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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ACCENT SOFTWARE INTERNATIONAL LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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ACCENT SOFTWARE INTERNATIONAL LTD.
28 PIERRE KOENIG STREET
P.O. BOX 53063
JERUSALEM, 91530 ISRAEL
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NOTICE OF ANNUAL GENERAL AND
EXTRAORDINARY MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
---------------------
April 30, 1998
To Our Shareholders:
You are cordially invited to attend the Annual General and Extraordinary
Meeting of Shareholders to be held May 28, 1998, beginning at 10:00 A.M., at
the offices of the Company, 28 Pierre Koenig Street, Jerusalem, Israel. the
principal items of business will be:
1. To elect the Board of Directors;
2. To increase authorized share capital of the Company by 200,000
New Israeli Shekels and the number of authorized Ordinary Shares
by 20,000,000, from 45,000,000 to 65,000,000;
3. To increase the number of options to purchase Ordinary Shares which
may be granted under the Employee Share Option Plan (1995) by 750,000,
from 1,125,000 to 1,875,000;
4. To approve the adoption of the Non-Employee Share Option Plan (1998);
5. To appoint Luboshitz, Kasierer & Co., a member firm of Arthur
Andersen, as independent auditors, and to authorize the Board of
Directors to determine their level of compensation; and
6. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Israel Companies Ordinance confers upon the shareholders of an
Israeli company limited rights to receive and deliberate with respect to the
Company's financial statements for the year ended and as of December 31,
1997. Concurrently herewith, the Company is mailing to its shareholders its
Annual Report to Shareholders which includes the audited financial statements
referred to above.
Only holders of record of the Ordinary Shares, whether directly or as
part of a Unit, at the close of business on April 28, 1998, will be entitled
to notice of and to vote at the Meeting. Please sign, date and mail the
enclosed proxy so that your shares may be represented at the Meeting if you
are unable to attend and vote in person.
By Order of the Board of Directors.
Robert Trachtenberg
SECRETARY
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ACCENT SOFTWARE INTERNATIONAL LTD.
28 PIERRE KOENIG STREET
P.O. BOX 53063
JERUSALEM, 91530 ISRAEL
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PROXY STATEMENT
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ANNUAL GENERAL AND EXTRAORDINARY MEETING OF SHAREHOLDERS
---------------------
April 30, 1998
This Proxy Statement is being furnished to shareholders of Accent
Software International Ltd., a corporation organized under the laws of the
State of Israel (the "Company"). The Board of Directors of the Company is
soliciting your proxy on the proxy card included with this proxy statement to
be voted at the Annual General and Extraordinary Meeting of Shareholders (the
"Meeting") to be held on May 28, 1998, beginning at 10:00 A.M., and at any
adjournments thereof.
At the Meeting, Shareholders will be asked:
1. To elect six (6) individuals to the Board of Directors;
2. To approve an increase in the authorized share capital of the Company by
NIS 200,000 and in the number of Ordinary Shares, par value NIS .01 per
share, of the Company (the "Ordinary Shares") by 20,000,000, from
45,000,000 to 65,000,000, by approving an amendment to the Company's
Articles of Association;
3. To approve an increase in the number of options to purchase Ordinary
Shares which may be granted under the Employee Share Option Plan (1995)
by 750,000, from 1,125,000 to 1,875,000;
4. To approve the adoption of the Non-Employee Share Option Plan (1998);
5. To appoint Luboshitz, Kasierer & Co., a member firm of Arthur Andersen,
as independent auditors to audit the Financial Statements of the Company
and its subsidiaries for the year ended December 31, 1998, and to
authorize the Board of Directors to determine their level of compensation;
and
6. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The Israel Companies Ordinance confers upon the shareholders of an
Israeli company limited rights to receive and deliberate with respect to the
Company's financial statements for the year ended and as of December 31,
1997. Concurrently herewith, the Company is mailing to its shareholders its
Annual Report to Shareholders which includes the audited financial statements
referred to above.
The Board of Directors has fixed the close of business on April 28,
1998, as the record date (the "Record Date") for the determination of the
holders of the Ordinary Shares, whether directly or as part of a Unit,
entitled to notice of and to vote at the Meeting. Each such Shareholder will
be entitled to one vote for each Ordinary Share held on all matters to come
before the Meeting and may vote in
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person or by proxy authorized in writing. At the close of business on April
28, 1998, there were 27,318,911 Ordinary Shares outstanding and entitled to
vote.
This Proxy Statement and the accompanying form of proxy are first being
sent to holders of the Ordinary Shares on or about April 30, 1998.
THE MEETING
DATE, TIME AND PLACE
The Meeting will be held on May 28, 1998, beginning at 10:00 A.M., at
the offices of the Company, 28 Pierre Koenig Street, Jerusalem, Israel.
MATTERS TO BE CONSIDERED
At the Meeting, Shareholders will be asked to consider and vote upon:
(i) the election of the Board of Directors
(See "ELECTION OF DIRECTORS");
(ii) the increase in the authorized share capital and in the number
of Ordinary Shares which are authorized and available for
issuance (See "CAPITALIZATION AMENDMENT");
(iii) the increase in the number of shares which may be granted under
the Employee Share Option Plan (1995). (See "PROPOSAL FOR
APPROVAL OF AN INCREASE IN THE TOTAL NUMBER OF OPTIONS TO
PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED UNDER THE
COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)");
(iv) the adoption of the Non-Employee Share Option Plan (1998)
(See "PROPOSAL FOR APPROVAL OF THE ADOPTION OF THE COMPANY'S
NON-EMPLOYEE SHARE OPTION PLAN (1998)"); and
(v) the appointment of independent auditors (See "APPOINTMENT OF
INDEPENDENT AUDITORS").
The Board of Directors knows of no matters that are to be brought before
the Meeting other than as set forth in the Notice of Meeting and this Proxy
Statement. If any other matters properly come before the Meeting or at any
adjournment thereof, the persons named in the enclosed form of proxy or their
substitutes will vote in accordance with their best judgment on such matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Shareholders as of the Record Date are entitled to notice of and to vote
at the Meeting. As of the Record Date, there were 27,318,911 Ordinary Shares
outstanding and entitled to vote, with each Ordinary Share entitled to one
vote. Pursuant to the Company's Articles of Association, the presence, in
person or by proxy, of two persons entitled to vote upon the business to be
transacted in the Annual General and Extraordinary Meeting, each being a
shareholder, a proxy for a shareholder or a representative of a corporate
shareholder, holding together more than 33-1/3% of the outstanding Ordinary
Shares, is necessary to constitute a quorum at the Annual General and
Extraordinary Meeting with respect to all matters apart from item (ii),
above. With respect to item (ii), above, the presence, in person or by proxy,
of two persons entitled to vote upon the business to be transacted in the
Annual General and Extraordinary Meeting, each being a shareholder, a proxy
for a shareholder or a representative of a corporate shareholder, holding
together more than 51% of the outstanding Ordinary Shares, is necessary to
constitute a quorum.
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REQUIRED VOTES
The affirmative vote of the holders of a majority of the Ordinary Shares
present and voting at the Meeting is required to approve each of the matters
upon which the Shareholders will be asked to vote apart from item (ii),
above. The affirmative vote of the holders of at least 75% of the Ordinary
Shares present and voting at the meeting is required to approve the matter
set out in item (ii), above. Under Israeli law, broker non-votes and
abstentions will have no effect on whether the requisite vote is obtained
since they do not constitute present and voting shares.
VOTING AND REVOCATION OF PROXIES
Shareholders are requested to complete, date, sign and promptly return
the accompanying form of proxy in the enclosed envelope. Ordinary Shares and
Units represented by properly executed proxies received by the Company and
not revoked will be voted at the Meeting in accordance with the instructions
contained therein. If instructions are not given, proxies will be voted FOR
the election of each nominee for director named herein, FOR the increase in
the total number of authorized Ordinary Shares, FOR the increase in the total
number of options available for grant under the Employee Share Option Plan
(1995), FOR the adoption of the Non-Employee Share Option Plan (1998), and
FOR the ratification of the selection of independent auditors and
authorization for the Board of Directors to determine their compensation.
Any proxy signed and returned by a Shareholder may be revoked at any
time before it is voted by filing with the Secretary of the Company, at the
address of the Company set forth herein, written notice of such revocation or
a duly executed proxy bearing a later date or by attending the Meeting and
voting in person. Attendance at the Meeting will not in and of itself
constitute revocation of a proxy.
PROXY SOLICITATION
The Company will bear the costs of solicitation of proxies for the
Meeting. In addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies from Shareholders by telephone,
telegram, personal interview or otherwise. Such directors, officers and
employees will not receive additional compensation, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. Brokers,
nominees, fiduciaries and other custodians have been requested to forward
soliciting material to the beneficial owners of Ordinary Shares and Units
held of record by them, and such custodians will be reimbursed for their
reasonable expenses.
INDEPENDENT AUDITORS
The Company has been advised that representatives of Luboshitz, Kasierer
& Co., a member firm of Arthur Andersen, the Company's independent auditors
for 1997, will attend the Meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
ELECTION OF DIRECTORS
Directors are to be elected to serve until the next Meeting or until
their successors are elected and qualified. Unless authority to vote is
withheld, the persons named in the enclosed form of proxy have advised that
they intend to vote FOR the six (6) nominees named and described below, all
of whom have consented to being named in this proxy statement and to serve if
elected. The Board of Directors does not expect that any of the nominees
will be unavailable for election as a director.
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However, if, by reason of an unexpected occurrence, one or more of the
nominees is not available for election, the persons named in the form of
proxy have advised that they will vote for such substitute nominees as the
Board of Directors of the Company may propose. The following information is
current and correct as of April 28, 1998.
Roger R. Cloutier, II Mr. Cloutier, 44, has served as a Director of the
Company since May 1994, and as Chairman since
November 1996. He currently serves as a Vice
President of Jacobs Investors, Inc. and IMR
General, Inc. and is a limited partner of IMR
Management Partners, L.P., the general partner
of the IMR Fund, L.P. Since February 1996,
Mr. Cloutier has also served as Executive Vice
President, Chief Financial Officer and Director
of Genmar Holdings, Inc., a power boat company.
Mr. Cloutier serves on the Executive, Audit and
Compensation Committee.
Pursuant to a Stock Purchase Agreement, dated
May 11, 1994, and amended on July 20, 1995,
between the Company, Robert Rosenschein, Jeffrey
Rosenschein, KZ International Holding Corporation,
Elliott Broidy (as successor to Accent Software
Partners), IMR and Pal-Ron Marketing, Ltd., the
signatories agreed that as long as IMR held 5%
or more of the outstanding Ordinary Shares of
the Company, they would cause shares over which
they had control to be voted in favor of the
election of at least one person nominated,
designated or approved by IMR. Mr. Cloutier
currently serves as IMR's designee to the
Company's Board of Directors.
Esther Dyson Ms. Dyson, 45, has served as a Director of the
Company since June 1996. Ms. Dyson has been
President of EDventure Holdings, Inc., a
diversified holding company which publishes
newsletters and sponsors conferences for the
software industry, for more than the past five
years. Ms. Dyson is a member of the advisory
boards of the Software Entrepreneurs Forum, the
Poynter Institute for Media Studies, the Institute
for Research on Learning and the Cyberspace Law
Institute. Ms. Dyson is a limited partner of the
Mayfield Software Fund. Ms. Dyson is also a
Director of Thinking Tools, Inc.
Ms. Dyson serves on the Executive, Audit and
Compensation Committee.
Todd A. Oseth Mr. Oseth, 36, was appointed President and Chief
Executive Officer of the Company on February 6,
1997. He also serves as Chief Executive Officer
of AgentSoft, Ltd., the Company's majority-owned
subsidiary. He has served as a Director of the
Company since February 6, 1997. Prior to joining
the Company, Mr. Oseth served as Vice President,
Business Development of Sony Information
Technologies of America. From 1989 to 1995, he
served in various senior managerial
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capacities, including two years as President of
Enhanced Memory Systems, Inc., a subsidiary of
Ramtron International Corp. He holds a B.S.
degree in Electrical Engineering and Computer
Science from the University of Minnesota and
an M.B.A. degree from the University of
St. Thomas.
Dr. Jeffrey S. Rosenschein Dr. Rosenschein, 41, was appointed Senior Vice
President, Engineering of the Company in July
1995, and prior thereto, was the Vice
President, Engineering since 1988. In
addition, he has been Chief Scientist and a
Director of the Company since its inception in
1988. Dr. Rosenschein served as Chief
Technology Officer for Intelligent Agent
Technology from February 1997 until April 9,
1998, when he ceased to be an officer and
employee of the Company. Dr. Rosenschein also
serves as the Chairman of the Board of
Directors of AgentSoft, a majority-owned
subsidiary of the Company. He is a Senior
Lecturer in Computer Science at the Hebrew
University of Jerusalem, where he has taught
since 1989. Dr. Rosenschein holds an A.B.
degree from Harvard University in Applied
Mathematics and M.Sc. and Ph.D. degrees in
Computer Science from Stanford University.
Dr. Jeffrey S. Rosenschein and Robert S.
Rosenschein are brothers.
Robert S. Rosenschein Mr. Rosenschein, 44, served as President, Chief
Executive Officer and Chairman of the Board of
Directors of the Company since its inception in
1988, until November 1996. In February 1997,
Mr. Rosenschein became the Company's Chief
Technology Officer for Language Technologies.
His full time position as an officer and
employee of the Company ceased on April 9,
1998. He holds a B.S. degree from the
Massachusetts Institute of Technology. Robert
S. Rosenschein and Dr. Jeffrey S. Rosenschein
are brothers.
Mark A. Tebbe Mr. Tebbe, 36, has served as a Director of the
Company since May 1996. He has been the
President of Lante Corporation, a Chicago-based
microcomputing consulting and integration firm,
since 1984. Mr. Tebbe is a member of the
Advisory Board of Comdex.
Mr. Tebbe serves on the Executive, Audit and
Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NAMED NOMINEES.
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CAPTILIZATION AMENDMENT
On April 23, 1998, the Board of Directors unanimously adopted a resolution
recommending that the shareholders approve an amendment to the Articles of
Association of the Company which increases the authorized share capital of
the Company by NIS 200,000 and authorizes the addition of 20,000,000
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Ordinary Shares, each with a nominal value of NIS 0.01 per share, so that the
Company's authorized share capital shall consist of 65,000,000 Ordinary
Shares (together with 10,000,000 authorized Preferred Shares).
As of April 28, 1998, the Company had 27,318,911 Ordinary Shares issued
and outstanding. It also had 5,869,913 shares reserved for issuance upon the
exercise of outstanding warrants and 1,865,079 shares reserved for issuance
upon the exercise of outstanding options. Thus, of the current authorized
number of Ordinary Shares of 45,000,000, only 9,946,097 shares remained
available for further issuance by the Company in pursuit of its legitimate
business activities.
The Company's Board of Directors believes that the increase in the number
of authorized Ordinary Shares is therefore in the best interest of the
Company and its shareholders. As the Company disclosed in its 1997 SEC Form
10-K, during 1997, the Company was required to raise funds through the
issuance of convertible securities to meet its working capital requirements.
Specifically, the Company sold $7,750,000 in convertible securities for which
it issued 15,455,469 Ordinary Shares and a total of warrants to purchase
2,537,500 Ordinary Shares at various exercise prices over a five year period.
The funds raised during 1997 are essentially exhausted and the Company is
dependent on new sources of revenue, further cost reduction initiatives, an
infusion of additional external capital, or some combination of these actions
if it is to have adequate working capital to meet its operating requirements.
Any failure on the part of the Company to attain adequate working capital
will have a material adverse impact on the Company and may cause the Company
to cease operations.
The Company has been having discussions with potential financial and
strategic investors regarding possible investments in the Company. The
Company has also entered into negotiations with its major lender and certain
other creditors to restructure its long-term debt and other liabilities,
possibly by issuing equity in exchange for all or a portion of the debt.
The proposed amendment will give the Company a sufficient number of
unreserved and unissued shares to allow the Company to pursue equity
financing transactions, strategic alliances or acquisitions, to compensate
consultants and employees, and for other transactions which the Board of
Directors believes may be in the best interest of the Company's shareholders,
including, potentially, the use of equity to satisfy the claims of the
Company's creditors. ANY UNISSUED AUTHORIZED SHARES MAY BE ISSUED IN THE
FUTURE BY THE BOARD OF DIRECTORS, WITHOUT FURTHER SHAREHOLDER APPROVAL
(EXCEPT IN THOSE SITUATIONS WHERE SHAREHOLDER APPROVAL IS REQUIRED BY
APPLICABLE LAWS, REGULATIONS, RULES OR CONTRACT), FOR SUCH CORPORATE PURPOSES
AS THE BOARD MAY DEEM IN THE BEST INTEREST OF THE COMPANY.
The increase in the authorized shares proposed by the Board is substantial
and is designed to provide flexibility to the Company. If, in the future, a
significant amount of additional shares are issued, significant dilution of
the beneficial ownership interests and/or voting power of the Company's
current shareholders will occur.
Although the Company does not currently contemplate using any of the
authorized shares for such purpose, the additional authorized shares could be
used for purposes that might be deemed to be in defense of a potential
takeover threat. For example, Ordinary Shares could be issued to persons
favoring the Board of Directors, thereby making removal of the incumbent
Board more difficult and
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making acquisition of a sufficient number of shares to accomplish a takeover
more costly. Moreover, the additional shares could be used as part of a
"rights" or "poison pill" plan to deter future takeovers.
VOTE REQUIRED
Pursuant to the terms of the Israeli Companies Ordinance, the increase
in the total number of authorized Ordinary Shares from 45,000,000 to
65,000,000 must be approved by 75% of Shares outstanding present and voting
at a duly convened meeting of the shareholders of the Company. Consequently,
the shareholders of the Company are requested to adopt the following
resolution:
RESOLVED, that the authorized share capital of the Company be increased
by NIS 200,000 and that the Articles of Association be amended to increase
the number of authorized shares by an additional 20,000,000 Ordinary Shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL FOR APPROVAL OF AN INCREASE IN THE TOTAL NUMBER OF
OPTIONS TO PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED
UNDER THE COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)
In order to attract, retain and motivate employees (including officers)
who perform for or on behalf of the Company, in May 1995, the Board of
Directors of the Company adopted, and the shareholders approved, the Employee
Share Option Plan (1995) (the "Employee Share Option Plan"). The Employee
Share Option Plan currently authorizes the granting of options to purchase up
to 1,125,000 Ordinary Shares, consisting of options intended to qualify as
"incentive stock options" within the meaning of Section 422 of the United
States Internal Revenue Code of 1986, as amended (the "Code") and options not
intended to satisfy the requirements for incentive stock options.
To date, the Company has granted options to purchase 1,118,251 Ordinary
Shares under the Employee Share Option Plan and thus only 6,749 options are
currently available to be granted thereunder. Thus, the Board of Directors
has proposed that the total number of options which may be granted under the
Employee Share Option Plan be increased by 750,000 from 1,125,000 to
1,875,000.
DESCRIPTION OF THE PLAN
The following description of the Employee Share Option Plan is qualified
in its entirety by reference to the full text of the Employee Share Option
Plan, as amended, which is attached to this Proxy Statement as Annex A.
The Employee Share Option Plan is administered by a committee of the
Board of Directors consisting of at least two directors appointed by the
Board of Directors (the "Committee"). To serve as a member of the Committee,
a director must be a "disinterested person" within the meaning of Rule 16b-3
of the Securities and Exchange Act of 1934, as amended. The Committee is
vested with complete authority to administer and interpret the Employee Share
Option Plan, including determining the persons to whom options will be
granted, the number of options to be granted and the terms of such option
grants. The current members of Committee are Roger Cloutier Esther Dyson and
Mark Tebbe.
Options granted under the Employee Share Option Plan shall be for no
more than a ten-year
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term, provided, however, that options that are intended to qualify as
incentive stock options and that are granted to an employee who on the date
of grant is a 10% shareholder in the Company or any subsidiary corporation or
parent corporation shall be for no more than a five-year term. The exercise
price of options granted under the Employee Share Option Plan is determined
by the Committee but may not be less than the fair market value of the
Ordinary Shares on the date of the grant,. In the case of options that are
intended to be incentive stock options granted to an employee who, at the
date of such grant, is a 10% shareholder in the Company or any subsidiary
corpora tion or parent corporation, the exercise price for such options may
not be less than 110% of the fair market value of the Ordinary Shares on the
date of such grant. The number of shares covered by an option granted under
the Employee Share Option Plan is subject to adjustment for stock splits,
mergers, consolidations, reorganizations and recapitalizations. Options are
non-assignable except by will or by the laws of descent and distribution.
Options which have vested may be exercised at any time until their
expiration, so long as the grantee is still employed by the Company. Should
the grantee's employment with the Company be terminated, any vested options
must be exercised within 90 days of such termination, unless otherwise
determined by the Board of Directors of the Company. If the optionee dies,
becomes disabled or retires, the right to exercise the option will be
determined by the Committee in its sole discretion. The optionee is
responsible for all personal tax consequences of the grant and the exercise
thereof. For so long as the Company is not a U.S. taxpayer, the Company
believes that no tax consequences will result to the Company in connection
with the grant or exercise of options pursuant to the Employee Share Option
Plan.
VOTE REQUIRED
Pursuant to the terms of the Employee Share Option Plan, the increase in
the total number of options which may be granted under the Employee Share
Option Plan by 750,000 from 1,125,000 to 1,875,000 must be approved by the
shareholders of the Company. Consequently, the shareholders of the Company
are requested to adopt the following resolution:
RESOLVED, that the increase of 750,000 in the number of options which
may be granted under the Company's Employee Share Option Plan (1995), from
1,1250,000 to 1,875,000, is hereby approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL FOR APPROVAL OF THE ADOPTION OF
THE COMPANY'S NON-EMPLOYEE SHARE OPTION PLAN (1998)
In order to attract and retain the services of non-employee members of
the Board of Directors and to provide them with increased motivation and
incentive, on April 23, 1998, the Board of Directors of the Company adopted,
subject to shareholder approval, the Non-Employee Share Option Plan (1998)
(the "Non-Employee Share Option Plan"). The Non-Employee Share Option Plan
is intended to replace the Non-Employee Share Option Plan (1995), previously
adopted and approved by the shareholders of the Company in May 1995, (the
"Former Plan"), and which will be formally cancelled as a result of
shareholder approval of the Non-Employee Share Option Plan. The Non-Employee
Share Option Plan shall be administered by the Committee.
To attract and retain the services of non-employee members of the Board
of Directors and provide them with increased motivation and incentive, the
Board of Directors has proposed replacing the Former Plan with the
Non-Employee Share Option Plan, as described below. The fundamental purpose
of the adoption of the Non-Employee Share Option Plan is to increase the
number of options
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granted to non-employee members of the Board of Directors, both to compensate
the current non-employee directors, who have received no compensation for
their expanded efforts on behalf of the Company beyond the automatic grants
of relatively small number of options, and to attract and retain other
potential directors who could assist the Company in important ways.
The Company has granted options to purchase 265,000 Ordinary Shares
under the Former Plan which are currently outstanding. Of these options,
90,000 are held by three non-employee directors of the Company (Roger
Cloutier, Esther Dyson and Mark Tebbe) at exercises prices ranging from $0.72
to $32.65. Provided that the shareholders approve the adoption of the
Non-Employee Share Option Plan, as described below, these three directors
have agreed to the cancellation of above-mentioned options in exchange for
new option grants as described below.
DESCRIPTION OF THE PLAN
The following description of the Non-Employee Share Option Plan is
qualified in its entirety by reference to the full text of the Non-Employee
Share Option Plan, which is attached to this Proxy Statement as Annex B.
Under the Non-Employee Share Option Plan, a non-employee who serves as a
director of the Company shall be entitled to receive options to purchase the
Company's Ordinary Shares as follows: (i) each of Cloutier, Dyson and Tebbe,
provided they are serving as a director of the Company upon the adoption of
the Non-Employee Share Option Plan, will automatically receive an initial
grant of options to purchase 35,000 Ordinary Shares, all of which shall vest
upon grant, (ii) each of all other non-employees who is serving as a director
of the Company upon the adoption of the Non-Employee Share Option Plan, will
automatically receive an initial grant of options to purchase 25,000 Ordinary
Shares, all of which shall vest six month after the date of grant, (iii) each
non-employee who becomes a member of the Board of Directors after the
adoption of the Non-Employee Share Option Plan will automatically receive an
initial grant of options to purchase 50,000 Ordinary Shares, which shall vest
as to the entire grant one year after the date of grant, and (iv) upon each
anniversary of an initial grant, each non-employee director who is still
serving as a director of the Company will automatically receive an annual
grant of options to purchase 25,000 Ordinary Shares, vesting six months after
the date of grant. Under the Non-Employee Share Option Plan, options may be
granted to any consultant of the Company.
The number of Ordinary Shares being reserved for issuance upon exercise
of options granted pursuant to the Non-Employee Share Option Plan shall be
600,000. Any change in the number of Ordinary Shares so reserved must be
approved by the shareholders.
Options granted under the Non-Employee Share Option Plan are for a
five-year term. The exercise price of options granted to non-employee
directors under the Non-Employee Share Option Plan may not be less than the
fair market value of the Ordinary Shares on the date of the grant, as
determined by the Committee. The exercise price and vesting schedule of
options granted to consultants of the Company under the Non-Employee Share
Option Plan are set at the discretion of the Committee. The number of shares
covered by an option granted under the Non-Employee Share Option Plan is
subject to adjustment for stock splits, mergers, consolidations,
reorganizations and recapitalizations. Options are non-assignable except by
will or by the laws of descent and distribution. Options which have vested
may be exercised at any time until their expiration, so long as the grantee
continues to be a director of, or consultant to, the Company. Should the
grantee's directorship or consultancy with the Company be terminated, any
vested options must be exercised within 90 days of such termination, unless
otherwise determined by the Board of Directors. If the optionee dies or
becomes disabled, the right to exercise the option, to the extent then
vested, continues for specified
10
<PAGE>
periods. The optionee is responsible for all personal tax consequences of
the grant and the exercise thereof. For so long as the Company is not a U.S.
taxpayer, the Company believes that no tax consequences will result to the
Company in connection with the grant or exercise of options pursuant to the
Non-Employee Share Option Plan.
VOTE REQUIRED
Pursuant to Israeli law, all director compensation and changes thereof
must be approved by the shareholders. Consequently, the shareholders of the
Company are requested to adopt the following resolution:
RESOLVED, that the adoption of the Company's Non-Employee Share Option
Plan (1998), as set forth in Annex B, is approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders appoint
Luboshitz, Kasierer & Co., a member firm of Arthur Andersen, certified public
accountants, as independent auditors to audit the accounts of the Company and
its subsidiaries for 1998, and to authorize the Board of Directors of the
Company to determine the level of compensation of the independent auditors.
Luboshitz, Kasierer & Co. served as the Company's independent auditors for
the year ended December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of the date of
this filing and their respective ages and positions with the Company are set
forth below. Biographical information for those individuals not included on
pages 6 and 7 is also set forth below. The officers hold office until their
successors are appointed by the Board of Directors.
<TABLE>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Todd A. Oseth 36 President, Chief Executive Officer and
Director
Robert J. Behr 47 Chief Financial Officer
Robert Trachtenberg 41 Senior Vice President, Administration
and Legal Affairs
Roger R. Cloutier, II 44 Chairman of the Board of Directors
Esther Dyson 44 Director
Dr. Jeffrey S. Rosenschein 41 Director
Robert S. Rosenschein 44 Director
Mark A. Tebbe 35 Director
</TABLE>
11
<PAGE>
ROBERT J. BEHR has been Chief Financial Officer of the Company since
March, 1997. Prior thereto, Mr. Behr was a consultant to Jacobs Management
Corporation since January, 1997. From 1995 to 1996, Mr. Behr was Corporate
Controller of AmeriData, Inc., a computer value added reseller headquartered
in Minneapolis. From 1983 to 1995, Mr. Behr held various positions within the
General Dynamics Corporation (a defense and aerospace company headquartered
in Falls Church, Virginia) including Corporate Director of Finance, Corporate
Director of Accounting and Corporate Director of Strategic Planning. He
holds a B.B.A. degree in Accounting from the University of Notre Dame and an
M.B.A. degree from Northeastern University. Mr. Behr is a Certified Public
Accountant.
ROBERT TRACHTENBERG has been Senior Vice President, Administration and
Legal Affairs since February, 1997. He joined the Company in June, 1994, as
the General Counsel and served as Vice President and General Counsel from
February, 1996. Prior to joining the Company, Mr. Trachtenberg was an
Assistant Chief in the General Litigation Division of the New York City
Corporation Counsel, where he acted as lead counsel in major federal and
state litigation on behalf of New York City. Mr. Trachtenberg graduated with
a J.D. degree from New York University School of Law in 1981 and is admitted
to practice law before the bars of the State of New York and Israel.
Apart from the shareholders' agreement described on page 6 of this proxy
pursuant to which Roger Cloutier serves as a director, there are no
arrangements or understandings between the Company's directors or executive
officers, or any other persons, pursuant to which any of the directors have
been selected as directors or any of the officers selected as officers.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
AND BOARD COMMITTEES
MEETINGS AND COMMITTEES
During 1997, the Board of Directors held six meetings and took actions
by unanimous written consent eight times. All members of the Board of
Directors attended all of the meetings of the Board, except Meldon Levine who
missed three meetings, Mark Tebbe who missed two meetings, and Esther Dyson
who missed three meetings. Mr. Levine and Mr. Broidy resigned from the Board
of Directors to pursue other personal and business commitments, effective
November 19, 1997, and December 29, 1997, respectively.
During 1997, the Board of Directors had a standing Executive Committee,
an Audit Committee and a Compensation and Share Option Committee.
The functions of the Executive Committee were to carry out the general
oversight functions of the Board of Directors, to act as a board-level
resource for the management of the Company between formal Board meetings, and
to undertake, from time to time, other tasks as were delegated to it by the
full Board. The members of the Executive Committee were Roger Cloutier, Todd
Oseth and Elliott Broidy. The Executive Committee met three times during 1997.
The functions of the Audit Committee were to recommend to the Board
independent auditors for the Company, to review the financial statements and
any transactions between the Company and interested parties, to analyze the
recommendations of the auditors, and to review internal audit procedures and
controls. The Audit Committee represented the Board of Directors in
discharging its responsibilities relating to the accounting, reporting and
financial control practices of the Company. The members of the Audit
Committee were Roger Cloutier, Elliott Broidy and Meldon Levine. The Audit
Committee met once during 1997.
12
<PAGE>
The functions of the Compensation and Share Option Committee were to
determine and review the compensation of the Company's executive officers,
and to establish and review the Company's employee benefit plans and to
present recommendations thereon to the Board. The Compensation and Share
Option Committee also had the responsibility to administer and interpret the
Company's share option plans, subject to the terms thereof, including
determining the persons to whom options will be granted, the number of
options to be granted and the terms of such options. The members of the
Compensation and Share Option Committee were Roger Cloutier, Elliott Broidy
and Esther Dyson. The Compensation and Share Option Committee met once during
1997, and took one action by unanimous written consent.
All members attended all of the meetings of such committees.
As of 1998, the three committees of the Board of Directors will be
combined into a single Executive, Audit and Compensation Committee consisting
of Roger Cloutier, Esther Dyson and Mark Tebbe. The consolidation of the
committees is consistent with the smaller size of the Board. The Executive,
Audit and Compensation Committee will be responsible for all of the functions
which were previously within the purview of the individual Executive, Audit
and Compensation and Share Option Committees.
The Board of Directors does not have a Nominating Committee. Nominees
for the Board of Directors are selected by the entire Board.
PRESENT BENEFICIAL OWNERSHIP OF ORDINARY SHARES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information with respect to the beneficial
ownership of Ordinary Shares as of April 28, 1998 by (i) each person who, to
the knowledge of the Company, is the beneficial owner of more than 5% of the
outstanding Ordinary Shares and Units (the Company's only voting securities),
(ii) each director and named executive officer of the Company and (iii) all
executive officers and directors of the Company as a group. As of April 28,
1998, there were 27,318,911 Ordinary Shares (including 1,800,000 Ordinary
Shares that are part of Units).
<TABLE>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
------------------------
NAME OF BENEFICIAL OWNER(1)(2) NUMBER PERCENT
- ------------------------------ ------ -------
<S> <C> <C>
Group consisting of IMR Investments V.O.F.
and IMR Fund, L.P......................... 2,894,705(3) 10.4%
St. Michielshaam 50
Brussels 1040, Belgium
Robert S. Rosenschein....................... 629,000(4) 2.3%
Dr. Jeffrey Rosenschein..................... 530,196(5) 2.0%
Todd A. Oseth............................... 116,000(6) 0.4%
2864 South Circle Drive, Suite 340
13
<PAGE>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
------------------------
NAME OF BENEFICIAL OWNER(1)(2) NUMBER PERCENT
- ------------------------------ ------ -------
Colorado Springs, Colorado 80906
Roger R. Cloutier, II....................... 31,500(7) 0.1%
100 South Fifth Street, Suite 2500
Minneapolis, Minnesota 55402
Mark A. Tebbe............................... 27,000(8) 0.1%
161 North Clark Street, Suite 4900
Chicago, Illinois 60601
Esther Dyson................................ 27,000(9) 0.1%
Edventure Holdings, Inc.
104 Fifth Avenue
New York, New York 10011
Robert J. Behr.............................. 21,667(10) 0.1%
2864 South Circle Drive, Suite 340
Colorado Springs, Colorado 80906
Robert Trachtenberg......................... 18,000(11) 0.1%
All Executive Officers and Directors as a
Group (8 persons).......................... 1,400,363(12) 5.0%
</TABLE>
- -------------------
(1) Unless otherwise indicated the address of each beneficial owner identified
is 28 Pierre Koenig Street, Jerusalem 91530, Israel.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all Ordinary
Shares beneficially owned by them. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days of April 28, 1998 have been exercised.
(3) Includes warrants to purchase an aggregate of 456,750 Ordinary Shares.
(4) Includes options to purchase 109,875 Ordinary Shares and warrants to
purchase 41,875 Ordinary Shares.
(5) Includes options to purchase 102,750 Ordinary Shares and warrants to
purchase 24,375 Ordinary Shares.
(6) Includes options to purchase 100,000 Ordinary Shares.
(7) Includes options to purchase 31,500 Ordinary Shares. Does not include
options that are the subject of the proposal to approve an option grant to
certain non-employee directors referred to earlier in this Proxy Statement.
Roger R. Cloutier, II is a Vice President of IMR General, Inc., one of the
partners of IMR Investments and the general partner of IMR Management
Partners, L.P. which, in turn, is the general partner of IMR. Mr.
Cloutier disclaims beneficial ownership of the equity securities owned by
IMR and IMR Investments.
(8) Includes options to purchase 27,000 Ordinary Shares. Does not include
options that are the subject of the proposal to approve an option grant to
certain non-employee directors referred to earlier in this Proxy Statement.
(9) Includes options to purchase 27,000 Ordinary Shares. Does not include
options that are the
14
<PAGE>
subject of the proposal to approve an option grant to certain non-employee
directors referred to earlier in this Proxy Statement.
(10) Includes options to purchase 16,667 Ordinary Shares.
(11) Includes options to purchase 17,500 Ordinary Shares.
(12) Includes options to purchase 432,292 Ordinary Shares and warrants to
purchase 66,250 Ordinary Shares.
As of April 28, 1998, Cede & Co. held of record 23,750,032 Ordinary
Shares and Units (approximately 87% of the total number of Ordinary Shares
outstanding including Ordinary Shares which are part of Units). Cede & Co.
held such shares as a nominee for broker-dealer members of The Depository
Trust Company, which conducts clearing and settlement operations for
securities transactions involving its members.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information in respect to the
compensation of the Chief Executive Officer and the Company's four most
highly compensated executive officers who had annual compensation in 1997 in
excess of $100,000.
<TABLE>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
---- ------ ----- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Todd A. Oseth 1997 $181,153 $ - $ 0 350,000 $102,905(2)
President & CEO
Robert S. Rosenschein (3) 1997 $130,446 $ - $15,966 - $ -
Former Chief 1996 $120,511 - $28,443 - -
Technology Officer 1995 75,744 - 16,805 90,000 -
(Languages)
Dr. Jeffrey S. Rosenschein (3) 1997 $118,870 $15,255
Former Chief Technology 1996 106,067 - 24,219 - -
Officer (Intelligent Agents) 1995 56,604 - 12,919 45,000 -
Herbert Zlotogorski (3) 1997 $118,870 $15,255
Former Senior Vice 1996 107,484 - 25,041 - -
President 1995 78,155 - 17,310 45,000 -
Moshe Kranc (4) 1997 $124,316 $15,990 65,000
Former Senior Vice 1996 19,623 2,518
President
</TABLE>
(1) In the case of Messrs. Rosenschein, Kranc, and Zlotogorski and Dr.
Rosenschein, amounts reported as "Other Annual Compensation" represent
contributions made by the Company into a Continuing Education Fund (similar
to a deferred compensation account in the United States) and a pension fund.
(2) The amount of "All Other Compensation" for Mr. Oseth is reimbursement of
expenses associated with the relocation of his household, in accordance with
his employment agreement.
15
<PAGE>
(3) Messrs. Rosenschein and Zlotogorski and Dr. Rosenschein ceased their
employment as officers and employees of the Company on April 9, 1998.
(4) Mr. Kranc ceased his employment as an officer and employee of the Company
on March 31, 1998. In addition, his salary and other annual compensation
for 1996 reflect his start date of November 1, 1996.
The following table summarizes for each of the named executive
officers, the total number of unexercised outstanding options to purchase
Ordinary Shares as of December 31, 1997, and the aggregate dollar value of
unexercised in-the-money options to purchase Ordinary Shares, if any, held by
them at December 31, 1997. The value of unexercised in-the-money options at
fiscal year-end is the difference between the exercise price of such options
and the market value of the underlying Ordinary Shares at the close of
business on December 31, 1997, which was $0.4375 per share. These values have
not been, and may never be, realized, as these options have not been, and may
never be, exercised. Actual gains, if any, upon exercise will depend on the
market value of the Ordinary Shares at the time of any such exercise of
options. None of the named executive officers exercised any options to
purchase Ordinary Shares in 1997.
<TABLE>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END FISCAL YEAR-END
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Todd A. Oseth 0 350,000 $0 $0
Robert S. Rosenschein 109,875 30,000 9,850 0
Dr. Jeffrey S. Rosenschein 102,750 15,000 8,443 0
Herbert Zlotogorski 127,500 15,000 13,331 0
Moshe Kranc 13,333 51,667 0 0
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Todd A. Oseth for a
three-year term beginning on February 6, 1997, which is terminable upon three
months notice at the option of the Company. The agreement provides that Mr.
Oseth will receive an annual salary of $200,000, together with employee
benefits granted by the Company to its senior managerial personnel. The
agreement contains provisions prohibiting Mr. Oseth from competing with the
Company for a two-year period following termination of employment and
requiring him not to disclose confidential or proprietary information of the
Company for a six-year period following termination of employment.
The Company also had employment agreements with each of Messrs. Robert
S. Rosenschein, Herbert Zlotogorski and Dr. Jeffrey Rosenschein. Each of
these agreements was for a three-year term which commenced on July 26, 1995,
but each agreement contained a provision permitting early termination. Each
of the agreements was terminated on April 9, 1998. The Company also had an
employment agreement with Mr. Kranc, which was terminated on March 31, 1998.
All four of these agreements contains provisions prohibiting competition with
the Company for a two-year period following termination of employment and the
disclosure of confidential or proprietary information of the Company for a
six-year period following termination of employment.
In connection with the formation of AgentSoft, a wholly-owned subsidiary
of the Company, the Company agreed to cause AgentSoft to grant options with
respect to ordinary shares of AgentSoft to certain persons involved in the
formation and ongoing business of AgentSoft, including
16
<PAGE>
Dr. Rosenschein. On March 14, 1996, Dr. Rosenschein was granted options to
purchase up to 800 ordinary shares of AgentSoft (8% of the currently
outstanding shares on a fully diluted basis) at an exercise price equal to
NIS (New Israel Shekel) 30 per share. Such options will vest over a three
year period which commenced one year from the date of grant, and will be
subject to Dr. Rosenschein's continued service to AgentSoft.
COMPENSATION OF DIRECTORS
All Directors hold office until the next annual meeting of shareholders
and the election and qualification of their successors. Directors receive no
cash compensation for serving on the Board of Directors other than
reimbursement of reasonable expenses incurred in attending meetings. The
Company has also agreed to reimburse the current non-employee directors for
their reasonable out-of-pocket expenses incurred in performing various
services on behalf of the Company.
In addition, the Company has granted to its non-employee directors
options to purchase Ordinary Shares pursuant to the Company's Non-Employee
Share Option Plan (1995), and will continue to grant such options under the
Non-Employee Share Option Plan (1998), provided it is approved by the
Shareholders hereby. Under the Non-Employee Share Option Plan (1995), (i)
each non-employee who served as a director of the Company upon adoption of
the Non-Employee Share Plan automatically received an initial grant of
options to purchase 22,500 Ordinary Shares, of which 11,250 vested upon grant
and 11,250 vested one year after the date of grant (ii) each non-employee who
became a member of the Board of Directors after the adoption of the
Non-Employee Share Option Plan (1995) automatically received an initial grant
of options to purchase 22,500 Ordinary Shares, vesting one year from the date
of grant and (iii) upon each anniversary of an initial grant, each
non-employee who served as a director of the Company automatically received
an annual grant of options to purchase 4,500 Ordinary Shares, vesting six
months after the date of grant. The terms of the proposed Non-Employee Share
Option Plan (1998) are described above in "PROPOSAL FOR APPROVAL OF THE
ADOPTION OF THE COMPANY'S NON-EMPLOYEE SHARE OPTION PLAN (1998)". Options
granted under either Non-Employee Share Option Plan are for a five-year term.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1997, IMR, L.P., a 5% shareholder and the employer of
Roger Cloutier, the Chairman of the Board of Directors, provided a short-term
loan to the Company in the amount of $140,000. The proceeds from the
transaction were used by the Company to meet working capital requirements
while it awaited the closure of a financing transaction with outside
investors. The entire amount of the loan, including interest which accrued at
the rate of 12% per annum, was repaid prior to December 31, 1997.
The Company believes that the transaction referred to above was on terms
no less favorable to the Company than terms that could have been obtained
from unrelated third parties. Any future transactions between the Company and
affiliated parties will be approved by a majority of the independent and
disinterested directors and, under certain circumstances, by the audit
committee or the shareholders, and will be on terms no less favorable than
those that could have been obtained from unrelated third parties.
17
<PAGE>
REPORT OF THE COMPENSATION
AND SHARE OPTION COMMITTEE OF THE BOARD OF DIRECTORS
During 1997, the Compensation and Share Option Committee of the Board of
Directors was composed of Roger R. Cloutier, Elliott Broidy and Esther Dyson,
all independent outside directors. The Compensation and Share Option
Committee was responsible for overseeing and administering executive
compensation decisions, for administering the Company's Employee Share Option
Plans, and for making option grants to employees of the Company thereunder.
As of 1998, the duties and responsibilities of the Compensation and Share
Option Committee have been assumed by a combined Executive, Audit and
Compensation Committee whose current members are Roger R. Cloutier, Esther
Dyson and Mark Tebbe (the "Committee").
Executive compensation decisions are made by the Committee and are
designed to serve the interest of the Company and its shareholders and to
encourage and reward management initiative and good performance.
Specifically, executive compensation decisions are made to:
(i) implement compensation practices which allow the Company to
attract and retain highly qualified executives and maintain a
competitive position in the executive marketplace with employers of
comparable size and in similar lines of business;
(ii) enhance the compensation potential of executives who are in the
best position to contribute to the development and success of the
Company by providing the flexibility to compensate individual
performance; and
(iii) directly align the interests of the executives with the
long-term interest of the shareholders and the Company through
compensation opportunities in the form of share option grants vesting
over a three-year period.
These objectives are met through a combination of base salary,
annual cash incentive awards based upon the annual operating performance of
the Company, and long-term incentive opportunities which, to date, have been
in the form of incentive share option grants.
SALARY
The Committee considers, on an annual basis, salary for the Company's
executive officers, including those named in the Summary Compensation Table.
Any salary adjustments are designed to reflect internal comparability and
organizational considerations, as well as competitive data provided by
independent external information.
INCENTIVE AWARDS
Executive officers are eligible for cash awards annually based upon
financial and non-financial results. For the year ended December 31, 1997,
no cash incentive awards were granted. Any cash incentive awards during 1998
will be based upon pre-established performance targets and objectives.
SHARE OPTION GRANTS
Executive officers may receive grants of options pursuant to the
Company's Employee Share Option Plan (1995), which has already been described
earlier in this proxy statement. See "PROPOSAL FOR AN INCREASE IN THE TOTAL
NUMBER OF OPTIONS TO PURCHASE ORDINARY SHARES WHICH MAY BE GRANTED UNDER THE
COMPANY'S EMPLOYEE SHARE OPTION PLAN (1995)".
18
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1997, Todd Oseth received annual compensation as President and
Chief Executive Officer, pursuant to the terms of an employment agreement, as
set forth in the Summary Compensation Table.
THE COMMITTEE
Roger R. Cloutier II
Esther Dyson
Mark Tebbe
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Cloutier and Ms. Dyson each served as a member of the Compensation
and Share Option Committee. Neither Mr. Cloutier nor Ms. Dyson served as a
member of the compensation committee of another entity so as to create any
compensation committee interlock or served as an officer of the Company or
any of its subsidiaries so as to create any insider participation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Executive officers, directors and
greater than 10% beneficial shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely upon a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers,
directors and greater than 10% beneficial shareholders, the Company believes
that during the year ended December 31, 1997, all persons subject to the
reporting requirements of Section 16(a) filed the required reports on a
timely basis.
SHAREHOLDER RETURN PERFORMANCE GRAPH**
The following graph compares the cumulative total shareholder return of
the Ordinary Shares against the cumulative total return of the Russell 2000
Index and the Russell 2000 Technology Index for the period commencing as of
the close of trading on July 20, 1995 (the effective date of the registration
of the Ordinary Shares under Section 12 of the Exchange Act). As the
Ordinary Shares began trading on July 21, 1995, the price of the Ordinary
Shares in the graph below as of the close of trading on July 20, 1995 is
assumed to be the initial public offering price. The data were furnished by
The Bloomberg News Service.
COMPARISON OF TOTAL RETURN OF THE COMPANY, RUSSELL 2000 INDEX AND RUSSELL 2000
- ----------------------------
* The disclosure contained in this section of the Proxy Statement is not
incorporated by reference into any prior filings by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporated
future filings or portions thereof (including this Proxy Statement or the
"Executive Compensation" section of this Proxy Statement).
19
<PAGE>
The graph assumes that $100 was invested July 20, 1995 in each of the
Ordinary Shares, the Russell 2000 Index and the Russell 2000 Technology Index
and that all dividends, if any, were reinvested. Figures for the Company
have been restated to show the effect of the 3 for 2 stock split in June,
1996.
The following chart is presented in accordance with the requirements of
the U.S. securities laws. Shareholders are cautioned against drawing any
conclusion from the data contained therein, as past results are not
necessarily indicative of future performance. This chart in no way reflects
the Company's forecast of future financial performance.
<TABLE>
RUSSELL RUSSELL
ACCENT 2000 TECHNOLOGY
DATE INDEX INDEX INDEX
- ---- ------ ------- ----------
<S> <C> <C> <C>
7/20/95 100.0 100.0 100.0
7/31/95 122.7 101.6 112.3
8/31/95 129.6 104.9 111.8
9/30/95 143.2 108.4 115.3
10/31/95 131.8 104.4 111.3
11/30/95 238.6 105.2 117.9
12/31/95 213.7 108.3 115.9
1/31/96 218.2 107.4 110.5
2/29/96 309.1 111.7 118.5
3/31/96 350.0 113.5 117.1
4/30/96 400.0 117.4 130.7
5/31/96 433.0 123.7 138.5
6/30/96 419.3 122.9 124.5
7/31/96 209.7 112.7 109.2
8/31/96 175.6 114.2 117.4
9/30/96 187.5 118.2 126.5
10/31/96 107.4 120.2 123.4
11/30/96 110.8 120.4 129.9
12/31/96 86.9 124.1 131.2
1/31/97 101.4 127.4 134.8
2/28/97 56.3 127.4 122.7
3/31/97 29.8 124.4 111.6
4/30/97 25.6 118.4 112.8
5/31/97 28.1 127.1 134.3
6/30/97 23.4 135.6 135.1
7/31/97 21.3 140.5 145.9
8/31/97 34.1 144.7 151.2
9/30/97 36.2 153.7 154.7
10/31/97 32.0 157.4 144.4
11/30/97 23.4 150.7 141.4
12/31/97 6.0 149.1 137.9
</TABLE>
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders is being furnished
to shareholders on or about April 30, 1998, with this Proxy Statement.
PROPOSALS BY SHAREHOLDERS
Proposals that Shareholders wish to include in the Company's Proxy
Statement and form of proxy for presentation at the Company's 1999 Annual
Meeting of Shareholders that meet the requirements of the Securities and
Exchange Commission relating to shareholders' proposals must be received by
the Company at 28 Pierre Koenig Street, P.O. Box 53063, Jerusalem, 91530
Israel, Attention: Robert Trachtenberg, Secretary, no later than December
31, 1998.
By Order of the Board of Directors
Robert Trachtenberg
SECRETARY
20
<PAGE>
ANNEX A
EMPLOYEE SHARE OPTION PLAN (1995)
A. NAME AND PURPOSE
1. NAME: This plan, as amended from time to time, shall be known as
the Accent Software International Ltd. Employee Share Option Plan (1995) (the
"Plan").
1. PURPOSE: The purpose and intent of the Plan is to provide incentives to
employees of Accent Software International Ltd. (the "Company") or of any parent
corporation or subsidiary corporation of the Company (each as defined in Section
424 of the Internal Revenue Code of 1986, as amended (the "Code"))
("Affiliates") now existing or subsequently formed or acquired by providing them
with opportunities to purchase shares in the Company, pursuant to the Plan that
was approved by the Board of Directors of the Company.
B. GENERAL TERMS AND CONDITIONS OF THE PLAN
3. ADMINISTRATION:
3.1 The Plan will be administered by a Share Option Committee (the
"Committee"), which will consist of such number of Directors of the Company (not
less than two (2) in number), as may be fixed from time to time by the Board of
Directors of the Company. The Board of Directors shall appoint the members of
the Committee, may from time to time remove members from, or add members to, the
Committee and shall fill vacancies in the Committee however caused. All members
of the Committee shall be disinterested persons within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
3.2 The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it shall determine. Actions
at a meeting of the Committee at which a majority of its members are present or
acts reduced to or approved in writing by all members of the Committee, shall be
the valid acts of the Committee. The Committee may appoint a Secretary, who
shall keep records of its meetings and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
3.3 Subject to the general terms and conditions of this Plan, the
Committee shall have full authority in its discretion, from time to time and at
any time, to determine (i) the persons to whom Option Awards (as hereinafter
defined) shall be granted ("Grantees"), (ii) the number of shares to be covered
by each Option Award, (iii) the time or times at which the same shall be
granted, (iv) the schedule and conditions on which such Option Awards may be
exercised and on which such shares shall be paid for, and/or (v) any other
matter which is necessary or desirable for, or incidental to, the administration
of the Plan. In determining the number of shares covered by the Option Awards
to be granted to each Grantee, the Committee shall
<PAGE>
consider, among other things, the Grantee's salary and the duration of the
Grantee's employment by the Company.
3.4 The Committee may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem best. No member of the Board of
Directors or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option Award granted
thereunder.
3.5 The interpretation and construction by the Committee of any
provision of the Plan or of any Option Award thereunder shall be final and
conclusive unless otherwise determined by the Board of Directors.
4. ELIGIBLE GRANTEES:
4.1 No Option Award may be granted pursuant to this Plan to any person
serving as a member of the Committee at the time of the grant.
4.2 Subject to this limitation and any restriction imposed by applicable
law, Option Awards may be granted to any officer, key employee or other employee
of the Company or an Affiliate, whether or not a Director of the Company or
Affiliate ("Employee"). The grant of an Option Award to a Grantee hereunder,
shall neither entitle such Grantee to participate, nor disqualify him from
participating, in any other grant of options pursuant to this Plan or any other
share incentive or share option plan of the Company or any of its subsidiaries.
5. TRUSTEE: The Option Awards and/or shares in the Company which will
be issued upon the exercise of the Option Awards may be held in trust, by a
trustee (the "Trustee"). The Trustee shall hold the same pursuant to the
Company's instructions from time to time. The Trustee shall not use the voting
rights vested in such shares and shall not exercise such rights in any way
whatsoever, except in cases when, at its discretion and after consulting with
the Committee, the Trustee believes that the said rights should be exercised for
the protection of the Grantees as a minority among the Company's shareholders.
6. RESERVED SHARES: The Company has reserved 500,000 authorized but
unissued Ordinary Shares (nominal value NIS 0.01 per share) of the Company for
purposes of the Plan, subject to adjustment as provided in paragraph 11 hereof.
Any shares under the Plan, in respect of which the right hereunder of a Grantee
to purchase the same shall for any reason terminate, expire or otherwise cease
to exist, shall again be available for grant through Option Awards under the
Plan.
7. OPTION AWARDS:
7.1 The Committee in its discretion may award to Grantees options to
purchase shares in the Company available under the Plan ("Option Awards"). The
Plan is intended to be a Section 102 Employee Option Plan within the meaning of
the Israel
<PAGE>
Income Tax Ordinance (New Version). The Option Awards granted under the Plan
are intended to be either incentive share options ("Incentive Options") within
the meaning of Section 422 of the Code, or options ("Non-Qualified Options").
The Company makes no warranty, however, as to the qualification of any Option
Award as an Incentive Option. Option Awards may be granted at any time after
this Plan has been approved by the Board of Directors of the Company (or prior
to this Plan being so approved, provided that the grant of such Option Awards is
made subject to such approval) and the shares reserved for the Plan effectively
created. The date of grant of each Option Award shall be the date specified by
the Committee at the time such award is made.
7.2 The instrument granting an Option Award shall state, inter alia, the
number of shares covered thereby, the dates when it may be exercised (subject to
Section 9.1), the option price, the schedule on which such shares may be paid
for and such other terms and conditions as the Committee at its discretion may
prescribe, provided that they are consistent with this Plan.
8. OPTION PRICES:
8.1 The price per share covered by each Option Award shall be 100% of
the fair market value of each share as determined by the Committee on the date
of grant, or such other percentage as determined by the Committee; PROVIDED,
HOWEVER, that in the case of an Incentive Option granted to an Employee who, at
the time such Incentive Option is granted, owns shares possessing more than ten
percent (10%) of the total combined voting power of all classes of shares of the
Company or any subsidiary corporation or parent corporation, the purchase price
for each share shall be not less than one hundred ten percent (110%) of the fair
market value per share at the date the Option Award is granted. In determining
the share ownership of an Employee for any purpose under the Plan, the rules of
Section 424(d) of the Code shall be applied, and the Committee may rely on
representations of fact made to it by the Employee and believed by it to be
true..
9. EXERCISE OF OPTION AWARD:
9.1 Option Awards shall be exercisable pursuant to the terms under which
they were awarded and subject to the terms and conditions of this Plan;
PROVIDED, HOWEVER, that in no event shall an Incentive Option be exercisable
after the expiration of ten (10) years from the date such Option Award is
granted; PROVIDED, FURTHER, that in the case of an Incentive Option granted to a
person who, at the time such Incentive Option is granted, owns shares possessing
more than ten percent (10%) of the total combined voting power of all classes of
shares of the Company or of any subsidiary corporation or parent corporation of
the Company, such Incentive Option shall not be exercisable after the expiration
of five (5) years from the date such Incentive Option is granted.
<PAGE>
9.2 An Option Award, or any part thereof, shall be exercisable by the
Grantee's signing and returning to the Company at its principal office (and to
the Trustee, where applicable), a "Notice of Exercise" and a Share Incentive
Agreement (the "Agreement") in such form and substance as may be prescribed by
the Committee from time to time.
9.3 Anything herein to the contrary notwithstanding, but without
derogating from the provisions of paragraph 10 hereof, if any Option Award, or
any part thereof, has not been exercised and the shares covered thereby not paid
for within ten (10) years after the date of grant (or any other period set forth
in the instrument granting such Option Award pursuant to Section 7), such Option
Award, or such part thereof, and the right to acquire such shares shall
terminate, all interests and rights of the Grantee in and to the same shall
expire, and, in the event that in connection therewith any shares are held in
trust as aforesaid, such trust shall expire and the Trustee shall thereafter
hold such shares in an unallocated pool until instructed by the Company that
some or all of such shares are again to be held in trust for one or more
Grantees.
9.4 Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of shares for which Incentive Options (under all
share option plans of the Company and of any parent corporation or subsidiary
corporation of the Company) are exercisable for the first time by an Employee
during any calendar year exceeds one hundred thousand dollars ($100,000), such
Option Awards shall be treated as Non-Qualified Options. For purposes of this
limitation, (a) the fair market value of shares is determined as of the time the
Option Award is granted and (b) options will be taken into account in the order
in which they were granted.
9.5 Each payment for shares under an Option Award shall be in respect of
a whole number of shares, shall be effected in cash or by a cashier's or
certified check payable to the order of the Company, or such other method of
payment acceptable to the Company as determined by the Committee, and shall be
accompanied by a notice stating the number of shares being paid for thereby.
10. TERMINATION OF EMPLOYMENT:
10.1 IN GENERAL: Subject to the provisions of paragraph 10.2 hereof, if
a Grantee should, for any reason, cease to be employed by the Company, all of
his rights, if any, in respect of all Option Awards granted to him under the
Plan which are not yet exercisable on the date of the cessation of employment
shall terminate and, unless otherwise determined by the Board of Directors of
the Company, all of his rights in respect of such Option Awards which are
exercisable on the date of the cessation of employment, but are not exercised
within 90 days after such cessation of employment, shall terminate upon the
expiration of such 90 day period. In the event of resignation or discharge of a
Grantee from the employ of the Company or a subsidiary thereof, his or her
employment shall, for the purposes of this paragraph 10.1, be deemed to have
ceased upon the delivery to the Company of notice of resignation or the delivery
to the
<PAGE>
employee of notice of discharge, as the case may be, irrespective of the
effective date of such resignation or discharge. In the event the employment of
a Grantee is terminated by the Company for cause, such Grantee shall not be
entitled to exercise the Option Awards subsequent to the time of delivery of the
notice of discharge.
10.2 DEATH, DISABILITY, RETIREMENt: Anything herein to the contrary
notwithstanding: If a Grantee should die, or if a Grantee is unable to continue
to be employed by the Company by reason of becoming incapacitated while in the
employ of the Company as a result of an accident or illness or other cause which
is approved by the Committee, or if a Grantee should retire, such Grantee shall,
subject to approval of the Committee (which shall not be unreasonably withheld),
continue to enjoy rights under the Plan on such terms and conditions as the
Committee in its discretion may determine.
11. ADJUSTMENTS: Upon the happening of any of the following described
events, a Grantee's rights to purchase shares under the Plan shall be adjusted
as hereinafter provided;
11.1 In the event the Ordinary Shares of the Company shall be subdivided
or combined into a greater or smaller number of shares or if, upon a merger,
consolidation, reorganization, recapitalization or the like, the Ordinary Shares
of the Company shall be exchanged for other securities of the Company or of
another corporation, each Grantee shall be entitled, subject to the conditions
herein stated, to purchase such number of Ordinary Shares or amount of other
securities of the Company or such other corporation as were exchangeable for the
number of Ordinary Shares of the Company which such Grantee would have been
entitled to purchase except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision, combination
or exchange.
11.2 In the event that the Company shall issue any of its Ordinary Shares
or other securities as bonus shares (stock dividend) upon or with respect to any
shares which shall at the time be subject to a right of purchase by a Grantee
hereunder, each Grantee upon exercising such right shall be entitled to receive
(for the purchase price payable upon such exercise), the shares as to which he
or she is exercising such right and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such bonus shares
(stock dividend) were declared, and such amount of shares and the amount of cash
in lieu of fractional shares, as is equal to the shares which he would have
received had he been the holder of the shares as to which he is exercising his
right at all times between the date of the granting of such right and the date
of its exercise.
11.3 Upon the happening of any of the foregoing events, the class and
aggregate number of Ordinary Shares issuable pursuant to the Plan (as set forth
in paragraph 6, hereof), in respect of which Option Awards have not yet been
granted,
<PAGE>
shall also be appropriately adjusted to reflect the events specified in
paragraphs 11.1 and 11.2 above.
11.4 The Committee shall determine the specific adjustments to be made
under this paragraph 11, and its determination shall be conclusive.
12. ASSIGNABILITY AND SALE OF SHARES:
12.1 No shares purchasable hereunder which were not fully paid for, shall
be assignable or transferable by the Grantee. For avoidance of doubt, the
foregoing shall not be deemed to restrict the transfer of a Grantee's rights in
respect of Option Awards or shares purchasable pursuant to the exercise thereof
upon the death of such Grantee to his estate or other successors by operation of
law or will, whose rights therein shall be governed by paragraph 10.2 hereof.
12.2 No Option Award may be transferred other than by will or by the laws
of descent and distribution, and during the Grantee's lifetime an Option Award
may be exercised only by him.
13. SECURITIES ACT OF 1933; ISRAEL SECURITIES LAW, 1967: By his
exercise of an Option Award hereunder, the Grantee agrees not to sell, transfer
or otherwise dispose of any of the shares so purchased by him except in
compliance with the United States Securities Act of 1933, as amended, and the
rules and regulations thereunder and the Grantee further agrees that all
certificates evidencing any of such shares shall be appropriately legended to
reflect such restriction. The Company does not obligate itself to register any
shares under the United States Securities Act of 1933, as amended. However, the
securities being offered and/or issued hereby have been issued in compliance
with the Israel Securities Law, 1967.
14. TERM AND AMENDMENT OF THE PLAN:
14.1 The Plan was adopted by the Board of Directors of the Company on
May 15, 1995, and shall expire on May 14, 2005 (except as to Option Awards
outstanding on that date). This Plan was approved on May 15, 1995 by a majority
of the Company's shareholders in accordance with Regulation 240.16b-3(b)
promulgated under the Exchange Act.
14.2 The Board of Directors may, at any time and from time to time,
terminate or amend the Plan in any respect except that, without the prior
approval of the Shareholders of the Company: (i) the total number of Ordinary
Shares which may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 11 hereof) and (ii) the provisions of paragraph
4.1 regarding the eligibility may not be modified. In no event may any action
of the Company alter or impair the rights of a Grantee, without his consent,
under any Option Award previously granted to him.
<PAGE>
15. CONTINUANCE OF EMPLOYMENT: Neither the Plan nor the Agreement shall
impose any obligation on the Company or a subsidiary thereof (to the extent
there shall be one or more), to continue any Grantee in its employ, and nothing
in the Plan or in any Option Award granted pursuant thereto shall confer upon
any Grantee any right to continue in the employ of the Company or a subsidiary
thereof, or restrict the right of the Company or a subsidiary thereof, to
terminate such employment at any time.
16. GOVERNING LAW: The Plan and all instruments issued thereunder or in
connection therewith, shall be governed by, and interpreted in accordance with,
the laws of the State of Israel.
17. APPLICATION OF FUNDS: The proceeds received by the Company from the
sale of shares pursuant to Option Awards granted under the Plan will be used for
general corporate purposes of the Company or any subsidiary thereof.
18. TAX CONSEQUENCES: Any tax consequences arising from the grant or
exercise of any Option Award, from the payment for shares covered thereby or
from any other event or act (of the corporation that employs the Grantee or the
Grantee) hereunder, shall be borne solely by the Grantee. Furthermore, the
Grantee shall agree to indemnify the corporation that employs the Grantee 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 Grantee.
<PAGE>
ANNEX B
NON-EMPLOYEE SHARE OPTION PLAN (1998)
A. NAME AND PURPOSE
1. NAME: This plan, as amended from time to time, shall be known
as the Accent Software International Ltd. Non-Employee Share Option Plan (1998)
(the "Plan").
2. PURPOSE: The purpose and intent of the Plan is to provide
incentives to certain non-employee directors and consultants of Accent Software
International Ltd. ("Accent") or of any parent corporation or subsidiary
corporation of the Company now existing or subsequently formed or acquired
(Accent and its parent or subsidiary corporations are collectively referred to
as the "Company") by providing them with opportunities to purchase shares in
Accent, pursuant to the Plan that was approved by the Board of Directors of
Accent.
B. GENERAL TERMS AND CONDITIONS OF THE PLAN
3. ADMINISTRATION:
3.1 The Plan will be administered by a committee of the Board of
Directors (the "Committee"), which will consist of such number of Directors of
Accent (not less than two (2) in number), as may be fixed from time to time by
the Board of Directors of Accent. The Board of Directors shall appoint the
members of the Committee, may from time to time remove members from, or add
members to, the Committee and shall fill vacancies in the Committee however
caused. All members of the Committee shall be disinterested persons within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
3.2 The Committee shall select one of its members as its Chairman
and shall hold its meetings at such times and places as it shall determine.
Actions at a meeting of the Committee at which a majority of its members are
present or acts reduced to or approved in writing by all members of the
Committee, shall be the valid acts of the Committee. The Committee may appoint a
Secretary, who shall keep records of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
3.3 Subject to the general terms and conditions of this Plan and to
the specific limitations set forth herein, the Committee shall have full
authority in its discretion, from time to time and at any time, to interpret
this Plan, with respect to persons to whom Option Awards are granted who are not
Directors of the Company, to determine (i) the persons to whom Option Awards (as
hereinafter defined) shall be granted ("Grantees"), (ii) the number of shares to
be covered by each Option Award, (iii) the time or times at which the same shall
be granted, (iv) the schedule and conditions on which such Option Awards may be
exercised and on which such shares shall be paid for, and/or (v) any other
matter which is necessary or desirable for, or incidental to, the administration
of the Plan. All Option Awards granted pursuant to this Plan must be exercised
within five (5) years of the date of grant. Notwithstanding anything to the
contrary contained herein, options granted hereunder to non-employees serving as
Directors of the Company shall only be granted pursuant to the provisions set
forth in paragraph 6.3.
<PAGE>
3.4 The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. No member of the
Board of Directors or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option Award
granted thereunder.
3.5 The interpretation and construction by the Committee of any
provision of the Plan or of any Option Award thereunder shall be final and
conclusive unless otherwise determined by the Board of Directors.
4. ELIGIBLE GRANTEES:
4.1 [Reserved.]
4.2 Subject to this limitation and any restriction imposed by
applicable law, Option Awards may be granted to any director ("Director") or
consultant of the Company, provided that such director or consultant is not an
employee of the Company. The grant of an Option Award to a Grantee hereunder,
shall neither entitle such Grantee to participate, nor disqualify him from
participating, in any other grant of options pursuant to this Plan or any other
share incentive or share option plan of the Company or any of its subsidiaries.
5. RESERVED SHARES: Accent has reserved 600,000 authorized but
unissued Ordinary Shares (nominal value NIS 0.01 per share) of Accent for
purposes of the Plan, subject to adjustment as provided in paragraph 10 hereof.
Any shares under the Plan, in respect of which the right hereunder of a Grantee
to purchase the same shall for any reason terminate, expire or otherwise cease
to exist, shall again be available for grant through Option Awards under the
Plan.
6. OPTION AWARDS:
6.1 The Committee shall award to Grantees options to purchase
shares in Accent available under the Plan ("Option Awards") in accordance with
the provisions of Sections 6.3 and 6.4 below. Option Awards may be granted at
any time after this Plan has been approved by the Board of Directors and the
Shareholders of the Company (or prior to this Plan being so approved, provided
that the grant of such Option Awards is made subject to such approval) and the
shares reserved for the Plan effectively created. The date of grant of each
Option Award shall be the date specified by the Committee at the time such award
is made.
6.2 The instrument granting an Option Award shall state, inter
alia, the number of shares covered thereby, the dates when it may be exercised
(subject to Section 8.1), the option price, the schedule on which such shares
may be paid for and such other terms and conditions as the Committee at its
discretion may prescribe, provided that they are consistent with this Plan.
6.3 Subject to the general terms and conditions of this Plan, a
non-employee who serves as a Director of the Company shall be entitled to
receive grants of Option Awards as follows: (i) each of the non-employee
Directors of the Company who was serving as such non-employee Director on
January 1, 1997, provided they are serving as a director of the Company upon the
adoption of the Non-Employee Share Option Plan, shall receive an initial grant
of an Option Award to purchase 35,000 Ordinary Shares, which shall vest as to
the entire grant upon the date of grant; (ii) each of all other non-employees
who is serving as a Director at the time of the adoption of this Plan shall
receive an initial grant of an Option Award to purchase 25,000 Ordinary Shares
of Accent, which shall vest as to the entire
2
<PAGE>
grant six months after the date of grant; (iii) each non-employee who becomes a
member of the Board of Directors at any time after the adoption of this Plan
shall receive an initial grant of an Option Award to purchase 50,000 Ordinary
Shares of Accent, which shall vest as to the entire grant one year after the
date of grant; and (iv) upon each anniversary of an initial grant, provided that
such non-employee is still serving as a member of the Board of Directors, such
non-employee Director shall receive an annual Option Award to purchase 25,000
Ordinary Shares of Accent, which shall vest as to the entire grant six months
after the date of grant.
6.4 The Committee may in its discretion grant Option Awards to any
consultant of the Company.
7. OPTION PRICES:
7.1 The price per share covered by each Option Award to any eligible
director of the Company shall be 100% of the fair market value of each
share as determined by the Committee on the date of grant. If Accent's
share's are publicly traded on a securities market in the United
States or in Israel, then the fair market value of such shares on the
date of grant shall be equal to the closing sale price of such shares
the date of such grant.
7.2 The price per share covered by each Option Award to any consultant
of the Company shall be determined by the Committee in its discretion
on the date of the grant..
8. EXERCISE OF OPTION AWARD:
8.1 Option Awards shall be exercisable pursuant to the terms under
which they were awarded and subject to the terms and conditions of this Plan.
8.2 An Option Award, or any part thereof, shall be exercisable by
the Grantee's signing and returning to Accent at its principal office a "Notice
of Exercise" and a Share Incentive Agreement (the "Agreement") in such form and
substance as may be prescribed by the Committee from time to time.
8.3 Anything herein to the contrary notwithstanding, but without
derogating from the provisions of paragraph 9 hereof, if any Option Award, or
any part thereof, has not been exercised and the shares covered thereby not paid
for within five (5) years after the date of grant, such Option Award, or such
part thereof, and the right to acquire such shares shall terminate, all
interests and rights of the Grantee in and to the same shall expire.
8.4 Each payment for shares under an Option Award shall be in
respect of a whole number of shares, shall be effected in cash, by a cashier's
or certified check payable to the order of Accent, by cashless exercise, or,
with respect to persons to whom Option Awards are granted who are not Directors
of the Company, such other method of payment acceptable to Accent as determined
by the Committee, and shall be accompanied by a notice stating the number of
shares being paid for thereby.
9. TERMINATION OF SERVICE AS A DIRECTOR OR CONSULTANT:
9.1 If a Director Grantee should, for any reason (other than by
reason of death or disability) cease to be a Director of Accent, all of his
rights, if any, in respect of all Option Awards granted to him under the Plan
which are not yet exercisable on the date of the cessation of the directorship
3
<PAGE>
shall terminate and all of his rights in respect of such Option Awards which are
exercisable on the date of the cessation of the directorship, but are not
exercised within 90 days after such cessation of the directorship, shall
terminate upon the expiration of such 90 day period. In the event of the
resignation or dismissal of a Director, the Director shall, for the purposes of
this paragraph 9.1, be deemed to have ceased to be a Director of the Company
upon the delivery to the Company of notice of resignation or the delivery to the
Director of notice of dismissal, as the case may be, irrespective of the
effective date of such resignation or dismissal.
9.2 If a Director Grantee should cease to be a Director of Accent
by reason of death or disability, all outstanding Option Awards shall be deemed
fully vested, and the successor in interest of the Grantee may exercise such
Option Awards in accordance with their terms.
9.3 If a non-director consultant Grantee should, for any reason
(other than by reason of death or disability) cease to be a consultant of the
Company, all of his rights, if any, in respect of all Option Awards granted to
him under the Plan which are not yet exercisable on the date of the cessation of
the consultancy shall terminate and, unless otherwise determined by the Board of
Directors of Accent, all of his rights in respect of such Option Awards which
are exercisable on the date of the cessation of the consultancy, but are not
exercised within 90 days after such cessation of the consultancy, shall
terminate upon the expiration of such 90 day period. In the event of the
resignation of a consultant or the termination of a consultancy, the consultant
shall, for the purposes of this paragraph 9.3, be deemed to have ceased to be a
consultant of the Company upon the delivery to the Company or notice of
resignation or the delivery to the consultant of notice of termination of the
consultancy, as the case may be, irrespective of the effective date of such
resignation or discharge. In the event the consultancy of a non-director
consultant Grantee is terminated by the Company for cause, such Grantee shall
not be entitled to exercise the Option Awards subsequent to the time of delivery
of the notice of discharge.
9.4 If a non-director consultant Grantee should die, or be unable
to continue to be employed by the Company by reason of becoming incapacitated
while in the employ of the Company as a result of an accident or illness or
other cause which is approved by the Committee, such Grantee shall, subject to
approval of the Committee (which shall not be unreasonably withheld), continue
to enjoy rights under the Plan on such terms and conditions as the Committee in
its discretion may determine.
10. ADJUSTMENTS. Upon the happening of any of the following
described events, a Grantee's rights to purchase shares under the Plan shall be
adjusted as hereinafter provided:
10.1 In the event the Ordinary Shares of Accent shall be subdivided
or combined into a greater or smaller number of shares or if, upon a merger,
consolidation, reorganization, recapitalization or the like, the Ordinary Shares
of Accent shall be exchanged for other securities of Accent or of another
corporation, each Grantee shall be entitled, subject to the conditions herein
stated, to purchase such number of Ordinary Shares or amount of other securities
of Accent or such other corporation as were exchangeable for the number of
Ordinary Shares of Accent which such Grantee would have been entitled to
purchase except for such action, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision, combination or
exchange.
4
<PAGE>
10.2 In the event that Accent shall issue any of its Ordinary Shares
or other securities as bonus shares (stock dividend) upon or with respect to any
shares which shall at the time be subject to a right of purchase by a Grantee
hereunder, each Grantee upon exercising such right shall be entitled to receive
(for the purchase price payable upon such exercise), the shares as to which he
or she is exercising such right and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such bonus shares
(stock dividend) were declared, and such amount of shares and the amount of cash
in lieu of fractional shares, as is equal to the shares which he would have
received had he been the holder of the shares as to which he is exercising his
right at all times between the date of the granting of such right and the date
of its exercise.
10.3 Upon the happening of any of the foregoing events, the class
and aggregate number of Ordinary Shares issuable pursuant to the Plan (as set
forth in paragraph 5, hereof), in respect of which Option Awards have not yet
been granted, shall also be appropriately adjusted to reflect the events
specified in paragraphs 10.1 and 10.2 above.
10.4 The Committee shall determine the specific adjustments to be
made under this paragraph 10, and its determination shall be conclusive.
11. ASSIGNABILITY AND SALE OF SHARES AND OPTION AWARDS:
11.1 No shares purchasable hereunder which were not fully paid for,
shall be assignable or transferable by the Grantee. For avoidance of doubt, the
foregoing shall not be deemed to restrict the transfer of a Grantee's rights in
respect of Option Awards or shares purchasable pursuant to the exercise thereof
upon the death of such Grantee to his estate or other successors by operation of
law or will, whose rights therein shall be governed by paragraph 9.2 hereof.
11.2 No Option Award may be transferred other than by will or by the
laws of descent and distribution, and during the Grantee's lifetime an Option
Award may be exercised only by the Grantee.
12. SECURITIES ACT OF 1933; ISRAEL SECURITIES LAW, 1967: By the
exercise of an Option Award hereunder, the Grantee agrees not to sell, transfer
or otherwise dispose of any of the shares so purchased by him except in
compliance with the United States Securities Act of 1933, as amended, and the
rules and regulations thereunder and the Grantee further agrees that all
certificates evidencing any of such shares shall be appropriately legended to
reflect such restriction. Accent does not obligate itself to register any
shares under the United States Securities Act of 1933, as amended. However, the
securities being offered and/or issued hereby have been issued in compliance
with the Israel Securities Law, 1967.
13. TERM AND AMENDMENT OF THE PLAN:
13.1 The Plan was adopted by the Board of Directors of Accent on
April 23, 1998, and shall expire on April 23, 2008 (except as to Option Awards
outstanding on that date). This Plan was approved by a majority of Accent's
shareholders on May 28, 1998, in accordance with Regulation 240.16b-3(b)
promulgated under the Exchange Act.
13.2 The Board of Directors may, at any time and from time to time,
terminate or amend the Plan in any respect except that, without the prior
approval of the Shareholders of Accent: (i) the total number of Ordinary Shares
which may be issued under the Plan may not be increased (except by
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adjustment pursuant to paragraph 10 hereof); (ii) the provisions of paragraph
4.2 regarding eligibility may not be modified; and (iii) the provisions of
paragraph 6.3 shall not be amended more than once in any six-month period other
than to comport with changes in the United States Internal Revenue Code or the
Employee Retirement Income Security Act of the United States or the rules
thereunder. In no event may any action of the Company alter or impair the rights
of a Grantee, without his consent, under any Option Award previously granted to
him.
14. CONTINUANCE OF STATUS: Neither the Plan nor the Agreement
shall impose any obligation on Accent or a subsidiary thereof (to the extent
there shall be one or more), to continue any Grantee as a Director or as a
consultant, and nothing in the Plan or in any Option Award granted pursuant
thereto shall confer upon any Grantee any right to continue as a Director of or
consultant to the Company, as the case may be, or restrict the right of the
Shareholders, other directors or the Company, to remove the Director as provided
for in Accent's Articles of Association or to terminate the consultancy.
15. GOVERNING LAW: The Plan and all instruments issued thereunder
or in connection therewith, shall be governed by, and interpreted in accordance
with, the laws of the State of Israel.
16. APPLICATION OF FUNDS: The proceeds received by Accent from the
sale of shares pursuant to Option Awards granted under the Plan will be used for
general corporate purposes of the Company.
17. TAX CONSEQUENCES: Any tax consequences arising from the grant
or exercise of any Option Award, from the payment for shares covered thereby or
from any other event or act (of the Company or the Grantee) hereunder, shall be
borne solely by the Grantee. Furthermore, the Grantee shall agree to indemnify
the Company and hold it harmless against and from any and all liability for any
such tax or interest or penalty thereon, including without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to the Grantee.
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