<PAGE> 1
As filed with the Securities and Exchange Commission on January 19, 2000
SEC File No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
COMMTOUCH SOFTWARE 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.)
6 Hazoran Street, Poleg Industrial Park, Netanya, Israel 42504
-------------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
1996 CSI STOCK OPTION PLAN
1999 SECTION 3(i) SHARE OPTION PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
(Full title of the Plan)
Gideon Mantel
Chief Executive Officer
CommTouch Software Ltd.
3945 Freedom Circle, Suite 730
Santa Clara, California 95054
(Name and Address of Agent For Service)
(408) 653-4330
(Telephone Number, Including Area Code, of Agent For Service)
Copies to:
Lior O. Nuchi
McCutchen, Doyle, Brown & Enersen, LLP
3150 Porter Drive
Palo Alto, California 94304-1212
Tel: (650) 849-4400
Fax: (650) 849-4800
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered (1) Per Unit (2) Price (2) Fee
---------- -------------- ------------ --------- ---
<S> <C> <C> <C> <C>
1996 CSI Stock 5,000,000 $41.81 $209,050,000 $55,189.20
Option Plan and 1999
Section 3(i) Share
Option Plan, NIS
0.05 Nominal Value
1999 Employee Stock
Purchase Plan, NIS 150,000 $41.81 $6,271,500 $1,655.68
0.05 Nominal Value
1999 Nonemployee
Directors Stock 250,000 $41.81 $10,452,500 $2,759.46
Option Plan, NIS
0.05 Nominal Value
</TABLE>
(1) This Registration Statement shall also cover any additional ordinary
shares which become issuable by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without
the receipt of consideration which results in an increase in the number
of the outstanding ordinary shares.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee on the basis of the average of the high and low prices
as reported for an ordinary share on the Nasdaq National Market on
January 18, 2000, pursuant to Rule 457(h)(1) and 457(c).
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION.*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.*
* The documents containing the information specified in Part I of Form S-8 (plan
information and registrant information and employee plan annual information)
will be sent or given to employees as specified by Securities and Exchange
Commission (the "Commission") Rule 428(b)(1). Such documents need not be filed
with the Commission either as part of this registration statement or as
prospectuses or prospectus supplements pursuant to Rule 424. These documents and
the documents incorporated by reference in this registration statement pursuant
to to Item 3 of Form S-8 (Part II hereof), taken together, constitute a
prospectus that meets the requirements of Section 10(a) of the Securities Act of
1933, as amended (the "Securities Act"). The Registrant will provide a written
statement to participants advising them of the availability without charge, upon
written or oral request, of the documents incorporated by reference in Item 3 of
Part II of this registration statement and including the statement in the
preceding sentence. The written statement to participants will indicate the
availability without charge, upon written or oral request, of other documents
required to be delivered to employees pursuant to Rule 428(b), and will include
the address and telephone number to which the request is to be directed.
<PAGE> 3
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 prospectus, dated July 13, 1999, filed pursuant to
Rule 424(b) of the Securities Act.
(b) Report of Foreign Private Issuer on Form 6-K for the quarter
ended June 30, 1999, filed on August 27, 1999; Report of Foreign Private Issuer
on Form 6-K for the period dated October 27, 1999, filed on November 4, 1999;
and Report of Foreign Private Issuer on Form 6-K for the quarter ended September
30, 1999, filed on December 3, 1999.
(c) Registrant's Registration Statement on Form F-1 filed on October
27, 1999, as amended (Registration No. 333-89773) (the "Registration Statement")
(see Exhibit 99.1).
(d) The description of the Registrant's capital stock contained in
the registration statement on Form 8-A dated June 25, 1999 and contained in the
Registration Statement under "Description of Capital Stock."
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this registration statement and prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, are deemed to be
incorporated by reference into this registration statement and to be part hereof
from the respective dates of filing of such documents. Any statement contained
in this registration statement or in a document incorporated by reference shall
be deemed modified or superseded to the extent that a statement contained in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein or therein modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed to constitute a part hereof,
except as so modified or superseded.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The partners of McCutchen, Doyle, Brown & Enersen, LLP, beneficially
own an aggregate of 13,840 Ordinary Shares. The partners of Naschitz, Brandes &
Co. beneficially own an aggregate of 15,000 Ordinary Shares.
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ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Israeli law permits a company to insure an Office Holder (generally,
a director or executive officer) in respect of liabilities incurred by him as a
result of the breach of his duty of care to the company or to another person, or
as a result of the breach of his fiduciary duty to the company, to the extent
that he acted in good faith and had reasonable cause to believe that the act
would not prejudice the company. A company can also insure an Office Holder for
monetary liabilities as a result of an act or omission that he committed in
connection with his serving as an Office Holder. Moreover, a company can
indemnify an Office Holder for monetary liability in connection with his
activities as an Office Holder. The Articles of Association of the Registrant
allow the Registrant to insure and indemnify Office Holders to the fullest
extent permitted by law. Pursuant to these provisions, the Registrant has in
effect as of January 7, 2000 insurance policies in the amount of US$25 million
covering its directors and officers.
Reference is made to Section 6 of the Underwriting Agreement, a copy
of which is filed as Exhibit 1.1 to the Registrant's prospectus, which provides
for indemnification of the directors and officers of the Registrant who sign the
Registration Statement by the Underwriters against certain liabilities,
including those arising under the Securities Act, in certain circumstances.
Certain members of the Registrant's management team are officers of
the Registrant's subsidiary, CommTouch Software, Inc., a California corporation,
or reside in California. The Articles of Incorporation of CommTouch Software,
Inc. provide that the liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law and that the corporation is authorized to provide for the indemnification of
agents of the corporation, as defined in Section 317 of the California General
Corporation Law, in excess of that expressly permitted by Section 317 for breach
of duty to the corporation and its shareholders to the fullest extent
permissible under California law.
With respect to all proceedings other than shareholder derivative
actions, Section 317 permits a California corporation to indemnify any of its
directors, officers or other agents only if such person acted in good faith and
in a manner such person reasonably believed to be in the best interests of the
corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. In the case of derivative
actions, a California corporation may indemnify any of its directors, officers
or agents only if such person acted in good faith and in a manner such person
believed to be in the best interests of the corporation and its shareholders.
Furthermore, in derivative actions, no indemnification is permitted (i) with
respect to any matter with respect to which the person to be indemnified has
been held liable to the corporation, unless such indemnification is approved by
the court; (ii) of amounts paid in settling or otherwise disposing of a pending
action without court approval; or (iii) of expenses incurred in defending a
pending action which is settled or otherwise disposed of without court approval.
To the extent that a director, officer or agent of a corporation has been
successful on the merits in defense of any proceeding for which indemnification
is permitted by Section 317, a corporation is obligated by Section 317 to
indemnify such person against expenses actually and reasonably incurred by him
in connection with the proceeding.
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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 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.
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(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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Clara, State of California, on January 19,
2000.
COMMTOUCH SOFTWARE LTD.
By: /s/ JAMES COLLINS
--------------------------------
James Collins
Chief Financial Officer and
Secretary
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<PAGE> 8
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James Collins true and lawful
attorney-in-fact and agent for such person on his behalf and in such person's
name, place and stead, and in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this registration statement
on Form S-8 and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully, to all intents and purposes,
as he himself might or could do if personally present, hereby ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Chief Executive Officer
(Principal Executive Officer)
/s/ Gideon Mantel and Director January 19, 2000
- ----------------------------------
Gideon Mantel
Chief Financial Officer and
Secretary
/s/ James Collins (Principal Financial Officer) January 19, 2000
- ----------------------------------
James Collins
Controller
/s/ Devyani Patel (Principal Accounting Officer) January 19, 2000
- ----------------------------------
Devyani Patel
Chairman of the Board of
/s/ Allan Barkat Directors January 19, 2000
- ----------------------------------
Allan Barkat
/s/ Amir Lev Director January 19, 2000
- ----------------------------------
Amir Lev
/s/ Yiftah Atir Director January 19, 2000
- ----------------------------------
Yiftah Atir
/s/ Yoseph Sela Director January 19, 2000
- ----------------------------------
Yoseph Sela
</TABLE>
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<TABLE>
<S> <C> <C>
/s/ Yair Safrai Director January 19, 2000
- ----------------------------------
Yair Safrai
/s/ Richard Sorkin Director January 19, 2000
- ----------------------------------
Richard Sorkin
/s/ Thomas Camp Director January 19, 2000
- ----------------------------------
Thomas Camp
</TABLE>
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<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
5.1 Opinion regarding legality of securities to be offered
10.1 CommTouch Software Ltd. 1996 CSI Stock Option Plan
10.2 CommTouch Software Ltd. 1999 Section 3(i) Share Option Plan
10.3 CommTouch Software Ltd. 1999 Employee Stock Purchase Plan
10.4 CommTouch Software Ltd. 1999 Nonemployee Directors Stock
Option Plan
23.1 Consent of Independent Auditors
23.2 Consent of Naschitz, Brandes & Co. (See Exhibit 5.1)
24.1 Power of Attorney (See page 7)
99.1 Registration Statement on Form F-1 (incorporated by reference)
(file #333-89773), as amended.
</TABLE>
9
<PAGE> 1
EXHIBIT 5.1
C/255/74
Tel Aviv, Tuesday, January 18, 2000
CommTouch Software Ltd.
6 Hazoran Street
Poleg Industrial Park, P.O. Box 8511
Netanya 42504
Israel
- ------
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-8 (the "Registration
Statement") to be filed by CommTouch Software Ltd. (the "Company") with the
Securities and Exchange Commission on or about January 18, 2000 in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 5,400,000 of the Company's Ordinary Shares (the "Shares") reserved
for issuance under the Company's 1996 CSI Stock Option Plan, the Company's 1999
Section 3(i) Share Option Plan, the Company's 1999 Employee Stock Purchase Plan
and the Company's 1999 Nonemployee Directors Stock Option Plan (collectively,
the "Option Programs").
As legal counsel to the Company, we have examined such corporate records
and documents and such questions of law as we have considered necessary or
appropriate for the purpose of this opinion. Upon the basis of such
examination, we are of the opinion that the Shares, when issued and sold
pursuant to the applicable provisions of the Option Programs and the agreements
which accompany the Option Programs, and in accordance with the Registration
Statement, will be legally and validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
/s/ Naschitz, Brandes & Co.
----------------------------
Naschitz, Brandes & Co.
<PAGE> 1
EXHIBIT 10.1
COMMTOUCH SOFTWARE LTD.
1996 CSI STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available personnel, 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. Shares Purchase Rights may also be granted under the Plan. The
Options and Shares 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, in its capacity as an administrator
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 CommTouch Software Ltd., an Israeli company.
(f) "Consultant" means any person who is not an Employee and 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 181st day
of such leave any Incentive Stock Option held by the Optionee shall
<PAGE> 2
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option.
(h) "CSI" means CommTouch Software, Inc., a California
corporation.
(i) "Director" means a member of either of the boards of
directors of the Company or the Subsidiary.
(j) "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."
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "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.
(m) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an option not intended to
qualify as an Incentive Stock Option.
(o) "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.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Optioned Stock" means the Ordinary Shares subject to an
Option or a Shares Purchase Right.
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<PAGE> 3
(r) "Optionee" means an Employee or Consultant who receives an
Option or Shares Purchase Right.
(s) "Ordinary Shares" means the Ordinary Shares of stock of the
Company.
(t) "Plan" means the 1996 CSI Stock Option Plan.
(u) "Restricted Shares" means each of the Ordinary Shares
acquired pursuant to a grant of a Shares Purchase Right under Section 11 below.
(v) "Section 16(b)" means Section 16(b) of the Exchange Act.
(w) "Shares Purchase Right" means a right to purchase Ordinary
Shares pursuant to Section 11 below.
(x) "Subsidiary" means CommTouch Software, Inc., a California
corporation, the Company's wholly-owned U.S. subsidiary.
3. Shares Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the aggregate number of Ordinary Shares that may be subject to
option and sold under this Plan is 5,000,000, unless amended by the shareholders
of the Company. The Ordinary Shares may be authorized but unused, or reacquired
Ordinary Shares.
If an Option or Shares 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 Ordinary Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated).
However, Ordinary Shares that have actually been issued under the Plan, upon
exercise of either an Option or Shares 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.
(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 Shares 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
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<PAGE> 4
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 Shares 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 and
regulations of Israel, of California laws and regulations, of the Code,
and of any applicable stock exchange (collectively, 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. Section
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;
(ii) to select the Consultants and Employees to whom
Options and Shares Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options and
Shares Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Ordinary Shares to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
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<PAGE> 5
(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 Shares Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Shares 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
Shares Purchase Right may, if otherwise eligible, be granted additional Options
or Shares 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 Ordinary Shares with respect to which Incentive Stock
Options are exercisable for the first time by any particular 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
Ordinary Shares shall be determined as of the time the Option with respect to
such Ordinary Shares is granted.
(c) Neither the Plan nor any Option or Shares 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 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.
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8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Ordinary 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 Ordinary 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 Ordinary 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 Ordinary 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 Ordinary Share on the date of grant.
(b) The consideration to be paid for the Ordinary 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) in the form attached hereto as Exhibit A, secured by a pledge of the
shares issued pursuant to a share pledge in the form attached hereto as Exhibit
B, 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 an Ordinary
Share.
An Option shall be deemed to be exercised when written notice of
such exercise in the form attached hereto as Exhibit C 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 Ordinary Shares with respect to
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<PAGE> 7
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 Ordinary
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 13 hereof.
Exercise of an Option in any manner shall result in a decrease in
the number of Ordinary Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Ordinary
Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
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
Ordinary Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee,
the 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 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
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<PAGE> 8
employed for two (2) years from the date of such termination. All remaining
Ordinary 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 Ordinary Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to a person subject to Section
16(b) of 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 Shares Purchase Rights. Options
and Shares 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. Restricted Shares.
(a) Awards of Restricted Shares.
The Committee may, in its discretion, permit an Optionee
to exercise an Option prior to the time the Option would otherwise be
exercisable under Section 9. Without limiting the generality of the foregoing,
the Committee may provide that if an Option is exercised prior to satisfaction
of the vesting requirements of Section 9, the Shares issued upon such exercise
shall remain subject to vesting as described in Section 11(c) and shall be
subject to a right, but not an obligation, of repurchase by the Company with
respect to all unvested Shares if the Optionee ceases to be an Employee for any
reason.
(b) Restrictions.
(i) Restricted Shares may not be sold, assigned,
transferred, pledged, encumbered, or otherwise disposed of, either voluntarily
or involuntarily, until the release of such Shares from the Company's repurchase
option under Section 11(c), other than by will or the laws of descent and
distribution.
(ii) Optionees receiving Restricted Shares shall be
entitled to dividend and voting rights for the Restricted Shares even though
they are not vested, provided that such rights shall terminate immediately as to
any Restricted Shares that are repurchased by the Company.
(iii) With respect to each receipt of Restricted Shares
by an Optionee, such Optionee shall execute a Restricted Share Purchase
Agreement in the form attached hereto as Exhibit D.
(c) Vesting.
If the Optionee ceases to be an Employee for any reason,
the Company shall have the right, but not the obligation, to repurchase certain
of the Shares at their original Exercise Price. The Company's right to
repurchase the Shares at their original Exercise Price shall lapse, unless the
stock option agreement provides otherwise, as to one-fourth (1/4) of the Shares
at the end
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<PAGE> 9
of the first year of continuous employment and as to one forty-eighth (1/48) of
the Shares per month of continuous employment over the next thirty-six (36)
months. Shares that are subject to repurchase at their original Exercise Price
are referred to as "Restricted Shares."
(d) Section 83(b) Election.
Within 30 days after the issuance of Restricted Shares to
an Optionee under the Plan, the Optionee shall decide whether or not to file an
election pursuant to Section 83(b) of the Code and Treasury Regulation section
1.83-2 (and state law counterparts) with respect to the Restricted Shares. If
the Optionee does file such an election, the Optionee shall promptly furnish a
copy of such election to the Company.
12. Shares Purchase Rights.
(a) Rights to Purchase. Shares Purchase Rights may be issued
either 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 Shares 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 Ordinary 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
Shares Purchase Right. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator.
(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 Shares 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 Shares Purchase Right is exercised,
except as provided in Section 13 of the Plan.
13. 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 Shares Purchase Right, and the number of Ordinary Shares
which have been authorized for issuance under the Plan but as to which no
Options or Shares Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option or Shares
Purchase Right, as well as the price for each Ordinary Share covered by each
such outstanding Option or Shares Purchase Right, shall be proportionately
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
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<PAGE> 10
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 Shares 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 Shares 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 Shares 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 Shares 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 Shares Purchase
Right shall be considered assumed if, following the merger, the Option or Shares
Purchase Right confers the right to purchase or receive, for each share of
Optioned Stock subject to the Option or Shares 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 Shares
Purchase Right, for each share of Optioned Stock subject to the Option or Shares
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 13 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.
14. Time of Granting Options and Shares Purchase Rights. The date of
grant of an Option or Shares Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or
Shares 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 Shares Purchase Right is so granted within a reasonable time
after the date of such grant.
15. 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 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.
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<PAGE> 11
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Shares Purchase Rights
already granted, and such Options and Shares 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.
16. Conditions Upon Issuance of Ordinary Shares. Ordinary Shares shall
not be issued pursuant to the exercise of an Option or Shares Purchase Right
unless the exercise of such Option or Shares Purchase Right and the issuance and
delivery of such Ordinary 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 Ordinary 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 Shares Purchase Right,
the Company may require the person exercising such Option or Shares Purchase
Right to represent and warrant at the time of any such exercise that the
Ordinary Shares are being purchased only for investment and without any present
intention to sell or distribute such Ordinary Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
17. Reservation of Ordinary Shares. During the term of this Plan, the
Company shall at all times reserve and keep available such number of Ordinary
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 Ordinary Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Ordinary Shares as to which such requisite authority shall not have
been obtained.
18. Agreements. Options and Shares Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
19. 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 Laws.
20. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Ordinary Shares pursuant to
the Plan, not less frequently than annually during the period such Optionee has
one or more Options or Shares Purchase Rights outstanding, and, in the case of
an individual who acquires Ordinary Shares pursuant to the Plan, during the
period such individual owns such Ordinary 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.
Approved by the Board of Directors: January 1, 1996
Approved by the Shareholders: January 1, 1996
Amended by the Board of Directors: April 18, 1999
Amendment approved by the Shareholders: June 8, 1999
11
<PAGE> 1
EXHIBIT 10.2
COMMTOUCH SOFTWARE LTD.
THE 1999
SECTION 3(i) SHARE OPTION PLAN
1. NAME
This share option plan, as amended from time to time, shall be known as
the CommTouch Software Ltd. 1999 Section 3(i) Share Option Plan (the
"OPTION PLAN").
2. PURPOSE OF THE OPTION PLAN
The Option Plan is intended as an incentive to retain in the employ of
CommTouch Software Ltd. (the "COMPANY") or a Subsidiary of the Company
which now exists or hereafter is organized or acquired by the Company,
persons of training, experience, and ability, to attract new directors,
employees, consultants and contractors, whose services are considered
valuable, 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 (the "OPTIONS"), pursuant to this Option
Plan approved by the Board of Directors of the Company (the "BOARD").
The term "PARENT" shall mean for the purposes of the Option Agreement
and the Option Plan: any company (other than the Company) in an unbroken
chain of companies ending with the Company if, at the time of granting
an Option, each of the companies (other than the Company), owns stock
possessing fifty percent (50%) or more of total combined voting power of
all classes of stock in one of the other companies in such chain.
The term "SUBSIDIARY" shall mean for the purposes of the Plan: any
company (other than the Company) in an unbroken chain of companies
beginning with the Company if, at the time of granting an option, each
of the companies other than the last company in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other companies in
such chains.
3. ADMINISTRATION OF THE OPTION PLAN
The Board or a share option committee appointed and maintained by the
Board for such purpose (the "COMMITTEE") shall have the power to
administer the Option Plan. Notwithstanding the above, the Board shall
automatically have a residual authority if no Committee shall be
constituted or if such Committee shall cease to operate for any reason
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<PAGE> 2
whatsoever.
The Committee shall consist of such number of members (not less than two
(2) in number) as may be fixed by the Board. The Committee shall select
one of its members as its chairman (the "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.
Any member of such Committee shall be eligible to receive Options under
the Option Plan while serving on the Committee, unless otherwise
specified herein.
The Committee shall have full power and authority to:
3.1 Designate participants.
3.2 Determine the terms and provisions of respective Option agreements
(which need not be identical) including, but not limited to, the
number of shares in the Company to be covered by each Option,
provisions concerning the time or times when and the extent to
which the Options may be exercised and the nature and duration of
restrictions as to transferability or restrictions constituting
substantial risk of forfeiture.
3.3 Accelerate the right of an Optionee to exercise, in whole or in
part, any previously granted Option.
3.4 Interpret the provisions and supervise the administration of the
Option Plan;
3.5 Determine the Fair Market Value (as defined below) of the Shares
(as defined below).
3.6 Determine any other matter which is necessary or desirable for, or
incidental to administration of the Option Plan.
The Committee shall have the authority to grant, in its discretion, to
the holder of an outstanding Option, in exchange for the surrender and
cancellation of such Option, a new Option having a purchase price equal
to, lower than or higher than the purchase price provided in the Option
so surrendered and canceled, and containing such other terms and
conditions as the Committee may prescribe in accordance with the
provisions of the Option Plan.
All decisions and selections made by the Board or the Committee pursuant
to the provisions of this Option Plan shall be made by a majority of its
members except that no member of the Board or the Committee shall vote
on, or be counted for quorum purposes, with respect to any proposed
action of the Board or the Committee relating to any Option to be
granted to that member. Any decision reduced to writing and signed by a
majority of the members who
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<PAGE> 3
are authorized to make such decision shall be fully effective as if it
had been made by a majority at a meeting duly held.
The interpretation and construction by the Committee of any provision of
the Option Plan or of any Option thereunder shall be final and
conclusive unless otherwise determined by the Board.
Subject to the Company's decision, each member of the Board or the
Committee shall be indemnified and held harmless by the Company against
any cost or expense (including counsel fees) reasonably incurred by him,
or any liability (including any sum paid in settlement of a claim with
the approval of the Company) arising out of any act or omission to act
in connection with the Option Plan unless arising out of such member's
own fraud or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification
the member may have as a director or otherwise under the Company's
Articles of Association, any agreement, any vote of shareholders or
disinterested directors, insurance policy or otherwise.
"FAIR MARKET VALUE" shall mean in the Plan, 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 Administrator deems reliable.
(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
Committee.
4. DESIGNATION OF PARTICIPANTS
The persons eligible for participation in this Option Plan as recipients
of Options may include any employees, directors and consultants of the
Company, or a Subsidiary of the Company or a company or a Parent or a
subsidiary company of such company issuing or assuming the Options in a
transaction described in Section 9.1 of this Option Plan (the foregoing
collectively, the "GROUP"). The grant of an Option hereunder shall
neither entitle the recipient thereof to participate nor disqualify him
from participating in any other grant
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<PAGE> 4
of Options pursuant to this Option Plan or any other option or stock
plan of the Company or any of its affiliates.
Anything in the Option 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 (the
"COMPANIES ORDINANCE")) shall be authorized and implemented only in
accordance with the provisions of the Companies Ordinance, as in effect
from time to time.
5. TRUSTEE
The Options which shall be granted to employees consultants and
contractors of the Group or any Shares (as defined below) issued upon
exercise of such Options and/or other shares received subsequently
following any realization of rights, shall be issued to a Trustee
nominated by the Committee) the "TRUSTEE" (and held for the benefit of
the Optionees from the date of grant.
Anything to the contrary notwithstanding, the Trustee shall not release
any Options and/or any Shares issued upon exercise of Options, prior to
the full payment of the Optionee's tax liabilities arising from Options
which were granted to him and/or any Shares issued upon exercise of such
Options.
Upon receipt of the Option, the Optionee will sign an undertaking to
exempt the Trustee from any liability in respect of any action or
decision duly taken and bona fide executed in relation with the Option
Plan, or any Option or Share granted to him thereunder.
6. SHARES RESERVED FOR THE OPTION PLAN; RESTRICTION THEREON
6.1 The Company has reserved 250,000 authorized but unissued Ordinary
Shares nominal value NIS 1.00 per share, of the Company (the
"SHARES"), for purposes of the Option Plan (subject to adjustment
as set forth in paragraph 9 below), the 1996 CommTouch Software,
Inc. Stock Option Plan and Israeli Option Agreements previously
issued to Israeli employees. Any of such Shares which may remain
unissued and which are not subject to outstanding Options at the
termination of the Option Plan shall cease to be reserved for the
purpose of the Option Plan, but until termination of the Option
Plan the Company shall at all times reserve sufficient number of
Shares to meet the requirements of the Option Plan. Should any
Option for any reason expire or be canceled prior to its exercise
or relinquishment in full, the Shares subject to such Option may
again be subjected to an Option under the Option Plan.
6.2 An optionee who purchased Shares hereunder upon exercise of
Options shall have no voting rights as a shareholder (in any and
all matters whatsoever) until the consummation of an initial
public offering of the Company's securities (an "IPO"). Until an
IPO, such Shares shall be voted by a proxy pursuant to the
directions of the Board, such proxy to be to the person or
persons designated by the Board. All Shares issued upon exercise
of the Options shall entitle the holder thereof to receive
dividends and other distributions thereon.
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<PAGE> 5
7. VESTING
Unless Exhibit B to the Option Agreement provides otherwise, one-fourth
(1/4) of the Options shall vest (i.e., Options shall become exercisable)
at the end of the first year of an Optionee's continuous services or
employment with the group, and one-thirty-sixth (1/36) of the remaining
Options shall vest per month of such continuous employment over the next
thirty-six months (the "VESTING DATES").
8. OPTION PRICE
8.1 The purchase price of each Share subject to an Option or any
portion thereof shall be determined by the Committee in its sole
and absolute discretion in accordance with applicable law,
subject to any guidelines as may be determined by the Board from
time to time.
8.2 The Option price shall be payable upon the exercise of the Option
in a form satisfactory to the Committee, including without
limitation, by cash or check. The Committee shall have the
authority to postpone the date of payment on such terms as it may
determine.
9. ADJUSTMENTS
Upon the occurrence of any of the following described events, the
Optionee's rights to purchase Shares under the Option Plan shall be
adjusted as hereafter provided:
9.1 In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of
the Company while unexercised Options remain outstanding under
the Option Plan the successor corporation or a Parent or
subsidiary of such successor corporation or the purchasing
corporation may assume the unexercised Options outstanding under
the Option Plan or may substitute for the Shares subject to the
unexercised portions of such outstanding Options an appropriate
number of shares of each class of shares or other securities of
the successor or purchasing corporation or cash or property which
were distributed to the shareholders of the Company in respect of
such shares. In the event of substitution of shares or securities
appropriate adjustments shall be made to the purchase price per
share to reflect such action, all as will be determined by the
Committee whose determination shall be final. In the event that
the successor or purchasing corporation does not agree to assume
or substitute as described in this Section 9.1, the Options shall
terminate as of the date of the closing of the above merger or
sale, as applicable.
9.2 In the event of the proposed liquidation or dissolution of the
Company, the Company shall notify the Optionee at least fifteen
(15) days prior to such proposed action. To
Page 5 of 11
<PAGE> 6
the extent not previously exercised, the Options shall terminate
immediately prior to the consummation of such proposed action.
9.3 If the outstanding shares of the Company shall at any time be
changed or exchanged by declaration of a stock dividend, stock
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 Shares
subject to this Option Plan or subject to any Options therefore
granted, and the Option prices, shall be appropriately and
equitably adjusted so as to maintain the proportionate number of
Shares without changing the aggregate Option price, provided,
however, that no adjustment shall be made by reason of the
distribution of subscription rights on outstanding shares. Upon
the occurrence of any of the foregoing, the class and aggregate
number of Shares issuable pursuant to this Option Plan (as set
forth in Section 6 hereof), in respect of which Options have not
yet been exercised, shall be appropriately adjusted, all as may
be determined by the Board who's determination shall be final.
9.4 Anything herein to the contrary notwithstanding, if prior to the
completion of an IPO, all or substantially all of the shares of
the Company are to be sold, or upon a merger or reorganization or
the like, the shares of the Company, or any class thereof, are to
be exchanged for securities of another Company, then in such
event, each Optionee shall be obliged to sell or exchange, as the
case may be, the shares such Optionee purchased under the Option
Plan, in accordance with the instructions then issued by the
Board whose determination shall be final.
10. TERM AND EXERCISE OF OPTIONS
10.1 The Options shall be exercised by the Optionee by giving written
notice to the Company, in such form and method as may be
determined by the Company and the Trustee, which exercise shall
be effective upon receipt of such notice by the Company at its
principal office. The notice shall specify the number of Shares
with respect to which Options are being exercised.
10.2 Each Option granted under this Option Plan shall be exercisable
following the exercise dates and for the number of Shares as
shall be provided in EXHIBIT B to the Option Agreement. However
no Option shall be exercisable after the Expiration Date, as
defined for each Optionee in his Option Agreement.
10.3 Options granted under the Option Plan shall not be transferable
by Optionees other than by will or laws of descent and
distribution, and during an Optionee's lifetime shall be
exercisable only by that Optionee.
10.4 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, prior to the Expiration
Page 6 of 11
<PAGE> 7
Date, and provided that, subject to the provisions of Section
10.6 below, the Optionee is an employee, a consultant or a
contractor of the Group at all times during the period beginning
with the granting of the Option and ending upon the date of
exercise.
10.5 Subject to the provisions of Section 10.6 below, in the event of
termination of the Optionee's employment or services with the
Group, all Options granted to the Optionee will immediately
expire. A notice of termination of employment or services shall
be deemed to constitute termination of employment or services
with Group.
10.6 Notwithstanding anything to the contrary previously stated, an
Option may be exercised after the date of termination of the
Optionee's services or employment with the Group during an
additional period of time beyond the date of such termination,
but only with respect to the number of Options already vested
according to the Vesting Dates, if:
10.6.1 termination is without Cause, in which event any Options
still in force and unexpired may be exercised within a
period of 90 (ninety) days from the date of such
termination.
10.6.2 termination is the result of death or disability of the
Optionee, in which event any Options still in force and
unexpired may be exercised within a period of 90 (ninety)
days from the date of termination.
10.6.3 prior to the date of such termination, the Committee shall
authorize an extension of the terms of all or part of the
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.
The term "CAUSE" shall mean any action, omission or state
of affairs related to the Optionee which the Committee or
the Boards decides, in its sole discretion, is against the
interests of the Company.
10.7 To avoid doubt, the holders of Options 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 part of an
Option, nor shall they be deemed to be a class of shareholders or
creditors of the Company for purpose of the operation of section
233 of the Companies Ordinance or any successor to such section,
until registration of the Optionee as holder of such Shares in
the Company's register of members.
10.8 Any form of Option Agreement authorized by this Option Plan may
contain such other provisions as the Committee may, from time to
time, deem advisable. Without limiting the foregoing, the
Committee may, with the consent of the Optionee, from time to
time cancel all or any portion of any Option then subject to
exercise, and the
Page 7 of 11
<PAGE> 8
Company's obligation in respect of such Option may be discharged
by (i) payment to the Optionee of an amount in cash equal to the
excess, if any, of the Fair Market Value of the Shares at the
date of such cancellation subject to the portion of the Option so
canceled over the aggregate purchase price of such Shares, (ii)
the issuance or transfer to the Optionee of Shares of the Company
with a Fair Market Value at the date of such transfer equal to
any such excess, or (iii) a combination of cash and shares with a
combined value equal to any such excess, all as determined by the
Committee in its sole discretion.
11. DIVIDENDS
With respect to all Shares (but not unexercised Options) issued upon the
exercise of Options purchased by the Optionee and held by the Trustee,
the Optionee shall be entitled to receive dividends in accordance with
the quantity of such Shares, and subject to any applicable taxation on
distribution of dividends. During the period in which Shares issued to
the Trustee on behalf of a Optionee are held by the Trustee, the cash
dividends paid with respect thereto shall be paid directly to the
Optionee.
12. ASSIGNABILITY AND SALE OF OPTIONS
No Option, purchasable hereunder, whether fully paid or not, shall be
assignable, transferable or given as collateral or any right with
respect to them given to any third party whatsoever, and during the
lifetime of the Optionee each and all of such Optionee's rights to
purchase Shares hereunder shall be exercisable only by the Optionee.
As long as the Shares are held by the Trustee in favor of the Optionee,
then all rights the Optionee possesses over the Shares are personal, can
not be transferred, assigned, pledged or mortgaged, other than by will
or laws of descent and distribution.
13. TERM OF THE OPTION PLAN
The Option Plan shall be effective as of the day it was adopted by the
Board and shall terminate at the end of 60 months from such day of
adoption.
14. AMENDMENTS OR TERMINATION
The Board may, at any time and from time to time, subject to the written
consent of the Trustee, amend, alter or discontinue the Option Plan,
except that no amendment or alteration shall be made which would impair
the rights of the holder of any Option therefore granted, without his
consent.
15. GOVERNMENT REGULATIONS
The Option Plan, 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 to such approvals by any governmental
agencies or national securities exchanges as may be required.
Page 8 of 11
<PAGE> 9
16. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES
Neither the Option Plan nor the Option Agreement with the Optionee shall
impose any obligation on the Group, to continue any Optionee in its
employ or the hiring by the Group of the Optionee's services, and
nothing in this Option Plan or in any Option granted pursuant thereto
shall confer upon any Optionee any right to continue in the employ or
service of the Group or restrict the right of the Group to terminate
such service or employment at any time.
17. GOVERNING LAW & JURISDICTION
This Option Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the
principles of conflict of laws. The competent courts of Tel-Aviv, Israel
shall have sole jurisdiction in any matters pertaining to this Option
Plan.
18. TAX CONSEQUENCES
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, the Trustee or the Optionee), hereunder, shall be
borne solely by the Optionee. The Company and/or the Trustee shall
withhold taxes according to the requirements under the applicable laws,
rules, and regulations, including withholding taxes at source.
Furthermore, the Optionee shall agree to 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 the Optionee. The
Committee and/or the Trustee shall not be required to release any Share
certificate to an Optionee until all required payments have been fully
made.
19. NON-EXCLUSIVITY OF THE OPTION PLAN
The adoption of the Option Plan 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 stock options otherwise
than under the Option Plan or under the Share Option Agreements
previously issued to Israeli employees, and such arrangements may be
either applicable generally or only in specific cases.
20. MULTIPLE AGREEMENTS
The terms of each Option may differ from other Options granted under
this Option Plan at the same time, or at any other time. The Committee
may also grant more than one Option to a given Optionee during the term
of this Option Plan, either in addition to, or in substitution for, one
or more Options previously granted to that Optionee.
Page 9 of 11
<PAGE> 10
EXHIBIT B TO THE OPTION AGREEMENT
TERMS OF THE OPTION
1. NAME OF THE OPTIONEE:
----------------------------------------
2. NUMBER OF OPTIONS GRANTED:
----------------------------------------
3. PRICE PER SHARE:
----------------------------------------
4. EXPIRATION DATE:
----------------------------------------
5. DATE OF GRANT:
----------------------------------------
Page 10 of 11
<PAGE> 11
EXHIBIT C TO THE OPTION AGREEMENT
PROXY
Mr.____________ and Mr.______________, or any of them, with power of
substitution in each, are hereby authorized to represent the undersigned at any
and all general meetings of CommTouch Software Ltd. (the "Company") (including
general meetings convened for the purpose of adopting extraordinary resolutions)
and to vote thereat on any and all matters the same number of Ordinary Shares of
the Company as the undersigned would be entitled to vote if then personally
present.
- ------------------------------- ------------------------------
NAME DATE
---------------------------------
SIGNATURE
Page 11 of 11
<PAGE> 1
EXHIBIT 10.3
COMMTOUCH SOFTWARE LTD.
1999 EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1 Establishment of the Plan ....................... 1
Section 2 Definitions ..................................... 1
Section 3 Shares Authorized ............................... 2
Section 4 Administration .................................. 3
Section 5 Eligibility and Participation ................... 3
Section 6 Offering and Purchase Periods ................... 4
Section 7 Purchase Price .................................. 4
Section 8 Employee Contributions .......................... 4
Section 9 Plan Accounts; Purchase of Shares ............... 5
Section 10 Withdrawal From the Plan ........................ 5
Section 11 Taxes ........................................... 6
Section 12 Effect of Termination of Employment or Death..... 6
Section 13 Rights Not Transferable ......................... 6
Section 14 Recapitalization, Etc ........................... 7
Section 15 Limitation on Stock Ownership ................... 7
Section 16 No Rights as an Employee ........................ 7
Section 17 Rights as a Shareholder ......................... 7
Section 18 Use of Funds .................................... 8
Section 19 Amendment or Termination of the Plan ............ 8
Section 20 Governing Law ................................... 8
</TABLE>
<PAGE> 3
COMMTOUCH SOFTWARE LTD.
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. ESTABLISHMENT OF THE PLAN.
The CommTouch Software Ltd. qualified 1999 Employee Stock Purchase Plan
(the "Plan") was established to provide Eligible Employees with an opportunity
to purchase the Company's Ordinary Shares so that they may increase their
proprietary interest in the success of the Company. The Plan, which provides for
the purchase of stock through after-tax payroll withholding, is intended to
qualify under Section 423 of the Code.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" or "Board" means the Board of Directors of the
Company, or an authorized committee of the Board.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Company" means CommTouch Software Ltd., a corporation formed under
the laws of the State of Israel.
(d) "Compensation" means the compensation paid to a Participant in
cash, including overtime and shift differential, incentive compensation,
commissions and other bonuses; provided, however, that for purposes of
determining a Participant's compensation, any election by such Participant to
reduce his or her regular cash remuneration under Sections 125 or 401(k) of the
Code shall be treated as if the participant did not make such election.
(e) "Eligible Employee" means any Employee of a Participating Company
(i) who is employed by the Participating Company on or prior to the Offering
Date, (ii) who is customarily employed for more than 20 hours per week, and
(iii) who is customarily employed for more than five months per calendar year.
In the event an Eligible Employee fails to remain in the continuous
employ of a Participating Company customarily for at least 20 hours per week
during an Offering Period or at least five months per calendar year, he or she
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to his or her account will be returned to him or her;
provided that a Participant who goes on an unpaid leave of absence shall be
permitted to remain in the Plan with respect to an Offering Period which
commenced prior to such leave of absence. If such Participant is not guaranteed
reemployment by contract or statute and the leave of absence extends beyond 90
days, such Participant shall be deemed to have terminated employment on the 91st
day of such leave of absence. Payroll deductions for a Participant who has been
on an unpaid leave of absence will resume at the same rate as in effect prior to
such leave upon return to work unless changed by such Participant or unless the
Participant has been on an unpaid leave of absence either throughout an entire
Offering Period or for more than 90 days, in which case the Participant shall
not be permitted
<PAGE> 4
to re-enter the Plan until a participation agreement is filed with respect to
a subsequent Offering Period that commences after such Participant has returned
to work from the unpaid leave of absence.
(f) "Employee" means any employee of a Participating Company.
(g) "Fair Market Value" shall mean (i) the closing price of an Ordinary
Share on the principal exchange on which the Ordinary Shares are trading, or
(ii) if the Ordinary Shares are not traded on an exchange but are quoted on the
Nasdaq National Market or a successor quotation system, the closing price on the
Nasdaq National Market or such successor quotation system, or (iii) if the
Ordinary Shares are not traded on an exchange or quoted on the Nasdaq National
Market or a successor quotation system, the fair market value of an Ordinary
Share as determined by the Plan Administrator in good faith. Such determination
shall be conclusive and binding on all persons.
(h) "Offering Date" means the first day of an Offering Period.
(i) "Offering Period" means a period during which contributions may be
made toward the purchase of Ordinary Shares under the Plan, as determined
pursuant to Section 6.
(j) "Ordinary Shares" means the Ordinary Shares, par value NIS 1.0, of
the Company.
(k) "Participant" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 5.
(l) "Participating Company" means the Company and such present or
future Subsidiaries of the Company as the Board of Directors shall from time to
time designate.
(m) "Plan Account" means the account established for each Participant
pursuant to Section 9(a).
(n) "Plan Administrator" means the administrator appointed by the Board
pursuant to Section 4.
(o) "Purchase Price" means the price at which Participants may purchase
Ordinary Shares under Section 5 of the Plan, as determined pursuant to Section
7.
(p) "Purchase Date" means the last day of each Purchase Period.
(q) "Purchase Period" means a period commencing on the Offering Date or
on the day after a Purchase Date and ending on a Purchase Date, as described in
Section 6.
(r) "Subsidiary" means a subsidiary corporation as defined in Section
424 of the Code.
SECTION 3. SHARES AUTHORIZED.
Subject to adjustment as provided in Section 14, the maximum aggregate
number of Ordinary Shares that may be offered under the Plan shall initially be
150,000; provided, however, that the number of Ordinary Shares that may be
offered under the Plan shall be increased as of January 1 of
2
<PAGE> 5
each year by 110 percent of the number of shares purchased under the Plan in the
previous calendar year.
SECTION 4. ADMINISTRATION.
(a) The Plan shall be administered by a Plan Administrator appointed by
the Board of Directors. The interpretation and construction by the Plan
Administrator of any provision of the Plan or of any right to purchase Ordinary
Shares hereunder shall be conclusive and binding on all persons.
(b) No member of the Board or the Plan Administrator shall be liable
for any action or determination made in good faith with respect to the Plan or
the right to purchase Ordinary Shares hereunder. The Plan Administrator shall be
indemnified by the Company against the reasonable expenses, including attorney's
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
it may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any stock purchased thereunder, and against all
amounts paid by it in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by it in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that the Plan Administrator is liable for gross negligence or
misconduct in the performance of its duties; provided that within 60 days after
institution of any such action, suit or proceeding, the Plan Administrator shall
in writing offer the Company the opportunity, at the Company's own expense, to
handle and defend the same.
(c) All costs and expenses incurred in administering the Plan shall be
paid by the Company. The Board or the Plan Administrator may request advice for
assistance or employ such other persons as are necessary for proper
administration of the Plan.
SECTION 5. ELIGIBILITY AND PARTICIPATION.
(a) Any person who qualifies or will qualify as an Eligible Employee on
the Offering Date with respect to an Offering Period may elect to participate in
the Plan for such Offering Period. An Eligible Employee may elect to participate
by executing the participation agreement prescribed for such purpose by the Plan
Administrator. The participation agreement shall be filed with the Plan
Administrator no later than two weeks prior to the applicable Offering Date or
such other deadline as is prescribed by the Plan Administrator. The Eligible
Employee shall designate in the participation agreement the percentage of his or
her Compensation which he or she elects to have withheld for the purchase of
Ordinary Shares, which may be any percentage of the Participant's Compensation
up to a maximum of 15 percent. In the event that the Fair Market Value of
Ordinary Shares on the last trading day before the commencement of the Offering
Period in which the Participant is enrolled is higher than on the last trading
day before the commencement of any subsequent Offering Period, the Participant
shall automatically be re-enrolled for such subsequent Offering Period, unless
the Participant elects to withdraw during the current Offering Period by
delivering a written notice, in form satisfactory to the Board, to the Plan
Administrator. When a Participant reaches the end of an Offering Period but his
or her participation is to continue, then such Participant shall automatically
be re-enrolled for the Offering Period that commences immediately after the end
of the prior Offering Period.
3
<PAGE> 6
(b) By enrolling in the Plan, a Participant shall be deemed to have
elected to purchase the maximum number of whole Ordinary Shares that can be
purchased with the amount of the Participant's Compensation which is withheld
during each Purchase Period.
(c) Once enrolled, a Participant will continue to participate in the
Plan for each succeeding Purchase and Offering Period until he or she terminates
participation or ceases to qualify as an Eligible Employee. A Participant who
withdraws from the Plan in accordance with Section 10 may again become a
Participant, if he or she then is an Eligible Employee, by following the
procedure described in Section 5(a).
SECTION 6. OFFERING AND PURCHASE PERIODS.
The Plan shall be implemented by one or more Offering Periods of not
more than 24 months each. The Board of Directors may determine the duration of
each Offering Period and the commencement dates. The Board may determine to
include one or more Purchase Periods within an Offering Period. The first
Offering Period shall commence on the first business day on which price
quotations for the Company's Ordinary Shares are available on the Nasdaq
National Market and shall end on August 14, 2001, and shall contain four
Purchase Periods commencing on the first day of the first Offering Period,
February 15, 2000, August 15, 2000 and February 15, 2001. Thereafter, unless
changed by the Board, the duration of each subsequent Offering Period shall be
two years, commencing on February 15 or August 15 and ending 24 months later on
February 14 or August 14, and shall contain four Purchase Periods commencing on
each February 14 and August 14 during each such Offering Period.
SECTION 7. PURCHASE PRICE.
The Purchase Price for each Ordinary Share shall be the lesser of (i)
85% of the Fair Market Value of such Ordinary Share on the last trading day
before the Offering Date (provided, however, in the case of the first Offering
Period, this number shall be 85% of the price per share at which the Company's
Ordinary Shares are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Ordinary Shares
pursuant to a registration statement filed with the SEC) or (ii) 85% of the Fair
Market Value of such Ordinary Share on the last trading day of the applicable
Purchase Period.
SECTION 8. EMPLOYEE CONTRIBUTIONS.
A Participant may purchase Ordinary Shares under the Plan solely by
means of payroll deductions. Payroll deductions, as designated by the
Participant pursuant to Section 5(a), shall commence with the first paycheck
issued during the Offering Period and shall be deducted from each subsequent
paycheck throughout the Offering Period. If a Participant desires to change the
rate of payroll withholding during the Offering Period, he or she may do so, if
permitted by the Plan Administrator, only one time during an Offering Period by
filing a new participation agreement with the Plan Administrator. Such a change
may be either an increase or a decrease and will be effective no later than the
first day of the second payroll period which begins following the receipt of the
new participation agreement. If a Participant desires to increase or decrease
the rate of payroll
4
<PAGE> 7
withholding more than one time during the participation period, he or she may
do so effective for the next Offering Period by filing a new
participation agreement with the Plan Administrator on or before the date
specified by the Plan Administrator, and if none is stated, then no later than
the first day of the Offering Period for which such change is to be effective.
SECTION 9. PLAN ACCOUNTS; PURCHASE OF SHARES.
(a) The Company will maintain a Plan Account on its books in the name
of each Participant. At the close of each pay period, the amount deducted from
the Participant's Compensation will be credited to the Participant's Plan
Account. No interest shall accrue on any amounts held in the Participant's Plan
Account.
(b) As of the last day of each Purchase Period, the amount then in the
Participant's Plan Account will be divided by the Purchase Price, and the number
of whole shares which results (subject to the limitations described in Sections
5(b), 9(c) and 15) shall be purchased from the Company with the funds in the
Participant's Plan Account. Foreign currencies will be converted to U.S. dollars
based on the foreign currency exchange rate as quoted in the Wall Street Journal
on the Purchase Date, or such other reasonable method selected by the Plan
Administrator that does not prevent the Plan from satisfying the requirements of
Section 423 of the Code. Shares representing the number of Ordinary Shares so
purchased shall be electronically delivered to a brokerage account designated by
the Plan Administrator and kept in such account pursuant to a participation
agreement between each Participant and the Company and subject to the conditions
described therein, which may include a requirement that Ordinary Shares be held
and not sold for certain time periods.
(c) In the event that the aggregate number of Ordinary Shares that all
Participants elect to purchase during a Purchase Period shall exceed the number
of shares remaining available for issuance under the Plan, then the number of
shares to which each Participant shall become entitled shall be determined by
multiplying the number of shares available for issuance by a fraction, the
numerator of which is the sum of the number of shares the Participant has
elected to purchase during that Purchase Period pursuant to Section 5, and the
denominator of which is the sum of the number of shares which all employees have
elected to purchase during that Purchase Period pursuant to Section 5. Any cash
amount remaining in the Participant's Plan Account under these circumstances
shall be refunded to the Participant.
(d) Any amount remaining in the Participant's Plan Account caused by a
surplus due to fractional shares after deducting the amount of the Purchase
Price for the number of whole shares issued to the Participant shall be carried
over in the Participant's Plan Account for the succeeding Purchase Period,
without interest. Any amount remaining in the Participant's Plan Account caused
by anything other than a surplus due to fractional shares shall be refunded to
the Participant in cash, without interest.
(e) As soon as practicable following the end of each Purchase Period,
the Company shall deliver to each Participant a Plan Account statement setting
forth the amount of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.
5
<PAGE> 8
SECTION 10. WITHDRAWAL FROM THE PLAN.
A Participant may elect to withdraw from participation in a Purchase
Period at any time up to the last day of the Purchase Period by filing the
prescribed form with the Plan Administrator. A Participant may elect to withdraw
(or not withdraw) from participation in an Offering Period at any time up to the
last day of the Offering Period by filing the prescribed form with the Plan
Administrator. As soon as practicable after a withdrawal, payroll deductions
shall cease and all amounts credited to the Participant's Plan Account will be
refunded in cash, without interest. A Participant who has withdrawn from an
Offering Period shall not be a Participant in future Offering Periods, unless he
or she again enrolls in accordance with the provisions of Section 5.
SECTION 11. TAXES.
The Participant shall make such arrangements as the Company may require
for the satisfaction of any federal, state, local or foreign tax obligations
that may arise in connection with the disposition of the Ordinary Shares
acquired under the Plan. If required by the applicable tax authority, these
arrangements may include withholding (or tendering back) of Ordinary Shares, or
withholding amounts from the Participant's compensation.
SECTION 12. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH.
(a) Termination of employment as an Eligible Employee for any reason,
including death, shall be treated as an automatic withdrawal from the Plan under
Section 10. A transfer from one Participating Company to another shall not be
treated as a termination of employment.
(b) A Participant may file a written designation of a beneficiary who
is to receive any cash from the Participant's Plan Account in the event of such
Participant's death prior to the last day of a Purchase Period. A Participant
may also file a written designation of a beneficiary who is to receive shares
and cash, if any, from the Participant's Plan Account in the event of such
Participant's death subsequent to the purchase of shares but prior to delivery
to his or her account of such shares and cash.
(c) A designation of beneficiary may be changed by the Participant at
any time by written notice. In the event of the death of a Participant in the
absence of a valid designation of a beneficiary who is living at the time of
such Participant's death, the Company shall deliver such cash and/or shares to
the executor or administrator of the estate of the Participant; or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such cash and/or shares to the
spouse or to any one or more dependents or relatives of the Participant; or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
SECTION 13. RIGHTS NOT TRANSFERABLE.
The rights or interests of any Participant in the Plan, or in any
Ordinary Shares or money to which he or she may be entitled under the Plan,
shall not be transferable by voluntary or involuntary assignment or by operation
of law, or by any other manner other than as permitted by the Code or by will or
the laws of descent and distribution. If a Participant attempts to transfer,
assign or otherwise
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encumber his or her rights or interest under the Plan, other than as
permitted by the Code or by will or the laws of descent and distribution, such
act shall be treated as an automatic withdrawal under Section 10.
SECTION 14. RECAPITALIZATION, ETC.
(a) The aggregate number of Ordinary Shares offered under the Plan, the
number and price of shares which any Participant has elected to purchase
pursuant to Section 5 and the maximum number of shares which a Participant may
elect to purchase under the Plan in any Offering Period shall be proportionately
adjusted for any increase or decrease in the number of issued Ordinary Shares
resulting from a subdivision or consolidation of shares or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
such shares effected without receipt of consideration by the Company.
(b) In the event of a dissolution or liquidation of the Company, or a
merger or consolidation to which the Company is a constituent corporation, this
Plan shall terminate unless the plan of merger, consolidation or reorganization
provides otherwise, and all amounts paid by each Participant toward the Purchase
Price of Ordinary Shares hereunder shall be refunded, without interest.
(c) The Plan shall in no event be construed to restrict in any way the
Company's right to undertake a dissolution, liquidation, merger, consolidation
or other reorganization.
SECTION 15. LIMITATION ON STOCK OWNERSHIP.
Notwithstanding any provision herein to the contrary, no Participant
shall be permitted to elect to participate in the Plan (i) if such Participant,
immediately after his or her election to participate, would own stock possessing
five percent or more of the total combined voting power or value of all classes
of stock of the Company or any parent or Subsidiary of the Company, or (ii) if
under the terms of the Plan the right of the Employee to purchase Ordinary
Shares under this Plan and all other qualified employee stock purchase plans of
the Company or its Subsidiaries would accrue at a rate that exceeds $25,000 of
the Fair Market Value of such Ordinary Shares (determined at the time such right
is granted) for each calendar year for which such right is outstanding at any
time. For purposes of this Section 15, ownership of stock shall be determined by
the attribution rules of Section 424(d) of the Code, and Participants shall be
considered to own any Ordinary Shares which they have a right to purchase under
this or any other stock plan.
SECTION 16. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of a Participating Company. Each Participating Company
reserves the right to terminate the employment of any person at any time and for
any reason.
SECTION 17. RIGHTS AS A SHAREHOLDER.
A Participant shall have no rights as a shareholder with respect to any
shares he or she may have a right to purchase under the Plan until the date of
issuance of the stock to the brokerage account designated by the Plan
Administrator for Ordinary Shares issued pursuant to the Plan.
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SECTION 18. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan
may be used by the Company for general corporate purposes, and the Company shall
not be obligated to segregate such payroll deductions in separate accounts.
SECTION 19. AMENDMENT OR TERMINATION OF THE PLAN.
The Board of Directors shall have the right to amend, modify or
terminate the Plan at any time without notice. An amendment of the Plan shall be
subject to shareholder approval only to the extent required by applicable laws,
regulations or rules. Amendments to the Plan to comply with the requirements of
a foreign country may be adopted by the Plan Administrator to the extent those
amendments do not prevent the Plan from satisfying the requirements of Section
423 of the Code.
SECTION 20. GOVERNING LAW.
The Plan shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California.
* * * *
Approved by the Board of Directors on April 18, 1999.
Approved by the Shareholders of the Company on June 8, 1999.
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EXHIBIT 10.4
COMMTOUCH SOFTWARE LTD.
1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE.
The purpose of this Plan is to offer Nonemployee Directors of
CommTouch Software Ltd. an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, by purchasing Ordinary
Shares of the Company. This Plan provides for the grant of Options to purchase
Shares. Options granted hereunder shall be "Nonstatutory Options," and shall not
include "incentive stock options" intended to qualify for treatment under
Sections 421 and 422 of the Internal Revenue Code of 1986, as amended.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the entity, either the Board or
the committee of the Board, responsible for administering this Plan, as provided
in Section 3.
(b) "AFFILIATE" means a parent or subsidiary corporation as
defined in Sections 424(e) and (f) of the Code.
(c) "ANNUAL OPTION" shall have the meaning set forth in
Section 6(b).
(d) "BOARD" shall mean the Board of Directors of the Company,
as constituted from time to time.
(e) "CHANGE IN CONTROL" shall mean the occurrence of any one
of the following:
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, an Affiliate, or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities;
(ii) the election of any director of the Company who
was not a candidate proposed by a majority of the Board in office prior to the
time of such election; or
(iii) the dissolution or liquidation (partial or
total) of the Company or a sale of assets involving 50% or more of the assets of
the Company, or any merger or reorganization of the Company, whether or not
another entity is the survivor, or other transaction
<PAGE> 2
pursuant to which the holders, as a group, of all of the shares of the Company
outstanding prior to the transaction hold, as a group, less than 50% of the
shares of the Company outstanding after the transaction.
(f) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
(g) "COMPANY" shall mean CommTouch Software Ltd., an Israeli
corporation.
(h) "DISABILITY" means permanent and total disability as
determined by the Administrator in accordance with the standards set forth in
Section 22(e)(3) of the Code.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
(j) "EXPIRATION DATE" shall mean the last day of the term of
an Option established under Section 6(e).
(k) "FAIR MARKET VALUE" means as of any given date (a) the
closing price of the Ordinary Shares as reported by the Nasdaq National Market;
(b) if the Ordinary Shares are no longer quoted on the Nasdaq National Market
but are listed on an established stock exchange or quoted on any other
established interdealer quotation system, the closing price for the Ordinary
Shares on such exchange or system, as reported in the Wall Street Journal; or
(c) if the Ordinary Shares are not traded on an exchange or quoted on the Nasdaq
National Market or a successor quotation system, the fair market value of an
Ordinary Share as determined by the Board in good faith. Such determination
shall be conclusive and binding on all persons.
(l) "INITIAL OPTION" shall have the meaning set forth in
Section 6(a).
(m) "NONEMPLOYEE DIRECTOR" shall mean any person who is a
member of the Board but is not an employee of the Company or any Affiliate of
the Company and has not been an employee of the Company or any Affiliate of the
Company at any time during the preceding 12 months. Service as a director does
not in itself constitute employment for purposes of this definition.
(n) "OPTION" shall mean a stock option granted pursuant to
this Plan. Each Option shall be a nonstatutory option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(o) "OPTION AGREEMENT" shall mean the written agreement
described in Section 6 evidencing the grant of an Option to a Nonemployee
Director and containing the terms, conditions and restrictions pertaining to
such Option.
(p) "OPTIONEE" shall mean a Nonemployee Director who holds an
Option.
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(q) "ORDINARY SHARES" shall mean the Ordinary Shares of the
Company.
(r) "PLAN" shall mean this CommTouch Software Ltd. 1999
Nonemployee Directors Stock Option Plan, as it may be amended from time to time.
(s) "SECTION" unless the context clearly indicates otherwise,
shall refer to a Section of this Plan.
(t) "SHARES" shall mean the Ordinary Shares subject to an
Option granted under this Plan.
(u) "TAX DATE" means the date defined in Section 7(c).
(v) "TERMINATION" means, for purposes of the Plan, with
respect to an Optionee, that the Optionee has ceased to be, for any reason, a
director of the Company.
3. ADMINISTRATION.
(a) ADMINISTRATOR. The Plan shall be administered by the Board
or, upon delegation by the Board, by a committee consisting of not fewer than
two non-employee directors (as such term is defined in Rule 16b-3(b)(3)(i) of
the Exchange Act) (in either case, the "Administrator"). The Administrator shall
have no authority, discretion or power to select the Nonemployee Directors who
will receive Options hereunder or to set the number of shares to be covered by
each Option granted hereunder, the exercise price of such Option, the timing of
the grant of such Option or the period within which such Option may be
exercised; provided, however, that the Administrator shall have the discretion
to change the exercise price of an outstanding option granted under the Plan or
to issue new options under the Plan with a lower exercise price in exchange for
outstanding options granted under the Plan in connection with a general
repricing by the Company of outstanding options. In connection with the
administration of the Plan, the Administrator shall have the powers possessed by
the Board. The Administrator may act only by a majority of its members. The
Administrator may delegate administrative duties to such employees of the
Company as it deems proper, so long as such delegation is not otherwise
prohibited by Rule 16b-3 under the Exchange Act. The Board at any time may
terminate the authority delegated to any committee of the Board pursuant to this
Section 3(a) and revest in the Board the administration of the Plan.
(b) ADMINISTRATOR DETERMINATIONS BINDING. Subject to the
limitations set forth in Section 3(a), the Administrator may adopt, alter and
repeal administrative rules, guidelines and practices governing the Plan as it
from time to time shall deem advisable, may interpret the terms and provisions
of the Plan, any Option and any Option Agreement and may otherwise supervise the
administration of the Plan. All decisions made by the Administrator under the
Plan shall be binding on all persons, including the Company and Optionees. No
member of the Administrator shall be liable for any action that he or she has in
good faith taken or failed to take with respect to this Plan or any Option.
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4. ELIGIBILITY.
Only Nonemployee Directors may receive Options under this
Plan.
5. SHARES SUBJECT TO PLAN.
(a) AGGREGATE NUMBER. Subject to Section 9, the total number
of Ordinary Shares reserved and available for issuance pursuant to Options under
this Plan shall be 250,000 shares. Such shares may consist, in whole or in part,
of authorized and unissued shares or shares reacquired in private transactions
or open market purchases, but all shares issued under the Plan regardless of
source shall be counted against the 250,000 share limitation. If any Option
terminates or expires without being exercised in full, the shares issuable under
such Option shall again be available for issuance in connection with other
Options. If Ordinary Shares issued pursuant to an Option are repurchased by the
Company, such Ordinary Shares shall not again be available for issuance in
connection with Options. To the extent the number of Ordinary Shares issued
pursuant to an Option is reduced to satisfy withholding tax obligations, the
number of shares withheld to satisfy the withholding tax obligations shall not
be available for later grant under the Plan.
(b) NO RIGHTS AS A SHAREHOLDER. An Optionee shall have no
rights as a shareholder with respect to any Shares covered by his or her Option
until an electronic transfer (as evidenced by the appropriate entry on the books
of the Company or its duly authorized transfer agent) of such Shares is
effected. Subject to Section 9, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions, or other rights for which the record date is prior to the date
the certificate is issued.
6. GRANT OF OPTIONS.
(a) MANDATORY INITIAL OPTION GRANTS. Subject to the terms and
conditions of this Plan, if any person who is not, and has not been in the
preceding 12 months, an officer or employee of the Company and who has not
previously been a member of the Board is elected or appointed a member of the
Board, then on the effective date of such appointment or election the Company
shall grant to such new Nonemployee Director an Option to purchase 10,000 shares
at an exercise price equal to the Fair Market Value of such Shares on the date
of such option grant. Any Option granted pursuant to this Section 6(a) shall be
referred to as an "Initial Option."
(b) MANDATORY ANNUAL OPTION GRANTS. Subject to the terms and
conditions of this Plan, on the date of the first meeting of the Board
immediately following the annual meeting of shareholders of the Company (even if
held on the same day as the meeting of shareholders) commencing in 1999, the
Company shall grant to each Nonemployee Director then in office (other than a
Nonemployee Director who received a grant under Section 6(a) on or after the
record date for such annual meeting) an Option to purchase 10,000 shares at an
exercise price equal to the Fair Market Value of such shares on the date of such
option grant; provided, however, the grant date for grants made in connection
with the annual shareholders meeting in
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1999 shall be deemed to be the first business day on which price quotations for
the Company's Ordinary Shares are available on the Nasdaq National Market and
the Fair Market Value of the Ordinary Shares on such date shall be deemed to be
the price at which Ordinary Shares were offered to the public on that day. Any
Option granted pursuant to this Section 6(b) shall be referred to as an "Annual
Option."
(c) VESTING OF INITIAL OPTION AND ANNUAL OPTION. Each Option
granted under Section 6(a) or 6(b) shall become exercisable with respect to one
fourth of the number of Shares covered by such Option three months after the
date of grant and with respect to one third of the remaining shares subject to
the Option every three months thereafter, so that the Option shall be fully
exercisable on the first anniversary of the date such Option was granted.
(d) TERM. Subject to the other provisions of this Plan, each
Option granted pursuant to this Plan shall have a term of ten years.
(e) LIMITATION ON OTHER GRANTS. The Administrator shall have
no discretion to grant Options under this Plan other than as set forth in
Sections 6(a) and 6(b).
(f) OPTION AGREEMENT. As soon as practicable after the grant
of an Option, the Optionee and the Company shall enter into a written Option
Agreement which specifies the date of grant, the number of Shares, the option
price, and the other terms and conditions applicable to the Option.
(g) TRANSFERABILITY. No Option shall be transferable except
that (I) an Option may be distributed by will or the laws of descent and
distribution; or (ii) Optionee may transfer or assign an Option to (a) any
family member or trust for the benefit of Optionee or a family member of
Optionee, or (b) any entity which is an investor in the Company and of which
Optionee is a general or limited partner or a member of senior management. The
terms of this Plan shall be binding upon the executors, administrators, heirs,
successors, assigns and transferees of the Optionee.
(h) LIMITS ON EXERCISE. Subject to the other provisions of
this Plan, an Option shall be exercisable in such amounts as are specified in
the Option Agreement.
(i) EXERCISE PROCEDURES. To the extent the right to purchase
Shares has accrued, Options may be exercised, in whole or in part, from time to
time, by written notice from the Optionee to the Company stating the number of
Shares being purchased, accompanied by payment of the exercise price for the
Shares, and other applicable amounts, as provided in Section 7.
(j) TERMINATION. In the event of Termination, Options held at
the date of Termination, to the extent then exercisable, may be exercised in
whole or in part at any time within three months after the date of Termination,
(but in no event after the Expiration Date), but not thereafter. Notwithstanding
the foregoing, if Termination is due to death or Disability, Options held at the
date of Termination, to the extent then exercisable, may be exercised in
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<PAGE> 6
whole or in part at any time within two years from the date of Termination (but
in no event after the Expiration Date) by the Optionee or by the Optionee's
guardian or legal representative in the case of Disability or in the case of
death, by the person to whom the Option is transferred by will or the laws of
descent and distribution.
7. PAYMENT AND TAXES UPON EXERCISE OF OPTIONS.
(a) PURCHASE PRICE. The purchase price of Shares issued under
this Plan shall be paid in full at the time an Option is exercised.
(b) DELIVERY OF PURCHASE PRICE. Optionees may make all or any
portion of any payment due to the Company upon exercise of an Option or with
respect to federal, state, local or foreign tax payable in connection with the
exercise of an Option, by delivery of cash or check. Exercise of an Option may
be made pursuant to a "cashless exercise/sale" procedure pursuant to which funds
to pay for exercise of the Option are delivered to the Company by a broker upon
receipt of stock from the Company, or pursuant to which Optionees obtain margin
loans from brokers to fund the exercise of the Option.
(c) TAX WITHHOLDING. The Optionee shall pay to the Company in
cash, promptly upon exercise of an Option or, if later, the date that the amount
of such obligations becomes determinable (in either case, the "Tax Date"), all
applicable federal, state, local and foreign withholding taxes that the
Administrator, in its discretion, determines will result upon exercise of an
Option or from a transfer or other disposition of the Ordinary Shares acquired
upon exercise of an Option or otherwise related to an Option or the Ordinary
Shares acquired in connection with an Option.
A person who has exercised an Option may make an election to
have the Ordinary Shares to be obtained upon exercise of the Option withheld by
the Company on behalf of the Optionee, to pay the amount of tax that the
Administrator, in its discretion, determines to be required to be withheld by
the Company.
Any Ordinary Shares tendered to or withheld by the Company will be
valued at Fair Market Value on such date. The value of the Ordinary Shares
tendered or withheld may not exceed the required federal, state, local and
foreign withholding tax obligations as computed by the Company.
8. USE OF PROCEEDS.
Proceeds from the exercise of Options pursuant to this Plan
shall be used for general corporate purposes.
9. ADJUSTMENT OF SHARES.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Ordinary Shares,
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<PAGE> 7
appropriate adjustments shall be made by the Administrator in the aggregate
number and kind of shares of stock reserved for issuance under the Plan and in
the number, kind and exercise price of shares subject to outstanding Options;
provided, however, that the number of shares subject to any Option shall always
be a whole number.
10. EFFECT OF CHANGE IN CONTROL.
In the event of a "Change in Control," any Options outstanding
as of the date such Change in Control is determined to have occurred and not
then exercisable and vested shall become fully exercisable and vested.
11. NO RIGHT TO DIRECTORSHIP.
Neither this Plan nor any Option granted hereunder shall
confer upon any Optionee any right with respect to continuation of the
Optionee's membership on the Board or shall interfere in any way with provisions
in the Company's Memorandum of Association and Articles of Association relating
to the election, appointment, terms of office, and removal of members of the
Board.
12. LEGAL REQUIREMENTS.
The Company shall not be obligated to offer or sell any Shares
upon exercise of any Option unless the Shares are at that time effectively
registered or exempt from registration under the federal securities laws and the
offer and sale of the Shares are otherwise in compliance with all applicable
securities laws and the regulations of any stock exchange on which the Company's
securities may then be listed. The Company shall have no obligation to register
the securities covered by this Plan under the federal securities laws or take
any other steps as may be necessary to enable the securities covered by this
Plan to be offered and sold under federal or other securities laws. Upon
exercising all or any portion of an Option, an Optionee may be required to
furnish representations or undertakings deemed appropriate by the Company to
enable the offer and sale of the Shares or subsequent transfers of any interest
in the Shares to comply with applicable securities laws. Certificates or records
of electronic transfers evidencing Shares acquired upon exercise of Options
shall bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan or the Option Agreements.
13. DURATION AND AMENDMENTS.
(a) DURATION. This Plan shall become effective upon the
closing of the Company's initial public offering, provided that it has been
adopted by the Board and approved by the shareholders of the Company, either by
written consent or by approval of shareholders voting at a validly called
shareholders' meeting. The Plan shall terminate automatically on the tenth
anniversary of its effective date.
(b) AMENDMENT AND TERMINATION. The Board may amend, alter or
discontinue the Plan or any Option, but no amendment, alteration or
discontinuance shall be
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<PAGE> 8
made which would impair the rights of an Optionee under an outstanding Option
without the Optionee's consent. No amendment shall require shareholder approval
except (i) an increase in the total number of shares reserved for issuance under
the Plan, (ii) to the extent required by applicable laws, rules or regulations
or (iii) to the extent that the Board otherwise concludes that shareholder
approval is advisable.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be
issued or sold under this Plan after the termination hereof, except upon
exercise of an Option granted before termination. Termination or amendment of
this Plan shall not affect any Shares previously issued and sold or any Option
previously granted under this Plan.
14. RULE 16b-3.
With respect to persons subject to Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with the applicable
conditions of Rule 16b-3 under the Exchange Act. To the extent any provision of
this Plan or action by the Administrator fails to so comply, it shall be
adjusted to comply with Rule 16b-3, to the extent permitted by law and deemed
advisable by the Administrator. It shall be the responsibility of persons
subject to Section 16 of the Exchange Act, not of the Company or the
Administrator, to comply with the requirements of Section 16 of the Exchange
Act; and neither the Company nor the Administrator shall be liable if this Plan
or any transaction under this Plan fails to comply with the applicable
conditions of Rule 16b-3, or if any such person incurs any liability under
Section 16 of the Exchange Act.
Approved by the Board of Directors on April 18, 1999.
Approved by the Shareholders of the Company on June 8, 1999, to be effective on
the date of the closing of the Company's initial public offering of its
ordinary shares.
Amended by the Board of Directors on August 9, 1999.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1996 CSI Stock Option Plan, 1999 Section
3(i) Share Option Plan, 1999 Employee Stock Purchase Plan and 1999 Nonemployee
Directors Stock Option Plan of CommTouch Software Ltd. of our report dated March
15, 1999 (except for Note 11, as to which the date is July 12, 1999) with
respect to the consolidated financial statements of CommTouch Software Ltd.
included in the Registration Statements on Form F-1 dated July 13, 1999 filed
with the Securities and Exchange Commission and Registration Statements on Form
F-1 dated October 27, 1999, as amended and declared effective on January 7, 2000
filed with the Securities and Exchange Commission.
/s/ Kost, Forer & Gabbay
KOST, FORER & GABBAY
Certified Public Accountants (Israel)
Tel-Aviv, Israel
January 19, 2000
