<PAGE>
EXHIBIT 10.29
-------------
VERISITY LTD.
(Hereafter: the "Company")
PLAN TO GRANT SHARES AND ALLOT OPTIONS TO THE COMPANY EMPLOYEES
1. Introduction
------------
The aim of this plan is to grant Company shares and/or options to the
employees and managers of the Company, its subsidiary companies and
affiliated companies (hereafter: the "Employees" or the "Employee"), in
order to create an incentive for the Employees and to make them partners in
the development and success of the Company.
The plan will be subject to receipt of all the certifications and/or
implementation of all other actions required from time to time, and will
enter into force on the date determined by the Board of Directors or the
Company, subject to receipt of the approval of the General Meeting of the
Company. In order to remove all doubt, this plan takes precedence over any
previous plan or prior undertaking, and in any case the date for the grant
for shares in pursuance of this plan shall enter into force only 30 days
from the date of the Company's notice and of the Trustee of the Assessing
Officer in pursuance of Section 102 of the Income Tax Ordinance (hereafter:
the "Date of the Grant").
It is the intention of the Company to apply to the Income Tax Authorities in
order to obtain approval of this plan, so that the plan will be operated
within the context of Section 102 of the Income Tax Ordinance, the
Regulations, Rules and Provisions that were issued on the basis thereof
(Section 102 and the said General Regulations and Provisions shall be called
hereafter - "Section 102"). At the same time, there is no guarantee that the
whole plan or part thereof will be approved by the Tax Authorities, or that
it will be in accordance with the provisions of the law from time to time.
Should there be a discrepancy between the sections of the plan, its
appendices and the agreements with Employees that are drafted within its
framework and the provisions of Section 102, the provisions of 102 shall
apply, and the necessary adaptations will be determined by the Board of
Directors of the Company, at its absolute discretion.
-1-
<PAGE>
2. Management of the Plan
----------------------
2.1 Subject to that stated in Section 2.3 and 2.4 below, this
Plan shall be managed by the Board of Directors of the Company at its
absolute discretion, or by whoever is determined by the Board of
Directors for the purpose of management of the Plan (hereafter: the
"Plan Manager"). The Board of Directors or officers of the Company
and/or the Trustee in pursuance of the Plan shall not bear personal
liability and shall not be obligated in any way towards an Employee on
account of a decision and/or actions taken concerning this Plan and/or
in connection therewith.
2.2 Without derogating from the general nature of the above, the
Board of Directors and/or the Plan Manager shall be
authorized as specified below:
2.2.1 To determine, at their absolute discretion, who are
the Employees who shall be granted shares and/or to
whom options will be allotted in pursuance of this
Plan and the number of shares and/or options to be
given to each one; to determine the date and manner
of granting the shares and/or options; to specify
terms that will not necessarily be identical for all
the Employees, for each share and /or option that the
Company grants, including the price and conditions
for receipt of the shares and/or options.
2.2.2 To determine the terms of the options including, but
without derogating from the general nature of that
stated, the exercise price of the options (the price
to be paid for the exercise shares at the time they
are allocated), the period for exercise of the
options including an extension of the period and to
determine the period, after the termination of an
employer - employee relationship as stated in Section
9.5 below, in the framework of which the Employee
shall be eligible to exercise the options. To remove
any doubt, the Board of Directors and/or the Plan
Manager may at any time extend the period for
exercise of the options by an Employee after the
termination of the employer - employee relationship
between him and the Company as stated in Section 9.5
below even after the termination of the employer -
employee relationship as stated while amending that
stated in this matter in the agreement with the
Employee and/or in this Plan.
2.2.3 To determine the obligations of the Employee towards
the Company in connection with this Plan and its
operation; to sign an
-2-
<PAGE>
agreement or agreements for the grant of shares and/or options
or any other agreement with the Employee or the Employees.
2.2.4 To determine the provisions in all that concerns the grant of
shares and/or options in installments that are allocated to
each Employee (the vesting period).
2.2.5 To alter any of the terms determined in all that is connected
with the shares and/or the options including all that is
connected with the terms determined as stated in sections
2.2.1 -2.2.5 above, providing that this will in no way
prejudice the rights of an Employee who has been granted shares
and/or allocated options as stated.
2.2.6 To determine at their absolute discretion the Trustee in
pursuance of the Plan and to replace him at any time in the
future, subject to the approval of the Income Tax Commission,
if such approval is required.
2.2.7 To freeze, terminate or cancel the whole plan or part thereof,
to interpret the Plan and its provisions, to determine
additional provisions and subsidiary plans, to specify in its
stead any other plan and to determine any other provisions and
to carry out any actions that are connected with this Plan. To
remove any doubt, the cancellation of the Plan is subject to
being coordinated with the Income Tax Commission, if such
coordination is required, and does not prejudice the rights
conferred on the Employees.
2.3 The Managing Director of the Company shall be authorized to allocate
an individual Employee shares and/or options that represent up to 1%
of the issued share capital of the Company, on the basis of full
dilution, at his sole discretion.
2.4 Despite that stated in Sections 2.1, 2.2 and 2.3 above, any resolution
of the Board of Directors of the Company or any person appointed by
the Board of Directors in the matter of this Plan, shall be subject to
the approval and veto of Mr. Yoav Hollander.
3. The Shares and Options in pursuance of the Plan
-3-
<PAGE>
The shares in pursuance of this Plan shall be ordinary shares in the
Company (above and below - the "Shares"). The options in pursuance of this
Plan shall be options to purchase ordinary shares in the Company with a
nominal value of NIS 1 each (above and below - the "Exercise Shares"). The
period for exercise of the options and the exercise price shall be
determined as stated in Section 1 above, and if the exercise period is not
determined as stated, the exercise period shall be 10 years from the time
the options are allocated to an Employee.
The maximum number of shares, including the exercise shares, that will
result from the exercise of the options in pursuance of this Plan is
1,260,000 shares each with a nominal value of NIS 1, that were allocated to
Ma'ahaz Ne'eman Ltd. and that are held in trust. This is subject to
verification because of changes in the Company equity, if there is any such
change, as stated in Section 13 below.
Should the conditions determined for the grant of shares and/or the
allocation of options to an Employee not be met for any reason whatsoever
and/or if the options allocated to an Employee are not exercised for any
reason whatsoever, the shares granted and/or which were not exercised as
stated, shall be placed at the disposal of the Plan and they may be used
otherwise, including in order to make a new grant and/or to allocate new
options to other Employees, all as stated in Section 2 above.
4. The Declarations and Undertakings of the Employee
-------------------------------------------------
Every Employee that participates in the Plan will sign the agreement and
any other or additional document and/or undertaking in the text determined
from time to time by the Board of Directors of the Company and/or the Plan
Manager (hereafter: the "Agreement"). The said Agreement will not
necessarily be identical in its text and/or its terms to agreements with
other Employees.
Without derogating in any way from the provisions of the Plan or from the
provisions of any other agreement and/or document that is signed by the
Employee on participating in this Plan, the Employee declares and confirms
as follows:
4.1 That the Plan and the Agreement take precedence over any
previous agreement, arrangement and/or understanding, whether made in
writing or orally, between him and the Company, its directors and/or its
shareholders in all that concerns the matters contained in the Plan and
concerning the shares and/or options in the Company and any such agreement,
arrangement or understanding, if there was any such agreement, arrangement
or understanding is hereby cancelled.
-4-
<PAGE>
4.2 In any event, Section 102, as is valid from time to time and the Deed
of Trust between the Company and the Trustee and the notice to the
Assessing Officer of the execution of the rightful allocation and any
additional and/or other document in connection therewith, obligate the
Employee in full and will take preference in the event of a
discrepancy in any other provision in this Plan.
4.3 That the Employee is aware and agrees that the shares in the Company
are not traded on any Stock Exchange whatsoever and that the Company
is not obligated in any way to register the Company shares and/or the
options and/or the exercise shares that are allocated to the Employee
as stated, for trading
4.4 That the Employee acknowledges that there are tax consequences in
connection with the grant of the shares and/or options. The Employee
is aware and agrees that in accordance with the provisions of the
Plan, the Employee solely will bear the taxes of any sort whatsoever,
any expenses derived therefrom, whether the provisions of Section 102
apply to the Employee or not, and the Employee shall not have, and the
Employee hereby waives any suit and/or claim that he has or that he
may have in the future against the Trustee and/or against the Company
and/or against those acting in their name and/or on their behalf that
arises from the taxation that is connected in any way with the shares
and/or the options and/or the participation of the Employee in the
Plan.
Similarly, the Employee acknowledges and agrees to that fact that
without derogating from his said obligation to pay all the taxes in
connection with the shares and/or options, the Company and/or the
Trustee may and/or are obliged to deduct tax at source from all
payments due to the Employee.
4.5 That he acknowledges that restrictions are placed on the transfer of
the shares and/or the options and inter alia as stated in Section 6, 7
and 10 below.
4.7 That he is familiar with the Company and its activities and that he
knows that the Company operates and manufactures in a sophisticated,
technology - intensive, high risk area and that there is an economic
risk in holding the Company shares. Therefore, the Employee undertakes
that he shall not make any claim against the Company, its directors,
employees or shareholders should it become clear that his investment
in
-5-
<PAGE>
the Company shares, on account of the payment of taxes that applies to
him or for any other reason whatsoever, fails.
4.8 The Employee hereby confirms and undertakes to the Company, the
Trustee, the Assessing Officer and the Income Tax Commission, in
accordance with that stated in the Income Tax Rules (Tax Relief on the
Allocation of Shares and/or Options to Employees) 5749 - 1989 and/or
any provision of law that replaces it, that he agrees that the said
arrangement in Section 102 applies to him and that he shall not demand
tax exemption according Sections 104 and 97(a) of the Income Tax
Ordinance in pursuance of Section 102. The Trustee and the Company
shall inform the Assessing Officer of this undertaking of the
Employee.
The text of the Employee's undertaking in this matter shall be signed
with the signature of the Employee on the Agreement.
4.9 That he is aware, agrees and confirms that the Plan is a flexible plan
and subject from time to time to material and/or other changes that
will be made by the Board of Directors and/or the Plan Manager and the
Employee agrees and undertakes that he will not object to any change
and/or replacement as stated, that he will sign any document that in
the opinion of the Company is required to give full effect to any
change in the Plan and that any change in the Plan or change in
connection with the Plan will obligate him as though it had been
contained in the Plan from the beginning, providing that any such
change does not prejudice the rights conferred on him.
5. The Terms of the Plan
---------------------
The following terms, unless explicitly specified otherwise in the Agreement
in respect of a particular Employee, shall apply to all the Employees who
participate in the Plan.
5.1 The Employee shall not have any right conferred on a
shareholder in the Company as long as the shares and/or exercise shares
have not been registered in his name in the Shareholders Register of the
Company, and in this matter that stated in Sections 6 and 7 below shall
apply.
5.2 The income charged to the credit of the Employee as a result of the
grant of the shares and/or options and/or exercise shares, their
transfer to his name or their sale and all that is connected with
them, shall not be
-6-
<PAGE>
considered when calculating the basis of the Employee's eligibility to
any social rights whatsoever. Without derogating from the general
nature of that stated, this income shall not be considered for the
purpose of calculating National Insurance, Directors' Insurance,
Advanced Studies Fund, Providence Funds, Severance Pay, Vacation Pay
and the like. Should the Company be obliged in pursuance of this
Agreement to take account of the above components in the income or
profit to be charged in any practical or theoretical manner to the
account of the Employee, and then the Company shall indemnify the
Employee in respect of any expense he incurs in this connection.
5.3 No provision whatsoever in this Agreement or in this Plan shall be
construed as an undertaking and/or agreement on the part of the
Company to employ the Employee for any particular period nor should
any provision in the Agreement or the Plan be construed as a
limitation of the Company's rights to terminate the employment of any
Employee at any time, at the sole discretion of the Company and
according to the Employment Agreement of each Employee and/or in law.
Therefore, inter alia, the Employee shall have no claim against the
Company because his rights in pursuance of Section 102 are likely to
be denied him on account of the termination of his Employment with the
Company as stated.
6. Vesting - Formulation of the Employees Eligibility to Shares and/or Options
---------------------------------------------------------------------------
The Employee's eligibility to shares and/or options that are allocated to
him in pursuance of this Agreement with him, shall be formulated, unless
otherwise stated in the Agreement with each Employee as is determined in
that stated above in Section 2, so that as long as any Employee is an
employee of the Company, or of its subsidiary company, the Employees rights
shall be formulated as 25% of the shares allocated to him in the Agreement
with him for each full year of his employment with the Company.
To remove any doubt, if the Employee's work with the Company is terminated
for any reason whatsoever before the end of his first year of employment
with the Company, the Employee shall not be eligible for shares and/or
options in the Company at all. If his employment with the Company is
terminated for any reason whatsoever after the end of the first year and
before the end of the fourth year, the Employee shall be entitled to shares
and/or options for the relative part according to the period during which
he was actually employed for his last "working year" subject to that stated
at the end of Section 9.2 below concerning the negation of eligibility of
an
-7-
<PAGE>
Employee who was dismissed in circumstances in which the Employee is not
eligible for severance pay or for any part thereof.
It is hereby made clear that regardless of the formulation of the
Employee's eligibility to shares and/or options as stated above, the shares
shall be blocked by the Trustee for a period of at less 24 months from the
end of the period of the Company and the Trustee's notice to the Assessing
Officer, in pursuance of the provisions of Section 102 (the "Date of
Grant").
7. Placing the Shares and/or the Options at the Disposal of the Trustee to be
--------------------------------------------------------------------------
Held by Him.
------------
7.1 The Trustee appointed as stated above by the Board of
Directors of the Company for the purposes of executing this Plan shall be
vested with all the powers in pursuance of Section 102 as well as any other
authority agreed between him and the Company in the Trust Agreement to be
drawn up between him and the Company.
7.2 The shares and/or the options and/or the exercise shares and the share
certificates in respect of the shares and the exercise shares that are
issued in the name of the Trustee, shall be deposited with him and
held by him and shall be registered in his name in the Shareholders'
Register of the Company for the period specified in section 7.4 below
which shall not be less than the period determined in pursuance of
Section 102 (hereafter: the "Blocking Period").
7.3 Unless otherwise stated in this Plan or in any other agreement, the
Trustee shall hold in trust any asset he receives in respect of the
shares and/or the options and/or the exercise shares. Should the
eligibility of any Employee be formulated in relation to particular
shares and/or options and/or exercise shares, the Trustee shall hold
any asset he receives in respect of these shares and/or options and/or
exercise shares to the benefit of the Employee and shall deem the
asset as part of those same shares and/or options and/or exercise
shares in connection with the Blocking Period in pursuance of Section
102.
7.4 Subject to that stated in Section 102, the Employee and/or his heirs
may not demand the transfer of the shares and/or options and/or
exercise shares into their possession from the Trustee before July 1,
2002 or immediately after the Company's shares have been issued to the
public, whichever is the earlier.
-8-
<PAGE>
7.5 As long as the shares and/or the exercise shares in pursuance of this
Plan are held by the Trustee or are registered in his name in the
Shareholders' Register of the Company, Ma'ahaz Ne'eman Ltd. only shall
be eligible to exercise any right of any sort whatsoever vested in the
shareholders of the Company in connection with the shares including
the right to be invited, to participate and to vote at any
Shareholders' Meeting and to appoint directors, in as far as such a
right exists. The Employee shall not be eligible to exercise any right
to approach the Trustee or the Company with any demand or request in
this matter. Ma'ahaz Ne'eman Ltd. shall be authorized whenever it so
requests by the Board of Directors of the Company to shorten the
period of advance notice for a General Meeting of the Company. Ma'ahaz
Ne'eman Ltd. shall sign each resolution of the Shareholders of the
Company in writing if instructed to do so by Mr. Yoav Hollander.
Ma'ahaz Ne'eman Ltd. will provide Mr. Yoav Hollander with a power of
attorney to vote in its name and in its stead in respect of the shares
which confer on them the said voting rights at any General Meeting in
respect of which Mr. Hollander requests such power of attorney. This
power of attorney will allow Mr. Hollander to appoint another
warrantor. If no such warrantor is appointed, Ma'ahaz Ne'eman Ltd.
shall be prevented from voting by virtue of the shares registered in
its name at the General Meeting of the Company.
In order to remove any doubt and without derogating from the
aforementioned, holders of options shall not be eligible for rights as
shareholders of the Company as long as they have not exercised the
options and as long as the exercise shares have not been allotted to
them and the consideration for them actually paid to the Company, and
on the allocation of the said exercise shares, all that stated above
in this Section shall apply to those shares.
7.6 Should at any time before the Company's shares are issued to the
public, the Company vote on an offer of rights to the shareholders
(hereafter- "Offer of Rights") and the Board of Directors of the
Company determine that the Employees are eligible to participate in
this Offer of Rights and at the same time the right to purchase the
shares offered within the framework of the Offer f Rights is conferred
on the Employees because of their holding Company shares, the Company
shall offer the Employees the right to purchase these shares in
accordance with the number of shares allocated to each Employee,
whether the Employee's right to shares has been formulated or not.
Should the Employee not exercise the right, the Trustee shall transfer
-9-
<PAGE>
the right not exercised to Mr. Yoav Hollander. The Trustee shall act
in accordance with the aforementioned so that time shall be allowed to
Mr. Hollander to exercise his right (if there is any such right) in
accordance with the schedule determined in the Company Articles of
Association. In order to remove any doubt, that stated in this Section
shall not apply to those Employees who were allotted options in
pursuance of this Plan.
In order to remove doubt, at any time at which the Employees do not
have the right to purchase shares in the Company because any such
issue is not within the framework of the Offer of Rights as stated
above in this Section, or if the Board of Directors has determined
that the Employees may not participate in such an Offer of Rights and
the Trustee, by virtue of the fact that he holds shares in the
Company, has the right to purchase shares and/or options in the
Company when offered (preemptive right) in accordance with that stated
in Articles 50 - 51 of the Articles of Association of the Company,
that stated in Section 7.5 above shall not apply and the Trustee shall
not exercise his right to purchase the shares in the Company as stated
in this framework.
7.7 The Trustee shall not exercise the right of first refusal to purchase
shares in the Company in respect of the shares registered in his name,
even if such a right is conferred on him in law, in the Articles of
Association or an agreement.
7.8 Should the Board of Directors of the Company or any person acting in
its name decide to terminate or cancel the Plan, the Trustee shall
transfer the assets he holds and that have not been allocated to an
Employee in accordance with the instructions of the Board of Directors
of the Company or whoever is authorized by the Board.
7.9 The Trustee shall not be liable to the Employee and/or to any third
party (including, but without derogating from the general nature of
that stated, the Income Tax Authorities and any other governmental or
administrative authority) in respect of any action he has taken and/or
that shall be taken concerning this Plan and its performance and all
that is connected with it or is derived therefrom. The Employee
undertakes not to make any claim against the Trustee in any manner
whatsoever or on any grounds whatsoever.
8. The Terms of the Options and Their Exercise
-------------------------------------------
-10-
<PAGE>
8.1 The options shall lapse to all intents and purposes on
December 31, 2007 unless this Plan is brought to an end before that date or
if this date is extended as stated in Section 2 above. After its lapse as
stated, the options shall be void to all intents and purposes and shall not
confer any right whatsoever on any person holding them or eligible to hold
them, before they lapsed as stated.
8.2 The right to exercise the options shall be conferred on an Employee in
installments and gradually as is determined in Section 6 above. At the
end of each of the periods determined as stated, the Employee may,
from time to time, exercise the options concerning all the shares
allocated for that period or any part thereof. In addition, during
each of the periods, it will be possible to exercise the options
concerning all the shares or part of the shares allocated for the
previous period in which the options were not exercised in full and on
condition that at the time of exercising the option, the Employee has
been employed continuously by the Company from the date of issue until
the date of exercise and/or he is within the extension period as
stated in section 2.2.2 above, subject to that stated at the end of
section 9.2 below concerning the negation of rights of an Employee who
was dismissed in circumstances in which the Employee is not eligible
to receive severance pay or any part thereof.
8.3 An Employee who wishes to exercise the option for which his
eligibility has been formulated as stated above in Section 6, and
subject to that stated in Section 8.2 above, notice in writing shall
be given to the Company, as is relevant, in the accepted text for the
matter at that time, and a copy of which the Employee may obtain from
the Company. The notice will itemize the number of shares that the
Employee wishes to exercise and the payment due will be attached, and
the manner in which it is paid, for the price for exercise of the
options, in accordance with that determined by agreement. All other
documents that the Employee is obliged to sign, as a condition for
exercising the option shall also be attached to the notice as
specified in the Plan and as decided by the Board of Directors. As a
condition for exercise of the option, the Employee shall pay the
applicable tax, if there is any such tax (including by the tax being
deducted at source by the Company).
8.4 On receipt of all the documents, certificates and payments as required
from the Employee as a condition for exercise of the option in
pursuance of this Plan and the fulfillment of all other conditions in
respect thereof in pursuance of the agreement and in law, the Trustee
shall send a notice to the Company in the text to be determined in the
-11-
<PAGE>
matter from time to time. The Company shall allocate the shares that
derive from the exercise of the option in the name of the Trustee,
shall register the Trustee in the Shareholders' Register of the
Company and shall issue the Trustee with a share certificate in the
name of the Trustee in accordance with that stated in this Plan and in
pursuance of the provisions of Section 102.
9. Termination of the Employee's Employment
----------------------------------------
9.1 Should the provisions of section 102 apply to the Plan, then
if the Employee has ceased to be an employee of the Company before the
end of the two year period determined in pursuance of the provisions of
Section 102, other than if he has ceased to be employed by the company on
account of his demise or on account of special circumstances that are not
under the control of the Employee, to the satisfaction of the
Commissioner, then the exemption determined in Section 102 shall not
apply to that Employee. In such a case, the Employee shall make
arrangements with the Tax Authorities, at his expense, in regard to all
that is connected with taxation of the shares and/or the options and pay
the applicable tax immediately, as stated in Section 102.
9.2 In the case of the termination of the Employee's employment with the
Company after the end of the first year, and providing that the date
of the termination of his employment comes into force after the end of
the blocking period in pursuance of Section 102, the Employee shall be
entitled to shares for which his eligibility has already been
formulated at the date of the termination of his employment as stated.
The aforementioned shall not apply in the case of the termination of
the employment of an Employee if in the circumstances in which he was
dismissed or if he was dismissed by the Company so that he is not
entitled in law to severance pay or any part thereof, then, the
Employee's right to any shares and/or options to which he is eligible
in pursuance of this Plan and which are registered in the name of the
Trustee including the shares and/or options for which his eligibility
has already been formulated in pursuance of Section 7 above, shall
lapse.
9.3 As concerns options that had not been exercised by the date of the
termination of the Employee's employment, the Employee may exercise
the options in accordance with the conditions to be determined as
stated in Section 2.2.2 above. In any case, and unless otherwise
determined in pursuance of Section 2.2.2 above, the exercise period,
after the termination of the employer - employee relationship shall
not be longer
-12-
<PAGE>
than 6 months in the case of the death of the employee, 30 days in the
case of termination of the employer - employee relationship for any
other reason, while in the case of the dismissal of an employee in
circumstances in which, in law, his severance pay may be negated, or
part thereof, subject to that stated at the end of Section 9,2 above
concerning the negation of the eligibility of an employee who was
dismissed in circumstances in which the Employee is not entitled to
severance pay or part thereof.
9.4 In the case of the demise of the Employee and subject to the
provisions of Section 102, shares and/or options held by the Trustee
or held directly by the Employee for which the Employee's eligibility
was formulated before his demise, shall be held by him for the heirs
of the Employee as they were held for the Employee subject to all the
provisions of this Plan and for the period of time determined for the
heirs to exercise the options as stated in Section 2.2.3 above, and
the remaining rights of the Employee to shares and/or options for
which his eligibility had not yet been formulated at the date of his
death shall lapse and shall not confer any right on his heirs.
9.5 As regards that stated above, the termination of the Employee's
employment shall be the date on which the Company or the Employee, as
is the case, informs the other party in writing of the termination of
the connection between them, even if a later date is recorded in the
notice for the termination of the employer - employee relationship,
unless another later date is determined by the Board of Directors
and/or the Plan Manager.
10. Restrictions of the Transfer of the Shares and/or the Options
-------------------------------------------------------------
Without derogating from that stated in Sections 6 and 7 above,
the Employee's rights in all that is connected with the shares and/or the
options, all or part of them, as long as the shares and/or the exercise
shares that are derived from the options have not been transferred to him
from the Trustee and registered in his name, are individual and may not be
transferred, assigned, mortgaged, subjected to a lien, charge or other
encumbrance whether voluntarily or by force of law, other than a transfer
by virtue of a will or the laws of inheritance, and no power of attorney
shall be granted in respect thereof nor deed of transfer, whether it enters
into force immediately or at a future date. To remove any doubt, the
options are not transferable in any manner whatsoever other than by virtue
of a will or the laws of inheritance, and they may be exercised solely by
the Employee
-13-
<PAGE>
or his heirs.
Any such transfer, whether made directly or indirectly, whether made to
obtain immediate effect or effect in the future shall be null and void.
In addition and without derogating from that stated above, should the Lock
Up or Market Standoff periods apply to the shares in pursuance of the
provisions of the Stock Exchange and/or the terms of issue and/or a demand
of the underwriters on an issue to the public, if there is an issue to the
public and/or the decision of the Board of Directors and/or the Plan
Manager and/or in law, the Board of Directors shall determine the extent
and the terms of the application of these Lock Up Periods, and the Employee
shall be subject to such decision.
11. Taxations, and Other Arrangements Arising from the Transfer of the Shares
-------------------------------------------------------------------------
and/or the Options to the Employee
----------------------------------
11.1 The Employee shall bear all obligations for tax, charges, compulsory
payments that are applied by the Tax Authorities (whether in Israel or
abroad) and any other compulsory payment whatever its source, in
respect of the shares and/or the options and/or the exercise shares or
dividend or any other benefit in respect thereof, in connection with
the transfer of the shares and/or the options and/or the exercise
shares to the name of the Employee and/or other charges that arise in
the name of the Employee and/or the Trustee in connection with the
Plan. The Company will deduct tax due, including deduction of tax at
source, as is compulsory according to the provisions of this Plan. If
at any stage of the execution of the Plan, any payment of tax is
demanded and the Company is not in possession of the required sums to
carry out the said deduction at source from the amount due to the
Employee from the Company, the Company may not execute that stage
and/or part of the Plan unless the Employee makes immediately
available to the Company on its demands, the sums required for making
the said payment of tax.
11.2 The Company or the Trustee may, at any time, approach the Assessing
Officer and any other foreign tax authority to obtain confirmation
concerning the amount of tax that the Company or the Employee or the
Trustee is bound to transfer in respect of the allocation of the
shares and/or the options and/or the exercise shares or any other
questions that concern the implementation of this Plan. Before the
transfer of the shares and/or the options and/or the exercise shares
to the name of the Employee, the Trustee shall obtain a confirmation
from the Assessing
-14-
<PAGE>
Officer or any other confirmation to the satisfaction of the Company
of the fact that the tax that applies in pursuance of Section 102 has
been paid and that the shares and/or the options and/or the exercise
shares may be transferred to the name of the Employee.
11.3 The Employee, if requested to do so by the Trustee or by the Company
Accountant, will furnish the Trustee with confirmation from the
Assessing Officer in the text acceptable to the Trustee, of the tax
that applies in respect of the shares and/or the options and/or the
exercise shares and that is to be transferred to the Assessing Officer
as a condition for the transfer of the shares and/or the options
and/or the exercise shares to the name of the Employee. Alternatively,
on the demand of the Trustee and in accordance therewith, the Employee
shall transfer the applicable tax directly to the Assessing Officer
and shall furnish the Trustee and the Company with confirmation from
the Assessing Officer in the accepted text of the release of the
Trustee and the Company from all liability for the payment of tax.
12. Transfer of Control
-------------------
In any instance of a transaction of transfer of control of the Company as
defined below, the Company shall approach the body acquiring control,
before the execution of the transfer of control transaction, in order to
promote the possibility that the body will accept responsibility for the
undertaking to meet the terms of the options in pursuance of this Plan, or
shall issue, in stead of the options in pursuance of this Plan that will be
cancelled as stated below, new options from that body (or of a body
affiliated to it). Should the body acquiring control not be interested in
the said possibilities on conditions that are determined to the
satisfaction of the Board of Directors and at its absolute discretion then:
12.1 In regard to the options for which the date of their eligibility has
not yet been formulated then the part of the options for which their
eligibility is formulated during the 12 months after the merger
transaction or if they represent 50% of the options for which the
eligibility had not yet been formulated at the date of the merger,
whichever is the lesser amount, so that all options that had not been
exercised on the eve of the said merger shall be cancelled and also:
12.2 The Board of Directors and/or the Plan Manager may, at their sole
discretion, cancel all the options not yet exercised on the date of
execution of the merger transaction, providing that notice is given a
reasonable period before that date to the holders of the options of
the
-15-
<PAGE>
merger transaction and of the possibility of exercising the options
for which their eligibility has been formulated, including the options
for which their eligibility has been formulated as stated above in
section 12.1, before the execution of the merger transaction.
In this matter, any transaction or business arrangement shall be deemed to
be a merger transaction for a period of 90 days in the framework of which
more than 50% of the controlling rights in the Company are transferred, or
any assets of the Company are sold or the Company merges with another while
the Company is the Company received.
13. Distribution of Dividends and Adjustments because of Changes in the Capital
---------------------------------------------------------------------------
Structure
---------
13.1 Should changes be made in the capital structure of the
Company, including but without derogating from the general nature of that
stated, changes in the exercise shares through consolidation, re-
organization, a change in the capital structure, distribution of bonus
shares, distribution of a non-cash dividend, splitting shares, a divided
on liquidation, consolidation of shares, exchange of shares, a change in
the structure of the Company or in any other way, but other than a
transfer of control of the Company in respect of which that stated in
Section 12 above shall apply, the Board of Directors and/or the Plan
Manager, at their exclusive discretion shall make the appropriate changes
in all that concerns the options or the exercise shares including
adjusting their number in order to reflect this event providing that it
shall not prejudice the rights conferred on the Employees. Should such
adjustment create fractions of shares when calculating the number of
shares subject to a particular option or that are due to a particular
Employee, they shall be rounded off to the lower or upper half unit as is
the case, in accordance with the instructions of the Board of Directors
and/or the Plan Manager.
13.2 Should bonus shares be issued by virtue of the shares
actually issued for an Employee within the framework of this Plan and
that are registered in the name of the Trustee, the bonus shares shall be
issued to the Trustee, shall be registered in his name and shall be
considered to all intents and purposes, including in all that is
connected with their subjection to the terms of the Plan and the
provisions of Section 102 as though they were the original shares by
virtue of which they were issued as long as the shares are registered in
the name of the Trustee.
-16-
<PAGE>
13.3 The eligibility of the shares actually issued to an
Employee to participate with the Ordinary Shares of the Company in a cash
dividend that is declared and distributed shall be subject to the decision
of the Board of Directors.
13.4 In the event that a cash dividend is distributed, subject
to that stated in Section 13.3 above, the dividend shall only be
distributed in respect of those shares actually allocated to an Employee
and in respect of the options exercised up until the "determining date" for
the distribution of the dividend and for the shares for which his
eligibility has been formulated, in accordance with that stated below in
Section 13.5. The Employee shall not make any claim against the Company,
its directors or shareholders if for any reason, whether it depends on the
Company or whether it depends on the Employee, the shares were not
allocated to the Employee by the determining date.
The decision of the Board of Directors of the Company to distribute a
dividend shall be sent by registered mail or by fax or by any other method
that will enable the Board of Directors to know that the notice has reached
the Employees on whom the options were conferred and who are entitled to
exercise them by the determining date, at least 7 days before the date
determined for the distribution of the dividend, or shall be delivered to
them by hand at least 48 hours before the determining date.
An Employee who according to the terms of the Plan may request
from the Trustee that he exercise the options to purchase any shares
whatsoever on his behalf by the determining date, may do so, if he actually
does so in the manner required by this Plan by the determining date. The
shares allocated in respect of the options exercised by the determining
date shall be eligible to participate in the distribution of the dividend
as stated above in this Section, subject to that stated in section 13.3
above.
13.5 A dividend concerning shares that were actually allocated
to the Employee, that are registered in the name of the Trustee and for
which his eligibility has already been formulated, shall be paid directly
to the Employee, after deducting the tax due whether at the standard rate
that applies to a dividend or whether at a higher rate, if tax is to be
deducted as stated.
The Company or the Trustee may offset and deduct at source
from any dividend declared and distributed as stated any sum that
-17-
<PAGE>
the Employee owes the Company or the Trustee as well as any sum that is
taxable, or subject to a charge or any other compulsory payment.
14. Miscellaneous
-------------
14.1 The Trustee shall not be liable to the Employee or to
any third party (including and without derogating from the general nature
of that stated, the Income Tax Authorities or any other governmental or
administrative authority) in respect of any action taken and/or that shall
be taken in connection with this Plan and its execution and all that is
connected with it or is derived from it. The Employee undertakes to
indemnify the Trustee for any such liability and/or that concerns any claim
and/or demand from any agent whatsoever, including the Tax Authorities, in
connection with this Plan.
14.2 Israeli law shall apply to this Plan and all that is
connected therewith, including the Agreement. The sole jurisdiction in
pursuance of this Plan shall be that of the competent Court of Law of the
State of Israel in Tel Aviv.
14.3 Any notice sent in pursuance of the Agreement or the
Plan shall be given in writing, and shall be deemed to have been delivered
on the date of its delivery to the Trustee by hand or by fax or 3 (three)
business days after it was dispatched by registered mail to the address of
the parties.
-18-
