<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1998
Registration No. 333-57971
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
GALILEO TECHNOLOGY LTD.
(Exact Name of Registrant as Specified in Its Charter)
Israel Not Applicable
------------------------------- --------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Moshav Manof, D.N. Misgav , Israel 20184
---------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
GALILEO TECHNOLOGY LTD. 1997 EMPLOYEES' STOCK OPTION PLAN AND
GALILEO TECHNOLOGY LTD. 1997 GTI STOCK OPTION PLAN
----------------------------------------------------------------
(Full Title of Plan)
Manuel Alba
President
Galileo Technology Inc.
142 Charcot Avenue
San Jose, California 95131
--------------------------------------
(Name and Address of Agent For Service)
(408) 367-1400
--------------
(Telephone Number, Including Area Code, of Agent For Service)
Copy to: Lior O. Nuchi
McCutchen, Doyle, Brown & Enersen, LLP
3150 Porter Drive
Palo Alto, California 94304-1212
(650) 849-4400
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share (1) Price (1) Fee
=============================================================================================
<S> <C> <C> <C> <C>
Ordinary Shares, NIS 0.01 Nominal
Value 750,000 $9.57 $7,177,500 $2,118.00
=============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on
the basis of the average of the high and low prices as reported on the
Nasdaq National Market System on September 4, 1998.
<PAGE>
EXPLANATORY NOTE
Registrant previously filed (i) a Registration Statement on Form S-8
(Registration No. 333-57971) registering Ordinary Shares issuable under
Registrant's 1997 Employees' Stock Option Plan and 1997 GTI Stock Option Plan
(the "Plans") on June 29, 1998, covering 809,656 shares and (ii) a Registration
Statement on Form S-8 (Registration No. 33-7852) registering Ordinary Shares
under the Plans on October 24, 1997, covering 4,230,000 shares. This
Registration Statement on Form S-8 is filed pursuant to Rule 413 and the general
instruction to Form S-8 entitled "Registration of Additional Securities" and is
made for the purpose of registering an additional 750,000 shares of the same
class of securities previously filed under the above-referenced Registration
Statements, which are issuable under the Plans.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed or to be filed with the Commission by
the Registrant are incorporated by reference in this Registration Statement:
(a) Registrant's latest Annual Report on Form 20-F for the fiscal year
ended December 31, 1997 filed pursuant to Section 13(a) or 15(d) of the
Securities Act of 1934, as amended (the "EXCHANGE ACT").
(b) Registrant's Quarterly Report on Form 6-K for the quarter ended
June 30, 1998, filed on August 18, 1998 with the Commission.
(c) The description of the Ordinary Shares of the Registrant contained
in the Registrant's Registration Statement on Form 8-A filed on July 25, 1997.
In addition, all documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this registration
statement and to be part thereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Yesha Primes, a member of Primes, Shiloh, Givon & Co., holds 360,000
shares of the Registrant in trust for certain key employees.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Association provide that the Registrant will indemnify
any Office Holder of the Registrant, as defined in the Companies Ordinance, out
of the assets of the Registrant against all liabilities incurred in good faith
by such Office Holder in the line of his duties for the Registrant or related
thereto. Such indemnification is subject to limitation by Israeli law and the
Articles of Association.
The Registrant has entered into separate indemnification agreements
with all its directors and officers. These agreements would require the
Registrant, among other things, to indemnify such directors and officers against
certain liabilities that may arise by reason of their status or service as
directors and officers (other than liabilities arising from willful misconduct
of culpable nature) and to advance expenses, in certain circumstances, incurred
as a result of any proceeding against them as to
2
<PAGE>
which they could be indemnified and to obtain directors' and officers' insurance
if available on reasonable terms.
Christopher J. Schaepe, a director of the Registrant and General Partner
of WPG Venture Partners III, L.P., which is the General Partner of Weiss, Peck &
Greer Venture Associates III, L.P. and WPG Enterprise Fund II, L.P. (both of
which are or were shareholders of the Registrant), is indemnified in his role as
a director of the Registrant pursuant to the terms of his respective partnership
agreements with the above entities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
See Index to Exhibits.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports
3
<PAGE>
filed by the Registrant pursuant to Section 13 or 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 6, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
4
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of San Jose, state of California, on this 10th day
of September, 1998.
GALILEO TECHNOLOGY, LTD.
By: /s/ George A. Hervey
--------------------
George A. Hervey
Chief Financial Officer
5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
<S> <C> <C>
5.1 Opinion regarding legality of securities to be offered
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Primes, Shiloh, Givon & Co.
(See Exhibit 5.1)
99.1 Galileo Technology Ltd. 1997 Employees' Stock Option Plan
99.2 Galileo Technology Ltd. 1997 GTI Stock Option Plan
</TABLE>
<PAGE>
Exhibit 5.1
[LETTER HEAD OF PRIMES, SHILOH,GIVON & CO., LAW OFFICE]
REF: G/115/2
August 27, 1998
Galileo Technology Ltd.
c/o Galileo Technology Inc.
1735 North First Street, #308
San Jose, Ca 95112
U.S.A.
- ------
REGISTRATION STATEMENT ON FORM S-8
Gentlemen:
With reference to the Registration Statement on Form S-8 to be filed by Galileo
Technology Ltd., an Israeli corporation (the "Company"), with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, related to an
additional number of 750,000 Ordinary Shares of the Company issuable pursuant
to the Company's 1997 Employees' Stock Option Plan and the Company's 1997 GTI
Stock Option Plan (the "Plans"), it is our opinion that such Ordinary Shares of
the Company, when issued, sold and fully paid for in accordance with the Plans
(provided that they are not offered to the public in Israel), will be legally
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities an Exchange
Commission as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Y. Primes
Y. Primes, Advocate
Primes, Shiloh, Givon & Co.
Law Offices
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Galileo Technology Ltd. 1997 Employees' Stock
Option Plan and Galileo Technology Ltd. 1997 GTI Stock Option Plan of our report
dated January 20, 1998, with respect to the consolidated financial statements
and schedule of Galileo Technology Ltd. included in its Annual Report (Form 20-
F) for the year ended December 31, 1997, filed with the Securities and Exchange
Commission.
Palo Alto, California
September 9, 1998
<PAGE>
Exhibit 99.1
GALILEO TECHNOLOGY LTD.
1997 EMPLOYEES' STOCK OPTION PLAN
A. NAME, PURPOSE AND SCOPE.
NAME.
This plan, as amended from time to time, shall be known as the "GALILEO
TECHNOLOGY LTD. 1997 EMPLOYEE STOCK OPTION PLAN," or "PLAN."
2. PURPOSE.
The purpose and intent of the Plan is to provide incentives to employees of
Galileo Technology Ltd. (the "COMPANY") by providing them with opportunities to
purchase Ordinary Shares of the Company (the "SHARES"), pursuant to this Plan
which was approved by the Board of Directors of the Company - which is designed
to benefit from, and is made pursuant to, the provisions of Section 102 of the
Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations
promulgated thereunder.
3. SCOPE.
Subject to the provisions of Section 11 of the Plan, the number of
authorized Shares (whether already issued or yet unissued) for purposes of the
Plan shall initially be 2,160,000 (two million, one hundred sixty thousand);
provided, however, that the number of shares that may be subject to option and
sold under this Plan and the Galileo Technology Ltd. 1997 GTI Stock Option Plan
(the "GTI PLAN") shall be increased each year by an aggregate of four percent of
the outstanding Shares of the Company. Such increase shall be effected each
year on January 1, and the allocation of the Shares to the Plan and the GTI Plan
will be as determined by the Board of Directors. All Shares under the Plan, in
respect of which the right hereunder of a Grantee to purchase the same shall,
for any reason, terminate, expire or otherwise cease to exist, shall again be
available for grant through Options under the Plan.
B. GENERAL TERMS AND CONDITIONS OF THE PLAN.
4. ADMINISTRATION.
4.1 The Plan will be administered by the Board of Directors of the Company
(the "BOARD") or by a committee appointed by the Board (the "COMMITTEE"), which,
if appointed, will consist of such number of Directors of the Company as may be
fixed, from time to time, by the Board. If a Committee is not appointed, the
term Committee, whenever used herein, shall mean the Board. The Board shall
appoint
<PAGE>
the members of the Committee, may from time to time remove members from, or add
members to, the Committee and shall fill vacancies in the Committee however
caused.
4.2 The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it shall determine.
Actions approved by a majority of the voting members of the Committee at a
meeting at which a majority of its members is present, or acts approved in
writing by all members of the Committee, shall be the valid acts of the
Committee.
The Committee shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
The Committee may appoint a Secretary, who shall keep records of its
meetings.
4.3 Subject to the express general terms and conditions of this Plan, the
Committee shall have the full authority in its discretion, from time to time and
at any time, to determine the following issues: (i) the persons (herein
"GRANTEES") to whom the options to purchase Shares ("OPTION/S") shall be
granted, (ii) the number of Shares to be covered by each Option, (iii) the time
or times at which the same shall be granted, (iv) the price, schedule and
conditions on which such Options may be exercised and on which such Shares shall
be paid for, and (v) any other matter which is necessary or desirable for, or
incidental to, the administration of the Plan.
In determining the number of Shares covered by the Option to be granted to
each Grantee, the Committee may consider, among other things, the Grantee's
position and salary, and the duration of the Grantee's employment by the
Company.
4.4 The Committee may, from time to time, adopt such rules and regulations
for carrying out the Plan as it may deem necessary.
No member of the Board or of the Committee shall be liable for any act or
determination made in good faith with respect to the Plan or any Option granted
thereunder.
4.5 The interpretation and construction by the Committee of any provision
of the Plan or of any Option thereunder shall be final and conclusive unless
otherwise determined by the Board.
5. ELIGIBLE GRANTEES.
The Committee, at its discretion, may grant Options to any employee or
consultant (the term "EMPLOYEES" in this Plan shall be interpreted to include
consultants) of the Company, including Directors who are employees of the
Company. Anything in this Plan to the contrary notwithstanding, all grants of
Options to Directors and Office Holders ("NOSEI MISRA" as such term is defined
in the Companies Ordinance (New Version) 1983, as amended from time to time -
the "COMPANIES ORDINANCE"), shall be authorized and implemented only in
accordance with the provisions of the Companies Ordinance.
The grant of an Option to a Grantee hereunder shall neither entitle such
Grantee to participate, nor disqualify him from participating, in any other
grant of options pursuant to this Plan or any other stock option plan of the
Company.
2
<PAGE>
6. GRANT OF OPTIONS AND ISSUANCE OF SHARES IN TRUST.
6.1 Grant of Options and Issuance of Shares in Trust
(a) Subject to Section 7.1 hereof, the effective date of the grant of
an Option (the "DATE OF GRANT") shall be the date specified by the
Committee in its determination relating to the award of such Option. The
Committee shall promptly give the Grantee written notice of the grant of an
Option (the "NOTICE OF GRANT").
(b) Any grant of Options under this Plan shall be made in
consideration for the Grantee's waiver with regard to his/her salary at a
rate to be determined by the Committee.
(c) Anything herein to the contrary notwithstanding, all Options
granted under the Plan and/or Shares underlying such Options shall be held
by a trustee designated by the Board and approved by the Israeli
Commissioner of Income Tax (the "TRUSTEE"), and the Trustee shall hold each
such Option and the underlying Shares and the Shares issued upon exercise
thereof in trust (the "TRUST") for the benefit of the Grantee in respect of
whom such Option was granted (the "BENEFICIAL GRANTEE"). All certificates
representing Shares issued to the Trustee under the Plan shall be deposited
with the Trustee, and shall be held by the Trustee until such time that
such Shares are released from the Trust as herein provided.
(d) Anything herein to the contrary notwithstanding, Options or Shares
shall not be released from the Trust until the later of (i) two (2) years
after the Date of Grant, and (ii) the vesting of such Shares pursuant to
Section 7.3 hereof or the Notice of Grant (such later date being
hereinafter referred to as the "RELEASE DATE").
(e) Subject to the terms hereof, at any time after the Release Date
with respect to any Options or Shares, the following shall apply:
(i) Options granted, and/or Shares issued to the Trustees, shall
continue to be held by the Trustee on behalf of the Beneficial
Grantee. From and after the Release date, upon the written request of
any Beneficial Grantee, the Trustee shall release from the Trust the
Options granted and/or the Shares issued on behalf of such Beneficial
Grantee, by executing and delivering to the Company such instrument(s)
as the Company may require, giving due notice of such release to such
Beneficial Grantee; provided, however, that the Trustee shall not so
release any such Options and/or Shares to such Beneficial Grantee
unless prior to or concurrently with such release, the Grantee
provides the Trustee with evidence, satisfactory in form and substance
to the Trustee, that all taxes, if any, required to be paid upon such
release have in fact been paid.
(ii) Alternatively, from and after the Release Date, upon the
written instructions of the Beneficial Grantee to sell any Shares
issued upon exercise of Options, the Trustee shall use its best
efforts to effect such sale and shall transfer such Shares to the
purchaser thereof concurrently with the receipt, or after having made
suitable arrangements to secure the payment of the proceeds, of the
purchase price in such transaction. The Trustee shall withhold from
such proceeds any and all taxes required to be paid in respect of such
sale, shall remit the amount so withheld to the appropriate tax
authorities and shall pay the balance thereof
3
<PAGE>
directly to the Beneficial Grantee, reporting to such Beneficial
Grantee and to the Company the amount so withheld and paid to said tax
authorities.
6.2 Dividends. All Shares issued upon the exercise of Options granted
under the Plan shall entitle the Beneficial Grantee thereof to receive dividends
with respect thereto.
For so long as Shares issued to the Trustee on behalf of a Beneficial
Grantee are held in the Trust, the dividends paid or distributed with respect
thereto shall be remitted to the Trustee for the benefit of such Beneficial
Grantee.
6.3 As long as the Shares purchased upon exercise of the Options are held
by the Trustee, the Beneficial Grantee shall not be entitled to receive notices
regarding general meetings of the Company nor to participate or to vote in such
meetings.
6.4 As long as the Shares purchased upon exercise of the Options are held
by the Trustee, the Trustee, or a proxy appointed by him, shall possess and be
entitled to exercise the exclusive right to vote all the Shares standing in the
name or held by the Trustee, at all regular and special meetings of the
shareholders of the Company and may vote for, do or assent or consent to, and
shall have all the powers, rights and privileges of a shareholder of the
Company. The Trustee shall vote all Ordinary Shares held by the Trustee in
proportion to the vote of all outstanding shares of the Company upon any vote of
the shareholders of the Company.
7. GRANT OF OPTIONS.
7.1 The Committee in its discretion may award to Grantees Options to
purchase Shares in the Company available under the Plan.
Options may be granted at any time after the passage of thirty (30)days
following the delivery by the Company to the appropriate income tax authorities
of a notice pertaining to the appointment of the Trustee and the adoption of the
Plan.
7.2 The Notice of Grant shall state, inter alia, the number of Shares
covered thereby, dates and rates according to which the Options may be exercised
(become vested), the exercise price, and such other terms and conditions as the
Committee at its discretion may prescribe, provided that they are consistent
with this Plan.
7.3 Without derogating from the rights and powers of the Committee under
Section 7.2 hereof, unless otherwise specified in the Notice of Grant, each
Option under the Plan shall be for a term of eight (8) years (the "TERM").
The schedule pursuant to which such Options shall vest, and the Beneficial
Grantee thereof shall be entitled to pay for and acquire the Shares, shall be
determined by the Committee. Unless otherwise determined by the Committee,
24/48 (one half) of the number of Shares covered by each Option shall vest on
the second anniversary of the Date of Grant, and 1/48 shall vest on the last day
of each calendar month thereafter.
7.4 Each Option granted hereunder shall be evidenced by a Grantee
Agreement, to be entered into by and between the Company and such Grantee, in
the form attached hereto as Exhibit A or in such other form and substance as may
be approved by the Committee from time to time, which shall incorporate
4
<PAGE>
the provisions of this Plan. In the event of any conflict between the terms and
conditions of a Grantee Agreement and the terms hereof, the terms hereof shall
prevail unless otherwise determined by the Committee.
8. EXERCISE PRICE.
The exercise price per Share covered by each Option shall be determined by
the Committee in its sole and absolute discretion; provided, however, that such
exercise price shall not be less than 85% of the fair market value of the Shares
on the Date of Grant, as determined by the Committee, taking into account the
relative rights of the Shares as compared to the rights attached to the other
classes of shares of the Company.
The Committee may, at any time prior to exercise of certain Options, reduce
the exercise price of such Options to the then current fair market value if the
previous exercise price exceeds the then fair market value of the Ordinary
Shares covered by such Options.
9. EXERCISE OF OPTIONS.
9.1 Options shall be exercisable pursuant to the terms under which they
were awarded and subject to the terms and conditions of the Plan.
9.2 The exercise of an Option shall be made by a written notice of
exercise (the "NOTICE OF EXERCISE") delivered by the Beneficial Grantee (or,
with respect to Options held in the Trust, by the Trustee upon receipt of
written instructions from the Beneficial Grantee) to the Company at its
principal executive office, specifying the number of Shares to be purchased and
accompanied by the payment therefor, and containing such other terms and
conditions as the Committee shall prescribe from time to time.
9.3 Anything herein to the contrary notwithstanding, but without
derogating from the provisions of Section 10 hereof, if any Option has not been
exercised and the Shares covered thereby not paid for within eight (8) years
after the Date of Grant (or any shorter period set forth in this Plan or in the
Notice of Grant), such Option and the right to acquire such Shares shall
terminate, all interests and rights of the Grantee in and to the same shall ipso
facto expire, and, in the event that in connection therewith any Options are
still held in the Trust as aforesaid, the Trust with respect thereto shall ipso
facto expire and the Trustee shall thereafter hold such Options in an
unallocated pool until instructed by the Company that some or all of such
Options are again to be held in trust for one or more Grantees.
9.4 Each payment for Shares shall be in respect of a whole number of
Shares, and shall be effected in cash or by a cashier's check payable to the
order of the Company, or such other method of payment acceptable to the Company.
9.5 Anything in this Plan to the contrary notwithstanding, in the event
the employment of a Grantee is terminated by the Company for "CAUSE" (as defined
hereafter), such Grantee shall not be entitled to exercise any Options
subsequent to the time of delivery of the notice of discharge, and all such
Options and the right to acquire Shares thereby shall terminate, all interests
and rights of the Grantee in and to the same shall ipso facto expire, and, in
the event that in connection therewith any Options are still held in the Trust
as aforesaid, the Trust with respect thereto shall ipso facto expire and the
Trustee shall thereafter hold such Options in an unallocated pool until
instructed by the Committee that some or all of such Options are again to be
held in trust for one or more Grantees. For purposes herein, "CAUSE" shall
include: (i) the
5
<PAGE>
commitment of a serious breach of trust, including but not limited to
embezzlement, theft or self-dealing; (ii) the prohibited disclosure to
unauthorized persons or entities of confidential or proprietary information of
or relating to the Company; (iii) the engaging by the Grantee in any prohibited
business competitive to the business of the Company and/or its affiliates; (iv)
the failure of the Grantee to perform any of his or her material duties and
obligations as an employee of the Company as a result of gross negligence or
willful misconduct.
10. TERMINATION OF EMPLOYMENT.
10.1 In the event that the employer-employee relations between the Company
and a certain Grantee terminate for any reason (hereinafter, "TERMINATION"), all
Options or part of Options granted to such Grantee which have not become vested
until the Termination shall terminate and expire (except in the case of
termination by death or disability of the Grantee as provided in Sections 10.3
and 10.4); and such Options and the right to acquire Shares thereby shall
terminate, all interests and right of the Grantee in and to the same shall ipso
facto expire, and, in the event that in connection therewith any Options are
still held in the Trust as aforesaid, the Trust with respect thereto shall ipso
facto expire and the Trustee shall thereafter hold such Options in an
unallocated pool until instructed by the Company that some or all of such
Options are again to be held in trust for one or more Grantees.
10.2 As to Options which have become vested prior to the Termination, and
subject to provisions of Section 9.5 above, the following shall apply: the
Grantee (or his legal representative, estate, heirs or other person to whom the
Grantee's rights are transferred by will or by laws of descent in case the
Termination is due to such Grantee's death or incompetence), shall have a period
of 90 days following Termination in which to exercise such vested Options or
such longer period as may be applicable upon death or disability of the Grantee
as provided in Sections 10.3 and 10.4 below. If any such Option has not been
exercised and the Shares covered thereby not paid for within such ninety (90)
day period or such longer period as may be applicable upon death or disability
of the Grantee as provided in Sections 10.3 and 10.4 below, such Option and the
right to acquire such Shares shall terminate, all interests and rights of the
Grantee in and to the same shall ipso facto expire, and the Trust with respect
thereto shall ipso facto expire and the Trustee shall thereafter hold such
Options in an unallocated pool until instructed by the Company that some or all
of such Options are again to be held in trust for one or more Grantees.
10.3 In the event that the employer-employee relations between the Company
and a certain Grantee terminate as a result of his or her "permanent disability"
as defined below, the Grantee shall be entitled, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Options as set forth in the Grantee
Agreement), to exercise all Options such employee would have been entitled to
exercise had such employee remained employed for two (2) years from the date of
such termination. If the Grantee does not exercise such Option to the extent so
entitled within the time specified herein, such Option and the right to acquire
such Shares shall terminate, all interests and rights of the Grantee in and to
the same shall ipso facto expire, and the Trust with respect thereto shall ipso
facto expire and the Trustee shall thereafter hold such Options in an
unallocated pool until instructed by the Company that some or all of such
Options are again to be held in trust for one or more Grantees. "Permanent
disability" shall be defined as an individual who is unable to engage in any
substantial gainful activity by reason of any determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less then twelve (12) months.
An individual shall not be considered permanently disabled unless he or she
furnishes proof of the existence thereof in such form and manner as the Company
may require.
6
<PAGE>
10.4 In the event of the death of a Grantee, the Grantee's estate or any
person who acquired the right to exercise the Options by bequest or inheritance
shall be entitled, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of such
Options as set forth in the Grantee Agreement), to exercise all Options such
employee would have been entitled to exercise through vesting had such employee
remained employed for two (2) years from the date of such termination. If, after
the Grantee's death, the Grantee's estate or a person who acquires the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, such Option and the right to acquire such
Shares shall terminate, and all interests and rights of the Grantee in and to
the same shall ipso facto expire, and the Trust with respect thereto shall ipso
facto expire and the Trustee shall thereafter hold such Options in an
unallocated pool until instructed by the Company that some or all of such
Options are again to be held in trust for one or more Grantees.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
11.1 Subject to any required action by the shareholders of the Company,
the number of Shares covered by each outstanding Option, and the number of
Shares which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Shares covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting
from a stock split, reverse stock split, stock dividend, combination, division
or reclassification of the Shares or the payment of a stock dividend (bonus
share) with respect to the Shares or any other increase or decrease in the
number of issued Shares effected without receipt of any consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares or stock of any
class, or securities convertible into shares or stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares section to an Option.
11.2 (a) In the event of a consolidation or merger of the Company with or
into another corporation, each Option shall be assumed or shall be
substituted by an equivalent option of such successor corporation or a
parent of subsidiary of such successor corporation. For this purpose, the
determination by the Committee of equivalent options shall be final,
binding and conclusive.
(b) In the event or a proposed dissolution, liquidation or re-
organization of the Company other than a specified in (a) above, the
Committee shall notify each Grantee at least thirty (30) days prior to such
proposed action. To the extent it has not been previously exercised, each
Option will expire and termination immediately prior to the consummation of
such proposed action.
12. NON-TRANSFERABILITY.
12.1 No Option shall be assignable or transferable by the Grantee to whom
granted, except by will or the laws of descent and distribution. An Option may
be exercised only by the Grantee or his/her guardian or legal representative.
The terms of such Option shall be binding upon the legal representatives,
guardians, beneficiaries, executors, administrators, heirs and successors of
such Grantee.
7
<PAGE>
12.2 No shares purchasable hereunder which were not fully paid for, shall
be assignable or transferable to or by the Grantee. In addition, until the
closing of an IPO of the Company's securities, all transfers of shares of the
Company by any of the Grantees or the Trustee on their behalf shall only be made
in accordance with the Articles of Association of the Company.
12.3 The Company shall not register any transfer of Shares not made in
accordance with the Company's Articles of Association and any applicable law.
13. TERM AND AMENDMENT OF THE PLAN.
13.1 The Plan was authorized by the Board on April 30, 1997, and shall
expire in May 2005 (except as to Options outstanding on that date), but such
expiration shall not affect the instructions contained herein or in any
applicable law with respect to the Options and Shares held in the Trust at such
time of expiration.
13.2 Subject to applicable laws, the Board may, at any time and from time
to time, terminate or amend the Plan in any respect. Except as allowed under
the Plan or by law, the Company may not alter or impair the rights of a Grantee,
without his consent, under any Option previously granted to him.
14. TAX CONSEQUENCES.
All tax consequences arising from the grant or exercise of any Option, from
the payment for, or the subsequent disposition of, Shares covered thereby or
from any other event or act (of the Company or the Grantee) hereunder, shall be
borne solely by the Grantee. The Grantee shall indemnify the Company and the
Trustee and hold them harmless against and from any and all liability for any
such tax or interest or penalty thereon, including (without limitation)
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from payment made to the Grantee.
15. MISCELLANEOUS.
15.1 Continuance of Employment Neither the Plan nor the grant of an
Option thereunder shall impose any obligation on the Company to continue the
employment of any Grantee, and nothing in the Plan or in any Option granted
pursuant thereto shall confer upon any Grantee any right to continue in the
employ of the Company, or restrict the right of the Company to terminate such
employment at any time.
15.2 Governing Law The Plan and all instruments issued thereunder or in
connection therewith, shall be governed by, and interpreted in accordance with,
the laws of the State of Israel; and the courts of Israel (Haifa District) shall
have exclusive jurisdiction over all claims related thereto.
15.3 Application of Funds The proceeds received by the Company from the
sale of Shares pursuant to Options granted under the Plan will be used for
general corporate purposes of the Company.
15.4 Multiple Agreements The terms of each Option may differ from other
Options granted under the Plan at the same time, or at any other time. The
Committee may also grant more than one Option to a given Grantee during the term
of the Plan, either in addition to, or in substitution for, one or more Options
previously granted to that Grantee. The grant of multiple Options may be
evidenced by a single Notice of Grant or multiple Notices of Grant, as
determined by the Committee.
15.5 Non-Exclusivity of the Plan The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any
8
<PAGE>
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
15.6 Hold Harmless The Grantee and the Company shall hold the Trustee
harmless against and from any act or omission in relation to his duties as
Trustee as long as he acts, in his professional judgment, according to the law
and the agreements he has signed in relation to the Trust.
The Grantee and the Company shall also indemnify the Trustee for any third
party claim made against him based on such a cause.
9
<PAGE>
EXHIBIT A
GALILEO TECHNOLOGY LTD. 1997 EMPLOYEES' STOCK OPTION PLAN
GRANTEE AGREEMENT
Galileo Technology Ltd.
Hacharoshet St. 36
20100 Karmiel, Israel
RE: GRANT OF OPTIONS
As an employee/consultant of Galileo Technology Ltd. (the "COMPANY"),
wishing to receive certain options to purchase shares of the Company, I confirm
and undertake as follows:
1. The aforesaid options (the "OPTIONS") are granted to me pursuant to the
terms and conditions set forth in that certain Galileo Technology Ltd. 1997
Employees' Stock Option Plan (the "PLAN") which was adopted on April 30, 1997 by
the Board of Directors of the Company and pursuant to the terms and conditions
set forth in the Trust Agreement between the Company and Elyahu Meir, Adv. (the
"TRUSTEE").
All capitalized terms used herein shall have the same meaning as defined in
the Plan.
I hereby confirm that I have been given the opportunity to review the Plan
and the Trust Agreement, and I agree that all the provisions of the Plan and the
Trust Agreement shall apply to the Options and shall govern my rights related
thereto.
2. The Plan is designed to benefit from, and was made pursuant to, the
provisions of Section 102 of the Israeli Income Tax Ordinance (New Version),
1961, (the "TAX ORDINANCE") and the rules and regulations promulgated
thereunder, said rules and regulations shall constitute an integral part hereof.
3. I hereby undertake to act in compliance with the terms and provisions
of said Plan and the Trust Agreement. Without prejudice to the foregoing, I
undertake that (i) the Options issued to the Trustee on my behalf will be held
in trust for a minimum period of twenty four (24) months from the Date of Grant,
(ii) as long as the Options are held in trust, any bonus shares distributed to
me shall be remitted to the Trustee for my benefit and shall be subject to the
terms and provisions set forth in the Plan and Trust Agreement; (iii) at any
time before I become liable to pay tax under Section 102(c) of the Tax
Ordinance, I will not request relief from any taxes according to Sections 95 or
97(a) of the Tax Ordinance or according to Chapter 7, the Encouragement of
Industry (Taxes) Law, 1969.
4. All tax consequences arising from the grant or exercise of the Options,
from the payment for or the subsequent disposition of Shares covered thereby or
from any other event or act (of the Company or of me) under the Plan or
hereunder, shall be borne solely by me, and I will indemnify the Company and the
Trustee and hold them harmless against and from any and all liability for any
such tax or interest or penalty thereon, including without limitation
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to me. I hereby irrevocably authorize the Company to
deduct from my salary and any other payment due to me from the Company any
amount I owe to the Company hereunder or under the Plan.
A-1
<PAGE>
5. Without derogating from the foregoing provisions, and as the Options
are granted according to Section 102 of the Tax Ordinance, I confirm that
whenever the Options or the Shares purchased upon their exercise are transferred
from the Trustee to me, or whenever the Shares are sold whether by me or by the
Trustee at my request, such sale or transfer shall be considered for the purpose
of tax liability as sale for consideration as defined in Section 88 of the Tax
Ordinance, i.e., the price to be expected upon sale of such Shares or Options,
free of any encumbrance or third party right, by a willing seller to a willing
purchaser. Upon such sale or transfer made by the Trustee, he shall deduct tax
at source at a rate of 30% of the consideration or such other rate to be
determined by the Tax Assessing officer.
6. Without derogating from the foregoing provisions, I confirm that as the
Options are granted according to the Income Tax Rules (Tax Relief related to
Shares' Issuance to Employees) 1989 (the "RULES"), the following provisions,
among others, shall apply:
6.1 The tax relief determined by Section 102(b) of the Tax Ordinance
shall not apply to me if within two (2) years from the Date of Grant my
employment in the Company is terminated, except if such termination is due to
death or special circumstances beyond my control, as determined by the Israeli
Income Tax Commissioner.
6.2 If the Shares I have purchased upon exercise of the Options are
registered for trade on the Israeli Stock Exchange, I shall be entitled to
request the Assessing Officer, within thirty (30) days after the registration
date, to consider such Shares as sold for their average price in the Stock
Exchange over the first three (3) days of trade. Having filed such a request, I
shall not be entitled to repudiate it.
6.3 The tax relief determined by Section 102 of the Tax Ordinance shall
not apply to me if within 2 years from the Date of Grant the Trustee has
transferred the Options to me or to any other person, or if I have sold the
Options or my beneficial rights under the Options.
6.4 The Income Tax Commissioner may revoke the tax relief determined
under Section 102 of the Tax Ordinance according to such reasons as are
specified in the Rules; and in such case or for any other reason by which the
relief shall not apply, I shall pay tax at the rate and the time determined in
the Rules.
7. I hereby waive any claim, demand or right which I may have in relation
to the grant of Options against the Company and anybody on its behalf, against
the Trustee and against any third party, except as specifically provided herein
and in the Plan.
8. I confirm that this Agreement does not include all relevant law
provisions regarding the Options or the Shares and/or their tax applications.
Therefore, without derogating from anything in this Agreement, only the precise
full relevant law provisions shall be binding.
A-2
<PAGE>
9. Any and all of my statements and obligations herein are irrevocable and
shall bind anybody acting on my behalf or for me and any assignee or successor
of me, since the Company has relied upon these statements and obligations when
it took the decision to grant the Options to me.
Signature of Employee/Consultant: ____________________________________
Name of Employee/Consultant: ____________________________________
Address: ____________________________________
____________________________________
ID No.: ____________________________________
Date: ____________________________________
We confirm.
____________________________________
Galileo Technology Ltd.
A-3
<PAGE>
EXHIBIT 99.2
GALILEO TECHNOLOGY LTD.
1997 GTI STOCK OPTION PLAN
1. Purposes of the Plan. The 1997 GTI Stock Option Plan amends and
--------------------
restates the Company's GTI Stock Option Plan. The purposes of this Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiary and to promote the success of the Company and the
Subsidiary's business. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at the
time of grant of an Option and subject to the applicable provisions of Section
422 of the Code and the regulations promulgated thereunder. Stock Purchase
Rights may also be granted under the Plan. The Options and Stock Purchase
Rights offered pursuant to the Plan are a matter of separate inducement and are
not in lieu of salary or other compensation.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board in accordance
---------
with Section 4 of the Plan.
(e) "Company" means Galileo Technology Ltd., an Israeli company.
-------
(f) "Consultant" means any person who is engaged by the Company or the
----------
Subsidiary to render consulting or advisory services and is compensated for such
services, and any Director of the Company or the Subsidiary whether compensated
for such services or not. If the Company registers any class of any equity
security pursuant to the Exchange Act, the term Consultant shall thereafter not
include Directors who are not compensated for their services or are paid only a
Director's fee.
(g) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company or the Subsidiary is not
interrupted or terminated. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of absence approved
by the Company or the Subsidiary or (ii) transfers between locations of the
Company or the Subsidiary or between the Subsidiary and the Company or any
successor. A leave of absence shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company or
the Subsidiary, as applicable. For purposes of Incentive Stock Options, no such
leave may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract, including policies of the Company or the
Subsidiary, as applicable. If reemployment upon expiration of a leave of
absence approved by the Company or the Subsidiary is not so guaranteed, on the
<PAGE>
181st day of such leave any Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option.
(h) "Director" means a member of either of the boards of directors of
--------
the Company or the Subsidiary.
(i) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or the Subsidiary. The payment of a Director's fee by
the Company or the Subsidiary shall not be sufficient to constitute
"employment."
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the value of the
-----------------
Ordinary Shares determined as follows:
(i) If the Ordinary Shares are listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination and reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Ordinary Shares are quoted on the NASDAQ System (but
not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices
for the Ordinary Shares on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Ordinary
Shares, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(m) "GTI" means Galileo Technology, Inc.
---
(n) "Nonstatutory Stock Option" means an option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Notice of Grant" means the notice of stock option grant to be
---------------
given to each of the Optionees.
(p) "Officer" means a person who is an officer of the Company or the
-------
Subsidiary within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
------
2
<PAGE>
(r) "Optioned Stock" means the Ordinary Shares subject to an Option or
--------------
a Stock Purchase Right.
(s) "Optionee" means an Employee or Consultant who receives an Option
--------
or Stock Purchase Right.
(t) "Ordinary Shares" means the Ordinary Shares of stock of the
---------------
Company.
(u) "Plan" means the 1997 GTI Stock Option Plan.
----
(v) "Restricted Stock" means each of the Ordinary Shares acquired
----------------
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(w) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(x) "Share" means each of the Ordinary Shares, as adjusted in
-----
accordance with Section 12 below.
(y) "Stock Purchase Right" means a right to purchase Ordinary Shares
--------------------
pursuant to Section 11 below.
(z) "Subsidiary" means Galileo Technology, Inc., the Company's wholly-
----------
owned U.S. subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the aggregate number of Ordinary Shares that may be subject to option
and sold under this Plan is initially 2,070,000 unless amended by the Board or
the shareholders of the Company; provided, however, that the number of shares
that may be subject to option and sold under this Plan and the Galileo
Technology Ltd. 1997 Employees' Stock Option Plan (the "GTL Plan") shall be
increased each year by an aggregate of four percent of the outstanding Ordinary
Shares of the Company. Such increase shall be effected each year on January 1,
and the allocation of the Ordinary Shares to the Plan and the GTL Plan will be
as determined by the Board of Directors. The Shares may be authorized but
unused, or reacquired Ordinary Shares.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an option
exchange pursuant to Section 4(c)(viii) or otherwise, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). However, Shares that have actually
been issued under the Plan, upon exercise of either an Option or Stock Purchase
Right, shall not be returned to the Plan and shall not become available for
future distribution under the Plan.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.
(b) Plan Procedure After the Date, if any, upon which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
3
<PAGE>
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the plan may be administered by different bodies with respect to Directors,
Officers and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options and Stock Purchase Rights to Employees who are
also Officers or Directors, the Plan shall be administered by (A) the Board
if the Board may administer the Plan in compliance with applicable Israeli
securities laws, the rules under Rule 16b-3 promulgated under the Exchange
Act or any successor thereto ("Rule 16b-3") relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted to comply with the applicable laws of Israel, rules
under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and
awards of equity securities are to be made. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed
by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
applicable laws of Israel, the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans under which Section
16(b) exempt discretionary grants and awards of equity securities are to be
made.
(iii) Administration With Respect to Other Employees and
--------------------------------------------------
Consultants. With respect to grants of Options and Stock Purchase Rights
-----------
to Employees or Consultants who are neither Directors nor Officers, the
Plan shall be administered by (A) the Board or (B) a Committee designated
by the Board, which committee shall be constituted in such a manner as to
satisfy the legal requirements relating to the administration of incentive
stock option plans, if any, of the laws of Israel, of California corporate
and securities laws, of the Code, and of any applicable stock exchange (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(iv) Compliance with Section 162(m). If, at any time, awards
------------------------------
made under the Plan shall be subject to Section 162(m) of the Code, the
Plan shall be administered by a committee comprised solely of "outside
directors" (within the meaning of Prop. Treas. Reg. (S) 1.162-27(e)(3)) or
such other persons as may be permitted from time to time under Section
162(m) of the Code and the Treasury Regulations promulgated thereunder.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the
Ordinary Shares are listed, the Administrator shall have the authority in its
discretion:
(i) to determine the Fair Market Value of the Ordinary Shares,
in accordance with Section 2(1) of the Plan;
4
<PAGE>
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Ordinary Shares
covered by such Option has declined since the date the Option was granted;
and
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and the Subsidiary) exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options. For purposes of this Section
5(b), Incentive Stock Options shall be taken into account in the order in which
they were granted. The Fair Market Value of the Shares shall be determined as
of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company or the Subsidiary, as
applicable, nor shall it interfere in any way with his or her right or the
Company or the Subsidiary's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the shareholders of the
Company, as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant
5
<PAGE>
thereof. In the case of an Incentive Stock Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or the
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise for the Shares to be issued upon exercise
of any Option shall be such price as is determined by the Administrator, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or of the
Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or of the
Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note (to the extent permitted by Applicable Laws), or
(4) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company. Optionee shall also deliver a properly executed exercise
notice together with such other documentation as the Administrator and a broker,
if applicable, shall require to effect an exercise of the Option.
9. Exercise of Option.
------------------
(a) Procedure for Exercise: Rights as a Shareholder. Any Option
------------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
6
<PAGE>
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with terms of the Option by
the person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Administrator, consist of any consideration
and method of payment allowable under Section 8(b) hereof. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote, receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
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event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee, such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but, only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
termination of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her "permanent
disability" as such term is defined in Section 22(e)(3) of the Code, the
Optionee shall be entitled, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), to exercise all Options such
Employee or Consultant would have been entitled to exercise had such Employee or
Consultant remained employed for two (2) years from the date of such
termination. If such disability is not a "permanent disability", in the case of
an Incentive Stock Option such Incentive Stock Option shall automatically cease
to be treated as an Incentive Stock Option and shall be treated for tax purposes
as a Nonstatutory Stock Option on the day three months and one day following
such termination. If the Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
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Optionee's estate or any person who acquired the right to exercise the Option by
bequest or inheritance shall be entitled, but only within twelve (12) months
from the date of such termination (and in no event later than the expiration
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date of the term of such Option as set forth in the Option Agreement), to
exercise all Options such Employee or Consultant would have received had such
Employee or Consultant remained employed for two (2) years from the date of such
termination. All remaining Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death, the
Optionee's estate or a person who acquires the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to person subject to Section 16(b) of
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the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
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Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
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(a) Rights to Purchase. Stock Purchase Rights may be issued either
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alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator makes the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased
pursuant to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(c) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
of the Company and shall be a shareholder of the Company when his or her
purchase is entered upon the records of the duly authorized transfer agent of
the Company. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of Ordinary Shares covered by each
outstanding Option or Stock Purchase Right, and the number of Ordinary Shares
which have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price for each Ordinary Share covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
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adjusted for any increase or decrease in the number of issued Ordinary Shares
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Ordinary Shares, or any other increase or decrease as
determined by the Administrator. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number of
Ordinary Shares subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, each outstanding Option or Stock Purchase Right may be
assumed or an equivalent option or right may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If, in
such event, an Option or Stock Purchase Right is not assumed or substituted, the
Option or Stock Purchases Right shall terminate as of the date of the closing of
the merger. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger, the Option or Stock
Purchase Right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Ordinary Shares for each Share
held on the effective date of the transaction (and if the holders are offered a
choice of consideration, the type of consideration received in the merger is not
solely common stock of the successor corporation or its parent). The
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by
holders of Ordinary Shares in the merger.
(d) Compliance with Incentive Stock Option Provisions.
-------------------------------------------------
Notwithstanding anything to the contrary herein, each adjustment made to an
Incentive Stock Option pursuant to this Section 12 shall comply with the rules
of Section 424(a) of the Code, and no adjustment shall be made that would cause
any Incentive Stock Option to become a Nonstatutory Stock Option.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with
9
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Section 422 of the Code (or any other applicable law or regulation, including
the requirements of the NASD or an established stock exchange), the Company
shall obtain shareholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the laws of Israel, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
16. Reservation of Shares. During the term of this Plan, the Company
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by Company counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Ordinary Shares are listed.
19. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Option or purchaser has
one or more Options or Stock Purchase Rights outstanding, and, in the case of an
individual who acquires Shares pursuant to the Plan, during the period such
individual owns such Shares, copies of annual financial statements. The Company
shall not be required to provide such statements to key employees whose duties
in connection with the Company assure their access to equivalent information.
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