholders upon exercise of the Option in accordance with
the provisions of the ISOP, but in case of Options and Shares held by
the Trustee, subject to the provisions of Section 6 of the ISOP.
10.7 Any form of Option Agreement authorized by the ISOP may contain such
other provisions as the Committee may, from time to time, deem
advisable.
10.8 With respect to Unapproved 102 Options, 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.
11. VESTING OF OPTIONS
11.1 Subject to the provisions of the ISOP, each Option shall vest following
the Vesting Dates and for the number of Shares as shall be provided in
the Option Agreement. However, no Option shall be exercisable after the
Expiration Date.
11.2 Unless the Committee provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence.
11.3 An Option may be subject to such other terms and conditions on the time
or times when it may be exercised, as the Committee may deem
appropriate. The vesting provisions of individual Options may vary.
12. PURCHASE FOR INVESTMENT
The Company's obligation to issue or allocate Shares upon exercise of
an Option granted under the ISOP is expressly conditioned upon: (a) the
Company's completion of any registration or other qualifications of such Shares
under all applicable laws, rules and regulations or (b) representations and
undertakings by the Optionee (or his legal representative, heir or legatee, in
the event of the Optionee's death) to assure that the sale of the Shares
complies with any registration exemption requirements which the Company in its
sole discretion shall deem necessary or advisable. Such required representations
and undertakings may include representations and agreements that such Optionee
(or his legal representative, heir, or legatee): (a) is purchasing such Shares
for investment and not with any present intention of selling or otherwise
disposing thereof; and (b) agrees to have placed upon the face and reverse of
any certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the Company or
a reference thereto and (ii) that, prior to effecting any sale or other
disposition of any such Shares, the Optionee must furnish to the Company an
opinion of counsel, satisfactory to the Company, that such sale or disposition
will not violate the applicable laws, rules, and regulations, whether of the
State of Israel or of the United States or any other State having jurisdiction
over the Company and the Optionee.
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13. DIVIDENDS
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
Articles of Association (and all amendments thereto) and subject to any
applicable taxation on distribution of dividends, and when applicable subject to
the provisions of Section 102.
14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS
14.1 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 it given to any third party
whatsoever, except as specifically allowed under the ISOP, and during
the lifetime of the Optionee each and all of such Optionee's rights to
purchase Shares hereunder shall be exercisable only by the Optionee.
Any such action made directly or indirectly, for an immediate
validation or for a future one, shall be void.
14.2 As long as Options and/or Shares are held by the Trustee on behalf of
the Optionee, all rights of the Optionee over the Shares are personal,
can not be transferred, assigned, pledged or mortgaged, other than by
will or pursuant to the laws of descent and distribution.
15. EFFECTIVE DATE AND DURATION OF THE ISOP
The ISOP shall be effective as of the day it was adopted by the Board
and shall terminate at the end of ten (10) years from such day of adoption.
Notwithstanding the foregoing, in the event that approval of the ISOP by the
shareholders of the Company is required under applicable law, in connection with
the application of certain tax treatment or pursuant to applicable stock
exchange rules or regulations, such approval shall be obtained within the time
required under the applicable law.
16. AMENDMENTS OR TERMINATION
The Board may at any time, but when applicable, after consultation with the
Trustee, amend, alter, suspend or terminate the ISOP. No amendment, alteration,
suspension or termination of the ISOP shall impair the rights of any Optionee
with respect to Options already granted, unless mutually agreed otherwise
between the Optionee and the Company, which agreement must be in writing and
signed by the Optionee and the Company. Termination of the ISOP shall not affect
the Committee's ability to exercise the powers granted to it hereunder with
respect to Options granted under the ISOP prior to the date of such termination.
A-14
17. GOVERNMENT REGULATIONS
The ISOP, and the granting and exercise of Options hereunder, and the
obligation of the Company to sell and deliver Shares under such Options, shall
be subject to all applicable laws, rules, and regulations, whether of the State
of Israel or of the United States or any other State having jurisdiction over
the Company and the Optionee, including the registration of the Shares under the
United States Securities Act of 1933, and the Ordinance and to such approvals by
any governmental agencies or national securities exchanges as may be required.
Nothing herein shall be deemed to require the Company to register the Shares
under the securities laws of any jurisdiction.
18. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES
Neither the ISOP nor the Option Agreement with the Optionee shall
impose any obligation on the Company or an Affiliate thereof, to continue any
Optionee in its employ or service, and nothing in the ISOP or in any Option
granted pursuant thereto shall confer upon any Optionee any right to continue in
the employ or service of the Company or an Affiliate thereof or restrict the
right of the Company or an Affiliate thereof to terminate such employment or
service at any time.
19. GOVERNING LAW & JURISDICTION
The ISOP 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 the ISOP.
20. TAX CONSEQUENCES
20.1 Any tax consequences arising from the grant or exercise of any Option,
from the payment for Shares covered thereby or from any other event or
act (of the Company or its Affiliates, the Trustee or the Optionee),
hereunder, shall be borne solely by the Optionee. The Company or its
Affiliates or the Trustee shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations,
including withholding taxes at source. Furthermore, the Optionee shall
indemnify the Company or its Affiliates 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 Optionee.
20.2 The Company and/or, when applicable, the Trustee shall not be required
to release any Share certificate to an Optionee until all required
payments have been fully made.
20.3 Until all taxes have been paid in accordance with the Section 102
Rules, Options and/or underlying Shares may not be sold, transferred,
assigned, pledged, encumbered, or otherwise willfully hypothecated or
disposed of, and no power of attorney or deed of transfer, whether for
immediate or future use may be validly given. Notwithstanding the
foregoing, the Options and/or underlying Shares may be validly
transferred in a transfer made by will or
A-15
laws of descent, provided that the transferee thereof shall be subject
to the provisions of Section 102 and the Section 102 Rules as would
have been applicable to the deceased Participant were he or she to have
survived.
21. NON-EXCLUSIVITY OF THE ISOP
The adoption of the ISOP by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangements
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 Options otherwise than under the ISOP, and such arrangements may
be either applicable generally or only in specific cases.
For the avoidance of doubt, prior grant of options to Optionees of the
Company under their employment agreements, and not in the framework of any
previous option plan, shall not be deemed an approved incentive arrangement for
the purpose of this Section.
22. MULTIPLE AGREEMENTS
The terms of each Option may differ from other Options granted under
the ISOP at the same time, or at any other time. The Board may also grant more
than one Option to a given Optionee during the term of the ISOP, either in
addition to, or in substitution for, one or more Options previously granted to
that Optionee.
* * *
A-16
ANNEX B
CLICKSOFTWARE INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of January 1, 2003 (the "Effective
Date") by and between ClickSoftware Inc. (the "Company"), and Moshe Benbassat
(the "Executive").
WHEREAS, Executive currently serves as the Chairman of the Board and
Chief Executive Officer of both the Company and its
parent company, Clicksoftware Technologies Ltd. ("Parent Company");
WHEREAS, the parties desire and agree to enter into an employment
relationship by means of this Agreement; and
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITIONS AND DUTIES. As of the Effective Date,
Executive will continue to serve as Chief Executive Officer of the Company.
Executive will render such business and professional services in the performance
of his duties, consistent with Executive's position within the Company, as shall
reasonably be assigned to him by the Company's Board of Directors (the "Board").
The period of Executive's employment under this Agreement is referred to herein
as the "Employment Term."
(b) BOARD MEMBERSHIP. During the Employment Term,
Executive will serve as a member of the Board, subject to the Company's Articles
of Incorporation and By Laws.
(c) OBLIGATIONS. During the Employment Term, Executive
will perform his duties faithfully and to the best of his ability and will
devote his full business efforts and time to the Company. For the duration of
the Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board. Notwithstanding the
foregoing, Executive may serve on the board of directors of any other companies
or work in academic pursuits as long as such service does not materially
interfere with the performance of his duties to the Company.
2. AT-WILL EMPLOYMENT. The parties agree that the Executive's
employment with the Company will be "at-will" employment and may be terminated
at any time with or without cause or notice. Executive understands and agrees
that neither his job performance nor promotions, commendations, bonuses or the
like from the Company give rise to or in any way serve as the basis for
modification, amendment, or extension, by implication or otherwise, of his
employment with the Company.
3. COMPENSATION.
(a) BASE SALARY. During the Employment Term, the Company
will pay Executive as compensation for his services a base salary at the
annualized rate of $225,000 (the "Base Salary"). The Base Salary will be paid
periodically in accordance with the Company's normal payroll practices and be
subject to the usual, required withholding.
A-17
(b) BONUS. In addition to the Base Salary, Executive shall
be entitled to earn an annual performance bonus of up to 100% of Base Salary
(the "Bonus"). Such Bonus, if any, shall be based on the achievement of target
milestones to be determined by the Compensation Committee of the Board after
consultation with Executive and shall be paid on a quarterly basis. The Bonus
may be reviewed annually by the Compensation Committee of the Board for possible
increases in light of Executive's performance.
(c) HOUSING AND LIVING ALLOWANCE. During the Employment
Term, the Company will pay to the Executive a housing and living allowance of
$75,000 per year for housing and living expenses incurred by the Executive
during such period as he is living outside of Israel. Any taxes which the
Executive incurs by reason of receipt of this allowance (and any taxes which the
Executive incurs with respect to any relocation and temporary living
reimbursement paid with respect to 2002) shall be borne by the Company, in which
case the allowance (or reimbursement, as applicable) shall be increased to the
extent necessary to ensure that the Executive receives the full allowance
amount.
(d) TEMPORARY REDUCTIONS. The Executive may at any time
elect to waive his right to receive all or part of the amounts sets forth in
this Section 3, provided however, that such amounts shall be returned to their
stated levels upon request of the Executive. Any amounts so waived shall not be
refunded to the Executive.
4. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the Employment Term, Executive
will be entitled to participate in the employee benefit plans currently and
hereafter maintained by the Company of general applicability to other senior
executives of the Company, including, without limitation, the Company's group
medical, dental, vision, disability and life insurance. The Company reserves the
right to cancel or change the benefit plans and programs it offers to its
employees at any time. In addition, and without limiting the Executive's right
to participate in the foregoing plans, and to the extent permitted under
applicable U.S. laws, the Company shall procure insurance and pension policies
in the United States and/or in Israel, whether management insurance ("BITUACH
MENAHALIM") or otherwise, at the Executive's direction, provided that the annual
cost of all such policies to the Company shall not exceed $32,000 (the "Annual
Premium"). The Annual Premium with respect to insurance in Israel shall be
increased each year by the amount of any increase during the previous calendar
year in the Consumer Price Index (Cost of Living Index) in Israel as published
by the Israeli Central Bureau of Statistics, or if that index is not published,
the substitute index adopted in its place.
(b) Use of Automobile. The Company will make available to
the Executive the use of an automobile of a make and model appropriate for a
Chief Executive Officer. The Company shall bear all expenses related to the
operation of the automobile (other than parking fines and traffic violations).
Upon termination of the Employment Term for any reason, the Executive shall
promptly return the automobile to the Company. Any taxes which the Executive
incurs by reason of receipt of the automobile benefits provided under this
Section 4(b) shall be borne by the Company, in which case the benefits provided
under this Section 4(b) shall be increased to the extent necessary to ensure
that the Executive receives the full benefits under this Section 4(b).
5. VACATION.Executive will be entitled to paid vacation of
twenty-six (26) days per year in accordance with the Company's vacation policy,
with the timing and duration of specific vacations mutually and reasonably
agreed to by the parties hereto.
A-18
6. EXPENSES. The Company will reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
7. SEVERANCE.
(a) INVOLUNTARY TERMINATION. If Executive's employment
with the Company terminates other than for "Cause" (as defined herein), and
Executive signs and does not revoke a standard release of claims with the
Company, then, subject to Section 11, Executive shall be entitled to receive
continuing payments of severance pay (less applicable withholding taxes) at a
rate equal to his Base Salary rate, as then in effect, for a period of twelve
(12) months from the date of such termination, to be paid, in Executive's
discretion, (i) periodically in accordance with the Company's normal payroll
policies or (ii) in a lump-sum within thirty (30) days of such termination.
(b) TERMINATION FOR CAUSE. If Executive's employment with
the Company terminates for Cause by the Company, then Executive will only be
eligible for severance benefits in accordance with the Company's established
policies as then in effect.
8. CHANGE OF CONTROL BENEFITS. In the event of a "Change of
Control" (as defined below) of the Parent Company that occurs prior to the
Executive's termination of service to the Company, the Option will have its
vesting accelerated so as to become 100% vested. Thereafter, the Option will
continue to be subject to the terms, definitions and provisions of the Option
Plan and Option Agreement.
9. DEFINITIONS.
(a) CAUSE. For purposes of this Agreement, "Cause" is
defined as (i) an act of dishonesty made by Executive in connection with
Executive's responsibilities as an employee, (ii) Executive's conviction of, or
plea of NOLO CONTENDERE to, a felony, or (iii) Executive's gross misconduct.
(b) CHANGE OF CONTROL. For purposes of this Agreement,
"Change of Control" of the Parent Company is defined as: (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Parent Company
representing 50% or more of the total voting power represented by the Parent
Company's then outstanding voting securities; or (ii) a change in the
composition of the Board occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" will mean directors who either (A) are directors of the Parent
Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Parent
Company); or (iii) the date of the consummation of a merger or consolidation of
the Parent Company with any other corporation that has been approved by the
stockholders of the Parent Company, other than a merger or consolidation which
would result in the voting securities of the Parent Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the total voting power represented by
the voting securities of the Parent Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Parent Company approve a plan of complete liquidation of the Parent Company; or
(iv) the date of the consummation of the sale or disposition by the Parent
Company of all or substantially all the Parent Company's assets.
A-19
10. CONFIDENTIAL INFORMATION. Executive agrees to enter into the
Company's standard Confidential Information and Invention Assignment Agreement
(the "Confidential Information Agreement") upon commencing employment hereunder.
11. CONDITIONAL NATURE OF SEVERANCE PAYMENTS.
(a) NONCOMPETE. Executive acknowledges that the nature of
the Company's and the Parent Company's business is such that if Executive were
to become employed by, or substantially involved in, the business of a
competitor of the Company or the Parent Company during the twelve (12) months
following the termination of Executive's employment with the Company, it would
be very difficult for the Executive not to rely on or use the Company's or the
Parent Company's trade secrets and confidential information. Thus, to avoid the
inevitable disclosure of the Company's and the Parent Company's trade secrets
and confidential information, Executive agrees and acknowledges that Executive's
right to receive the severance payments set forth in Section 7 (to the extent
Executive is otherwise entitled to such payments) shall be conditioned upon the
Executive not directly or indirectly engaging in (whether as an employee,
consultant, agent, proprietor, principal, partner, stockholder, corporate
officer, director or otherwise), nor having any ownership interested in or
participating in the financing, operation, management or control of, any person,
firm, corporation or business that competes with the Company or the Parent
Company or is a customer of the Company or the Parent Company. Upon any breach
of this section, all severance payments pursuant to this Agreement shall
immediately cease.
12. ASSIGNMENT. This Agreement will be binding upon and inure to
the benefit of (a) the heirs, executors and legal representatives of Executive
upon Executive's death and (b) any successor of the Company. Any such successor
of the Company will be deemed substituted for the Company under the terms of
this Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive's right to compensation or other benefits will be null
and void.
13. NOTICES. All notices, requests, demands and other
communications called for hereunder shall be in writing and shall be deemed
given (i) on the date of delivery if delivered personally, (ii) one (1) day
after being sent by a well established commercial overnight service, or (iii)
four (4) days after being mailed by registered or certified mail, return receipt
requested, prepaid and addressed to the parties or their successors at the
following addresses, or at such other addresses as the parties may later
designate in writing:
If to the Company:
Clicksoftware Inc.
c/o ClickSoftware Technologies Ltd.
34 HaBarzel Street
Tel Aviv 69710, Israel
ATTN: CFO
If to Executive:
at the last residential address known by the Company.
14. SEVERABILITY. In the event that any provision hereof becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement will continue in full force and effect without said
provision.
A-20
15. ARBITRATION.
(a) Executive agrees that any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Boston,
Massachusetts in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator will be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply California law to the
merits of any dispute or claim, without reference to rules of conflicts of law.
The arbitration proceedings will be governed by federal arbitration law and by
the Rules, without reference to state arbitration law. The Executive hereby
consents to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS
ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION
CLAIMS.
16. INTEGRATION. This Agreement, together with the Option Plan,
Option Agreement and the Confidential Information Agreement represents the
entire agreement and understanding between the parties as to the subject matter
herein and supersedes all prior or contemporaneous agreements whether written or
oral. No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
17. TAX WITHHOLDING. All payments made pursuant to this Agreement
will be subject to withholding of applicable taxes.
18. GOVERNING LAW. This Agreement will be governed by the laws of
the State of California (with the exception of its conflict of laws provisions).
19. ACKNOWLEDGMENT. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
A-21
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by their duly authorized officers, as of the day and
year first above written.
CLICKSOFTWARE INC.
By: Date:
-------------------------------- ---------------------------
Title:
-----------------------------
EXECUTIVE
Date:
------------------------------------ ---------------------------
Moshe Benbassat
A-22
ANNEX C
CLICKSOFTWARE TECHNOLOGIES LTD.
34A Habarzel Street
Ramat HaChayal
Tel Aviv, Israel
INDEMNIFICATION, INSURANCE AND EXEMPTION AGREEMENT
To: Date: ________, 2003
- ---------------
Dear Mr. _______,
WHEREAS it is in the best interest of ClickSoftware Technologies
Ltd. and its subsidiaries (the "COMPANY") to retain and
attract as directors, officers and employees the most
capable persons available, and such persons are unwilling
to serve in publicly-held companies unless they are
provided with adequate protection thorough insurance,
indemnification and exemption in connection with such
service; and
WHEREAS you are a director, officer or employee of the Company
("OFFICE HOLDER") and in order to enhance your continued
service to the Company in an effective manner, the Company
desires to provide hereunder for your indemnification and
exemption to the fullest extent permitted by law; and
WHEREAS the board of directors of the Company (the "BOARD") has
resolved that the Company shall indemnify you as further
specified below.
NOW, THEREFORE, in consideration of your service to the Company, the Company
hereby undertakes to indemnify you in advance in respect of:
1. INDEMNIFICATION
The Company shall indemnify you, to the maximum extent permitted by
applicable law and subject to Section 4 below, for the following
("INDEMNIFIABLE EVENTS"):
1.1 Any financial obligation imposed on you in favor of a third
party (which third parties include, without limitation and to
the fullest extent permitted by applicable law, any
governmental entity) by a court judgment, including a
compromise judgment approved by court (provided that the
Company approved the compromise in advance) or an arbitrator's
award approved by court (provided that it was given pursuant
to arbitration agreed to by the Company in advance), for an
act or omission performed by you in your capacity as an Office
Holder; and
1.2 Reasonable costs and expenses (which costs include, without
limitation and to the fullest extent permitted by applicable
law, all expenses reasonably incurred in defending any claim
including attorneys' fees and costs related to investigation
and pre-litigation negotiations), expended by you or charged
to you or adjudicated against you by a court, in each case in
B-1
connection with a proceeding commenced against you by the
Company or on its behalf or by another person, or in a
criminal charge from which you were acquitted, or in a
criminal charge that does not require proof of criminal intent
in which you were convicted, all for an act or omission
performed in your capacity as an Office Holder.
1.3 The foregoing shall not derogate from the Company's right to
indemnify you retroactively to the extent permitted by law.
2. The said indemnity shall apply in connection, directly or indirectly,
to any one or more of the type of events described in SCHEDULE A to
this letter, provided the maximum amount of the indemnification shall
not exceed the amount specified in Section 4 below, provided however
that said indemnity shall not apply with respect to:
2.1 a breach of a fiduciary duty, except for a breach of a
fiduciary duty to the Company while acting in good faith and
having reasonable cause to assume that such act would not
prejudice the interests of the Company;
2.2 a breach of a duty of care committed intentionally or
recklessly;
2.3 an intentional act aimed at deriving unlawful personal gain;
or
2.4 a fine or monetary composition imposed for an offense.
3. The provisions of paragraph 1 above to the contrary notwithstanding, no
payment hereunder shall be made to you in connection with an
Indemnifiable Event for which payment is actually paid to you under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause or agreement, except in respect of any excess beyond
the payment under such insurance, clause or agreement.
If so requested by you upon occurrence of an event in respect of which
you may be reasonably likely to be entitled to indemnification in
accordance with the foregoing, the Company shall advance an amount (or
amounts) necessary to cover your reasonable legal expenses, including
attorneys' fees of an attorney selected by you but reasonably
acceptable to the Company, in a manner whereby you will not be required
to make payment or finance such expenses yourself. The obligation of
the Company to make such advances shall be subject to the condition
that, if, when and to the extent that it is determined that you were
not entitled to be so indemnified under applicable law, you hereby
agree to promptly reimburse the Company for all such amounts
theretofore advanced.
As part of the aforementioned undertaking, the Company will make
available to you any security or guarantee that you may be required to
post in accordance with an interim decision given by a court or an
arbitrator, including for the purpose of substituting liens imposed on
your assets.
4. 4.1 The total amount of indemnification that the Company
undertakes towards all directors and officers whom it has been
resolved to indemnify, in the aggregate and in addition to any
amounts received by the Company from an insurance company with
respect to an Indemnifiable Event, shall not exceed an amount
equal to 20 Million US Dollars, according to the
representative rate of exchange, or any other official rate of
exchange that may replace it, at the time of indebtedness for
any one or more events.
4.2 If, and to the extent that, the total of all indemnification
amounts which the Company is called upon to pay to Office
Holders exceeds the amount set forth in Section 4.1 above, the
maximum amount set forth in Section 4.1 shall be divided among
the Office Holders entitled to indemnification in a manner
whereby the amount of indemnification paid to each of the
Office Holders will be calculated according to the ratio
between the amount of the indemnifiable liability of such
Office Holders and the aggregate amount of indemnifiable
liability of all Office Holders, in respect of such event or
events.
5. The Company will be entitled to any amount collected from a third party
in connection with liabilities indemnified hereunder. You shall execute
all papers required and shall do everything that may be necessary to
secure the Company's rights of subrogation, including the execution of
such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
B-2
NOTIFICATION AND DEFENSE OF CLAIM
6. Promptly after receipt by you of notice or any other indication of any
claim or of the commencement or threatened commencement of any action,
suit or other proceeding which may give rise to an Indemnifiable Event,
you will notify the Company in writing thereof and you will deliver to
the Company or pursuant to its instructions, without delay, and all
documents which you received or will receive in connection therewith.
7. Notwithstanding any other provision of this Agreement, with respect to
any claim, action, suit or other proceeding which may give rise to an
Indemnifiable Event: (other than with respect to proceedings that have
been initiated against you by the Company or in its name).
7.1 The Company will be entitled to participate therein at its
discretion and expense;
7.2 You shall fully cooperate with the Company and provide any
reasonable assistance requested by the Company to it and its
counsel including, but not limited to, the execution of
power(s) of attorney and other documents, at the expense of
the Company; and
7.3 To the extent that it may so desire, the Company shall be
entitled to assume the exclusive defense of any civil (but not
criminal) claim, action, suit or other proceeding and to
settle the same as it sees fit, with counsel satisfactory to
the Company, provided that you do not object, on reasonable
grounds, to the Company's choice of counsel.
8. After notice from the Company to you of its election to so assume the
defense thereof, the Company shall not be liable to you under this
Agreement for any legal expenses, including attorneys' fees,
subsequently incurred by you in connection with the defense thereof.
9. The Company shall not be liable to indemnify you under this Agreement
for any amounts paid in settlement of any claim, action, suit or other
proceeding effected without the Company's written consent.
EXEMPTION FROM LIABILITY
10. The Company hereby exempts you from any liability to it for any damage
which has been caused or may be caused by you to the Company as a
result of a breach of the duty of care to the Company.
INSURANCE
11. The Company shall at all times maintain liability insurance applicable
to directors and officers, with a reputable insurer in an amount and on
terms which are customary for a company comparable to the Company, but
in an amount of not less than US$ 10,000,000 (Ten million US Dollars),
and you shall be covered by such policy. In addition, the Company shall
procure and maintain a "run-off" policy extending Directors and
Officers insurance coverage to you for a period of at least seven 5
years after the date of your termination as an officer of director of
the Company or the cessation of the activities of the company.
GOVERNING LAW; NON-EXCLUSIVITY; ASSIGNMENT
12. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Israel.
13. Your rights hereunder shall not be deemed exclusive of any other rights
you may have under the Company's Articles of Association or applicable
law or otherwise, and to the extent that during the indemnification
period your rights are more favorable than the rights provided
hereunder, you shall be entitled to the full benefits of such more
favorable rights.
14. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors,
assigns (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), spouses,
B-3
heirs and personal and legal representatives. The Company shall require
and cause any successor (whether direct or indirect, and whether by
purchase, merger, consolidation or otherwise) to all, substantially
all, or a substantial part, of the business or assets of the Company,
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform if no such succession had taken place. This Agreement shall
continue in effect regardless of whether you continue to serve as a
director or officer of the Company.
Kindly sign and return the enclosed copy of this letter to acknowledge your
agreement to the contents thereof.
Very truly yours,
CLICKSOFTWARE TECHNOLOGIES LTD.
By: ____________________________
Name: Moshe BenBassat
Title: Chairman & Chief Executive Officer
ACKNOWLEDGMENT OF AGREEMENT:
- ------------------------------
Date: _______________________
B-4
SCHEDULE A
List of Events
1. The issuance of securities, including without limitation, the offering
of securities to the public pursuant to a prospectus or circular, a
private placement or any other manner of securities offering, and any
undertakings, representations and warranties or other obligations
related to such issuance.
2. The filing or furnishing, or omission to file or furnish, of any
information, report, material or document pursuant to the law, rules
and regulations of the US Securities and Exchange Commission or of any
securities regulator or stock exchange to which the Company is subject,
and the compliance with any applicable laws, rules or regulations
related to the Company's status as a public company.
3. The borrowing or other receipt of funds or other financing transaction
or arrangement of the Company, or any such proposed action.
4. The negotiation, execution, delivery and performance of commercial
agreements on behalf of the Company, and any anticompetitive acts or
acts of commercial wrongdoing.
5. A merger, sale, acquisition or other business combination or similar
transaction of the Company or affiliates.
6. Any action with respect to the employment of employees or engagement of
consultants by the Company.
7. Any action with respect to the intellectual property of the Company or
of any other person, and its protection.
8. Any action related to an obligation of the Company to obtain regulatory
or other governmental licenses, permits or authorizations in any
jurisdiction.
9. Approval of corporate actions, including the approval of the acts of
the Company's management, their guidance and their supervision.
B-5
CLICKSOFTWARE TECHNOLOGIES LTD.
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
ANNUAL MEETING OF SHAREHOLDERS, MAY28, 2003
P R O X Y B A L L O T
THIS PROXY/BALLOT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CLICKSOFTWARE TECHNOLOGIES LTD.
The undersigned revokes all previous proxies, acknowledges receipt of
the notice of the annual meeting of shareholders to be held May28, 2003 and the
proxy statement related thereto and appoints Moshe BenBassat and Shmuel Arvatz,
jointly and severally, the proxy of the undersigned, with full power of
substitution, to vote all ordinary shares of ClickSoftware Technologies Ltd.
which the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the annual meeting of shareholders of the
Company to be held at 34 Habarzel Street, Tel Aviv, Israel on May28, 2003 at
11:00 A.M local time, and at any adjournment or postponement thereof, with the
same force and effect as the undersigned might or could do it personally present
thereat. The shares represented by this proxy shall be voted in the manner set
forth on the reverse side.
I hereby vote my ordinary shares of ClickSoftware Technologies Ltd. as
specified on the reverse side of this card.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
Please mark votes as in this example.
The board of directors recommends a vote FOR each of the matters listed
below. This proxy/ballot, when properly executed, will be voted as specified
below.
THIS PROXY/BALLOT WILL BE VOTED FOR PROPOSALS NO. 1, 2, 3, 4, 5, 6 AND 7 IF NO SPECIFICATION IS MADE.
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1. ELECTION OF CLASS I DIRECTOR, CLASS II
DIRECTORS, CLASS III DIRECTORS AND FOR AGAINST
EXTERNAL DIRECTORS
James W. Thanos (Class I director)
Roni Einav (Class II director)
Gil Weiser (Class II director)
Moshe BenBassat (Class III director)
Eddy Shalev (Class III director)
Naomi Atsmon (External director)
Dan Falk (External director)
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2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS FOR AGAINST ABSTAIN
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3. RATIFY AND APPROVE GRANT OF STOCK OPTIONS TO CERTAIN FOR AGAINST ABSTAIN
DIRECTORS
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4. RATIFY AND APPROVE GRANTS OF CASH COMPENSATION TO FOR AGAINST ABSTAIN
CERTAIN DIRECTORS
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5. APPROVAL OF ADOPTION OF 2003 ISRAELI SHARE OPTION FOR AGAINST ABSTAIN
PLAN
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6. RATIFY AND APPROVE REVISED EMPLOYMENT AGREEMENT FOR AGAINST ABSTAIN
WITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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7. APPROVE ADOPTION OF AMENDMENT TO COMPANY'S FOR AGAINST ABSTAIN
ARTICLES OF ASSOCIATION TO PERMIT THE COMPANY TO
PROSPECTIVELY EXEMPT DIRECTORS AND OFFICERS FROM
DAMAGES RESULTING FROM A BREACH OF THE DUTY OF
CARE TOWARD THE COMPANY
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8. APPROVE ISSUANCE OF LETTERS OF INDEMNIFICATION, FOR AGAINST ABSTAIN
INSURANCE AND EXEMPTION TO DIRECTORS
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Address Change Information
Please sign your name exactly as it appears hereon. If acting as attorney,
executor, trustee or in other representative capacity, sign name and title.
Signature: Date:
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Signature: Date:
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